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GAO_GAO-13-396
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{
"title": [
"Background",
"Technology, Design, and Construction Challenges Pose Risk to Lead Ship Cost and Schedule Outcomes",
"Some Critical Technologies Are Mature, but Others Face Significant Land- Based Testing Delays",
"Construction Progress Slowed by Inefficiencies that Could Delay Delivery of the Ship",
"Lead Ship Costs Will Likely Exceed Current Budget Estimates",
"Demonstration of Ship Capabilities after Delivery Is Limited by Test Plan Deficiencies and Reliability Shortfalls",
"Post-Delivery Test Plans Are Unlikely to Provide Timely Discovery of Deficiencies",
"Delayed Availability of Joint Strike Fighter Aircraft Has Hampered Integration Efforts",
"Lead Ship Unknowns Complicate the Navy’s Ability to Determine Follow-on Ship Cost Outcomes",
"Planned Improvements to Follow-on Ship Construction Are Complicated by Lead Ship Uncertainties",
"Lead Ship Uncertainties Limit Visibility on Follow- on Ship Costs in Sole Source Environment",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Scope and Methodology",
"Appendix II: Comments from the Department of Defense",
"Appendix III: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"The Navy intends for Ford-class nuclear-powered aircraft carriers to serve as premier forward assets for crisis response and provide early striking power during major combat operations. The Ford-class is expected to feature a number of improvements over existing aircraft carriers that the Navy believes will improve the combat capability of the carrier fleet while simultaneously reducing acquisition and life cycle costs. These improvements include the following: increased sortie generation rates for the aircraft being deployed from the carrier, a near threefold increase in electrical generating capability, increased operational availability, and increased service life margins for weight and stability to support future configuration changes to the ship over its expected 50-year service life.\nTo facilitate these capability and efficiency gains, the Navy is developing 13 new, critical technologies for installation on Ford-class carriers. For example, the ship includes a new electromagnetic aircraft launch system (EMALS) to propel aircraft off the ship, an advanced arresting gear to recover the aircraft, and an improved anti-aircraft missile system. It also includes a new dual band radar, which integrates two radars operating on different frequency bands to provide air traffic control, ship self-defense, and other capabilities. Other technologies are intended to improve the ship’s propulsion, supply (replenishment), water generation, and waste disposal systems.\nAside from their own intrinsic capabilities, these technologies are also intended to permit the Navy to implement favorable design features into the ship. Key design features include an enlarged flight deck; a smaller, aft-positioned island with fewer rotating radars than Nimitz-class carriers; and a track-based, flexible infrastructure system that allows ship compartments to be easily reconfigured to support changing missions over time. The Navy is managing these technology development activities across several different program offices and contractors, using quarterly integrated product team meetings to track progress. Figure 1 highlights the location of the 13 critical technologies on the ship.\nThe Navy’s strategy for acquiring a new class of carriers has changed from its initial concept. Initially, the Navy employed an evolutionary acquisition strategy, with technology improvements planned to be introduced gradually with each successive carrier. The Navy established the CVN(X) program in 1998 in support of this concept. Under the CVN(X) program, introduction of new technologies would be spread over three ships, beginning with the final Nimitz-class carrier, CVN 77, which was authorized in fiscal year 2001 to begin construction, and continuing over two, new design CVN(X) class carriers. In 2002, however, DOD decided to restructure the CVN(X) program (renamed as CVN 21) and accelerated plans for introducing new technologies on the first ship of the new class. To support this acceleration, in 2004 the Navy increased its planned research, development, test, and evaluation funding for the program from $2.3 billion to $4.3 billion.Navy named the lead ship of the program (CVN 78) Gerald R. Ford, thus initiating the Ford class.\nIn 2006, the Secretary of the Due to their vast size and complexity, aircraft carriers require funding for design, long-lead materials (such as nuclear propulsion plant components), and construction over many years. To accomplish these activities, the Navy awards contracts for two phases of construction— construction preparation and detail design and construction— underpinned by advance procurement and procurement funding. Additional funding, termed “cost to complete” funding, may be needed to cover unexpected cost growth that occurs during construction.\nFigure 2 outlines the Navy’s budgeting and contracting strategies for the Ford class. As indicated in the figure, construction preparation contracts can be awarded several years after advance procurement funds are in place, to allow for procurement of long-lead materials.\nIn September 2008, the Navy awarded a $4.9 billion cost-reimbursement contract for detail design and construction of CVN 78 to Newport News Shipbuilding. Cost-reimbursement contracts, also known as cost-plus contracts, provide for payment of allowable incurred costs, to the extent prescribed in the contract. This contract type places most of the risk on the government, which may pay more than budgeted should incurred costs be more than expected when the contract is signed.\nThe Navy expects to largely repeat the lead ship design for CVN 79, with minor modifications, and to construct that ship under a fixed-price incentive contract with the shipbuilder. Fixed-price incentive contracts place increased risk on the contractor, which generally bears some responsibility for increased costs of performance, including full responsibility once the contract’s ceiling is exceeded. These contracts include a negotiated target cost, target profit, and a formula for sharing the risk of cost overruns between the buyer and the seller (sometimes referred to as a shareline). Upon completion of performance, if the costs incurred by the contractor have exceeded the target cost, then application of the formula results in the contractor receiving a profit that is less than the target profit, and may result in a net loss for the contractor. The Navy has not yet determined the design parameters and contract type for CVN 80.\nCongress has previously expressed concern about Ford-class carrier costs. The John Warner National Defense Authorization Act for Fiscal Year 2007 included a provision that established (1) a procurement cost cap for CVN 78 of $10.5 billion, plus adjustments for inflation and other factors, and (2) a procurement cost cap for subsequent Ford-class carriers of $8.1 billion each, plus adjustments for inflation and other factors.\nFurther, in August 2007, we reported that delays in Ford class technology development could increase lead ship construction costs and lead to potential reductions in capability at delivery. In addition, we found that although the Navy had made considerable progress maturing CVN 78’s design, significant schedule pressures in development of the ship’s critical technologies could impede completion of the detailed phases of design and potentially disrupt construction. We also found that the Navy’s cost estimate used to develop the CVN 78 budget was optimistic. We recommended actions to improve the realism of the CVN 78 budget estimate, improve the Navy’s cost surveillance capability, and schedule carrier-specific tests of the dual band radar. The Navy addressed some, but not all, of our recommendations.\nAs is typical for all ships, Ford-class carrier construction is conducted over several phases:\nBlock fabrication: Metal plates are welded together into elements called blocks. Blocks are the basic building units for a ship, and when completed they will form completed or partial compartments, including accommodation spaces, engine rooms, and storage areas.\nAssembly and outfitting of blocks: Blocks are generally outfitted with pipes, brackets for machinery or cabling, ladders, and any other equipment that may be available for installation at this early stage of construction. This allows a block to be installed as a completed unit when it is welded to the hull of the ship. Installing equipment at the block stage of construction is preferable because access to spaces is not limited by doors or machinery, unlike at later phases.\nBlock erection: Blocks are welded together to form grand blocks, which are then erected with other grand blocks in a drydock.\nLaunch: Once the ship is watertight and the decision is made to launch—or float the ship in water—the ship is then towed into a quay or dock area where final outfitting and testing of machinery and equipment such as main engines will occur. Afterwards, the ship embarks on sea trials where performance is evaluated against the contractually required specifications and overall quality is assessed.\nDelivery: Following sea trials, the shipyard delivers the ship to the buyer (Navy).\nCommissioning: Following delivery, the act or ceremony of commissioning a ship marks its entry into active service.\nDOD acquisition policy requires major defense acquisition programs, including shipbuilding programs, to execute and complete developmental testing, reliability growth testing, initial operational test and evaluation (IOT&E), and live-fire testing activities:\nDevelopmental testing is intended to assist in the maturation of products, product elements, or manufacturing or support processes. For ship technologies, developmental testing typically includes robust land-based testing activities prior to introducing the technology to a maritime environment.\nReliability growth testing is an integral part of the systems engineering process for a weapon system. Simply stated, reliability is the ability of a system and its parts to perform its mission without failure, degradation, or demand on the support system under a prescribed set of conditions. Program managers are responsible for developing reliability growth curves for weapon systems, which outline a series of intermediate goals that are tracked through test and evaluation events until minimum reliability requirements are satisfied. In addition, program managers and operational test agencies are responsible for assessing and reporting on the reliability growth required for a system to achieve its minimum reliability requirements during IOT&E. The Navy measures reliability for key CVN 78 systems in terms of mean (average) time between failures and average number of cycles between critical mission failures.\nIOT&E—a major component of operational testing—is intended to assess a weapon system’s capability in a realistic environment when maintained and operated by sailors, subjected to routine wear-and- tear, and employed in combat conditions against a simulated enemy who fights back. During this test phase, the ship is exposed to as many actual operational scenarios as possible—a process that reveals the weapon system’s capabilities under stress. IOT&E for CVN 78 will take place after the shipbuilder completes construction and delivers the ship to the Navy.\nLive-fire testing provides timely assessment of the survivability and/or lethality of a weapon system as it progresses through its design and development. For ships, two major components of this testing are the full-ship shock trial and total ship survivability trial. The Navy defines a full-ship shock trial as an at-sea trial conducted to identify any unknown weakness in the ability of the ship to withstand specified levels of shock from underwater explosions. The Navy defines a total ship survivability trial as an at-sea, scenario-based assessment of the ability of the ship and crew to control damage, reconfigure, and attempt to reconstitute mission capability after damage.\nDOD also establishes two key milestones for introducing new weapon systems, including ships, to the warfighter: initial operational capability and full operational capability.\nInitial operational capability (or initial capability) for a weapon system is, in general, attained once some units and/or organizations in the force structure scheduled to receive the system have received it and have the ability to employ and maintain it. For CVN 78, initial capability closely follows the completion of combat system ship qualification trials, which are a series of technical and training events conducted aboard newly commissioned warships.\nFull operational capability (or full capability) generally represents the point when all units and/or organizations in the force structure scheduled to receive the system have received it and have the ability to employ and maintain it. For CVN 78, full capability closely follows the completion of joint task force exercises, which are designed to test the carrier’s ability to operate in hostile, complex environments alongside other U.S. and coalition forces. The purpose of these exercises is to prepare the carrier for an upcoming deployment.\nIn addition, DOD acquisition policy requires the development of a life cycle cost estimate for weapon systems. A cost estimate is a summation of individual cost elements—using established methods and valid data— to estimate the future costs of a program, based on what is known today. Cost estimates are necessary for many reasons: to support decisions about funding one program over another, to develop annual budget requests, to evaluate resource requirements at key decision points, and to develop performance measurement baselines. The management of a cost estimate involves continually updating the cost estimate with actual data as they become available, revising the estimate to reflect changes, and analyzing differences between estimated and actual costs. The Navy completed its initial life cycle cost estimate for CVN 78 in 2004, which largely underpinned initial budget requests for that ship. Since that time, the Navy has periodically updated that cost estimate and also recently developed a cost estimate for CVN 79 detail design and construction.\nFinally, the Defense Federal Acquisition Regulation Supplement (DFARS) requires certain contracts, to include the Ford class contract, to include a clause requiring the contractor to maintain a government-validated earned value management system and to provide monthly contract Earned value management is a performance reports to the government.program management tool for assessing cost and schedule performance. It goes beyond simply comparing budgeted costs to actual costs. It measures the value of work accomplished in a given period and compares it with the planned value of work scheduled for that period and with the actual cost of work accomplished. By using the metrics derived from these values to understand performance status and to estimate cost and time to complete the work, earned value management can alert program managers to potential problems sooner than expenditures alone can.",
"While construction of CVN 78 is more than halfway complete, the Navy and shipbuilder must still overcome significant technology development, design, and construction challenges in order to deliver a fully functional ship to the fleet at the currently budgeted cost of $12.8 billion and the February 2016 delivery date. However, several critical technologies— provided to the shipbuilder by the Navy—have encountered developmental delays and, subsequently, have not yet reached a level of maturity that will enable them to be effectively incorporated onto the ship. These delays are most evident in the land-based test programs for these technologies, which are lagging significantly behind schedule. At the same time, the ship’s design stability—a key factor in controlling future cost growth—is contingent on critical technologies maturing in the configurations currently anticipated. In addition, construction inefficiencies at the shipyard have delayed—and threaten additional delays to—ship launch and delivery. These combined challenges and uncertainties suggest that more cost growth could occur for CVN 78.",
"At present, the Navy assesses 7 of CVN 78’s 13 critical technologies as mature, meaning that they have been proven in an operational environment. The shipbuilder has begun installing the remaining 6 technologies on the ship even though their capabilities are not yet fully proven. This strategy introduces the risk of late and costly design changes aboard the ship. Specifically, progress continues to lag for several systems that are integral to the ship achieving its intended mission capabilities.\nOur previous work has shown that good acquisition outcomes are achieved through a knowledge-based approach to product development that demonstrates high levels of knowledge before significant commitments are made. In essence, knowledge supplants risk over time. In this approach, developers make investment decisions on the basis of specific, measurable levels of knowledge at critical junctures before investing more money and advancing to the next phase of acquisition. Shipbuilding programs are no exception. As we have previously reported, leading commercial ship buyers and shipbuilders retire program risks, including technology risk, prior to signing a contract. Demonstrating the maturity of critical technologies—by testing representative prototypes in realistic environments—is a key component to reducing these risks.\nDOD uses technology readiness levels (TRL) to describe the maturity of critical technologies in programs. Technologies with TRLs below 6 are at a stage of development where only components or a basic proof of concept of the system have been validated. Technologies developed into representative prototypes and successfully tested in a relevant environment meet requirements for TRL 6. Technologies developed into actual system prototypes (full form, fit, and function) and tested in an operational environment meet requirements for TRL 7. We have previously reported that TRL 7 constitutes low risk for starting a product development and, for shipbuilding programs, should be achieved for individual technologies prior to detail design contract award. Consequently, our assessment of CVN 78 technologies refers to technologies that have reached TRL 6 and TRL 7 as approaching maturity and as mature, respectively. Technologies exceeding TRL 7 represent actual systems that have been proven to work in final form and under expected (TRL 8) or actual (TRL 9) mission conditions. Table 1 summarizes the planned capabilities and development status of current Ford-class technologies and DOD’s assessment of TRLs since contract award in 2008.\nAs indicated in the table, the Navy has largely retired the risks posed by the reverse osmosis desalinization, plasma arc waste destruction, and nuclear propulsion/electric plant systems. These technologies are currently at TRL 7 or higher and were mature even before the CVN 78 contract award for detail design and construction. However, other critical technologies were immature at contract award and still must undergo extensive testing before reaching maturity. These technologies moved through development with lower-than-desired levels of knowledge and subsequently faced technical, design, and production challenges. For example, three systems integral to the ship’s ability to execute its mission assignments—the volume search radar, advanced arresting gear, and EMALS—were immature at CVN 78 detail design and construction contract award in 2008. These systems continue to experience disruptions in development and delays in the land-based testing that is needed to assess their levels of maturity. In contrast to the knowledge- based approach used by leading commercial ship buyers, the Navy, in an effort to meet required installation dates aboard CVN 78, elected to produce these systems prior to demonstrating their maturity. More information about the status of these three critical technologies follows:\nVolume search radar: Prior to the CVN 78 detail design contract award, the Navy had only built, tested, and integrated prototype components of the volume search radar in controlled laboratory environments. As we previously reported, these tests revealed deficiencies related to key components of the radar. Under the Navy’s 2008 program schedule, the volume search radar was to be developed and tested as part of the Zumwalt-class destroyer program and was expected to approach maturity following land-based testing in fiscal year 2009. The radar would then participate in combat system integration testing with the other major component of the dual band radar, the multifunction radar, and eventually demonstrate maturity as part of Zumwalt-class destroyer at-sea testing in fiscal year 2014. In 2010, however, to reduce Zumwalt-class construction costs, the Navy removed the volume search radar from the destroyer program and suspended remaining land-based testing, leaving key Ford-class testing requirements unaddressed. The Navy subsequently transferred remaining development work to the Ford class program and planned to resume land-based testing in fiscal year 2012 using an actual production unit of the radar—but contracting delays pushed the start of this testing out to fiscal year 2013. As a result of this delay, and the Navy’s desire not to slow down the current radar installation schedule for CVN 78, remaining land-based testing will be completed in fiscal year 2014, 4.5 years later than originally planned, using a less capable developmental radar array than the actual production configuration that will be installed on CVN 78. The Navy has also scheduled shipboard testing beginning in fiscal year 2016 to complete additional volume search radar testing not executed on land. This testing schedule increases the risk that discovery of problems with the system will trigger costly design changes and rework aboard the ship.\nAdvanced arresting gear: Prior to CVN 78’s detail design contract award, the advanced arresting gear completed early verification tests to prove out the system’s concept, along with some component testing. Under the Navy’s 2008 program schedule, this system was scheduled to execute the following land-based testing program: (1) extended reliability testing in fiscal year 2009 to demonstrate integration of high risk subcomponents and produce reliability growth data; (2) environmental qualification testing between fiscal years 2009 and 2011, which would verify the system’s suitability; (3) jet car track site testing—where the system arrests jet-engine-propelled vehicles that travel down a railway with different physical loads and speeds— between fiscal years 2010 and 2011 to validate the system’s full range of performance; and (4) runway arrested landing site testing between fiscal years 2011 and 2012, which would verify aircraft compatibility and performance with the system. Progress has proven slower than anticipated, however. Deficiencies affecting five major components, plus software, have contributed to several redesigns of the system since 2007. Most recently, the Navy and its contractor redesigned and remanufactured the energy absorbing “water twister” components of the system, which turned out to be costly, time consuming processes that have delayed installation of these units aboard the ship. Consequently, the Navy has delayed the start of runway arrested landing site testing—required to mature the advanced arresting gear technology—until fiscal year 2014. Under this revised testing schedule, the Navy now expects to complete land-based developmental testing, 2.5 years later than initially planned, by fiscal year 2015—after it has installed the full system aboard CVN 78.\nEMALS: Unlike the other critical technologies discussed above, this system was approaching maturity prior to the CVN 78 detail design contract award because the Navy had built and tested competitive prototypes of the system as part of the contractor selection process for EMALS development in 2004. Under the Navy’s 2008 program schedule, land-based testing for the system was scheduled to occur between fiscal years 2008 and 2011. However, technical issues affecting the EMALS power interface and conversion systems, among other deficiencies, have slowed progress. The Navy’s 2012 development schedule calls for land-based testing to continue into fiscal year 2014, which, upon completion, the Navy expects will mature the EMALS technology. In the meantime, however, significant numbers of EMALS components have already been produced, delivered to the shipbuilder, and installed on CVN 78—even though the functional requirements, performance, and suitability of the system remain unproven.\nAlthough the Navy has encountered land-based testing delays totaling 2.5 to 4.5 years each for the volume search radar, advanced arresting gear, and EMALS critical technologies, it has elected to not adjust the CVN 78 construction schedule to compensate for these delays. As a result, the Navy and its shipbuilder are constructing CVN 78 with less knowledge about the ship’s critical technologies than it deemed appropriate at contract award in 2008. As the disparity between land-based testing and construction schedules persists—or worsens—the Navy faces significant risk of unbudgeted cost growth arising from technical discoveries late in construction. Figure 3 illustrates changes to the CVN 78 construction schedule and to land-based testing programs for critical technologies that have been incurred since the 2008 detail design and construction contract award.\nSince the CVN 78 contract was awarded in 2008, the Navy and shipbuilder have made progress stabilizing and completing the Ford-class design. The Ford class represents the first time that the shipbuilder has used a 3D, computer-aided design product model to generate the design of an entire aircraft carrier. The product model generates a detailed design, allowing engineers to visualize the arrangement of spaces and systems. The design is also fed into a simulated 3D environment that allows engineers, planners, and construction workers to validate the design and build strategy by conducting virtual “walkthroughs.” These tests validate elements of the design prior to construction, thereby avoiding potentially costly rework.\nIn our work on shipbuilding best practices, we found that achieving design stability before start of fabrication is a key step that leading shipbuilders and ship buyers follow to ensure their vessels deliver on-time, within planned costs, and with planned capabilities. Leading commercial firms assess a ship design as stable once all basic and functional design activities have been completed. Basic and functional design refers to two- dimensional drawings and 3D computer-aided models (when employed) that fix the ship’s hull structure; set the ship’s hydrodynamics; route all major distributive systems including electricity, water, and other utilities; and identify the exact positioning of piping and other outfitting within each block of the ship. At the point of design stability, the shipbuilder has a clear understanding of the ship structure as well as electrical, piping, and other systems that traverse individual blocks of the ship. To achieve design stability, shipbuilders need suppliers (also called vendors) to provide complete, accurate system information prior to beginning basic design. This vendor-furnished information describes the exact dimensions of a system or piece of equipment going into a ship, including space and weight requirements, and also requirements for power, water, and other utilities that will have to feed the system.\nIn designing and constructing a new ship, the Navy seeks to preserve “service life allowances”—room for weight growth after the vessel enters service—in order to provide room to take on new, heavier equipment over the ship’s life cycle. The Navy generally sets service life allowances for a new ship’s overall weight and for its vertical center of gravity (stability). For the Ford class carrier, these minimum margins are 5.0 percent of full load displacement in long tons and 1.5 feet, respectively. still in development—including the volume search radar, advanced arresting gear, and EMALS technologies. According to shipbuilder representatives, additional weight growth to the advanced arresting gear was of particular concern and could trigger a need for future structural and space modifications around the installed system. Further, until the advanced weapons elevators, joint precision approach and landing system, and evolved sea sparrow missile weapons link each demonstrate maturity, the likelihood of additional design changes to CVN 78 persists.\nIn addition, as construction progresses, the shipbuilder is discovering “first-of-class” type design changes, which it will use to update the model prior to the follow-on ship construction. To date, several of these design changes have related to EMALS configuration changes, which have required electrical, wiring, and other changes within the ship. Although the Navy reports that these EMALS-related changes are nearing completion, it anticipates additional design changes stemming from remaining advanced arresting gear development and testing. In total, over 1,200 anticipated design changes remain to be completed (out of nearly 19,000 planned changes). According to the Navy, many of these 19,000 changes were programmed into the construction schedule early on—a result of the government’s decision at contract award to introduce improvements during construction to the ship’s warfare systems, which are heavily dependent on evolving commercial technologies.",
"As of April 2013, the shipbuilder had erected 95 percent of the ship’s structural units and had achieved a key milestone of installing the ship’s island (command tower) onto the flight deck. Nevertheless, the ship was only 56 percent complete in April 2013, as compared to the builder’s planned 62 percent completion rate at that point in construction. As a result of these construction delays, the Navy and shipbuilder recently elected to delay CVN 78’s launch and delivery by 4 months each.\nShips are ideally designed and constructed using the most cost efficient sequence for construction, called the optimal sequence. Typically, an optimal construction sequence includes designing and building the ship from the bottom up, maximizing the work completed in shipyard shops, and minimizing tasks performed when the ship is already in the water, which tend to be costlier than tasks completed on land. As a general shipbuilding rule, the earlier a particular task can be performed in the production plan, the fewer labor hours it will consume. The sequence is outlined in the shipbuilder’s integrated master schedule, which links all of the detailed construction tasks based on key event dates.\nBy comparison, progress constructing CVN 78 has been constrained by inefficient out-of-sequence work driven largely by material shortfalls, engineering challenges, and delays developing and installing certain critical technology systems (provided by the Navy to the shipbuilder for installation). These outcomes are consistent with those experienced by other Navy shipbuilding programs that began lead ship constructions prior to maturing critical technologies, stabilizing their designs, or both. Key examples of construction issues with the CVN 78 include the following:\nMaterial shortfalls: CVN 78 has experienced significant shortages of developmental valves throughout the ship due to delayed vendor deliveries. These valves are crucial for installing the ship’s chilled water system, which provides air conditioning and cooling for electronic systems, as well as other distributive piping systems. To mitigate the impact of valve delinquencies, the shipbuilder installed temporary metal spool pieces in place of missing valves in order to continue construction work for piping systems. Installing the valves later, out-of-sequence, required additional labor hours to complete. According to shipbuilding representatives, their vendor base for valves did not have sufficient experience developing and manufacturing new Navy ship system valves, and consequently encountered difficulties meeting Navy and shipbuilder specifications. To improve vendor performance, the shipbuilder provided on-site engineering and procurement assistance. The shipbuilder reports that suppliers have now delivered over 90 percent of the required valves and that most of the spool piece installations have been replaced with actual valves.\nEngineering challenges: The shipbuilder’s use of HSLA 65 thin steel plating for ship decks—intended to reduce weight in the ship’s design—excessively warped and flexed during construction, which contributed to lower than desired levels of pre-outfitting and additional disruption to build processes. In an effort to compensate for the warping and flexing, the shipbuilder erected scaffolding around ship blocks to secure the assemblies. This scaffolding facilitated some pre- outfitting improvements, but produced corresponding cost increases and schedule delays. In addition, ship welders experienced substantial difficulty early on working this new plate steel because it was thinner than what had traditionally been used on aircraft carriers.\nThe Navy and shipbuilder have also experienced other engineering challenges, including late delivery of accurate construction drawings and instructions to shipworkers. In many instances, the shipbuilder produced construction drawings—derived from the ship’s 3D product model—that lacked sufficient detail necessary for efficiently installing critical components within the ship. This lack of comprehensive, detailed construction drawings contributed to inefficient work delays and restarts.\nCritical technology system delays: Advanced arresting gear delivery delays to date have caused the shipbuilder to modify the planned arresting gear engine room loading sequence. Instead of being built in one piece in the yard and hoisted into place as originally envisioned, arresting gear components will be installed in sequence, including through a hole cut in the flight deck. This strategy has caused additional work and interfered with the construction of other ship features in some areas, such as duct work and cabling. Further, late dual band radar equipment deliveries have required the shipbuilder to cut open previously closed areas of the ship to allow loading of equipment. Additional delays, as well as rework or retrofits on installed components, remain possible as these developmental systems continue to progress through testing.\nThe construction inefficiencies suffered by CVN 78 have only recently begun to materialize in the form of schedule delays. Recently revised Navy and shipbuilder plans now call for the ship to be launched in November 2013 at a 70 percent completion level—a total lower than what is found among leading commercial shipbuilding programs, which complete as much as 95 percent of the ship before launch. Executing these plans requires completion of certain shipbuilding activities prior to the scheduled launch date. For example, the establishment of the chilled water system—necessary to support the ship’s energization of the electrical distribution system for launch—is several weeks behind schedule. As launch gets delayed, so, too, does the shipbuilder’s post- launch test program for key systems. Since this testing program is synched closely with ship delivery, the 4-month delay to the planned July 2013 launch date has produced a corresponding delay in delivering the ship to the Navy.",
"Since CVN 78 construction was authorized with the contract award in fiscal year 2008, the Navy has consistently increased its procurement budget for the ship to account for cost growth as construction has progressed. Budgeted costs have grown to $12.8 billion, compared to the Navy’s initial $10.5 billion procurement budget request. This total represents an increase of $2.3 billion, or 22.3 percent, and includes almost $1.4 billion in future years’ funding (fiscal years 2014 and 2015) to cover the anticipated cost growth. It also exceeds the $10.5 billion legislative cost cap on the program, which the Navy is currently seeking to amend as part of its fiscal year 2014 budget submission.\nFigure 4 outlines the evolution of CVN 78 procurement costs.\nAs figure 5 highlights, CVN 78 cost growth to date is primarily attributable to cost increases with acquiring critical technology systems provided to the shipbuilder by the Navy, although the shipbuilder detail design and construction inefficiencies discussed above also account for considerable growth.\nWe further analyzed the reasons for the 38 percent procurement cost growth in the critical technology systems aboard the ship. Table 2 shows that the cost growth is largely attributable to the dual band radar (volume search and multifunction radars), advanced arresting gear, and EMALS acquisitions.\nThe Navy has taken steps to limit cost growth for EMALS and the advanced arresting gear, which are being developed and produced under contracts separate from the CVN 78 detail design and construction contract. Most notably, in 2010, the Navy negotiated firm fixed-price contracts for production of these systems for CVN 78. According to the Navy, these contracts have helped cap cost growth for these systems and have incentivized more timely deliveries to the shipyard. While EMALS is farther along in development than both the dual band radar and advanced arresting gear systems, all have experienced significant cost growth, and costs are likely to increase, given the remaining work needed to fully develop, test, and integrate the systems on CVN 78. This potential for additional cost growth is also apparent based on the Navy’s experience with the most recent Nimitz-class carrier, CVN 77. That ship experienced cost growth during its system integration, even though that effort employed mostly nondevelopmental systems.\nAside from the risk of cost growth stemming from the integration of critical technology systems into the ship, the shipbuilder’s cost and schedule performance under the detail design and construction contract suggests additional overruns are looming. Our review of the contractor’s earned value management data for the program indicates that shipbuilder cost pressures remain high and additional costs are likely, especially as key developmental items are integrated onto the ship. We reviewed 18 months of earned value management data for the CVN 78 ship program during the period of July 2011 through December 2012. During this time, the shipbuilder increased its estimate of the number of labor hours required to construct CVN 78 from 44.4 million to 47.3 million. Consequently, the shipbuilder’s budgeted cost grew substantially, from $4,758 million to $5,266 million (an increase of $508 million).analysis shows that, as of December 2012, the contractor was forecasting an overrun at contract completion of over $913 million. This cost growth is attributable to the shipbuilder not accomplishing work as planned. The Navy has largely, but not fully, funded this cost growth within CVN 78’s $12.8 billion procurement budget.\nFurther, the Navy’s current budget estimate of $12.8 billion for completing CVN 78 is optimistic because it assumes the shipbuilder will maintain its current level of performance throughout the remainder of construction. This assumption is inconsistent with historical Navy shipbuilding experiences for recent lead ships, which have suffered from performance degradation late in construction. Our previous work has shown that the full extent of cost growth does not usually manifest itself until after the ship is more than 60 percent complete, when key systems are being In April 2013, the ship was 56 percent installed and integrated. complete. The Director of DOD’s Cost Assessment and Program Evaluation office and the Congressional Budget Office—as well as Navy cost analysts and a Navy-commissioned expert panel—have also projected higher than budgeted procurement costs for CVN 78, with cost estimates ranging from $13.0 to $14.2 billion.\nGAO, Defense Acquisitions: Realistic Business Cases Needed to Execute Navy Shipbuilding Programs, GAO-07-943T (Washington, D.C.: July 24, 2007). underpinning this plan is that the Navy will be able to maintain cost control over its major shipbuilding acquisition programs. Yet, the budgets for many ships, including CVN 78, have already proven inadequate to cover the costs required to complete their constructions. To compensate, the Navy must shift funds away from other priorities—including future ship constructions—or request additional funds from Congress to pay for this cost growth. Analysis of the Navy’s fiscal year 2014 long-term shipbuilding plan shows that Ford-class procurement costs alone are estimated to comprise approximately 14 percent of the Navy’s total new ship construction budgets between fiscal years 2014 and 2018. Even a small percentage of cost growth on these ships could lead to the need for hundreds of millions of dollars in additional funding. Already, the Navy is programming $1.3 billion between fiscal years 2014 and 2015 to cover CVN 78 cost growth. To the extent that this cost growth continues for CVN 78 or follow-on ships, it may result in fewer ships acquired than planned in the near term.",
"Several factors are likely to hamper the Navy’s plans to demonstrate CVN 78 capabilities after it accepts delivery of the ship. In particular, significant risk is introduced due to the Navy’s plan to conduct integration testing of critical technologies concurrently with the ship’s IOT&E. This strategy will constrain opportunities to implement timely, corrective actions if problems are discovered with key ship systems. If significant discoveries are made during IOT&E, initial deployment could be delayed. In addition, Joint Strike Fighter integration with CVN 78 remains in its infancy, with work to date limited to paper-based assessments and a single test with EMALS. Further, key ship systems face reliability shortfalls that the Navy does not expect to resolve until many years after CVN 78 commissioning, which will limit the ship’s mission effectiveness during initial deployments and likely increase costs to the government.",
"Following ship delivery in February 2016 and a brief maintenance period, the Navy plans to embark on two separate developmental and operational test phases for CVN 78 intended to demonstrate successful integration of key ship systems and overall effectiveness and suitability of the ship itself. At present, the Navy anticipates requiring 10 months to complete the first phase—integration testing—and 32 months to complete the second phase—IOT&E. Further, in an effort to meet the lead ship’s anticipated deployment schedule, the Navy plans to execute much of its integration testing concurrent with IOT&E. This concurrent strategy will constrain opportunities for the Navy to implement corrective actions to problems discovered in integration testing and risks introducing significant discovery during IOT&E—outcomes that could delay demonstration of ship capabilities. DOD and Navy operational test officials stated that they share these concerns. According to the Director, Operational Test and Evaluation’s Test and Evaluation Master Plan Guidebook, premature commencement of IOT&E can waste scarce resources if testing is suspended or terminated early because of technical problems that should have been resolved prior to the start of this testing phase. This guidance further states that a system should demonstrate acceptable hardware and software performance during mission-focused developmental testing conducted in operationally realistic environments with the hardware and software to be used in IOT&E.\nFigure 6 illustrates how the Navy has sequenced its test plans for CVN 78, as outlined in the Navy’s current post-delivery test schedule, and where they fall with regard to ship delivery, initial and full capability, and the planned initial deployment of the ship.\nIn 2012, the Navy added the integration testing component to the CVN 78 post-delivery schedule in recognition of concerns raised by the Deputy Assistant Secretary of Defense for Developmental Test and Evaluation and the Director, Operational Test and Evaluation, that under previous testing plans, developmental systems would not be tested with one another until IOT&E. Previously, the CVN 78 program office planned to rely on developmental testing of individual systems as a means to establish confidence in the interoperability of capabilities ahead of IOT&E—a strategy assessed as high risk by DOD and Navy operational testers. Earlier testing of developmental systems with one another— above and beyond testing individual systems separately—is beneficial and can provide earlier demonstration of interoperability and combined capabilities, including measured performance against ship requirements ahead of IOT&E. Under the integrated testing approach, for example, the dual band radar will be required to conduct near-simultaneous air traffic control and self-defense operations, using both the multifunction radar and the volume search radar. On CVN 78, these operations will occur in an environment where multiple antennas and arrays are emitting and receiving transmissions, and multiple loads are placed upon the ship’s power and cooling systems. Incompatibility between the dual band radar and other elements of the ship’s combat system could endanger mission execution. To date, however, the Navy has not defined the scope or activities that will be covered by the new integration testing phase, which is planned to begin in February 2017, or the resources required to execute this testing. CVN 78 program officials told us they are defining these items as part of the updated Ford-class test and evaluation master plan, which is scheduled to be approved shortly before CVN 79 detail design and construction contract award in September 2013. Until integration testing scope and activities are clarified, and resource requirements are defined, the sufficiency of this testing and availability of necessary schedule and funding remains unknown.\nFurther, the aforementioned developmental testing delays facing critical technology systems also threaten the Navy’s integration testing plans for CVN 78. In the draft revision to the Ford class test and evaluation master plan, program officials stated a willingness to defer developmental test events for critical technologies to the integration testing phase, should remaining land-based testing activities not progress at planned rates. Already, the program has deferred certain tests of the volume search radar from land to sea. To the extent that the Navy defers additional critical technology tests planned over the next 4 years, CVN 78’s current integration testing schedule will face increased disruption, and the revised test and evaluation master plan may prove unexecutable.\nIn addition, live-fire test and evaluation plans for CVN 78 remain unclear. In 2004, the Navy and the Director, Operational Test and Evaluation, reached agreement that two major components of live-fire test and evaluation—full-ship shock trial and total ship survivability trial—would occur as part of CVN 78 post-delivery tests and trials. However, in 2012, the Navy modified its live-fire testing plans for the Ford class, citing resource constraints facing the lead ship, and deferred this testing to the first follow-on ship, CVN 79. The Director, Operational Test and Evaluation disagreed with this proposed strategy, expressing concern that delaying the testing to CVN 79 would cause a 5- to 7-year delay in obtaining data critical to evaluating Ford class survivability and would preclude timely modification of subsequent ships. On this basis, the Director rescinded approval of the Navy’s alternative life-fire test and evaluation plan and recommended that the Navy plan and budget for adequate live-fire testing on CVN 78. Although the Navy’s draft test and evaluation master plan appears to take steps toward addressing the Director’s concerns—stating plans to conduct a total ship survivability trial following CVN 78 delivery—shock trial plans remain linked to CVN 79. According to CVN 78 program officials, the Navy continues to work with the Director, Operational Test and Evaluation to provide a robust modeling, simulation, and analysis process to better understand the survivability characteristics of the Ford class. However, these program officials also state that they expect the Defense Acquisition Board to ultimately decide the Ford class’s live-fire test and evaluation strategy as part of its planned program review later this year ahead of the detail design and construction contract award for CVN 79.",
"The Ford-class is designed to accommodate the new Joint Strike Fighter carrier variant aircraft (F-35C), but aircraft development and testing delays have affected integration activities on CVN 78. These integration activities include testing the F-35C with CVN 78’s EMALS and advanced arresting gear system and testing the ship’s storage capabilities for the F- 35C’s lithium-ion batteries (which provide start-up and back-up power), tires, and wheels.\nWhile the Navy has engaged in paper-based assessments to define F- 35C integration requirements—and plans to incorporate necessary design changes ahead of scheduled CVN 78 deployment—actual integration testing of F-35C and CVN 78 system hardware and software remains in its infancy. To date, F-35C aircraft have participated in only one test with EMALS, and have not completed any tests with the advanced arresting gear system. Joint Strike Fighter program officials state that prior to deploying aboard CVN 78, F-35C aircraft will need to complete multiple qualification tests, on the order of 60 advanced arresting gear arrestments and 80-100 EMALS launches at the Navy’s land-based testing site in Lakehurst, New Jersey.\nPreviously, F-35C initial capability was scheduled to occur prior to the shipbuilder’s delivery of CVN 78 to the Navy in 2016. However, as a result of F-35C developmental delays, the Navy will not field the aircraft until at least 2017—one year after CVN 78 delivery. As a result, the Navy has deferred critical F-35C integration activities, which introduces risk of system incompatibilities and costly retrofits to the ship after it is delivered to the Navy.\nAs Table 3 illustrates, the CVN 78 design baseline includes several F- 35C-required accommodations to facilitate integration, and the Navy is evaluating modifications to other aspects of the ship design so as to better accommodate F-35C aircraft.\nReliability is a key driver of system performance, directly affecting the amount of time that individual systems are online and mission capable. Reliability also drives life cycle costs related to manning, repairs, and sparing. When systems demonstrate low reliability, they can risk costing more than planned and not delivering the intended capability to the warfighter. DOD acquisition policy requires program managers to analyze, plan, track, and report on reliability for their systems—including taking steps to improve it, as needed—at intervals throughout the acquisition process.\nThe Navy’s business case for Ford class carriers hinges on improved capabilities—particularly the ship’s increased sortie generation rates— and reduced manning requirements, as compared to legacy Nimitz-class carriers. Together, these requirements are intended to position the Navy to field more capability in the fleet at a lower operating cost. At present, however, the Navy projects that the dual band radar, advanced arresting gear, EMALS, and advanced weapons elevators will all fall well short of their required reliability rates ahead of CVN 78 IOT&E. High reliability is a key attribute that underpins the contributions that these systems are intended to make toward Ford-class sortie generation rates and manning levels.\nFor the advanced arresting gear and EMALS, the Navy has outlined reliability growth curves, which illustrate the anticipated positive improvement in system reliability in future years due to implementation of corrective actions to system design, operation or maintenance procedures, or manufacturing processes. However, developmental testing to date has demonstrated that reliability for both of these systems was much lower than the Navy initially estimated. This shortfall has undermined the effectiveness of the Navy’s initial reliability improvement plans. In response to these realities, the Navy crafted new curves for each system, which assumed lower reliability at the start. However, these more realistic starting points were offset by more optimistic assumptions about the pace of reliability gains in coming years. Therefore, the revised reliability growth curves project (1) sharp increases in system reliability in coming years and (2) achievement of required reliability levels within roughly the same amount of time as under initial plans—scenarios that may not be underpinned by sound methodologies. According to Navy officials, reliability growth projections for the advanced arresting gear and EMALS technologies are generated using a DOD growth planning methodology—called the Duane methodology—coupled with historical aircraft data from relevant points in development. However, DOD’s handbook on reliability growth management notes certain drawbacks to the Duane methodology, including with how growth curves are calculated within that model. Specifically, Duane’s assumptions about the rate of reliability growth, which date back to 1981, have since been shown to be unrealistic. Further, Duane’s methodology for estimating regression makes no allowance for variation. Subsequently, the handbook outlines several alternative models to Duane to use when projecting reliability growth for a system.\nThe validity of the Navy’s updated growth curves is further undermined by recent reliability data on the advanced arresting gear and EMALS, which show continued underperformance against growth estimates. Although these technologies are assessed as approaching maturity (TRL 6), as discussed above, TRL criteria do not account for reliability performance. The Navy measures advanced arresting gear and EMALS reliability in terms of the average number of arrestments and launches, respectively, that the systems can complete prior to failing. The total number of arrestments and launches that these two systems complete over time are referred to as cycles. Figures 7 and 8 highlight the Navy’s reliability growth projections, and current reliability performance, for the advanced arresting gear and EMALS technologies. As the figures show, neither of these systems is scheduled to reach its required rate of reliability until many years after CVN 78 is scheduled to complete IOT&E.\nWhile the Navy also anticipates reliability growth testing for the dual band radar and advanced weapons elevators, program officials have not yet completed plans for demonstrating this growth. Further, Navy officials stated that reliability requirements for these two systems continue to evolve, noting, in particular, that reliability metrics for the dual band radar were recently invalidated based on evolving analysis from their subject matter experts. As a result, the planned reliability of each system at key points, including CVN 78 IOT&E, is unknown. For the dual band radar, however, Navy program officials state that they are collecting reliability data during first unit production and factory testing—a phase that typically produces high failure rates over limited run times. Additional data collection opportunities for dual band radar include land-based testing, shipyard testing, and post-delivery testing and trials for CVN 78. According to Navy officials, data collected during shipboard testing will support a reliability assessment of the dual band radar.\nIn addition, the ship itself has operational availability requirements that are linked to the reliability performance of its individual systems, such as EMALS and the advanced arresting gear. The projected reliability shortfalls for these key systems—even under the Navy’s optimistic assumptions—could delay CVN 78’s planned entry into IOT&E in 2017. The Navy’s draft test and evaluation master plan for the program identifies various entrance criteria that it must meet before initiating IOT&E. In particular, these criteria include a requirement that testing and analysis demonstrate that the ship’s reliability will meet or exceed program requirements. The criteria further stipulate that adequate reliability data be available (or planned) to enable evaluation of current versus predicted reliability growth progress. During land-based and shipboard developmental testing, the Deputy Assistant Secretary of Defense for Developmental Test and Evaluation will conduct assessments that consider testing progress to date as well as the risks associated with the ship’s capability to meet operational suitability and effectiveness goals (including reliability). These assessments will be based, in part, on the IOT&E entrance criteria outlined in the program’s test and evaluation master plan. Ultimately, the Under Secretary of Defense for Acquisition, Technology, and Logistics will make the determination as to CVN 78’s readiness for IOT&E.\nBecause of the development and testing delays and reliability deficiencies affecting key systems, CVN 78 will likely face operational limitations that extend past commissioning and into initial deployments. Thus, the ship will likely deploy without meeting its key sortie generation rate and reduced manning requirements. In the National Defense Authorization Act for Fiscal Year 2010, Congress gave the Navy a temporary waiver that lowered the statutory requirement for the minimum number of operational aircraft carriers from 11 to 10 during the period between the then-planned inactivation of the USS Enterprise (CVN 65) and commissioning into active service of CVN 78, currently planned for March 2016. The temporary waiver granted to the Navy on its number of operational aircraft carriers ends on the date that CVN 78 is commissioned into the fleet. However, because of the magnitude of its operational deficiencies, it is unlikely that CVN 78 will adequately fill the capability gap created by the inactivation of CVN 65 for some time. For example, between February and June 2011, CVN 65 aircraft completed flight operations in support of Operation Enduring Freedom that totaled 2,970 combat missions and a 99.1 percent sortie completion rate. Further, of the 112 days that the ship was on station for these operations, only 18 days were consumed performing maintenance.\nUntil the ship completes IOT&E, the full scope of CVN 78’s operational limitations remains unclear. In the interim, the Navy is evaluating adding extra spares and maintenance personnel to the ship for initial deployments—at a presently unknown, additional cost to the government—to help offset some of these reliability shortfalls. The Navy also plans to conduct reliability testing for these systems as their development progresses to support updated reliability analyses and assessments.\nIn January 2013, the Joint Requirements Oversight Council issued a memorandum encouraging program managers and other acquisition executives—in coordination with requirements sponsors—to request requirements relief when major performance requirements for a system appear out of line with an appropriate cost-benefit analysis. According to the memo, requirements that do not provide the best return on investment for warfighters should be considered for reevaluation. The memorandum further highlighted the pressures that DOD faces from increased fiscal constraints, noting the importance of providing cost effective capability to warfighters, consideration of risk-informed trades throughout the life cycle of programs, and, when needed, revisitation of previously validated requirements at the joint and component levels.\nDOD last validated CVN 78 requirements in 2007—well before important knowledge was gained about the capabilities of key ship technologies. These requirements include a 25 percent increase in sortie generation rate above Nimitz class capabilities—performance contingent on the advanced arresting gear and EMALS maturing as planned. In addition, the dual band radar, advanced arresting gear, and EMALS together are projected to reduce manning requirements by over 100 people, as compared to the Nimitz class. While the Navy continues to assess reliability growth for these technologies, it has not yet considered the costs and benefits of maintaining current requirements versus modifying them. Such analysis could affect the Navy’s investment priorities in the program over the long term. For example, trade-off assessments could inform decisions about the soundness and effect of less strenuous sortie generation rate requirements on the warfighter’s mission versus the costs associated with the approximately 15-year effort needed to reach current minimum requirements.",
"The Navy and shipbuilder are implementing changes to the build strategy for CVN 79 aimed at reducing that ship’s costs before the construction contract is awarded, currently planned for September 2013. These changes include increased time allotted to construct the ship and in-yard construction process improvements. Remaining technical and design risks with CVN 78, however, could interfere with the Navy’s ability to achieve its desired cost savings for CVN 79. These uncertainties also affect the Navy and contractor’s ability to assess the likely CVN 79 costs ahead of contract award and, when coupled with the existing sole source environment for aircraft carrier construction, compromise the government’s negotiating position for CVN 79.",
"The Navy and its shipbuilder have learned valuable lessons from CVN 78 construction that have the potential to improve cost outcomes for the construction of the first follow-on ship, CVN 79. The shipbuilder plans to employ a new build strategy for CVN 79 that (1) allots more time to fund and construct the ship compared to CVN 78 and (2) implements process improvements aimed at completing more work earlier in the build process—steps that the Navy anticipates will achieve construction efficiency improvements as compared to CVN 78. However, remaining technical and design risks in the program could undermine the Navy’s ability to realize cost savings on CVN 79.\nIn its fiscal year 2012 budget, the Navy programmed CVN 79 construction funding over a 4-year period beginning in fiscal year 2013. However, as part of its fiscal year 2013 budget, the Navy revisited this strategy and requested congressional authority to extend Ford-class construction funding, including for CVN 79, across 6 years for each ship. Congress approved this strategy change as part of the National Defense Authorization Act for Fiscal Year 2013. As table 4 illustrates, this strategy allows the Navy to request less funding in the near term for CVN 79 construction, but also reflects a $1.1 billion increase in cost as compared to the fiscal year 2012 budget estimate for the ship. According to CVN 78 program officials, roughly half of this increase is a direct result of the increased build duration, whereas the remaining half is attributable to (1) design, construction, and critical technology system pricing changes and (2) shipyard and supplier base effects, including growth in overhead and inflation estimates.\nThe Navy’s decision to fund CVN 79 construction over 6 years was coupled with a decision to increase the build time for the ship as compared to CVN 78. According to the Navy, it will use the additional time to improve CVN 79’s construction sequence and implement cost reduction initiatives. Further, Ford class shipbuilders report that the increased time afforded to CVN 79 construction provides additional opportunities to apply lessons learned from lead ship construction. The Navy expects the combined savings from these actions to more than offset the increased costs associated with extending the funding of the ship by 2 years. Figure 9 compares CVN 78 and CVN 79 construction schedules.\nAs part of CVN 79 construction, the shipbuilder plans to implement process improvements aimed at reducing the labor hours—and cost— required to construct the ship, as compared to CVN 78. The sidebar outlines several examples of key improvements planned.\nThe core of the shipbuilder’s strategy for CVN 79 is moving more planned work—including complex ship assemblies—earlier in the build process so that it can be completed in shipyard workshops. Generally, the earlier work can be sequenced in the build process, the more efficiently it can be completed. As we have previously reported, shipbuilders often describe a general “1-3-8” rule where work that takes 1 hour to complete in a workshop takes 3 hours to complete once the steel panels have been welded into blocks, and 8 hours to complete after a block has been erected and/or after the ship has been launched.\nAlthough the Navy and shipbuilder expect CVN 79’s design to be virtually the same as that of the lead ship—another step toward improving follow- on ship outcomes—remaining developmental and design risks in the program could undermine the actual realization of cost savings. As discussed above, these risks are exemplified by key ship systems not progressing through their land-based test programs at the pace the Navy anticipated—delays largely attributable to persisting technical deficiencies. Navy and shipbuilder efforts to resolve these deficiencies on CVN 78—concurrent with follow-on ship construction—are likely to lead to redesign and potentially costly out of sequence work or rework for CVN 79. If these discoveries and fixes disrupt CVN 79 construction and offset planned improvements, they could jeopardize the Navy’s ability to complete the ship within planned cost and schedule estimates.",
"The Navy’s cost estimate for CVN 79 detail design and construction is closely linked to CVN 78 outcomes and reflects an expectation that the shipbuilder will deliver the lead ship within current labor hour estimates. One key component of the CVN 79 cost estimate is a Navy assumption that 15 percent fewer labor hours will be required to construct the follow- on ship as compared to the lead ship. This estimate is also underpinned by expectations that the shipbuilder’s current level of performance will persist between now and lead ship delivery. Further, the Navy’s budget for CVN 79 is predicated on even higher performance gains than those forecast in the cost estimate—notably, 20 percent fewer labor hours in construction as compared to CVN 78. Yet, as we previously detailed, the Navy’s understanding of the costs required to construct and deliver CVN 78 remains incomplete. These knowledge gaps add risk and uncertainty to CVN 79 cost and budget estimates.\nThe Navy plans to award a fixed-price incentive type contract for CVN 79 detail design and construction, as compared to CVN 78’s cost-plus incentive contract. A fixed-price incentive contract provides for adjusting profit and establishment of a final contract price by application of a formula (sometimes referred to as a shareline) based on the relationship of total final negotiated cost to total target cost. A fixed-price incentive contract includes a ceiling (maximum) price that constrains the government’s exposure to potential cost growth. For CVN 79, the Navy’s request for proposal stipulated a 120 percent (of target cost) ceiling price and a 50/50 cost shareline between the government and the contractor (shipbuilder) for cost increases above target cost, although final contract terms are subject to change pending completion of negotiations between the government and shipbuilder.\nBecause the Ford-class shipbuilder represents the only domestic entity capable of constructing, testing, and delivering nuclear-powered aircraft carriers, the government’s contract negotiating position is compromised. Contracting in this sole source environment, the government lacks the leverage it would have in a competitive environment to negotiate lower costs or capability enhancements. Similarly, the shipbuilder’s proposed price will not be influenced by competition and, as such, is likely to account for the remaining technical and design risks facing the Ford class program. For example, in a previous solicitation for Littoral Combat Ship constructions, potential shipbuilders submitted proposals which were priced significantly higher than the Navy’s expectations. Even in light of the competition in this case, contractor officials stated that the fixed-price terms the Navy sought prompted a forthright assessment of remaining program risks—including technical, design, and funding uncertainties— and subsequent pricing of that risk in their proposals. Alternatively, Navy officials report that the CVN 79 shipbuilder could propose to remove high- risk items from the contract’s shareline or move to renegotiate the planned cost-sharing terms altogether. For example, in Zumwalt-class destroyer contract negotiations, the Navy and its shipbuilder reached agreement to remove work from the scope of the lead ship’s construction contract and to include a special incentive fee associated with construction and delivery of the ship’s innovative, composite-material deckhouse, which had never before been manufactured.",
"The Navy awarded a multibillion dollar contract for detail design and construction of CVN 78 in 2008, even in light of substantial technology development risks and an overly optimistic budget. Now, nearly 5 years later, the cost of the lead ship has increased by more than $2.3 billion and many risks still remain which are likely to lead to further cost increases before the ship is completed. Although the ship is now more than half constructed, and promises significant capability increases over existing carriers, it is still grappling with land-based testing delays and system reliability deficiencies for critical government-provided technologies, a high-risk operational testing strategy, potentially unachievable performance requirements, and cost estimating uncertainties. Further complicating matters, the Navy is attempting to manage these challenges within an operational environment that is pressuring it to deliver CVN 78 to the fleet with haste.\nCongress granted the Navy a temporary waiver from the requirement to have 11 operational aircraft carriers in the fleet. Under the terms of the waiver, the waiver period ends at the planned CVN 78 commissioning in March 2016. As it stands, the Navy will not be positioned to deliver a fully capable ship at that time. For example, recent Navy decisions to introduce shipboard integration testing after lead ship delivery will provide valuable insights and facilitate identification of any deficiencies of integrated ship systems. However, because of the overlapping timing of this testing with IOT&E—as well as with deferred developmental tests for ship systems—the Navy will not have time to incorporate potentially significant results of the testing before CVN 78 likely deploys. Further, reliability shortfalls facing key Ford-class systems cloud the Navy’s ability to forecast when, or if, current sortie generation rate and manning requirements for the ship will be met—analysis that could inform decisions on cost and requirements trade-offs in the program, both within DOD and by Congress.\nAs the Navy looks ahead to its planned detail design and construction contract award for CVN 79, it will be important to avoid repeating the mistakes of the past. Staying within budget will require the Navy to retire significant technical risks mainly by completing land-based testing for critical technologies before negotiating a contract with the shipbuilder. The results of this important testing will allow the government and shipbuilder to gain clearer insights on the capabilities of each system and, subsequently, better position the government to avoid paying a costly risk premium within the planned, fixed-price incentive contract. Further, the Navy’s current CVN 79 cost and budget estimates are overly optimistic in that they do not take into account remaining developmental and design risks with the lead ship. A more realistic assessment of CVN 79 costs would put the government in a better negotiating position, even within the existing sole source environment. Until these issues are resolved, the Navy cannot be confident that the CVN 79 capabilities it desires can be attained at the most advantageous price to the taxpayer.",
"We recommend the Secretary of Defense direct the Secretary of the Navy to take the following five actions: To ensure Ford-class carrier acquisitions are supported by sound requirements and a comprehensive testing strategy, and to promote the introduction of reliable, warfighting capable ships into the fleet, take the following actions prior to accepting delivery of CVN 78:\nConduct a cost-benefit analysis on (1) currently required capabilities, including increased sortie generation rates and reduced manning and (2) the time and money needed to field systems to provide these capabilities, in light of known and projected reliability shortfalls for critical systems. This analysis should be informed by demonstrated system performance from land-based testing, including updated reliability growth projections, and should identify trade space among competing cost, schedule, and performance parameters. The analysis should also consider whether the Navy should seek requirements relief from the Joint Requirements Oversight Council, to the extent necessary, to maximize its return on investment to the warfighter. The Navy should report the results of this analysis to Congress within 30 days of CVN 78 commissioning.\nUpdate the Ford class program’s test and evaluation master plan to account for developmental testing outcomes experienced since 2013 and ensure that sufficient time is allotted post-delivery to complete developmental testing activities deferred from land to sea prior to initiating integration testing.\nAdjust the planned post-delivery test schedule to ensure that system integration testing is completed prior to entering initial operational test and evaluation.\nTo improve the Navy’s ability to manage the costs and schedule of CVN 79 detail design and construction, take the following actions:\nDefer the CVN 79 detail design and construction contract award until land-based testing for critical, developmental ship systems including the dual band radar, advanced arresting gear, and EMALS is completed.\nDuring the recommended deferral period, update the Navy’s CVN 79 cost estimate on the basis of actual costs and labor hours associated with CVN 78 construction to determine whether the preliminary information and assumptions remain relevant and accurate.",
"We provided a draft of this report to DOD for comment. In its written comments, which are reprinted in appendix II, DOD concurred with one of our recommendations, partially concurred with three recommendations, and did not concur with one recommendation. Additionally, we removed one recommendation from our final report based on new information that DOD provided. DOD also provided technical comments that we incorporated into the report, as appropriate.\nDOD partially concurred with our recommendation to conduct a cost- benefit analysis on Ford-class capability requirements and the time and money needed to field systems to provide these capabilities. While DOD agreed that seeking requirements relief from the Joint Requirements Oversight Council is a potential long term solution if certain systems do not meet stated capabilities, it disagreed that a cost-benefit analysis is needed within 30 days of CVN 78 commissioning. In its comments, DOD stated that it does not anticipate major requirements changes for the ship and offered that the most cost-effective path forward in the program is to complete construction of the existing design. However, DOD noted that after measuring CVN 78 warfighting capabilities through planned developmental and operational testing and following lead ship delivery, it intends to identify mitigations for any systems that do not meet stated capabilities, which could include seeking requirements relief from the Joint Staff. Under DOD’s proposed approach, the process of measurement and mitigation would conceivably extend into 2020, when CVN 78 is scheduled to complete IOT&E. This strategy is unnecessarily concurrent—particularly since the Navy has already identified several significant, long-term limitations that will face the ship. We believe the knowledge gained from developmental testing—coupled with additional study and evaluation leading up to CVN 78 delivery in 2016—would provide a strong foundation for conducting a cost-benefit analysis of the ship’s current required capabilities. Waiting until IOT&E is completed may be too late to make effective tradeoffs among cost, schedule, and performance. Further, such analysis could provide a sound basis for investment decisions related to CVN 80, prior to that ship’s planned detail design and construction contract award in late 2017.\nDOD concurred with our recommendation to update the Ford class program’s test and evaluation master plan prior to delivery of CVN 78. DOD cited its current efforts to update the program’s test and evaluation master plan as being responsive to our recommendation. According to DOD, the revised plan is expected to include three phases of land-based developmental testing followed by two phases of integration testing for shipboard systems. The first integration testing phase is scheduled to commence three months prior to CVN 78 delivery, to be followed by the second integration testing phase beginning in 2017. Although DOD expressed confidence that its planned testing strategy would provide ample time for developmental and integration testing prior to operational testing, it did not directly address our recommendation related to ensuring that sufficient time is allotted to complete certain land-based testing activities that have been deferred to sea prior to beginning integration testing. Further, the extent to which additional testing will be deferred to sea remains unknown, as it hinges on land-based developmental testing outcomes leading up to CVN 78 delivery in 2016. Consequently, DOD’s current update of the test and evaluation master plan will be structured around assumptions about future land-based testing outcomes that may or may not come to fruition.\nDOD partially concurred with our recommendation to adjust the planned post-delivery test schedule for CVN 78 to ensure that system integration testing is completed prior to entering IOT&E. In its comments, DOD presented a plan under which warfare and non-warfare systems will separately complete integration testing prior to entering into their respective operational testing phases. However, this plan shows that when non-warfare system operational testing is scheduled to begin, integration testing of the warfare systems will be just past halfway complete. As we point out in our report, concurrency in integration and operational test schedules will constrain opportunities for the Navy to implement any needed corrective actions stemming from problems identified in the integration testing. Further, given the strong linkage between non-warfare and warfare systems, this overlap poses risk to the test program. For instance, ship warfare systems such as the dual band radar, EMALS, and advanced arresting gear require cooling and power from non-warfare systems aboard the ship. Subsequently, until these warfare systems are fully integrated and developmentally tested with the non-warfare systems upon which they rely, the Navy cannot be confident that the ship is ready to enter IOT&E.\nDOD did not agree with our recommendation to defer the CVN 79 detail design and construction contract award until land-based testing for critical, developmental ship systems is completed. In its comments, DOD responded as if we had recommended a total work stoppage for CVN 79—a drastic measure inconsistent with our recommendation. As we noted in this report, the Navy has contracted for construction preparation activities for this ship since 2009. That ongoing contract provides a vehicle for continuing limited CVN 79 construction work into the future— while allowing time for land-based testing activities to regain traction and retire risks—and precludes any need for a detail design and construction contract in the near term. In its response, DOD noted that an extension of the CVN 79 construction preparation contract would require use of fiscal year 2014 funds for additional bid and proposal efforts. In response to our further inquiry on this matter, the Navy stated the costs would be on the order of $5-10 million and acknowledged there are no known legal or regulatory impediments to a limited extension of the construction preparation contract. According to the Navy, under an extension of the construction preparation contract, building and outfitting of structural units and the procurement of materials could continue. Retiring remaining risks in land-based testing will improve the Navy and shipbuilder’s ability to assess the likely CVN 79 costs before the planned detail design and construction contract is awarded. We continue to believe that, in light of the existing sole source environment for aircraft carrier construction, a delay in awarding the CVN 79 detail design and construction contract—by extending the construction preparation contract—would improve the government’s negotiating position for the ship.\nDOD partially concurred with our recommendation to update the Navy’s CVN 79 cost estimate on the basis of actual costs and labor hours associated with CVN 78 construction. We recommended that this update take place following deferral of the CVN 79 detail design and construction contract award—an action DOD did not agree to take, as discussed above. Nonetheless, DOD stated that it plans to have an updated independent cost estimate prepared by the Office of Cost Assessment and Program Evaluation ahead of the CVN 79 detail design and construction contract award. According to DOD, this cost estimate will take into account actual costs and labor hours associated with CVN 78 construction.\nDOD did not concur with our recommendation on delaying the commissioning of CVN 78 that was included in the draft report that we sent to DOD for comment. We made the decision to remove this recommendation based on information DOD provided about unintended consequences associated with delaying the commissioning of the ship, including potential issues related to how a noncommissioned ship would operate effectively within the Navy’s chain of command. The intent of the draft recommendation was to highlight the operational limitations that will be associated with the ship when it is commissioned, but DOD noted in its response that the ship will not be designated operationally ready until testing and trials are completed—an estimated 34 months after delivery. Until the ship is judged operationally ready, it will lack the ability to conduct assigned operations for which it is designed.\nFurther, DOD disagreed with our finding that, when it is commissioned, CVN 78 will have significant operational limitations due to the expected reliability rates of key technologies, including EMALS, advanced arresting gear, dual band radar, and advanced weapons elevator systems. DOD stated that these systems are designed and engineered to be highly reliable. However, DOD did not address the significant evidence we present in this report demonstrating that these systems are projected to experience reliability deficiencies well into future years. For instance, the Navy now estimates that the advanced arresting gear and EMALS will not demonstrate their minimum required reliabilities until 2027 and 2032, respectively. High reliability from these and other ship systems is key to enabling the Ford class to achieve its planned capabilities. DOD also outlined the Navy’s disagreement with our findings related to the effect that land-based testing delays have had on the development of certain critical technologies within the Ford-class program. The response asserts that our report overstates the cost, schedule, and technical risks associated with these delays. According to the response, the system designs for EMALS, advanced arresting gear, and dual band radar have progressed to the point where the Navy expects that any future changes will be internal to each system and independent of the ship interface. As a result, the Navy concludes that the ship’s design is stable. We disagree. As we have documented in this report, the Navy’s knowledge deficit about these systems is evidenced by the significant land-based testing delays that EMALS, advanced arresting gear, and volume search radar (a dual band radar component) have encountered. Tests to date have uncovered a multitude of deficiencies that the Navy did not anticipate when it developed its CVN 78 and CVN 79 construction schedules. These outcomes have prompted Navy decisions to produce the systems prior to achievement of stable designs—a strategy that risks costly retrofits and rework aboard CVN 78 before and after ship delivery. In light of the considerable testing scope that remains for each of these developmental technologies, we do not share the Navy’s confidence that all future design changes to these systems will be independent of the overall ship design.\nWe are sending copies of this report to interested congressional committees, the Secretary of Defense, and the Secretary of the Navy. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-4841 or mackinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report.",
"This report evaluates the Navy’s acquisition of Ford-class aircraft carriers. Specifically, we (1) assessed technical, design, and construction challenges the Navy faces in delivering the lead ship, CVN 78, within current budget and schedule estimates; (2) evaluated whether the Navy’s post-delivery test and evaluation strategy for CVN 78 will provide timely demonstration of required capabilities; and (3) identified actions the Navy is taking to improve cost outcomes for the first follow-on ship, CVN 79, ahead of contract award for detail design and construction.\nTo assess challenges the Navy faces delivering CVN 78, we reviewed Department of Defense (DOD) and contractor documents that address technology development efforts including technology readiness assessments, test reports, program schedules and briefings, and reports to Congress. We also witnessed testing of the electromagnetic aircraft launch system (EMALS) and the advanced arresting gear critical technologies at the Navy’s land-based test site in Lakehurst, New Jersey, and we visited the Nimitz-class carrier USS Harry S. Truman (CVN 75) to improve our understanding of the capability improvements and technical innovations planned for introduction aboard CVN 78. In our review, we relied on DOD’s selection of critical technologies and its determination of the demonstrated levels of maturity. Although we did not validate the technology readiness levels (TRL) that DOD assigned to Ford-class critical technologies, we did seek to clarify the TRLs in those cases where information existed that raised concerns. To identify design changes and to understand the impact of these changes to CVN 78 construction, we reviewed quarterly ship production progress conference briefings, contract performance reports, and program schedules and briefings. We also evaluated Navy and contractor documents outlining cost and schedule parameters for CVN 78 including budget submissions, contracts, contract performance reports, reports to Congress, and program schedules and briefings. We also relied on our prior work evaluating the Ford-class program and shipbuilding best practices to supplement the above analyses. To further corroborate documentary evidence and gather additional information in support of our review, we conducted interviews with relevant Navy and contractor officials responsible for managing the technology development, design, and construction of CVN 78, such as the Program Executive Office, Aircraft Carriers; CVN 78 program office; Newport News Shipbuilding (a division of Huntington Ingalls Industries) (CVN 78 shipbuilder); Supervisor of Shipbuilding, Conversion, and Repair officials; Aircraft Launch and Recovery program office; General Atomics (EMALS and advanced arresting gear prime contractor); Program Executive Office, Integrated Warfare Systems; Above Water Sensors program office; Integrated Combat Systems program office; and Raytheon Integrated Defense Systems (dual band radar prime contractor). We also held discussions with the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics; Office of the Director, Cost Assessment and Program Evaluation; Office of the Director, Operational Test and Evaluation; Office of the Deputy Assistant Secretary of Defense for Developmental Test and Evaluation; Office of the Deputy Assistant Secretary of the Navy for Ship Programs; Office of the Chief of Naval Operations’ Air Warfare directorate; Office of the Commander, Navy Operational Test and Evaluation Force; Naval Sea Systems Command’s Nuclear Propulsion and Cost Engineering and Industrial Analysis offices; Naval Air Warfare Center—Aircraft Division; and the Defense Contract Audit Agency.\nTo evaluate whether the Navy’s post-delivery test and evaluation strategy for CVN 78 will provide timely demonstration of required capabilities, we analyzed (1) development schedules and test reports for CVN 78 critical technologies; (2) construction, delivery, and testing schedules and reports for CVN 78; and (3) the Navy’s December 2012 draft revision to the CVN 78 test and evaluation master plan to identify concurrency among developmental, integration, and operational testing plans. Further, we reviewed Joint Strike Fighter reports and program briefings to identify plans for integrating that aircraft with CVN 78. We also reviewed the draft CVN 78 test and evaluation master plan, reliability data and growth curves for key ship systems, program briefings, and DOD guidance to identify and assess the impact of reliability shortfalls on CVN 78 capabilities. To further corroborate documentary evidence and gather additional information in support of our review, we held discussions with Navy and contractor officials and DOD agencies responsible for managing development and reliability growth for key CVN 78 systems, ship integration testing, and operational testing, including the Program Executive Office, Aircraft Carriers; CVN 78 program office; Newport News Shipbuilding; Aircraft Launch and Recovery program office; Program Executive Office, Integrated Warfare Systems; Above Water Sensors program office; Office of the Director, Operational Test and Evaluation; Office of the Deputy Assistant Secretary of Defense for Developmental Test and Evaluation; Office of the Commander, Navy Operational Test and Evaluation Force; Naval Air Warfare Center—Aircraft Division; and the Joint Strike Fighter joint program office.\nTo identify actions the Navy is taking to improve cost outcomes for CVN 79 ahead of detail design and construction contract award, we reviewed shipbuilder reports detailing lessons learned constructing CVN 78, the Navy’s request for proposals for detail design and construction of CVN 79, CVN 79 construction plans and reports, program briefings, Navy budget submissions, and our prior work. To supplement our analysis and gain additional visibility into the Navy’s actions for improving CVN 79 outcomes, we interviewed officials from the Program Executive Office, Aircraft Carriers; CVN 78 program office; CVN 79 and CVN 80 program office; Newport News Shipbuilding; Office of the Director, Cost Assessment and Program Evaluation; and Naval Sea Systems Command’s Contracting and Cost Engineering and Industrial Analysis offices.\nWe conducted this performance audit from June 2012 to September 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"",
"",
"",
"In addition to the contact named above, key contributors to this report were Diana Moldafsky, Assistant Director; John Oppenheim, Assistant Director; Greg Campbell; Christopher R. Durbin; Laura Greifner; Kristine Hassinger; Karen Richey; W. Kendal Roberts; Charlie Shivers; Roxanna Sun; and Holly Williams."
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{
"question": [
"To what extent is CVN 78 completion on-schedule?",
"How successful has the development of CVN 78's critical technology been?",
"How has the construction of CVN 78 been delayed?",
"How do these delays affect the cost of construction?",
"What factors are delaying demonstrations of CVN 78 capabilities?",
"How do these delays affect other critical schedules?",
"How do IOT&E findings affect ship capability demonstrations?",
"To what extent is the Joint Strike Fighter on schedule?",
"How reliable is the ship?",
"What recommendations did GAO make?",
"How is the Navy improving the construction process for the future?",
"How similar is CVN 79 to CVN 78?",
"To what extent will the new process mitigate the flaws which exist in the present process?",
"How could this affect the government's ability to negotiate a desirable contract?",
"How does the Navy plan on expanding its carrier fleet?",
"What progress has been made in the construction of these ships?",
"What new features will these ships have?",
"What does this report examine?",
"What information did GAO consider in writing this report?",
"What did GAO recommend to the Secretary of Defense?",
"What did GAO recommend to the Navy?",
"How did DOD respond to these recommendations?",
"What is GAO's current stance regarding the construction contract award?"
],
"summary": [
"The Navy faces technical, design, and construction challenges to completing Gerald R. Ford ( CVN 78) that have led to significant cost increases and reduced the likelihood that a fully functional ship will be delivered on time.",
"The Navy has achieved mixed progress to date developing CVN 78's critical technologies, such as a system intended to more effectively launch aircraft from the ship. In an effort to meet required installation dates aboard CVN 78, the Navy has elected to produce some of these systems prior to demonstrating their maturity--a strategy that GAO's previous work has shown introduces risk of late and costly design changes and rework, and leaves little margin to incorporate additional weight growth in the ship.",
"In addition, progress in constructing CVN 78 has been overshadowed by inefficient out-of-sequence work, driven largely by material shortfalls, engineering challenges, and delays developing and installing critical technology systems.",
"These events are occurring in a constrained budget environment, even as lead ship costs have increased by over 22 percent since construction authorization in fiscal year 2008--to $12.8 billion. Additional increases could follow due to uncertainties facing critical technology systems and shipbuilder underperformance.",
"The Navy's strategy for providing timely demonstration of CVN 78 capabilities is hampered by post-delivery test plan deficiencies, Joint Strike Fighter aircraft delays, and reliability shortfalls affecting key ship systems.",
"Additional risk is introduced due to the Navy's plan to conduct integration testing of key systems with the ship at the same time as initial operational test and evaluation (IOT&E). This strategy will constrain opportunities to implement timely, corrective actions if problems are discovered with key ship systems.",
"In addition, significant discoveries during IOT&E could delay demonstration of ship capabilities.",
"The Joint Strike Fighter, intended to operate with the carrier, has faced delays, and there is the likelihood of costly retrofits to the ship to accommodate the aircraft after CVN 78 is delivered to the Navy.",
"But even after the ship commissions, several key ship systems will continue to face significant reliability shortfalls that will likely increase costs to the government and limit the ship's mission effectiveness. The extent of these limitations will not be known until after IOT&E.",
"GAO contemplated making a recommendation to delay CVN 78 commissioning until the ship successfully completes IOT&E. However, based on additional information provided by DOD, GAO decided not to include this recommendation in the report.",
"The Navy and shipbuilder are implementing process improvements aimed at reducing the cost of the follow-on ship, John F. Kennedy (CVN 79), ahead of the main construction contract award for that ship, currently planned for September 2013.",
"CVN 79 is to be of nearly identical design to CVN 78.",
"The shipbuilder plans to employ a new, more efficient build strategy, but remaining technical and design risks with the lead ship could interfere with the Navy's ability to achieve its desired cost savings for CVN 79. These uncertainties also affect the soundness of the Navy's current CVN 79 cost estimate, which is optimistic.",
"These factors, when coupled with the existing sole source environment for aircraft carrier construction, may compromise the government's negotiating position for CVN 79.",
"The Navy plans to spend over $43 billion to produce three Ford-class aircraft carriers.",
"The lead ship, CVN 78, is under construction, and preparation work is underway for the second, CVN 79.",
"These ships will feature new technologies designed to increase capability and reduce crew size.",
"This report examines (1) technical, design, and construction challenges to delivering the lead ship within budget and schedule estimates; (2) the Navy's test strategy for demonstrating CVN 78's required capabilities; and (3) actions the Navy is taking to improve CVN 79 cost outcomes.",
"GAO analyzed documents related to mission requirements, acquisition plans and performance, and testing strategies, and interviewed Department of Defense (DOD) and contractor officials.",
"GAO recommends the Secretary of Defense take several actions aimed at ensuring Ford-class carrier acquisitions are supported by sound requirements and a comprehensive testing strategy, including conducting a cost-benefit analysis of required capabilities and associated costs.",
"GAO is also recommending actions to improve the Navy’s knowledge about CVN 79 capabilities and costs before beginning contract negotiations.",
"DOD concurred with one recommendation, partially concurred with three others, and did not concur with the recommendation to defer CVN 79’s detail design and construction contract award.",
"GAO maintains that DOD’s current schedule for awarding this contract undermines the government’s negotiating position."
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CRS_RL33851
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{
"title": [
"",
"Overview1",
"Afghan Refugees: Historical Background",
"Profile of Remaining Refugees",
"Refugees in Pakistan14",
"Population Breakdown",
"Historical Background and Status of Afghans",
"Pakistan's Economic and Security Concerns",
"Registration",
"Future Prospects",
"Refugees in Iran",
"Population Breakdown",
"Historical Background and Status of Afghans",
"Labor Migration",
"Concerns and Future Prospects",
"U.S. Assistance for Afghan Refugees",
"Funding Partners",
"Supported Activities",
"Issues for Congress",
"Establishing USG Funding",
"Sustainability of Returns",
"New Political Arrangements in South Asia"
],
"paragraphs": [
"",
"The United Nations High Commissioner for Refugees (UNHCR) has helped over 3.69 million Afghan refugees return to Afghanistan since March of 2002, marking the largest assisted return operation in UNHCR's history. In addition, more than a million refugees have returned to Afghanistan without availing themselves of UNHCR's assistance (also known as \"spontaneous returns\") bringing the total number of returnees to 4.8 million or more. Almost all of these Afghans have returned from neighboring Iran and Pakistan, where the vast majority of Afghan refugees have lived for well over two decades (see Table 1 ).\nIssues of particular concern to the 110 th Congress are 1) continuing and sustaining refugee returns as part of Afghanistan's overall reconstruction; 2) developing funding strategies for the next phase of Afghanistan's remaining refugees; and 3) examining the refugee situation in light of border security issues, particularly with regard to Pakistan's recently announced plan to lay land mines and build a fence along its border with Afghanistan. In the long term, the impact of Afghan migration trends may need to be better understood in light of its potential impact on political arrangements in South Asia.",
"Afghans began fleeing their country in April 1978, when the Marxist People's Democratic Party of Afghanistan (PDPA), overthrew the government of Muhammad Daoud (who had himself seized power from his cousin Afghan king Zahir Shah in a bloodless coup in 1973). The trickle of refugees accelerated when the Soviet Union invaded in December 1979, ostensibly to restore order to the country as the PDPA became increasingly splintered. While political infighting was certainly a problem, some observers also noted that Afghanistan's leadership had begun irking Moscow by making decisions without Soviet approval. The Soviet attempt to subjugate the Afghans was at times particularly brutal, including the alleged use of torture and collective punishment. By the beginning of 1981, some 3.7 million refugees had fled to Iran and Pakistan.\nSmaller numbers of refugees continued to flee Afghanistan for the next decade, as the Soviets fought an insurgency mounted by a loosely allied group of mujahideen , or holy warriors. In 1988, the Soviet Union agreed to withdraw from Afghanistan, and UNHCR and the international assistance community prepared for the massive repatriation of refugees. Large-scale returns did not begin until 1992, however, when the Soviet-installed leader Najibullah was finally forced from power. No sooner had some million and a half refugees returned, however, than Kabul descended into armed disorder as various mujahideen factions began fighting for control of the capital and the surrounding area. A new wave of people was displaced (possibly up to a million), a majority of whom remained within Afghanistan's borders as internally displaced people (IDPs). After a year-long siege, the Taliban took Kabul in 1996, and had gained control of most of the country by 1998. Although they brought a measure of peace to the areas they captured, many Afghans, especially the educated, fled the Taliban's particularly austere vision of Islamic propriety, with its severe restrictions on women's activities, education, and social and cultural life.\nA final wave of refugees numbering 200,000 to 300,000 left Afghanistan during the U.S.-led invasion of October 2001. With the defeat of the Taliban a month later, UNHCR led consultations with the three governments centrally involved in the Afghan refugee issues—Pakistan , Iran, and Afghanistan—and began planning for another mass repatriation. Beginning in 2002, UNHCR along with Afghanistan, established separate Tripartite Agreements with Pakistan and Iran to provide a legal and operational framework for voluntary repatriations from each country. These agreements have been renewed several times since then. The working assumption at the time was that there were approximately 2 million refugees in Pakistan and 1.5 million in Iran. Almost everyone was caught off-guard, when subsequently 2.15 million Afghans returned in 2002, and yet most of the camps in Pakistan (and to some extent the cities in Iran) continued to house large numbers of Afghan refugees. It turned out that there were far more Afghans living in Pakistan than most analysts had thought. Although the numbers of returns declined in subsequent years, it can be seen from Table 1 that through 2005 the pace remained very strong.",
"UNHCR estimates that, as of December 2006, perhaps 2.46 million registered and unregistered Afghans are currently living in Pakistan and more than 900,000 in Iran. Who among these Afghans is a refugee and who is not is a matter of debate in each country. Still, perhaps as many as 3.5 million registered and unregistered Afghans still live in exile. In Pakistan, 80 percent of those remaining have been there for more than two decades; 50 percent were born in exile.",
"",
"A census was completed by UNHCR and the Government of Pakistan (GoP) in March of 2002 that provided a clear picture, for the first time in years, of the Afghan population in Pakistan. The census found 3,049,268 Afghans living in Pakistan, 42% of them in camps and 58% in urban areas. Over 81% of the Afghans were Pashtuns, with much smaller percentages of Tajiks, Uzbeks, Turkmen, and other ethnic groups (see Figure 1 ).\nThe census revealed two related factors that could have profound implications for the future of repatriation from Pakistan. First, the vast majority of Afghan families in Pakistan arrived in the first years of the refugee crisis; over 50% arrived in 1979 and 1980 alone. Second, it appears that a very substantial number of the Afghans remaining in Pakistan were in fact born in Pakistan—not Afghanistan (see Figure 2 ). Encouraging Afghans who have been living for two and a half decades outside their country—some of whom, in fact, may never have even set foot in Afghanistan—to repatriate may be a distinct challenge in the coming months and years.",
"Although most Afghans in Pakistan date their arrival to the early years of the Soviet occupation, agricultural and economic instability have long been a feature of life in the highlands of Afghanistan, and for centuries Afghans have migrated in response to crop failures, drought, and other problems, often across international borders, to look for temporary work. While the numbers crossing into Pakistan in 1979 and 1980 probably dwarfed any previous population flows, many of the fleeing Afghans had connections—social networks, kinship ties, economic contacts—in Pakistan that helped ease their transition.\nFor the first decade and a half of the refugee crisis, the GoP, although it has never signed the 1951 Refugee Convention or the 1967 Protocol, was relatively tolerant in its treatment of Afghan refugees. Several dozen camps were set up beginning in 1979, most of them in the Northwest Frontier Province (NWFP) and a few in Balochistan. Although the GoP did not allow the primarily rural Afghans to own or work the land, it did permit them to freely move and work within the country. Nevertheless, it was assumed at the time that most Afghans remained in the camps, where they received food rations, along with basic health and educational services. (The subsequent realization that there were far more Afghans in Pakistan than anyone knew suggests that urbanization was far more extensive during this period.) The camps were, and are, overseen by UNHCR and the Pakistani Chief Commissionerate for Afghan Refugees (CCAR), a division of the Ministry of States and Frontier Regions (SAFRON). UNHCR and CCAR contracted with a number of international and local NGOs to provide health, education, water, and sanitation services in the camps. These have included major U.S.-based NGOs, including Mercy Corps, International Rescue Committee, Save the Children, American Refugee Committee, Church World Service, and others.\nIn 1995, the World Food Programme (WFP) determined that Afghans were capable of providing for their own food needs, and it ceased providing rations to the camps. The GoP's position toward the refugees began to harden as the flow of international aid began to diminish, and more Afghans were driven into cities to look for work. With the cessation of food aid, the sole identity document given to Afghans, a refugee passbook, became meaningless; therefore, Afghans (until very recently) had no identification in Pakistan, a factor that doubtless contributed to the general uncertainty about their numbers.",
"With the defeat of the Taliban, the GoP began strongly advocating that conditions were appropriate for the return of all Afghans to Afghanistan. The GoP appears to have both economic and security concerns about the Afghan population in Pakistan. On the economic level, some Pakistani politicians believe that Afghans are taking jobs that might otherwise go to Pakistanis. Additionally, Afghans are reportedly willing to work for lower wages than Pakistanis, causing some Pakistanis to believe that wage levels are being depressed. Some recent research has shown that several business sectors—particularly transport and construction—make heavy use of Afghan labor. Economic worries about the Afghan population have become more persistent in recent years, as the overall level of international funding for refugees in Pakistan has decreased. The census provided more fuel for this concern when it revealed that, despite the record repatriation, millions of Afghans still remain in Pakistan.\nIn addition to their economic impact, some Pakistani leaders are concerned that Afghans represent a security risk for Pakistan. These fears concern lawlessness, terrorism, and anti-government activity. There is a perception among many Pakistanis, including government officials, that Afghans are responsible for a great deal of the smuggling of stolen goods, narcotics, and weaponry across Pakistan's western border. The so-called \"smugglers' markets\"on the outskirts of Peshawar and Quetta, for instance, where one can allegedly buy anything from counterfeit passports to heroin to Kalashnikovs, are alleged to be run by Afghans and to flourish because of their proximity to Afghanistan. Pakistani police, in justifying their sweeps through Afghan areas, have cited the imperative to crack down on crime.\nOne of the reasons the smugglers' markets have been difficult for Islamabad to deal with is that they exist in the so-called Federally Administered Tribal Areas (FATA), where the central government's writ is weak. Although each of the FATA's seven agencies is ostensibly governed by a \"political agent\" appointed by the government in Islamabad, in practice the tribal areas are ruled by traditional Pashtun leaders, exercising a blend of personal decree, Islamic law ( sharia ), and traditional Pashtun legal practices known collectively as pushtunwali . Despite Islamic proscriptions against drugs and alcohol, the smugglers' markets have been an important source of revenue for some FATA leaders, who continue to permit this operation.\nIt is not merely lost economic revenue or local law and order that concerns Pakistani government officials. Many experts and officials believe that the FATA is being used as a staging area for militant activity, some of it directed against coalition forces in neighboring Afghanistan and some against the Pakistani government. This worry has grown more acute in the wake of several assassination attempts against Pakistan's President Pervez Musharraf. In light of the difficult to verify but nevertheless oft-stated presumption that Osama bin Laden and other senior members of Al Qaeda are hiding in the mountainous tribal areas of Pakistan, perhaps with the knowledge of local leaders, the government's efforts to gain control over these areas have gained urgency.\nSecurity was considered to be one of the reasons behind the GoP's decision to close all of the remaining refugee camps in the FATA. The GoP had for at least two years declared its desire to clear out the FATA camps, but only began the operation in summer 2005 when it closed refugee camps in South Waziristan Agency. Camps in North Waziristan were next with the most recent closures occurring in Bajaur and Kurram agencies in autumn 2005. All told, close to 200,000 refugees were displaced in the closures, the majority of them electing to repatriate to Afghanistan. The GoP received some criticism during each closure operation for failing to identify suitable relocation alternatives for Afghans unable to repatriate because they lacked shelter or the means to earn a living in Afghanistan, or other reasons. According to some reports, this resulted in many Afghans crossing the border into Afghanistan without the desire to do so and without adequate preparation, support, or security on either side of the border. According to the terms of the Tripartite Agreement between the GoP, the government of Afghanistan (GoA) and UNHCR, which was signed in March 2002 (and extended several times since), all returns must be voluntary. While there have been isolated reports of forced deportations, most observers believe that the GoP has largely abided by the agreement.\nOn January 17, 2007, Pakistan's government announced the pending closure of four Afghan refugee camps in the border areas, stating it was doing so in order to ensure security. Two camps will reportedly be closed in March 2007 with another two to follow later in the year. The camps are located in the provinces of Balochistan and North West Frontier. Some closures had been announced several years ago, but were postponed until 2007. The move could affect as many as 250,000 Afghan refugees. The United Nations and other humanitarian organizations have expressed their concerns for the wellbeing of the refugees affected.",
"In order to gather more information on Afghans in Pakistan, and ultimately to sort out those who have legitimate protection concerns from others, the GoP conducted a census in February and March 2005 that has become the basis for the registration program developed with UNHCR and the government of Afghanistan. Registration of Afghans began on October 15, 2006, and is being conducted by Pakistan's National Database and Registration Authority (NADRA) with the support of UNHCR and the government's Commissionerate for Afghan Refugees. To encourage Afghans to come forward for the registration, those who are registered are given a new identity document entitling them to live and work in Pakistan for three years. The validity period of the documentation is still being negotiated among UNHCR, the GoP, and the government of Afghanistan. Initially, only those Afghans counted in the census (about 2.5 million) could register, but in December 2006, the list was expanded to include all Afghans who could show documented evidence as proof that they were living in Pakistan at the time the census was conducted. The idea was to provide for a transition period during which Afghans may reconnect with Afghanistan and ultimately return home. As of January 17, 2007, 1.5 million had registered. The registration was supposed to end on December 31 but has been extended twice—the first time until January 19, 2007, and then again to February 2, 2007.",
"With each passing year, however, it may become more difficult to encourage refugees to return voluntarily to Afghanistan. According to UNHCR data, the refugees who have already returned to Afghanistan have spent, on average, less time in Pakistan than those who remain. This may suggest that those who left in the early years did so because it was easier for them: they still had connections with Afghanistan. Those who remain, by contrast, may find it especially difficult to return to a country to which they have, relatively speaking, few ties. UNHCR, the U.N. Development Program (UNDP) and the Pakistani authorities are developing a needs assessment to address these ongoing refugee issues.",
"",
"In contrast to Pakistan, there are almost no refugee settlements in Iran. Instead, Afghans tend to occupy urban areas, where, as long as they have official refugee status (see below) they are entitled to basic government-subsidized services such as health care and education. According to recent government statistics, and based on a registration initiative undertaken by the government in November 2005, there were approximately 920,000 registered Afghans in Iran as of May 2006. This figure includes only officially registered refugees, however. It is likely that additional hundreds of thousands (the Government of Iran (GoI) estimates perhaps close to one million) Afghans are living in Iran as undocumented workers. It is estimated that 60% of the registered Afghan refugees have been living in Iran for at least 15 years.",
"As with Pakistan, the history of Afghan migration to Iran long predates the refugee crisis. Thousands of ethnic Turkmen, for instance, sought work in Iran in the 19 th century, and received official recognition from the Persian government. The flow continued a century later, when many Afghans sought work in Iran during the oil crisis of the 1970s, and when, because of increasing international demand and high oil prices, Iran both needed and could afford foreign workers. The cross-border flow picked up dramatically, however, after the Soviet invasion of 1979. By 1981, some 1.5 million Afghans were estimated to have fled to Iran. The number would expand to over 3 million by 1990.\nThe status of Afghans in Iran went through several changes over the course of the refugee crisis. Although Iran is a signatory to the 1951 Refugee Convention, Afghans fleeing the Soviet invasion were initially greeted not as refugees ( panahandegan ) but as \"involuntary religious migrants\" ( mohajerin ). While this category, based on Islamic principles, was technically not an international legal designation, it was considered a higher-status term than \"refugee\" in post-revolutionary Iran. Mohajerin were given indefinite permission to reside in Iran and had access to free education and subsidized health care and food.\nAfter the Soviet withdrawal, however, the status of Afghans began to change. Although 1.4 million Afghans are estimated to have repatriated in 1992, well over a million remained in Iran. Beginning in 1993, new migrants were no longer deemed to be fleeing religious persecution and were categorized as refugees ( panahandegan ); instead of being granted indefinite residency status, they were issued with temporary registration cards. After the fall of the Taliban, Afghans once again began to return in large numbers to Afghanistan (see Table 1 ).",
"As in Pakistan, there is ample evidence that Afghan labor migration now plays in important role in both the Afghan and Iranian economies. Remittances from Afghans working in Iran bring a good deal of revenue to their families in Afghanistan, and Afghans continue to be an important source of labor in Iran, where they are particularly prevalent in construction and agriculture. One measure of the continuing importance of Afghan labor in Iran is the fact that the GoI has recently offered to permit some 200,000 Afghans to work in Iran as guest workers. A key aspect of this offer is that the Afghan workers will be required to leave their families in Afghanistan, presumably to ensure that they will not attempt to emigrate. In fact, however, a number of recent research papers commissioned and published by the Afghanistan Research and Evaluation Unit (AREU) show that this migration pattern has already been a model for some time. Many young Afghan men travel to Iran for a period of months or even years to supplement their family income, while the women and other men remain in Afghanistan. This contrasts with many of the Afghans in Pakistan, who emigrated with their entire extended families or even whole tribal groups. Indeed, there may be something of a reverse migration of single Afghan men in Pakistan, who, leaving their families in Pakistan, return to Afghanistan in search of higher-paying seasonal work and to look after family assets.\nAlthough there has not yet been a systematic study of population movement across the Afghan-Iranian border similar to the International Organization for Migration (IOM) study of the Afghan-Pakistani border, it is clear that since 1979 the volume and frequency of Afghan migration to Iran is much less than it is into Pakistan. To begin with, traffic across the Iranian border is more tightly regulated than it is across the Pakistani border; it is not possible to simply walk from Afghanistan into Iran. Furthermore, Afghans crossing into Iran must pay for a passport and a visa. Obtaining these legally is expensive and time-consuming; obtaining them illegally is even more expensive. In addition, there is much less settlement along Afghanistan's rather arid border with Iran than there is along the border with Pakistan. Afghans wishing to work in Iran must travel fairly deeply into the country before reaching the major population centers of Tehran and Isfahan; even Iran's eastern city of Mashad is over 200 miles from Herat in Afghanistan. The cost of transportation can be prohibitive for many Afghans. For these reasons, Afghan migration to and from Iran does not happen as frequently or as casually as it does along Afghanistan's eastern border.",
"While Afghan refugees in Pakistan have, for at least a decade, gone relatively undocumented, the GoI through the Ministry of Interior's Bureau of Aliens and Foreign Immigrant Affairs (BAFIA) has maintained a fairly detailed list of Afghans whom it has accepted as refugees. Afghans on this \"Amayesh\" list have been entitled to basic health and education services provided by the Iranian government. The list is updated periodically, at which time Afghans must re-register with Iranian authorities in order to remain in the country legally.\nAfghans who are not on the list are subject to deportation; since the beginning of the assisted repatriation program in Spring of 2002, the GoI has deported some Afghans often to protests by UNHCR and other humanitarian agencies. It has been reported that some of the deported Afghans do, in fact, have prima facie refugee status. Hundreds of deported Afghans allegedly were held in detention facilities for days where they were beaten before being sent back to Afghanistan. Although deporting Afghan refugees is contrary to the terms of the Tripartite Agreement signed with UNHCR and Afghanistan, Iran holds that the deportees are illegal immigrants, and not refugees, and that Tehran is thus legally permitted to send them back to Afghanistan.\nAfghans who are clearly on the Amayesh list have encountered increasing difficulties in recent years. Whereas Afghan refugees in the past have received subsidized—or even free—education, health care, and food rations, the GoI has begun implementing measures to force Afghans to pay for these resources. These efforts reached a peak in February 2004, when the GoI announced Afghans would lose their exemption to paying school fees and have to pay increased health care premiums. Additionally, the GoI announced in early 2005 that Afghans would be subject to a nominal tax. Previously, Afghans had received free education and paid the same amounts as Iranians for health care. UNHCR, which felt that the service reductions were particularly draconian considering its own budget cuts in Iran, has reported that the GoI has not been overly fastidious in enforcing the new rules.\nNevertheless, Iran's position, like that of Pakistan, has generally been that it is time for Afghans to return home, and these efforts are part of an explicit effort to encourage Afghans to return to Afghanistan. In both cases, GoI and GoP argue that relative stability has returned to Afghanistan, and there are no further reasons that Afghans require protection abroad. Indeed, the GoI's Director-General of the Interior Ministry's Department for Immigrants and Foreign Nationals Amad Hoseyni recently announced in early 2006 that Iran plans to \"voluntarily repatriate\" all Afghans—no matter what their status is—by March 2007. There is a certain implicit contradiction in this and other such statements by both Tehran and Islamabad: if repatriation is indeed to be voluntary, many Afghans may choose to remain in countries of asylum, thus rendering somewhat questionable the government's assertion that all Afghans will leave. The GoI's announcement that it is considering extending a limited number of work visas to Afghans suggests that the GoI is remaining flexible in its planning—or that there may be some disagreement among leaders.",
"The United States government (USG) has provided humanitarian assistance to Afghan refugees since the early 1980s. Funding for Afghan refugees declined rapidly since it peaked after the U.S.-led invasion in October 2001. Almost all assistance has been provided through the Migration and Refugee Assistance (MRA) account, and has been programmed by the Department of State's Bureau of Population, Refugees, and Migration (PRM). This funding is used not only for the protection and care of refugees in countries of asylum, but also for the reintegration of Afghan returnees in Afghanistan. Table 2 presents USG assistance to Afghan refugees and returnees since the U.S.-led invasion in October 2001. Since the majority of PRM funding is provided to regional projects, it is not possible to provide a breakdown of assistance by country.",
"The majority of PRM's assistance for Afghans is provided to international organizations (IOs), principally UNHCR and the International Committee of the Red Cross (ICRC), both of which have been active in Afghanistan since the 1980s. In past years, some funding has also been provided to the International Federation of Red Cross and Red Crescent Societies (IFRC), IOM, the U.N. Children's Fund (UNICEF), and the U.N. Office for the Coordination of Humanitarian Affairs (OCHA). PRM also provides funding directly to non-governmental organizations (NGOs) for targeted projects. Proposals are selected by a panel of PRM experts based on the NGO's track record, the cost-effectiveness of the proposal, and the extent to which the work meets PRM's stated guidelines.",
"USG assistance to Afghan refugees and returnees through PRM is generally intended to meet the most basic humanitarian needs, including food, shelter, protection, water and sanitation, health care, and primary education. In addition, PRM helps support the assisted repatriation of refugees back to Afghanistan. Much of this activity is carried out by PRM's principal IO partners. UNHCR, in addition to managing the massive repatriation operation, also oversees shelter construction and water and sanitation activities in Afghanistan. In Pakistan and Iran, UNHCR is responsible for refugee protection and camp management, including provision of health care, primary education, and adequate water and sanitation to refugees. Many of these activities are actually conducted by international and local NGOs with oversight and funding from UNHCR. UNHCR has also taken on a leading role in the humanitarian response to the South Asia earthquake of October 2005. Although most of the earthquake's victims were not refugees, because of its experience and assets in Pakistan, UNHCR was designated the lead agency for the camp management cluster, which officially ended on August 31, 2006.\nAlthough it has offices in Iran and Pakistan, the ICRC is more active in Afghanistan, where it supports health care, demining, water and sanitation, family reunification, promotion of international humanitarian law, and detention visits. In addition to supporting the activities of IOs, PRM directly funds NGOs to carry out humanitarian projects, such as shelter construction for returnees, refugee education, skills training for women, and refugee and returnee health care. These projects are designed to complement the activity of the IOs. In keeping with humanitarian practice, PRM does not single out refugees and returnees alone for assistance. Most PRM-funded projects also benefit host communities as well as the target population.",
"",
"Even after four years of exceptionally high refugee return numbers, the population of Afghan refugees in Pakistan and Iran remains the second-highest in the world. If recent returnees—also central to PRM's mandate—are added to this number, Afghans represent by far the largest population of refugees and returnees in the world. Funding for Afghan refugees has, however, diminished both overall and as a percentage of PRM's total annual budget since FY2002. The United States thus faces the challenge of maintaining its crucial assistance in this area of the world despite competing priorities.\nThis challenge may become even more difficult in the near future, because maintaining the successful repatriation program is likely to become more, not less, expensive as time goes on. This is because the refugees remaining in Pakistan and Iran have fewer resources in and ties to Afghanistan than those who returned earlier. They have also, on average, spent far more time outside of Afghanistan than earlier returnees (see Figure 2 ). As time goes on, it becomes increasingly more difficult—and expensive—to encourage remaining refugees to voluntarily return to Afghanistan. Thus, as funding is declining, its importance may be increasing. A related issue may be whether Pakistan and Iran would be receptive to encouragement to grant citizenship to Afghans who do not want to return to Afghanistan.",
"Another factor influencing the success of the repatriation program is the sustainability of previous returns to Afghanistan—that is, the degree to which returnees are being adequately anchored in their communities, whether they are receiving health care, education, and opportunities to make a living. Integration of returnees increasingly is examined in both studies and reports and getting the attention of policymakers. The success of the repatriation program thus depends on the success of the overall reconstruction effort in Afghanistan, including the extent to which returned refugees (and IDPs) are integrated into reconstruction efforts.\nThere is already evidence that many Afghan returnees do not remain in Afghanistan; traffic across the Pakistani border in particular—in both directions—is heavy. To a certain extent, and as noted above, this is a historical pattern that pre-dates not only the repatriation program but the refugee crisis as well. A cause for concern may emerge, however, if it is concluded that many of the Afghans crossing back into Pakistan and Iran are doing so because they could not sustain themselves in Afghanistan. A renewed outward flow of Afghans, in addition to signaling the possible inadequacies of the reconstruction effort in Afghanistan, could increase tensions with host countries. Both the GoI and the GoP, indicate some possible flexibility on the future of Afghan migration, but have nevertheless made clear that they believe the refugee crisis in Afghanistan is over, and that there is no excuse for Afghans to remain in their countries on humanitarian grounds. Future study of the reasons for Afghan population movements is required in order to determine their reasons for migration.\nIt remains to be seen what effect the Pakistani government's recently announced plans for controlling and securing the Afghan border, through the construction of fences and planting of landmines, will have on refugee movements. Humanitarian groups have voiced their concerns and condemned the plan. Pakistan is not a signatory to international conventions banning the use of landmines and the government says the plan is a necessary step to increase border security. President Hamid Karzai apparently also objected strongly to the announcement not only for political and humanitarian reasons, but because he does not believe the plan will be effective in preventing terrorists from crossing the border into Afghanistan.",
"In the longer term, the governments of Afghanistan, Pakistan, and Iran may need to come to new political arrangements concerning the migration of Afghans in South Asia. New research indicates that Afghan labor migration may prove beneficial to both Afghanistan—in the form of remittances—and to countries of asylum—in the form of labor. Indeed, experts have noted that such migration is nothing new; many Afghans have for a long time migrated seasonally in search of livelihood opportunities. It remains to be seen what role the United States might take on this issue.\nDespite its economic advantages, establishing such a \"labor migration regime\" in South Asia may prove politically difficult on the Pakistani and Iranian domestic fronts. Segments of both the GoI and GoP have indicated that they believe Afghans are a net drain on the economy. Maintaining security along the border with Afghanistan is also a concern. Afghans in Pakistan are blamed for a good deal of lawlessness in the country, and there are few down sides for authorities to engage in this kind of scapegoating. Ultimately, however, Afghans will likely continue to live and work outside of Afghanistan, regardless of the legality of doing so; understanding and regulating as much of this migration as possible may be one way to ensure that it is done so in a secure, humane, and effective manner."
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{
"question": [
"How important is the issue of Afghani refugees to the 110th Congress?",
"How does the return of refugees serve as an indicator for the success of the U.S. reconstruction?",
"Why are fewer refugees returning?",
"How can the high pace of returns be maintained?",
"How has the status of Afghan refugees changed in recent years?",
"Why is the Pakistani government concerned about the refugees?",
"How might Afghan refugees be beneficial to Pakistan?",
"How would cutting off this source of income affect the refugees?",
"What level of control does Islamabad have over border crossings?",
"How does the lack of border security affect any future plans?"
],
"summary": [
"The safe and voluntary return of refugees to Afghanistan is not only a major part of the U.S. reconstruction effort in Afghanistan, but also an important indicator of its success.",
"To the extent that refugees continue to return, it can be seen that Afghans are taking part in the future of their country.",
"Those who were most capable of returning did so in the early years; those who remain have progressively less to return to—houses, livelihoods, family—in Afghanistan.",
"Furthermore, maintaining the high pace of returns will require greater levels of reintegration assistance to anchor returnees in their homes and help them reestablish their lives in Afghanistan. Security will also be a major factor in population displacement within and across borders.",
"The status of Afghan refugees in Pakistan and Iran has also been somewhat controversial in recent years as these governments want all Afghan refugees to return to Afghanistan.",
"Officials in Pakistan have become concerned that the concentrations of Afghans in the country pose a security and crime risk, as individuals and goods are smuggled across the border.",
"At the same time, however, many observers argue that Afghan labor migration may be beneficial to both Iran and Pakistan—which take advantage of cheap and effective immigrant labor—as well as Afghanistan, whose citizens benefit heavily from remittances sent in from abroad.",
"To cut off this source of income for many poor Afghans could have disastrous consequences—not only humanitarian, but in the security sphere as well, as more than a million Afghans along the Afghan-Pakistan border are deprived of livelihoods and resort to other means to feed their families.",
"Reportedly, many Afghans cross the border regularly, without documentation, and Islamabad does not appear to have the resources to control this flow.",
"A future challenge will thus be to balance reasonable concerns about security with the importance of Afghanistan's labor plans in the regional economies and the forces that drive its migration patterns. It remains to be seen what effect the Pakistani government's recently announced plans for controlling and securing the Afghan border, through the construction of fences and planting of landmines, will have on refugee movements."
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GAO_GAO-15-732
|
{
"title": [
"Background",
"USAID Does Not Track Use of Conditional Food Aid, although Most Title II Projects Included It in Fiscal Years 2013-2014",
"USAID Does Not Systematically Collect or Use Data on Conditional Food Aid to Manage Title II Projects",
"Almost All Title II Projects Included Conditional Food Aid Activities, Predominantly Food for Assets",
"Implementing Partners Cited Multiple Factors and Challenges Affecting Design of Food-for- Assets Activities",
"Implementing Partners Cited Stakeholder Input, Food Security Assessment, and Availability of Technical Expertise as Important Design Factors",
"Implementing Partners Reported Many Challenges Affecting Design of Food-for- Assets Activities",
"USAID Cannot Systematically Assess Food-for- Assets Activities, but Implementing Partners Highlighted Both Benefits and Challenges",
"USAID Cannot Systematically Assess the Effectiveness of Food for Assets across Title II Development Projects",
"Implementing Partners Reported Food-for-Assets Benefits Such as Building Infrastructure and Teaching Skills",
"Implementing Partners Cited Numerous Challenges to Implementing Food- for-Assets Activities",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: WFP’s Use of Food for Assets in Emergency Projects",
"Factors WFP Considers in Designing and Implementing Food-for- Assets Activities for Emergency Projects",
"WFP-Identified Benefits of Food-for-Assets Activities as Well as Risks and Challenges in Designing and Implementing Its Activities",
"Appendix II: Objectives, Scope, and Methodology",
"Appendix III: Award Amounts for Projects Including Conditional Food Aid in Fiscal Years 2013 and 2014",
"Development Projects",
"Emergency Projects",
"Appendix IV: Comments from the U.S. Agency for International Development",
"GAO’s Comments",
"Appendix V: Comments from the World Food Program",
"GAO’s Comments",
"Appendix VI: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments",
"Related GAO Products"
],
"paragraphs": [
"USAID and its partners implement a variety of conditional food aid activities through development and emergency projects, including maternal and child health care and nutrition, food-for-training, and food- for-assets activities, among others. Such activities are intended to achieve a variety of objectives. For example, maternal and child health care and nutrition activities associated with conditional food aid seek to address major health risks faced by mothers and children by providing special rations in exchange for their attendance at health-related sessions focusing on topics such as infant development. Food-for-training activities provide food in exchange for participation in, for example, agricultural training sessions intended to help recipients learn the skills necessary to increase food productivity. Food-for-assets activities provide food in exchange for participation in activities focused on constructing community assets, such as roads or irrigation systems. Table 1 lists and describes the types of conditional food aid activities implemented through Title II projects.\nFood for assets was one of the most prevalently used types of conditional food aid in Title II development and emergency projects in fiscal years 2013 and 2014. According to WFP, implementing partners, and subject matter experts in the field of international food aid, food-for-assets activities have both advantages and disadvantages. For example, according to some experts, a major advantage of these activities is that, by design, the individuals who can benefit the most are those most likely to participate, for instance, because they may lack other employment opportunities—that is, those who most need the food are generally the most willing to perform the required work, while those who do not need the food are less motivated. According to implementing partners, including WFP, food-for-assets activities also create community infrastructure, such as rural roads and irrigation canals, that provides benefits to the wider community. For instance, irrigation canals can help increase farm productivity, and rural roads can provide access to markets where farmers can sell produced goods. According to implementing partners, including WFP, beneficiaries participating in such activities can learn building and maintenance skills that can also be used to help their communities become more resilient when food shortages occur.\nAt the same time, some experts have expressed concern that food-for- assets activities can benefit those who are not among the neediest or can fail to include the neediest, such as the elderly and those who are not able-bodied. In addition, a critique by WFP questions whether the dual goal of providing food to help meet beneficiaries’ nutritional needs in the short term, while also building assets to help communities increase their resilience in the longer term, could make it difficult to accomplish either goal. According to experts and WFP officials, conditional food aid activities come with additional costs, such as the cost of purchasing concrete and other materials to build irrigation canals. These costs can reduce the partner’s ability to supply food aid. Finally, expert, implementing partner, and WFP stakeholders expressed the concern that the assets created through these activities are not easily sustained over the long term. For example, in a 2014 synthesis of evaluations of food-for- assets activities in 2002 through 2011, WFP reported that ongoing operations and maintenance are required to ensure that assets remain functional and useful. Additionally, the WFP evaluators found that assets might not be properly constructed or maintained if the technical expertise and specialized equipment needed for the assets were too complicated for the community.",
"USAID does not track the use of conditional food aid in Title II projects, although our comprehensive review of USAID data found that most Title II projects included conditional food aid in fiscal years 2013 and 2014. Despite the prevalence of conditional food aid activities, USAID does not systematically collect or use data on conditional food aid provided through Title II projects and, as a result, could not readily provide data on the use of these activities in USAID’s projects. Our review of available USAID data for fiscal years 2013 and 2014 found that 111 of 119 Title II development and emergency projects included conditional, as well as unconditional, food aid activities and that funding for these projects totaled $2.1 billion—87 percent of all USAID funding for Title II projects during this period. USAID and its implementing partners implemented various conditional food aid activities through these projects, including food for assets, food for training, and maternal and child health care and nutrition. However, without the ability to identify all conditional food aid activities, USAID cannot reliably oversee the projects that use it.",
"USAID does not systematically collect data specific to conditional food aid activities in Title II development and emergency projects. As a result, it took USAID several months to identify, and provide information about, the projects that included conditional food aid activities. For example, USAID could not readily identify the types of activities that the projects included and could not provide data on the resources used for these activities. USAID lacks data specific to these activities because it does not require development projects partners to report them and does not track information about these activities that WFP submits.\nDevelopment projects. USAID does not require implementing partners to report on activities, beneficiaries, or financial resources applied to conditional food aid activities. Instead, partners are required to report data based on program elements—common categories used throughout foreign assistance projects to aggregate information for reporting purposes—such as civic participation, maternal and child health, natural resources and biodiversity, and agricultural activity. According to USAID officials, these program elements often include multiple conditional food aid activities in addition to general food distribution, training, and other activities unrelated to conditional transfers.\nEmergency projects. USAID does not systematically track data about the types of conditional food aid activities that WFP implements through USAID-funded Title II emergency projects, although WFP’s annual standard project reports contain this information. However, the WFP reports do not provide, and USAID does not have access to, data specific to WFP’s conditional food aid activities supported by U.S. contributions. Since the United States may be one of multiple donors for WFP’s emergency projects, USAID cannot determine the percentages of its contributions that support particular aspects of these projects.\nBecause information about conditional food aid in Title II projects was not readily available, USAID officials spent several months gathering and revising the data we requested to determine (1) which Title II development and emergency projects contained conditional food aid activities in fiscal years 2013 and 2014, (2) how much money USAID contributed to these projects, (3) how many beneficiaries participated in each project, and (4) what quantities of commodities USAID provided for these projects. Despite these limitations, we were able to estimate the beneficiaries and metric tonnage associated with Title II development awards that included conditional food aid. We gathered project-level data on beneficiaries since USAID lacked data on the beneficiaries of U.S. conditional food aid activities. In addition, we collected data on food used for general emergency food distribution, as USAID did not have data about the number of metric tons of food donated by the United States that was distributed specifically through conditional food aid activities. Finally, we gathered data on food that was shipped from the United States, purchased locally, or otherwise purchased, since USAID lacked information about the metric tons of food distributed by emergency programs for conditional food aid.\nAccording to chapter 203 of USAID’s Automated Directives System (ADS), USAID operating units must strive to continuously learn and improve their approach to achieving results in order to meet development goals. The ADS states that evaluation is the systematic collection and analysis of information as a basis for judgments to improve programs’ effectiveness, to inform decisions about current and future programming, or both. The ADS also states that the purpose of strong evaluation and performance monitoring practices is to apply learning gained from evidence and analysis.\nWithout tracking the use of conditional food aid, USAID cannot identify the scope of conditional food aid activities implemented under Title II. Moreover, USAID cannot readily identify Title II projects that include conditional food aid activities or report the dollars awarded for these activities, the number of beneficiaries served, or the metric tons of commodities used. Additionally, without the ability to collect information about the resources being used to implement conditional food aid activities, USAID cannot reliably monitor or evaluate these activities to learn systematically from their use.",
"Although USAID was unable to provide data about the amounts of Title II funding that were used for conditional food aid activities, our comprehensive review of available USAID data found that in fiscal years 2013 and 2014, 98 percent of USAID-funded Title II development projects and 88 percent of Title II emergency projects included these activities. USAID awarded a total of $2.4 billion in Title II funds, including $2.1 billion for projects that included conditional food aid activities. Table 2 shows the countries where USAID-funded development and emergency projects included conditional food aid activities in fiscal years 2013 and 2014.\nOur analysis showed that the conditional food aid activities implemented in fiscal years 2013 and 2014 included six types of activities—food for assets, maternal and child health care and nutrition, school feeding, food for training, take-home rations, and food for education. Of these activity types, food for assets was the most prevalent for development and emergency projects in aggregate, implemented in 87 of 119 (73.1 percent) of projects (see fig. 1). In development projects, food for assets and maternal and child health care and nutrition activities were equally prevalent, followed by food for training. In emergency projects, food-for- assets activities were most prevalent, followed by school feeding and food for training, respectively. Moreover, partners implemented some food-for-assets activities in conjunction with other conditional food aid activity types, such as maternal and child health care and nutrition activities, to improve a community’s food security. For example, during our fieldwork in Guatemala, we observed the implementation of a Preventing Malnutrition in Children under 2 Years of Age activity that provided fortified rations to participants and assisted the community in developing gardens and learning animal husbandry techniques to promote egg production. The implementing partner also provided cooking demonstrations to teach mothers how to prepare food for their young children using the fortified rations, vegetables from the garden, and eggs. In the same community, another partner was implementing a food-for- assets activity that provided food in exchange for beneficiaries’ participation in community councils and other community-building activities.\nImplementing partners used food-for-assets activities to construct a variety of communal assets. During our fieldwork in Ethiopia and Djibouti, we observed examples of such assets, including small-scale dams and irrigation canals, rural access roads, and a school facility, constructed through food-for-assets activities (see fig. 2). For more information about award amounts, beneficiaries, and metric tonnage, see app. III.",
"Implementing partners of Title II development projects reported considering a number of factors, as well as experiencing challenges, in designing food-for-assets activities. For example, partners reported considering stakeholder input and the availability of technical expertise in designing their food-for-assets activities. Partners also identified a number of challenges to designing these activities, such as an inability to serve all of the most food-insecure people in a region and determining a plan for community maintenance and use of the assets after the project has ended.",
"Implementing partners reported considering multiple factors when designing food-for-assets activities for Title II development projects. To identify these factors, we asked 10 partners that implemented 14 projects with food-for-assets activities in fiscal year 2014 to respond to a checklist of potential factors; we also asked the partners to identify during interviews the factors they considered most important (see fig. 3).\nAll of the implementing partners indicated that they had considered some form of stakeholder input. As shown in figure 3, all of the partners also identified the availability of technical expertise as a factor that they considered when designing food-for-assets activities for the 14 projects we reviewed. Two of these partners explained that the availability of expertise in the local market and in their organizations to oversee the technical design and implementation of assets are among the most important factors that they consider when designing food-for-assets activities. Specifically, in Ethiopia, a partner and its subawardee told us that they had developed a construction plan to secure cement, sand, and stone for a dam and irrigation canal to be constructed through a food-for- assets activity. The partner spent 4 months training beneficiaries in construction, irrigation maintenance, and water management and employed a full-time foreman at the construction site to oversee construction. As a result, according to the partner, an engineer estimated that the structure would last 15 to 25 years. In contrast, a partner implementing a project in Zimbabwe told us that it had tried to recruit skilled laborers for food-for-assets activities by providing double food rations but, when this effort proved unsuccessful, had to adjust its budget and project design to reflect skilled labor as an additional cost.\nIn 12 of the 14 development projects we reviewed, partners reported working with the local community by incorporating beneficiary and community leader input when designing food-for-assets activities. While the type of stakeholder input varied across the projects we reviewed, 7 partners noted that community buy-in is one of the most important factors in the success of food-for-assets activities; some also noted that communities selected the communal assets that they viewed as high priority. For example, partner officials implementing a project in Ethiopia stated that community needs are one of the factors that they consider most important when selecting food-for-assets activities. According to partner officials, after their project was approved, they began working directly with villages to identify potential food-for-assets activities. Officials from another implementing partner explained that seeking community input when designing food-for-assets activities is important, because community members are more likely to maintain assets that the community sees as priorities.",
"Implementing partners reported that various challenges affected the design of food-for-assets activities in their Title II development projects. We asked 10 partners that implemented 14 development projects to respond to a checklist of potential challenges, as well as to identify the challenges they considered most important during interviews. Figure 4 shows the challenges that partners identified as affecting food-for-assets activity design.\nThe challenge that the partners most frequently cited as affecting the design of food-for-assets activities was the inability to serve all of the most food-insecure people in a region because of a lack of capacity to operate in the region, government restrictions, or insecurity. Partners citing this challenge reported varying effects on their projects. For example, according to a partner implementing a project in the Democratic Republic of the Congo, ongoing armed conflict affected the design of food-for-assets activities in that, because of security concerns, beneficiaries could not travel away from their homes or at night to work on assets. Officials of this implementing partner cited this as one of the most challenging factors they experienced in designing food-for-assets activities. According to officials implementing a program in Ethiopia, the inability to serve all of the region’s most food-insecure population because of government restrictions was one of the most challenging factors they experienced. These officials noted that the Ethiopian government had determined the number of beneficiaries in each district almost 10 years ago, resulting in the exclusion of many people who are newly eligible to participate and also limiting ration size, because there was no mechanism to increase rations when children were born and family size increased.\nEnsuring the quality of the assets created through food-for-assets activities, including determining a plan for community maintenance and use was cited as a challenge affecting design for 7 of the projects we reviewed. According to implementing partner officials in Zimbabwe, community preference and capacity to manage the maintenance of the asset are essential to achieving the goals of their activities, and the community must identify and prioritize the assets if they are to be maintained. Additionally, according to USAID officials, if the community is engaged in the design process, it is more likely to maintain assets after the implementing partners’ projects end and the partners leave the area. One partner also noted that a lack of host country involvement was a barrier to determining a plan for community maintenance and use of roads constructed with food-for-assets labor after the project was over. This partner reported that there were no entities to fund the maintenance of these roads in the Democratic Republic of the Congo, even though the partner was seeking to transfer the roads’ maintenance to the local government.",
"USAID cannot systematically measure the performance of food-for-assets activities across all Title II development projects and therefore cannot determine the effectiveness of food-for-assets activities in achieving short-term or longer-term development goals. While USAID uses indicators to assess the overall effectiveness of these development projects, the agency cannot use these indicators to systematically assess the specific effectiveness of food-for-assets activities across all Title II development projects. During our interviews with 10 implementing partners that implemented 14 projects, partners identified several benefits specific to food-for-assets activities, such as developing needed infrastructure, teaching skills to beneficiaries, and achieving short-term increases in food security. They also cited challenges in implementing these activities, such as difficulty in ensuring the sustainability of the assets created as well as weak technical capacity and inadequate resources in host governments and communities.",
"USAID requires implementing partners to report indicators about food-for- assets activities as part of their monitoring process, but USAID cannot systematically use this information to assess the effectiveness of food-for- assets activities separately from that of other activities across Title II development projects. USAID requires partners to monitor project performance and track progress in achieving project results through its standard performance indicators, such as the number of beneficiaries who have participated in a project, as well as project-specific custom performance indicators, such as the number of hectares of land a farmer was able to irrigate as a result of a food-for-assets activity. USAID requires partners to share this information by submitting annual results and other reports. As part of this monitoring, USAID requires partners to collect data through standard indicators, which provide project-wide results and are common across multiple projects. Partners implementing food-for-assets activities report annually, through a standard indicator, on the number of project-wide beneficiaries who have participated in such activities. However, this indicator and USAID’s other standard indicators do not measure the performance of food-for-assets activities, or the effect of these activities on the community, separately from other project activities in a way that allows USAID to compare results for and across projects. For instance, the standard indicators do not address immediate outcomes, such as whether targets for assets constructed were met or the extent to which food-for-assets activities have improved assets in the communities served.\nAccording to USAID officials, USAID also requires partners to collect data through custom indicators, which measure results of specific activities within projects. USAID officials stated that USAID works with each implementing partner to identify appropriate custom indicators to measure the effects of specific activities, including food-for-assets activities, on achieving project goals. USAID officials noted that implementing partners’ activity-level reporting on custom indicators, as well as partners’ narrative reports and implementation plans, provide information that allows for oversight of individual projects but make compilation of some data across the Title II portfolio challenging. Since these indicators, narratives, and plans vary among projects, USAID cannot use them to systematically assess the effectiveness of food-for-assets activities across its Title II projects.\nIn contrast to the standard indicators used for food-for-assets activities, standard indicators specific to other types of conditional food aid activities are used to measure the performance of these activities. For example, for interventions to promote maternal and child health and nutrition, USAID uses a set of standard indicators to assess the extent to which various interventions, such as increasing access to improved drinking water and providing antenatal care, are effective in achieving project goals. In addition, WFP uses a community asset score, at the beginning and end of a project, to measure the number of functioning assets created in a community through a food-for-assets activity. Moreover, documents for 10 of 13 WFP projects we reviewed noted performance indicators specific to food-for-assets activities, such as the number of assets completed.\nAccording to USAID’s operational policy documented in the Automated Directives System (ADS) chapter 203, performance monitoring should be an ongoing process that indicates whether desired results are occurring and whether development objectives and project outcomes are on track. Additionally, chapter 203 of the ADS states that to ensure accountability, metrics should be matched to meaningful outputs and outcomes that are under the control of the agency.\nUSAID officials told us that a lack of data demonstrating the effectiveness of food-for-assets activities in improving long-term food security represents a significant challenge in development projects involving food for assets. Because USAID has not developed standard performance indicators specific to food for assets, and cannot use its custom indicators to aggregate performance data for food-for-assets activities across projects, the agency cannot systematically assess the results of these activities for all Title II projects that include them. Lacking this information, USAID is unable to determine whether food-for-assets activities are an effective mechanism for decreasing dependence on food aid and increasing food security.",
"Although USAID does not have standardized performance indicators to collect and report performance data specific to food-for-assets activities, implementing partners for the 14 Title II development projects we reviewed cited benefits from these activities. During our interviews with the 10 partners that implemented these 14 projects, partners most frequently cited building infrastructure, teaching skills to beneficiaries, and improving social cohesion among community members as benefits of food-for-assets activities (see fig. 5).\nAs figure 5 shows, implementing partners generally reported that food-for- assets activities led to the creation of infrastructure or physical assets that benefited target communities. During fieldwork in Ethiopia, we also observed benefits of infrastructure created with food for assets. Of the 6 partners that cited increased self-sufficiency of beneficiaries for more than a year as a benefit of food for assets, all reported that their projects also developed needed infrastructure, which may contribute to greater food security. For example, according to a partner implementing a project in Bangladesh, roads constructed through food-for-assets activities help people reach markets to buy and sell food but also allow for increased access to health clinics.\nBenefits of Infrastructure Constructed through Food-for-Assets Activities in Ethiopia During fieldwork in Ethiopia, we observed small-scale farms that were irrigated with water supplied by dams and irrigation canals constructed through food-for-assets activities. Implementing partner officials highlighted the importance of sequencing the projects to ensure that assets constructed early in the project help support assets planned for the future. For example, in 2005, under a previous U.S. Agency for International Development (USAID) project, this partner began a food-for- assets activity that terraced the upper slopes of the watershed to reduce runoff and recharge the water table. In 2013 and 2014, the partner constructed small-scale dams and irrigation canals to irrigate farmland and increase the variety and production of crops. According to implementing partner officials, when the original project began in 2005, all 2,500 people living in the community were dependent on food aid; as of December 2014, partner officials stated that 75 percent of the community members had graduated out of the program and were no longer dependent on food aid.\nTeaching beneficiaries skills was commonly cited as a benefit of food-for- assets activities. For example, according to a partner implementing a project in the Democratic Republic of the Congo, working on food-for- assets activities taught beneficiaries the skills needed to maintain the rural access roads that had been constructed after the partner’s project ends. Specifically, the beneficiaries learned how to develop a plan to maintain the roads as well as community-organizing skills needed to keep the community engaged in communal projects.",
"While implementing partners identified benefits of food-for-assets activities, they also noted challenges to implementing these activities. These challenges include weather or other unforeseen events interrupting activities, as well as difficulties in ensuring that assets are maintained and used after projects end. USAID officials noted that achieving long-term benefits of food-for-assets activities often requires maintenance to ensure that the assets remain functional and useful. While ensuring quality control of assets and determining a plan for maintenance were cited as design challenges for 7 projects we reviewed, these challenges may affect implementing partners’ ability to ensure that the assets will function as planned after the food-for-assets activities end. For example, officials implementing a project in the Democratic Republic of the Congo noted that, although the project is using food-for-assets activities to construct feeder roads to improve market access, no local authorities or other entities are available to take responsibility for maintaining the roads after the project ends.\nAs figure 6 shows, partners most frequently cited interruption of food-for- assets activities by weather or other unforeseen events, such as civil conflict, as negatively affecting implementation. For example, because inclement weather can delay or interrupt the construction of assets, partners must take into consideration the seasonal timing of food-for- assets activities. As one implementing partner official explained, conducting such activities in the dry season mitigates the challenge of inclement weather; however, beneficiaries may not need as much food assistance during this season. In areas with armed conflict, partners reported experiencing disruptions because of security concerns. For example, a partner implementing a project in the Democratic Republic of the Congo stated that it had to stop working in certain areas because of the presence of rebel forces.",
"Conditional food aid activities confer benefits, such as creating communal infrastructure, that serve the wider community, and they have the potential to make significant contributions to meeting long-term food security goals. Given that we found most Title II development and emergency projects include conditional food aid activities, an understanding of whether and under what circumstances the use of conditional food aid activities has been effective and appropriate is essential to USAID’s oversight of Title II projects. However, without the ability to identify, and systematically collect information about, the conditional food aid activities being implemented in its Title II program— particularly food-for-assets activities, which our analysis found to be most prevalent—USAID is unable to make effective management decisions about conditional food aid. For example, USAID is not able to determine whether conditional food aid’s effect on food insecurity warrants the additional costs of, for instance, providing building materials for asset construction projects, nor is it able to effectively assess the benefits of these activities separately from other project activities. Moreover, without the ability to systematically assess the effectiveness of these activities across Title II projects, USAID is unable to benefit from lessons learned to improve these activities in the future and to further reduce dependence on food aid and increase food security.",
"To strengthen USAID’s ability to monitor Title II conditional food aid and evaluate food-for-assets activities’ impact on reducing food insecurity, we recommend that the USAID Administrator take the following two actions: establish a mechanism to readily identify all Title II projects that include conditional food aid activities and systematically collect information about the type of conditional activity included in each project and systematically assess the effectiveness of food-for-assets activities in development projects in achieving project goals and objectives.",
"We provided a draft of this report to USAID and WFP for their review. Both provided written comments, which we have reprinted in appendixes IV and V, respectively. USAID also provided technical comments, which we incorporated as appropriate throughout our report.\nIn its written comments, USAID concurred with our recommendations. USAID signaled its intention to establish a mechanism to readily identify all Title II projects that include conditional food aid activities and to collect information about the type of conditional activity in each project. USAID stated that it is already collecting such information for another food assistance program. In addition, USAID agreed that it should assess the effectiveness of food-for-assets activities in development projects in achieving project goals and objectives. USAID added that it has undertaken relevant reviews of the effectiveness and sustainability of Title II development projects and that it is considering expanding evaluations of completed Title II development projects to assess sustainability of results over time. USAID disagreed with statements in our draft report that, because it has not collected data on conditional food aid activities systematically, the agency has limited ability to reliably oversee or monitor programs that use these activities and is not following operation policy that calls for systematic collection of data for monitoring and evaluating program performance. USAID noted that its operational policy also states that collecting more information increases the management burden and cost to collect and analyze this information. Chapter 203 of USAID’s Automated Directives System lists efficiency as a key principle for effective performance monitoring and does not prescribe a specific level of data collection. We revised our draft accordingly. However, our observations and analysis do not support USAID’s position that it is able to reliably oversee or monitor conditional food aid programs. For example, USAID was unable to provide data on the numbers of beneficiaries, funds, or commodities associated with conditional food activities. Moreover, by agreeing to systematically collect data about, and assess the effectiveness of, conditional food aid activities in Title II development projects, USAID acknowledges the importance of this information as well as the feasibility of the recommended actions.\nIn its written comments, WFP noted, among other things, that it found encouraging our findings regarding its capacity to design and implement food for assets, monitor and report results, and achieve both short- and longer-term goals. WFP also commented that food-for-assets activities serve distinct purposes in the two types of emergency operations where WFP uses these activities; we added language to our report to address this comment. WFP did not comment on our recommendations, since they were not directed to WFP.\nWe are sending copies of this report to the appropriate congressional committees; the Secretary of State; the Administrator of USAID; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-9601 or melitot@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI.",
"",
"The U.S. Agency for International Development (USAID) makes most of its Title II emergency awards to the World Food Program (WFP) and bases these awards on WFP funding appeal documents as well as USAID’s analysis of current and emerging crises worldwide. When designing its emergency projects, WFP considers projects addressing long-term crises, chronic poverty, or recurring national disasters to be well suited for food-for-assets activities, according to WFP officials. If food-for- assets activities are to be part of the project, WFP also meets with stakeholders at the village level to identify the assets that are most needed in the community as well as limitations to constructing and maintaining these assets. At the end of this process, WFP country offices develop project proposals—either a protracted relief and recovery operation or an emergency operations project document—outlining the action that is required and also serving as a funding appeal. After WFP releases an appeal, donors, including the United States, determine whether they will provide funding, in-kind commodities, or other resources for the project. According to WFP officials, once WFP has commitments from the donors, it further refines the design of the project to reflect the resources that the donors committed to provide and begins implementation.\nWFP considers several factors in the design and implementation of food- for-assets activities for emergency projects. WFP officials cited the importance of considering stakeholder and community input and the availability and level of technical expertise, and reported factoring gender considerations into the design and implementation of their food-for-assets activities. In addition, WFP considers input from a variety of stakeholders at the national, regional, and local levels to help it assess food security, and appropriately plan and implement food-for-assets activities. Our review of documents for 13 WFP emergency operations and protracted relief and recovery operations projects with food-for-assets activities found that documents for 10 of the projects noted partnerships with host governments. Documents for 7 of the projects noted partnerships with other implementing partners, such as the Food and Agriculture Organization of the United Nations. During our fieldwork in Djibouti, we visited a newly constructed water catchment where WFP worked with an international development agency that provided technical expertise and machinery and where WFP food-for-assets beneficiaries collected the rocks that were used to build the dam (see fig. 7). In addition, WFP beneficiaries later planted a garden close to the catchment to make use of the collected water, with the Food and Agriculture Organization providing seeds and WFP providing tools and food rations.\nIn addition to considering stakeholder input, WFP considers the availability and level of technical expertise and capacity when designing and implementing food-for-assets activities. In 2014, WFP evaluators found that assets might not be properly constructed or maintained if the needed technical expertise and specialized equipment for the asset exceeded the technical capacity of the community. According to WFP officials, when neither the host government nor the community has the technical expertise or resources to maintain high-technology assets, WFP will either recommend against building the assets or recommend a focus on low-technology assets.\nFurther, WFP integrates gender considerations throughout the planning process for food-for-assets activities, according to WFP officials. According to WFP, this includes acknowledging the different roles, community status, and hardships that men and women have experienced and assessing the potential for exacerbating or addressing these differences through food-for-assets activities. In WFP’s evaluation of projects from 2002 to 2011 in six countries, evaluators found that strategic targeting of assets to women’s needs, creation of gender- sensitive worksites, and consideration for women’s competing demands all affected women’s participation in, and the benefits they derived from, food-for-assets’ activities. Our review of documents for 13 WFP emergency operations projects from fiscal years 2013 and 2014 found that 11 of these projects included targets for women’s participation and that 6 of the 11 projects had targets giving special consideration to gender issues, such as targets for women in leadership roles.",
"WFP identified many benefits to its food-for-assets activities implemented in emergency projects, including benefits similar to those observed by development implementing partners. Additionally, WFP reported a number of risks affecting the design of projects containing food for assets, such as a lack of adequate and timely funding and insecure and unpredictable environments. WFP also reported challenges in implementing food-for-assets activities, including challenges similar to those facing development implementing partners, such as limited technical capacity within communities. WFP found that its food-for-assets activities had helped to develop infrastructure and that food-for-assets activities had built useful assets with both short- and long-term benefits, which in turn improved the beneficiaries’ food security. In its 2014 synthesis of evaluations, WFP evaluators noted that its projects had created assets that helped protect communities from floods and also provided longer term benefits. For example, in Bangladesh, dikes that provided protection from floods were built, and, building these dikes increased the productivity of the land. In addition, WFP evaluators found that in the medium term, assets built in Bangladesh, Ethiopia, Nepal, Senegal, and Uganda had increased land productivity and agricultural production, which in turn enhanced communities’ ability to generate income. Additionally, WFP reported that food-for-assets activities had had a long-term positive impact in creating cohesion among varying populations in Bangladesh, Guatemala, Nepal, and Uganda, some of which had experienced prolonged conflict.\nWFP reported in its operational documents and Impact Evaluation Synthesis that a number of risks could affect projects containing food for assets, such as a lack of adequate and timely funding, insecure and unpredictable environments, and limited technical expertise. WFP reported for all but 1 of the 13 projects we reviewed that reduced, inadequate, and delayed funding was a key risk to designing and implementing the projects’ activities. For its projects in the Democratic Republic of the Congo, Somalia, and Sudan, WFP noted that life-saving emergency assistance would be prioritized over food for assets when funding was insufficient. In addition, WFP officials in Djibouti told us that in 2014 only 15 percent of planned food-for-assets activities were completed because of a lack of funding.\nWFP also identified numerous challenges when implementing its food-for- work activities in emergency projects. Some of these challenges were similar to those identified by implementing partners, such as finding humanitarian workers with appropriate technical skills, maintaining assets in the long term, and determining appropriate target populations. WFP evaluators reported on the importance of community and government technical capacity for the proper maintenance of assets, and WFP cited a lack of institutional capacity among host country governments, communities, and other institutions as a risk for 8 of the projects we reviewed. Additionally, WFP evaluators found that limited technical capacity can affect whether an asset functions as intended, because assets are more likely to be maintained when communities and governments have the capacity to appropriately maintain them than when they lack the capacity.\nWFP evaluators noted that achieving long-term benefits for food-for- assets activities often requires ongoing operations and maintenance to ensure that the asset remains functional and useful. WFP’s 2014 synthesis of evaluations of food-for-assets activities in 2002 through 2011 reported that there was confusion about who would be responsible for maintaining the assets and that plans for maintaining the assets were in place for only a few of the activities. WFP reported that without clarity about maintenance responsibilities, there is a risk that assets will fall into disrepair.",
"Our objectives were to examine (1) the U.S. Agency for International Development’s (USAID) use of conditional food aid through Title II development and emergency projects in fiscal years 2013 and 2014, (2) the factors that implementing partners considered and the challenges they faced when designing food-for-assets activities in development projects, and (3) the extent to which USAID assessed the effectiveness of food-for-assets activities in development projects.\nTo address all three of our objectives, we reviewed Title II project documents and information from fiscal years 2013 and 2014. We focused our review of conditional food aid in Title II emergency projects on the World Food Program (WFP), because it is the largest recipient of USAID’s emergency Title II funding. We met with officials of USAID’s Food for Peace program in Washington, D.C.; officials at the WFP headquarters in Italy and via teleconference; officials at U.S.-based implementing partners’ headquarters in Washington, D.C., or via teleconference; and WFP officials in Chad, Sudan, and Pakistan via teleconference. In addition, we conducted fieldwork in Djibouti, Guatemala, and Ethiopia, meeting with USAID and WFP officials, implementing partner country program staff, and host country government officials, among others. In selecting countries for fieldwork, we considered various factors, including the range of project sizes and types of project (i.e., development or emergency) implemented in the country, the nature of food-for-assets activities in the country, and coverage of multiple implementing partners.\nFor background and context, we obtained information on the advantages and disadvantages of food for assets. We obtained this information by conducting interviews with three subject matter experts in the field of international food aid, selected based on their extensive field research and firsthand knowledge of the topic, as well as a literature review of academic articles related to the design and implementation of food for assets that we selected based on recommendations from the experts we interviewed, searches for articles covering food-for-assets design and implementation, and searches of the bibliographies for those articles we reviewed.\nIn addition, to examine USAID’s use of conditional food aid through Title II development and emergency projects in fiscal years 2013 and 2014—our first objective—we took the following steps. For development projects, we reviewed data from USAID’s Food for Peace Management and Information System (FFPMIS)—USAID’s official program, proposal, and financial management system—from implementing partners’ annual results reports for the 2 fiscal years. We used these data to determine the number of beneficiaries and metric tons of commodities associated with Title II development projects with conditional food aid activities. To assess the reliability of these data, we interviewed Food for Peace and contractor officials who are responsible for maintaining and using the FFPMIS system. To identify any obvious inconsistencies or gaps in the data, we performed basic checks of the data’s reasonableness, checking the FFPMIS data against data provided by agency officials. When we found discrepancies or missing data fields, we brought them to the attention of relevant agency officials and worked with the officials to correct the discrepancies and missing fields. In conducting our reliability assessment, we found two limitations associated with the annual results reports data.\nThe reports do not contain beneficiary or metric tonnage data specific to conditional food aid activities; the most specific data available are by program element. For example, the data we reviewed did not include information about food-for-assets activities but included data for activities that were completed under the agricultural sector capacity program element. USAID officials could not provide data specific to food-for-assets activities through other means.\nUSAID officials do not thoroughly check all of the data reported by implementing partners to ensure accuracy, although they conduct a quality check to assess whether the data are reasonable.\nThese limitations affected our ability to identify the award amounts, beneficiaries, and metric tonnage associated with conditional food aid activities implemented within Title II projects. Instead of gathering beneficiary and metric tonnage information specific to conditional food aid activities, we gathered higher-level data for program elements. On the basis of our interviews with relevant Food for Peace and contractor officials, our review of FFPMIS documentation, and our review and testing of the annual results report data that we received, we determined that the beneficiary and metric tonnage data at the program element level were sufficiently reliable for the purposes of our review.\nFor emergency projects, we used WFP’s standard project report (SPR) data for each Title II emergency project that contained conditional food aid activities in fiscal years 2013 and 2014. These data showed (1) total numbers of beneficiaries for each project, (2) numbers of beneficiaries for each type of conditional food aid activities (i.e., food for assets, school feeding, food for training, and take-home rations), (3) metric tons of commodities and quantities donated in-kind and purchased by WFP with cash donations, and (4) metric tons of U.S. in-kind donations shipped or purchased. We used these data to determine the numbers of beneficiaries and metric tons of U.S. commodities associated with Title II emergency projects with conditional food aid activities. To assess the reliability of the SPR data, we interviewed the WFP officials who gathered the award data for us as well as WFP officials who oversee country program offices’ programmatic and financial reporting. To identify any obvious inconsistencies and gaps in the Title II award data and SPR data, we also performed basic checks of the data’s reasonableness, checking the Title II award data against data provided by USAID officials. When we found discrepancies or missing data fields, we brought them to the attention of relevant agency officials and worked with the officials to correct them. In conducting our reliability assessment, we found three limitations with the SPR data.\nThe SPRs do not contain beneficiary data specific to U.S. donations.\nFor example, the data we reviewed show total numbers of beneficiaries served by WFP—which obtains donations from multiple countries and other entities—rather than by individual country donations. Neither WFP nor USAID officials could provide data specific to WFP’s conditional food aid activities through other means. Additionally, we cannot determine how much of this funding went to the conditional food aid activities as opposed to unconditional food distribution, supplemental distributions, or food or support for the elderly, disabled, or seriously ill.\nWhile SPRs contain in-kind metric tonnage data provided by the United States, these data are not specific to conditional food aid activities; they also include general food distribution. Similarly, the project totals for commodities shipped or purchased include general food distribution, locally procured food, and food obtained with cash from the United States and other donors by other means. Additionally, WFP data on U.S. donations of commodities may include commodities for conditional or unconditional assistance. Accordingly, it is not possible to distinguish, on the basis of these data, the metric tonnage of commodities that were distributed strictly for conditional food aid activities.\nBecause WFP beneficiary data may be collected both at the individual level and through estimates based on household rations, the SPR data on beneficiaries may not have been collected consistently.\nDespite these limitations, we were able to estimate the beneficiaries and metric tonnage associated with Title II emergency projects that included conditional food aid. Lacking data about beneficiaries of U.S. conditional food aid activities, we gathered project-level data. In addition, lacking data about the number of metric tons of food donated by the United States specific to conditional food aid activities, we collected data on food used for general emergency food distribution. Finally, lacking information about the metric tons of food distributed by emergency projects for conditional food aid, we gathered data on food that was shipped from the United States, purchased locally, or otherwise purchased. On the basis of our interviews with relevant Food for Peace and WFP officials, and our review and testing of the award and SPR report data that we received, we determined that the beneficiary and metric tonnage data were sufficiently reliable for the purposes of this report.\nTo examine the factors that partners considered and the challenges they faced when designing food-for-assets activities in Title II development projects, and to determine the extent to which USAID assessed the effectiveness of these food-for-assets activities—our second and third objectives, respectively—we focused on food-for-assets activities as the most prevalent type of conditional food aid activity for both development and emergency projects.\nFor our analysis of development projects, we analyzed USAID data for the 22 Title II projects that were active between fiscal years 2013 and 2014, and that included conditional food aid activities. We analyzed these projects to select the 14 that fit the following criteria: (1) contained food- for-assets activities, (2) were active in fiscal year 2014, and (3) were at least in their second year of implementation. We selected a subset of these 22 projects in the following manner: (1) 2 projects for each of the 4 partners that had multiple active projects, and (2)1 project each for the remaining 6 partners that had only 1 active project. We conducted semistructured interviews with officials of the 10 partners that implemented these 14 projects (see table 3). For partners implementing multiple projects captured in our analysis, we conducted separate interviews with implementing partner staff to discuss each project. The information we obtained through these interviews is not generalizable to all Title II development projects or all USAID development awards. To encourage open and honest discussion, we offered these implementing partners confidentiality and therefore are not naming the partners whose staff we interviewed.\nDuring our semistructured interviews covering these 14 projects, we asked the officials from each partner a similar set of questions that focused on the design, implementation, and evaluation of each project. We also provided each partner with four checklists to facilitate collection of uniform information about, respectively, (1) the factors they considered when designing food-for-assets activities in their Title II projects, (2) the challenges they experienced in designing these activities, (3) the benefits of implementing food-for-assets activities as opposed to unconditional food aid, and (4) the challenges they faced in implementing food-for- assets activities in their Title II projects. We asked the partners to complete these checklists prior to being interviewed. In interviews with partner officials, we discussed their responses to the checklists and elicited information about the benefits, factors, and challenges they considered most important to their projects. We analyzed the implementing partners’ responses to both the checklists and the semistructured interviews to determine the prevalence of various factors in designing food-for-assets activities as well as the benefits and challenges that the partners experienced in designing and implementing these activities. We then conducted a content analysis of the semistructured interview responses to determine which factors, challenges, and benefits the partners considered most valuable or important. In addition, we conducted interviews with officials of USAID’s Office of Food for Peace and reviewed USAID documents, including project design and implementation guidance; requests for applications; and partner award documentation, such as annual reports, monitoring indicators, and correspondence with USAID. We compared these data and documents with criteria for data collection and monitoring from USAID’s operational policy, to assess the extent to which USAID can report on the benefits of its food-for-assets activities.\nTo examine the factors that WFP considered when designing and implementing Title II emergency activities, as well as the reported benefits of such activities (see app. I), we reviewed WFP’s emergency operations and protracted relief and recovery operations documents and interviewed WFP country program officials. We selected a judgmental sample of 13 of 60 emergency projects on the basis of the fiscal year of implementation, the presence of a food-for-assets activity, the existence of a reported dollar amount, the availability of project documentation, the project type, and variety in the projects’ geographical location. Table 4 shows the countries and source documents for the 13 Title II emergency projects that we selected for our review.\nIn addition to analyzing operational documents for WFP protracted relief and recovery operations and emergency operations, we conducted telephone interviews with project officials in four WFP field offices: (1) Chad, (2) Djibouti, (3) Pakistan, and (4) Sudan. We selected these projects on the basis of size, the availability of WFP in-country officials, whether active food-for-assets projects were being implemented, and whether we had conducted fieldwork in the country, among other factors.\nTo further analyze what is known about the results of food-for-assets activities, we reviewed WFP’s May 2014 Impact Evaluation Synthesis—a synthesis report of six individual impact evaluations of food-for-assets activities implemented in Bangladesh, Ethiopia, Guatemala, Nepal, Senegal, and Uganda from 2002 to 2011, which we determined was reliable for the purposes of our review. We considered the research design, scope, and methodology of these evaluations and determined that they were reasonable for the purposes of these studies. For example, we considered whether the high-level findings in the summary report represented a fair summary of the individual studies and determined that they did. For example, we found that key challenges and problems with the programs were reported in the evaluation synthesis. We also found that that the benefits in the studies were not overstated in the final evaluation synthesis. However, we noted that a table on the functionality of assets did not appear reliable on the basis of the individual evaluations, and we therefore we did not report on that table. We defined benefits as the positive outcomes resulting from food-for-assets activities, such as improved agricultural production. We defined challenges as difficulties or deficiencies—within or outside WFP’s control—that hindered optimum project implementation and food-for-assets outcomes.\nWe conducted this performance audit from March 2014 to September 2015 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"For this report, we focused on the amounts awarded, numbers of beneficiaries served, and amounts of food aid commodities provided for development and emergency projects that included conditional food aid activities rather than for the conditional food aid activities themselves. Almost all development projects, and most emergency projects, that the U.S. Agency for International Development (USAID) funded under Title II of the Food for Peace Act in fiscal years 2013 and 2014 included conditional food aid activities.",
"Of the 60 Title II development projects that USAID funded and implemented through its partners in fiscal years 2013 and 2014, 59 projects included conditional food aid activities. Food for assets was the most prevalent activity in 2013, and maternal and child health care and nutrition was the most prevalent activity in 2014. Figure 8 shows the types and prevalence of conditional food aid activities implemented through Title II development projects during these 2 years.\nUSAID awarded $609.3 million to its implementing partners under Title II in fiscal years 2013 and 2014, most of which supported development projects with conditional food aid activities (see table 5). Awards per project ranged from $60,500 (Niger) to $40.4 million (Ethiopia) in fiscal year 2013 and from $2.0 million (Malawi) to $36.5 million (Ethiopia) in fiscal year 2014. Because most Title II development projects in fiscal years 2013 and 2014 included conditional food aid during this timeframe, the amounts awarded, beneficiaries served, and commodities provided through projects with conditional food aid activities were generally very similar to those for all Title II development projects. According to USAID officials, in fiscal year 2013, implementing partners monetized, or sold, food aid commodities in developing countries to fund development projects in 5 projects: 3 in Bangladesh, 1 in Madagascar, and 1 in Malawi.",
"Of the 59 Title II emergency projects that USAID funded and implemented through the World Food Program (WFP) in fiscal years 2013 and 2014, 52 projects included conditional food aid activities. Food for assets was the most prevalent type of conditional food aid activity in emergency projects, followed by school feeding and food for training. Figure 9 shows the types and prevalence of conditional food aid activities implemented through emergency projects during these 2 years.\nOf the 52 emergency projects that included conditional food aid activities, 40 were protracted relief and recovery operations—emergency projects that include long-term relief efforts—and 12 were emergency operations—emergency projects that focus on short-term recovery efforts (see table 6).\nIn fiscal years 2013 and 2014, USAID awarded $1.8 billion to WFP emergency projects under Title II, including $1.5 billion to WFP emergency projects with conditional food aid activities (see table 7). Awards per emergency project ranged from $2.5 million (Philippines) to $92.8 million (Ethiopia) in fiscal year 2013 and from $428,700 (Liberia) to $209.8 million (South Sudan) in fiscal year 2014. USAID provided 1.2 million metric tons (50.3 percent) of 2.3 million metric tons of commodities for general food distribution and conditional food aid activities that WFP received directly from donors for its emergency projects during this time frame, including in-kind donations and WFP purchases with cash donations.\nWFP emergency projects, including those with conditional food aid activities, served the majority of beneficiaries through general food distribution—that is, unconditional food aid that is traditionally provided in emergency projects. As table 8 shows, WFP served 40 percent of beneficiaries in fiscal year 2013 and almost 60 percent of beneficiaries in fiscal year 2014 through general food distribution in these projects. WFP served a smaller percentage of beneficiaries through conditional food aid activities, primarily through school feeding projects, although food for assets was the most frequently used conditional food aid activity. WFP served more beneficiaries through school feeding in Afghanistan, the Democratic Republic of the Congo, and Sudan than in any other countries where it implemented this activity in fiscal year 2013, and in Pakistan, the Democratic Republic of the Congo, and Sudan in fiscal year 2014. After school feeding, WFP served the most beneficiaries through food-for- assets activities. WFP served more beneficiaries through food-for-assets activities in Ethiopia, Kenya, and the Philippines in fiscal year 2013, and in Ethiopia, Kenya, and Burkina Faso in fiscal year 2014, than in any other countries where it implemented this activity. In addition, some beneficiaries participated in multiple conditional and unconditional activities and may be counted in more than one category. For this reason, the sum of the percentages shown in table 8 is greater than 100.",
"",
"1. Page numbers cited in USAID’s letter refer to a draft version of our report and may not correspond to page numbers in the published report. 2. USAID notes that data on conditional food aid activities currently collected through implementing partners’ narrative reporting, from implementation plans, and for custom indicators allow for robust oversight of individual projects. USAID also notes that its operational policy states that “more information is not necessarily better because it markedly increases the management burden and cost to collect and analyze.” It further notes that the manual compilation of conditional activities across all food assistance programming does not equate to a lack of monitoring, assessment or understanding of conditional food transfers. USAID’s Automated Directives System (ADS) 203.3.2.2 lists efficiency as a key principle for effective performance monitoring and does not prescribe a specific level of data collection.\nWe have revised our draft to ensure that we do not state that the agency has failed to adhere to its operational policy. However, our observations and analysis do not support USAID’s position that its current data collection practices allow for robust oversight of conditional food aid activities. In particular, we found a lack of systematic data that could be used to oversee and learn about these projects across Title II programs. First, although we were ultimately able to determine that almost all of USAID’s Title II projects implemented conditional food aid activities, USAID could not readily identify these projects or the types of activities they included and could not provide data on the resources used for these activities. As a result, USAID officials spent several months manually gathering and revising the data we requested and did not provide finalized data until 8 weeks before our report’s publication. Second, our initial analysis of these data, when they became available, showed them to be incomplete and flawed (for example, including projects that did not have conditional food aid and excluding projects that did) and therefore not useful for systematically monitoring conditional food aid activities in Title II development projects. We were eventually able to estimate these data for projects that included conditional food aid activities. However, USAID was not able to provide us with any data on the numbers of beneficiaries, funds, or commodities associated with conditional food activities. Finally, in its letter, USAID concurs with—and indicates its intent to implement—our recommendation to establish a mechanism to readily identify all Title II development projects that include conditional food aid activities and to collect information about the types of conditional activity included. In addition, USAID notes in its response to this recommendation that it already systematically collects data on conditional activities in food assistance projects funded through the Emergency Food Security Program, suggesting that the agency considers this information important and that taking these actions does not substantially increase management burden or cost. By agreeing to systematically collect data on, and assess the effectiveness of, conditional food aid activities in Title II development projects, USAID acknowledges both the importance and the feasibility of taking these actions to enhance its monitoring and oversight of conditional food aid in its Title II programs. We have added information to clarify USAID’s position on project oversight, such as information that is available in implementing partners’ narrative reporting. 3. We agree that the $2.1 billion in Title II awards in fiscal years 2013 and 2014 funded both conditional and unconditional food aid activities. However, we were not able to identify the amount of funding that went toward conditional activities, because USAID lacks data that would allow us to distinguish these activities from unconditional activities. We agree that the number of beneficiaries served through U.S.-funded Title II emergency projects, including food-for-assets activities, represents a small percentage of these projects’ total beneficiaries. However, this percentage represents emergency projects and does not reflect beneficiary numbers for development projects. We were unable to report similar data on the beneficiaries served through conditional food aid activities in Title II development projects, because USAID did not provide these data. Therefore we reported, as the closest reliable proxy, that 87 percent of USAID Title II funding went toward projects that included conditional food aid activities and that 111 of 119 USAID-funded Title II development and emergency projects included these activities. 4. We acknowledge that general food distributions are often provided to those not able to work in communities and have modified our report accordingly. However, to make effective management decisions about food-for-assets activities, including targeting the appropriate beneficiaries, it is necessary to systematically track these activities’ use and assess their effectiveness across Title II projects.",
"",
"1. The focus of our performance audit was USAID’s oversight of conditional food aid, and our highlights page (i.e., executive summary) reflects our findings in this regard. Nevertheless, we found both benefits and challenges associated with conditional food aid activities, which we note in our report. 2. To encourage open and honest discussions, we offered to treat as confidential the responses of USAID implementing partner representatives for Title II development projects to our interview questions, and our report therefore does not name these partners. Appendix II lists the criteria we used to select these implementing partners as well as the countries in which the projects we discuss were implemented. 3. We determined that WFP’s 2014 Synthesis of the Evaluation of the Impact of Food for Assets 2002-2011, Lessons for Building Livelihoods Resilience, was sufficiently reliable for our purpose—that is, to analyze benefits and challenges of food-for-assets activities that the document cites. Additionally, throughout our report, we discuss the role of community participation in the design and implementation of food-for-assets activities. 4. We have modified our report to clarify the distinction between the respective roles of food-for-assets activities in WFP’s protracted relief and recovery operations and in its emergency operations. 5. We have added a note to the table to clarify WFP’s definition of school feeding.",
"",
"",
"In addition to the contact named above, Valérie Nowak (Assistant Director), Jaime Allentuck, (Analyst-in-Charge), Ming Chen, Teresa Abruzzo Heger, Nicholas Jepson, Kalinda Glenn-Haley, Martin de Alteriis, Mark Dowling, Kirsten Lauber, Reid Lowe, Katya Rodriguez, Rachel Dunsmoor, and Tina Cheng made key contributions to this report.",
"International Cash-Based Food Assistance: USAID Has Processes for Initial Project Approval but Needs to Strengthen Award Modification and Financial Oversight. GAO-15-760T. Washington, D.C.: July 9, 2015.\nUSAID Farmer-to-Farmer Program: Volunteers Provide Technical Assistance, but Actions Needed to Improve Screening and Monitoring. GAO-15-478. Washington, D.C.: April 30, 2015.\nInternational Cash-Based Food Assistance: USAID Has Developed Processes for Initial Project Approval but Should Strengthen Financial Oversight. GAO-15-328. Washington, D.C.: March 26, 2015.\nInternational Food Aid: Better Agency Collaboration Needed to Assess and Improve Emergency Food Aid Procurement System. GAO-14-22. Washington, D.C.: March 26, 2014.\nInternational Food Aid: Prepositioning Speeds Delivery of Emergency Aid, but Additional Monitoring of Time Frames and Costs Is Needed. GAO-14-277. Washington, D.C.: March 5, 2014.\nGlobal Food Security: USAID Is Improving Coordination but Needs to Require Systematic Assessments of Country-Level Risks. GAO-13-809. Washington, D.C.: September 17, 2013. E-supplement GAO-13-815SP.\nInternational Food Assistance: Improved Targeting Would Help Enable USAID to Reach Vulnerable Groups. GAO-12-862. Washington, D.C.: September 24, 2012.\nWorld Food Program: Stronger Controls Needed in High-Risk Areas. GAO-12-790. Washington, D.C.: September 13, 2012.\nFarm Bill: Issues to Consider for Reauthorization. GAO-12-338SP. Washington, D.C.: April 24, 2012.\nInternational Food Assistance: Funding Development Projects through the Purchase, Shipment, and Sale of U.S. Commodities Is Inefficient and Can Cause Adverse Market Impacts. GAO-11-636. Washington, D.C.: June 23, 2011.\nInternational School Feeding: USDA’s Oversight of the McGovern-Dole Food for Education Program Needs Improvement. GAO-11-544. Washington, D.C.: May 19, 2011.\nInternational Food Assistance: Better Nutrition and Quality Control Can Further Improve U.S. Food Aid. GAO-11-491. Washington, D.C.: May 12, 2011.\nInternational Food Assistance: A U.S. Governmentwide Strategy Could Accelerate Progress toward Global Food Security. GAO-10-212T. Washington, D.C.: October 29, 2009.\nInternational Food Assistance: Key Issues for Congressional Oversight. GAO-09-977SP. Washington, D.C.: September 30, 2009.\nInternational Food Assistance: USAID Is Taking Actions to Improve Monitoring and Evaluation of Nonemergency Food Aid, but Weaknesses in Planning Could Impede Efforts. GAO-09-980. Washington, D.C.: September 28, 2009.\nInternational Food Assistance: Local and Regional Procurement Provides Opportunities to Enhance U.S. Food Aid, but Challenges May Constrain Its Implementation. GAO-09-757T. Washington, D.C.: June 4, 2009.\nInternational Food Assistance: Local and Regional Procurement Can Enhance the Efficiency of U.S. Food Aid, but Challenges May Constrain Its Implementation. GAO-09-570. Washington, D.C.: May 29, 2009.\nInternational Food Security: Insufficient Efforts by Host Governments and Donors Threaten Progress to Halve Hunger in Sub-Saharan Africa by 2015. GAO-08-680. Washington, D.C.: May 29, 2008.\nSomalia: Several Challenges Limit U.S. International Stabilization, Humanitarian, and Development Efforts. GAO-08-351. Washington, D.C.: February 19, 2008.\nForeign Assistance: Various Challenges Limit the Efficiency and Effectiveness of U.S. Food Aid. GAO-07-905T. Washington, D.C.: May 24, 2007.\nForeign Assistance: Various Challenges Impede the Efficiency and Effectiveness of U.S. Food Aid. GAO-07-560. Washington, D.C.: April 13, 2007."
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"question": [
"What was the range of USAID's aid in FY2014?",
"How do USAID's implementing partners provide aid?",
"Why might conditional food aid be beneficial to local communities?",
"What questions have been raised about conditional food aid?",
"What did GAO recommend?",
"How did USAID respond to the recommendations?",
"How did USAID's response affect GAO's stance?"
],
"summary": [
"In fiscal year 2014, USAID awarded about $1.3 billion for emergency and development food aid under Title II of the Food for Peace Act.",
"USAID's implementing partners may provide what is known as conditional food aid—that is, food in exchange for beneficiaries' participation in activities intended to support development.",
"For example, food-for-assets activities are intended to address beneficiaries' immediate food needs while building assets to improve longer-term food security.",
"Questions have arisen about whether the dual goals of addressing both immediate and long-term needs may compromise the ability to achieve either goal, underscoring the need to understand conditional food aid.",
"GAO recommends that USAID (1) establish a mechanism to readily identify all Title II programs that include conditional food aid activities and (2) systematically assess the effectiveness of food-for-assets activities in development projects.",
"USAID concurred with the recommendations but disagreed with some aspects of GAO's findings.",
"GAO continues to believe its findings are valid, as discussed in the report."
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GAO_GAO-13-654
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{
"title": [
"Background",
"The Foreign Service Promotion Process Includes Several Boards That Evaluate Promotion Candidates",
"Boards Evaluate Foreign Service Personnel for Promotion and Possible Separation",
"Selection Boards",
"Grievance Process Based on Multiple Adjudication and Resolution Options",
"State Has Developed Procedural Changes to Address Identified Concerns with the Foreign Service Promotion Process",
"New Board Member Oath",
"Revised Recusal Procedures",
"Updated Procedures for Reconstituted Boards",
"Renewed Emphasis on Certifying Board Results",
"Discontinued Annotation of Promotion Lists",
"More Nonspecialists to Serve on Specialists Boards",
"New Procedural Manual for HR Staff",
"Additional State- Initiated Practices to Strengthen Promotion Process Safeguards",
"State Complied with Many Updated Procedures in 2011 and 2012, but Some Documentation Gaps Existed",
"Selection Boards and Reconstituted Boards Had Some Documentation Gaps",
"Conclusions",
"Recommendation for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Comments from the Department of State",
"GAO Comment",
"Appendix III: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"State’s Foreign Service promotion process is governed by the Foreign Affairs Manual (FAM), the Foreign Service Act, and the Procedural Precepts for the Foreign Service Selection Boards—referred to as the procedural precepts. The procedural precepts are negotiated each year between State and the American Foreign Service Association (AFSA), and establish the scope, organization, and responsibilities of the Foreign Service selection boards that evaluate candidates for promotion. The procedural precepts cover areas such as the conditions for eligibility for promotion, guidance for boards on evaluating candidates, and the information boards are required to submit to the Director General of the Foreign Service and Director of Human Resources (Director General). The procedural precepts are provided to all selection board members at the convening of the boards and, according to State officials, are made available to all Foreign Service personnel worldwide.\nThe decision criteria for promotion in the Foreign Service, also known as the core precepts, provide the guidelines by which selection boards evaluate Foreign Service personnel for promotion. At least every 3 years, State and AFSA negotiate the core precepts. The core precepts define specific skills and levels of accomplishment expected at different grades and across the core competencies of Foreign Service personnel. These competencies include leadership skills, management skills, interpersonal skills, communication and foreign language skills, intellectual skills, and substantive knowledge—the skills, knowledge, and ability an employee applies to the job.\nState’s Foreign Service promotion system follows an up-or-out principle, under which failure to gain promotion to higher rank within a specified period in a single salary class leads to mandatory retirement for personnel in certain occupational categories. State’s FAM outlines the time-in-class and time-in-service limits for specific occupational categories.\nVarious offices and entities play key roles in the Foreign Service promotion process.\nHR, under the direction of the Director General, has authority over the Foreign Service promotion process.\nThe Office of Performance Evaluation, within HR, manages the promotion process, including recommending selection board members and processing final promotion results and other selection board outcomes. The office also provides various types of assistance and services related to the promotion process, such as guidance to employees in preparing their evaluation materials and monitoring of selection board activities.\nGrievance staff, also within HR, process grievances relating to the Foreign Service promotion process or underlying performance information relied upon by the selection boards or performance standards boards.\nThe Foreign Service Grievance Board provides an appeal mechanism for employees not satisfied with the outcome of grievances at the agency level. The board currently consists of 20 members. Each member, as well as the chairman, is appointed by the Secretary of State for a term of 2 years, subject to renewal.\nAFSA provides Foreign Service personnel guidance in preparing evaluation materials. In addition, AFSA attorneys provide assistance to staff who file a grievance with State or the Foreign Service Grievance Board.",
"State’s Foreign Service promotion process includes several types of boards that evaluate and rank order candidates for promotion, identify other candidates for possible separation from the Service, and address promotion process-related grievances. Foreign Service selection boards identify certain candidates for promotion, “low rank” others, and make other determinations. Performance standards boards then review low- ranked candidates for possible separation from the Service. There are several mechanisms to resolve grievances relating to the promotion process, including through the convening of reconstituted boards.",
"",
"State carries out several key steps prior to convening the Foreign Service selection boards. Selection boards then evaluate and rank order candidates for promotion. Next, HR officials process board outcomes before announcing promotions. Figure 1 provides information on key steps of the promotion process.\nState carries out several key steps before convening selection boards.\nThe Director General determines the number of available promotion opportunities, evaluating factors including vacancies, estimated attrition, and projected staffing needs.\nHR designates selection board members. After the Director General determines how many and what type of boards are needed, HR seeks to fill the boards by soliciting volunteers and recruiting members to meet specific needs in terms of rank or work experience. Each board typically has four to six members of the Foreign Service along with a public, or non-State, member. According to HR officials, public members can offer a different perspective than Foreign Service members, and can act as an additional safeguard over the integrity of the process. All selection board members must be approved by the Director General and cannot serve on a selection board for 2 consecutive years. Selection boards include generalist and specialist Once board members are chosen, State announces them in boards.a cable sent to posts worldwide, which includes instructions on the conditions under which promotion candidates can request certain board members be recused from reviewing their file. Board members can also recuse themselves from evaluating a candidate if they believe they may be unable to render a fair and unbiased judgment.\nHR office of performance evaluation staff present official performance folders for each candidate eligible for promotion. The Employee Evaluation Report (EER) is a key document used by selection boards to evaluate candidates, and includes sections on the candidate’s work requirements, performance, and areas for improvement. The EER is developed by the employee and the employee’s designated rating and reviewing officers, and is screened by a review panel that is to provide feedback on any technical mistakes that should be corrected before the EER is formally submitted to the office of performance evaluation. The folder also includes information on the employee’s training record and any commendations, official reprimands, or awards, among other information. Selection boards are to evaluate candidates based only on information in official performance folders, along with other employee records specified in the procedural precepts.\nSelection boards follow a series of steps to evaluate and rank order candidates for promotion and identify other candidates for possible separation from the Service. The boards first screen all candidate files, and sort them into one of three categories: promotion, mid-rank, or low- rank. Those candidates mid-ranked are generally not reviewed again for promotion by that board. Next, each board member ranks each promotable candidate using a forced distribution scale of 1-10. Any time there is a discrepancy between board members of at least four points in the ranking of a given candidate, the members must discuss the case and, if the discussion results in any changes, adjust rankings accordingly to comply with the forced distribution requirement. Each board has a chairperson responsible for leading such discussions and helping to ensure that board procedures are followed. Once all candidates have been considered and ranked by each board member, the board chair consolidates the scores for promotable candidates into one rank-order list. Once a final rank ordering is established, the board submits its final results as part of its official board report, which includes, among other elements: the rank-order list for each competition group of all candidates recom- mended for promotion; an alphabetical list of those mid-ranked; an alphabetical list of those low-ranked; an alphabetical list of any candidates referred directly to a performance standards board to be considered for possible separation; and recommendations concerning policies and procedures for subsequent boards and improvements to the performance evaluation system.\nAccording to HR officials, the board report is the only document retained from each selection board. All other documents, such as notes and score sheets, are destroyed soon after the board’s dismissal. HR officials explained that these documents are destroyed to encourage open and frank discussions and note-taking during the board sessions.\nAfter receiving the selection boards’ official reports, HR officials undertake several steps before announcing promotions. First, HR officials told us they draw a “cut-line” on selection boards’ ranked lists of candidates recommended for promotion based on the number of available promotion slots. Then, HR officials coordinate the vetting of candidates ranked above the cut line with several entities, including the Office of Inspector General, the Office of Civil Rights, the Office of Employee Relations, the Bureau of Diplomatic Security, and the Office of the Legal Adviser. These offices respond indicating whether there are any outstanding issues concerning individual candidates, such as a pending investigation or other matter, that could lead to their removal from the promotion list. In addition, in response to personnel changes, HR officials annotate the official board reports’ rank-ordered lists of candidates recommended for promotion, indicating which candidates have been permanently removed and lowering the cut line accordingly. Next, according to HR officials, several staff, including the director of HR’s Office of Performance Evaluation, review the revised list of candidates for promotion to ensure it accurately reflects changes due to vetting outcomes. State then publishes the list of promotions. Table 1 provides summary data for the 2011 and 2012 selection boards.\nPerformance standards boards convene each year to assess low-ranked candidates for possible separation from the Foreign Service. According to HR officials, there are typically two performance standards boards convened each year—one for generalists and one for specialists. Performance standards boards are governed by a set of procedural precepts outlined in the FAM.alongside no fewer than 10 randomly selected employee files from the same competition group and decide whether to recommend the employee for counseling or for separation. The board is required to submit a report to the Director General that includes a list of the members designated for separation along with individual statements justifying the board’s findings in each case. In 2011, 11 employees were designated for separation by performance standards boards. In 2012, 14 employees were designated for separation.\nThe boards review each employee’s file Employees selected for separation from the Foreign Service have several remedial options. The Director General first sets a separation date. According to HR officials, employees can, until that date, choose to retire, if eligible; resign; grieve; or request a special review board, where the matter is adjudicated by a judge from outside the Department of State.",
"Foreign Service personnel have several options to seek relief through the grievance process in response to promotion-related matters. Foreign Service personnel are encouraged to first attempt to resolve their concerns about their EERs with their supervisor at the post or bureau level. According to the director of State’s grievance staff, State does not track the number of grievances that are resolved between employees and supervisors at post or the bureau. Employees can also formally submit a grievance in writing to the agency grievance staff, providing information such as the nature of the grievance, its effect, which law or regulation the grievant believes was violated, and any relief requested. Grievance staff process these submissions and, according to the director of the grievance staff, will grant interim relief from separation at the agency level, if requested. According to the director of State’s grievance staff, grievances typically pertain to performance, discipline, or financial matters. Grievances relating to a low ranking typically pertain to the employee’s EER, or alleged errors in applying the applicable precepts. For example, in certain cases employees have alleged that their EERs contained falsely prejudicial information, or that selection boards misapplied the procedural precepts in arriving at a decision to low rank a candidate.\nEmployees also have several options beyond the agency grievance staff. A member whose grievance is not resolved satisfactorily under the agency procedures described above can file an appeal with the Foreign Service Grievance Board no later than 60 days after receiving the agency decision. According to the director of the grievance staff, Foreign Service personnel can also file charges relating to prohibited personnel practices via the Office of Special Counsel at any point in the process.\nGrievants may also appeal a decision of the Foreign Service Grievance Board by filing a complaint in federal district court.\nReconstituted boards may be convened if HR officials or the Foreign Service Grievance Board determines a candidate was not properly reviewed or that the official performance folder contained incomplete or inaccurate documentation of performance. reconstituted boards in response to 16 grievances. The members of a reconstituted board are to be chosen, to the extent possible, on the same basis as members of the original selection board, and, to the extent applicable, are to observe the precepts and procedures for the original board. Reconstituted boards review, in addition to the employee under consideration, the files of the four individuals immediately above the cut line for promotion as designated in the final board report for the competition group and the files of three individuals immediately below the cut line. The reconstituted board rank orders the files under review from one to eight. If the employee for whom the board was reconstituted is ranked by the reconstituted board among the top four files, he or she will be considered ranked for promotion.",
"Prompted by concerns identified by the OIG and Foreign Service Grievance Board in 2010, State took a number of actions to strengthen procedures governing selection boards and reconstituted boards. For example, in response to concerns identified by the OIG, State revised procedures governing the improper introduction of information about candidates and recusal requests. State also updated standard operating procedures for reconstituted boards in response to concerns raised by the OIG and Foreign Service Grievance Board. In addition, State initiated two other practices to strengthen safeguards over the promotion process.\nReconstituted boards are governed by a set of Standard Operating Procedures established by State in October 2011.",
"State developed a requirement that selection board members sign an oath in response to the OIG’s concerns about the improper introduction of information about candidates during board deliberations. The OIG reported that it became aware of selection board members allegedly improperly removing documents from, or attempting to introduce information not already contained in, a candidate’s record. In response, State implemented a requirement that each board member sign an oath to protect the confidentiality of board materials and report any improper introduction of information about a candidate. The oath also addresses board members’ adherence to the procedural precepts and promotion criteria. A copy of each signed oath should be filed in the final board report.",
"State revised its procedures governing candidate and board member recusal requests in response to OIG concerns about them. The OIG found the procedural precepts to be ambiguous regarding the allowable involvement by a selection board member who has voluntarily recused him- or herself from consideration of an individual candidate in other board deliberations, and also found the bases for recusal requests to be too limited. In response, State developed revised language covering selection board recusal requests, which was incorporated in the 2011 procedural precepts. The revised language broadened the circumstances under which an individual under review may request a board member’s recusal. The revised precepts also describe the steps a board member should take to recuse him- or herself and make clear that, while this member will be excused from further consideration of the particular individual, the member will continue to participate in the other activities of the board.",
"State updated its procedures for reconstituted boards in response to OIG and Foreign Service Grievance Board concerns about the operations of these boards. The OIG reported there was no regulation in place establishing the conditions that cause a reconstituted board to be formed, its membership, purpose, or the outcome of its recommendations. In addition, the Foreign Service Grievance Board found serious deficiencies and irregularities in the operation of six reconstituted boards, including destruction of underlying board records; inability of board members to confirm that the results reported in the final reports accurately reflected the board’s decisions; evidence that the boards failed to incorporate the safeguards followed by regular selection boards; and lack of evidence that HR staff prepared board reports with sufficient attention to detail. In response, State negotiated and published updated standard operating procedures for reconstituted boards in October 2011. The updated procedures require documentation of steps associated with reconstituted boards. For example, the procedures call for HR to retain an official folder on each reconstituted board, which should include, among other items, documentation of the notification to employees of the names of board members; final board scoresheets that are signed or initialed by all board recusal forms, if applicable; and the final board members; signed oaths;report, signed by all members or their proxy.",
"State said it would place renewed emphasis on ensuring that all board members sign board results in response to an OIG concern regarding board result certification. The OIG reported that several former board members asserted that HR officials submitted to the Director General rank-ordered lists of candidates for promotion without those board members certifying the lists, or with results that differed from the members’ recollections. State responded that, while a certification requirement, by signature and initials, of board results was already in place prior to the OIG’s report, it would re-emphasize the need to ensure that this procedure is followed prior to remitting any board list to the Director General. An HR official noted that the use of proxy signatures for board members’ certification of results was considered acceptable, so long as signed by another board member and not by an HR official.",
"State reported it discontinued annotating promotion lists in response to the OIG’s concern about this practice. The OIG reported that an existing practice of annotating candidate promotion lists—such as by computer, pen, or pencil—could be used to influence the board in favor of certain candidates, such as those who were nearly promoted in prior promotion cycles. According to HR officials, some HR staff had previously annotated promotion lists by noting employees who had the previous year received Meritorious Service Increases, which are given to some employees rank- ordered by selection boards but not promoted due to limited number of promotion opportunities. State reported that it ended this practice.",
"State said it would try to increase the number of nonspecialists on specialist boards—which evaluate Foreign Service personnel who provide technical, support, or administrative services—in response to the OIG’s concern about these boards’ composition. The OIG reported that, since specialist board members are drawn from a smaller universe than generalist boards, there is a greater possibility these members will personally or by reputation know the candidates being reviewed. State responded that it endorsed the OIG’s recommendation to include at least two nonspecialists on each specialist board. However, State noted that while it would seek to do so in the future, it needed to retain some flexibility to make exceptions in cases where two nonspecialists were not available.",
"The OIG reported there was no consolidated procedural manual for training new HR employees. State developed such a manual and distributed copies to staff. The manual includes information on procedures relating to the promotion process.",
"In addition to State’s actions taken in response to others’ identified concerns about the promotion process, we found that State initiated two additional documentation practices to strengthen promotion process safeguards. The first is to have selection board members, in addition to signing final board results, initial each page of the promotable, mid-rank, and low-rank lists in official board reports, thereby attesting to the accurate rank order of all candidates the selection board evaluated. The second is to include selection board and reconstituted board member recusal memos in each final board report.",
"We found that selection boards, performance standards boards, and reconstituted boards complied with many updated procedures in the 2011 and 2012 Foreign Service promotion cycles; however, some selection boards and reconstituted boards had documentation gaps for certain internal controls. Our review of board files, related grievances filed since October 2011, and responses to an online data collection tool sent to 2011 and 2012 board members revealed limited concerns about the operations of some boards.",
"Our review of 77 selection boards, performance standards boards, and reconstituted boards for the 2011 and 2012 promotion cycles found that board members and HR staff complied with many updated internal controls. For example, all 41 selection board reports we reviewed included a memo certifying final results signed by board members or by proxy, and documentation indicating that a public member served on the board. In addition, all 32 reconstituted board reports we reviewed included a statement describing the board’s purpose, a notification to the employee of the board’s composition, documentation indicating a public member served on the board, final board score sheets, and a final board report signed by all members or by proxy.\nHowever, we found that some board reports, which constitute the master record of proceedings, had a number of documentation gaps. As shown in figure 2, there were several instances of missing oaths and incomplete documentation of recusals among the 41 selection boards we reviewed. For example, we found that 2012 selection board reports did not include 45 of 122 required signed oaths from members, or nearly 40 percent of the required total. Subsequent to our file review, State officials provided a portion of these missing oaths and other missing documents from ancillary records.\nWe also checked for discrepancies between boards’ rank-ordered promotion lists and official promotion announcements and found a total of 74 names recommended for promotion in 2011 and 2012 selection board reports that did not appear on corresponding promotion announcements. State officials explained that these individuals were not included on promotion lists due to requirements outlined in the FAM relating to the (1) permanent removal of names from promotion lists due to personnel actions such as retirement, and (2) temporary removal of names from promotion lists due to outcomes of the vetting process described earlier. State provided documentation to account for each removed name.\nCompliance with procedures was better, but still not complete, for performance standards boards and reconstituted boards. For example, some reconstituted boards lacked final board score sheets that were signed or initialed by all members, and some lacked signed oaths from all board members. Compliance for performance standards boards and reconstituted boards is shown in figures 3 and 4.\nOur review of board files, related grievances, and responses to an online data collection tool sent to board members revealed limited concerns about the operations of some boards. Our review of selection boards’ observations about and recommendations for improving the promotion process revealed no concerns relating to the boards’ ability to adhere to core and procedural precepts. Our grievance file review revealed one allegation of bias concerning a board member, which was not sustained. Our online tool revealed a limited number of procedural concerns pertaining to a few specific boards.\nThe Director General requests that all selection boards provide observations about the promotion process and recommendations for improving it. Our review of the 41 selection boards’ observations and recommendations revealed no reported concerns relating to the boards’ ability to adhere to the core precepts and procedural precepts. However, we found that a number of boards provided observations and recommendations for improving the promotion process in several areas. For example, more than half of the 41 boards made observations and recommendations concerning the following: completeness, accuracy, or accessibility of the official performance folder; promotion criteria, policies, or related practices; and technological issues affecting board operations.\nIn addition, more than a third of the 41 boards made observations and recommendations concerning the following: uncertainty over how to interpret some performance appraisal information; and sufficiency or quality of promotion process guidance and training.\nState’s HR staff review and respond to board-identified issues each year and discuss proposed solutions with the Director General. In both 2011 and 2012, State issued worldwide cables with additional guidance to employees, raters, and review panel members to address key board- identified issues. For example, with regard to observations and recommendations about promotion criteria, policies, and related practices, the guidance stressed that candidates (and raters) need to demonstrate the extent of work experience within their “cone” and whether they are serving in “stretch” positions above their current grade level. In addition, in response to board feedback, State has developed a process, which was implemented in 2013, whereby employees can self- certify the accuracy of their eligibility for review and related performance information.\nWe reviewed all grievances related to 2011 and 2012 board actions and found that, with one exception, none alleged that any board or board member violated core integrity and fairness precepts such as the intentional introduction of extraneous material into the proceedings or overt bias toward an individual. The one exception was a case in which an employee alleged that a board member held a personal bias toward him and should have recused himself from considering the individual’s file. According to State officials, this grievance was denied at the agency level in April 2013. Grievances generally focused on a complaint that a board misapplied a given precept in arriving at a low-ranking decision. For example, some grievants alleged that a board relied on comments made in the Area for Improvement section of the EER to support a low-ranking determination without corroborating evidence of poor performance elsewhere in the EER, as is required by the procedural precepts. We noted that HR officials often agreed with the grievant in low-ranking complaints and provided the requested relief of expunging the low- ranking statement from the employee’s performance folder, along with related modifications to their “scorecard.”\nOur online data collection tool revealed a limited number of procedural concerns relating to the operations of three specific boards. Our online tool was designed to provide board members with an opportunity to identify whether they observed any actions, behaviors, or concerns that could have compromised their board’s integrity and fairness. Our online tool was sent to 293 of 298 members who served on the 2011 and 2012 selection boards, 2011 and 2012 performance standards boards, and reconstituted boards since October 2011. We received 206 completed forms. From this total, two responses identified a total of four concerns with the operation of a board in 2011 or 2012. One response claimed that a board member had refused to follow precept instructions to consider candidate service in Afghanistan, Iraq, and Pakistan in a favorable light.\nThe same response noted that the board did not follow proper recusal procedures in all cases. The second response claimed that an “HR official” had inappropriately instructed a board member. The same response noted that the board did not follow proper recusal procedures in all cases. We obtained permission from one respondent to provide the respondent’s two concerns to State’s HR staff and the OIG for further review and follow-up as appropriate.",
"State’s Foreign Service promotion process is conducted within the context of an up-or-out system and the practice of identifying a set percentage of staff each year for possible separation from the Service. Within an organizational culture that emphasizes performance and career advancement, safeguards to ensure the fairness and integrity of the promotion process are of particular importance. While we found that State had responded to previously identified concerns about its Foreign Service promotion process and taken a number of actions to strengthen internal controls over the process, documentation supporting the full implementation of these controls was sometimes missing. For example, we found that many selection board member oaths were missing from 2012 selection board reports and some boards did not include documentation of recusal requests. In the absence of a fully documented system of controls, there is a risk that intentional or unintentional failures to implement safeguards, by board members or HR staff, will go undetected and uncorrected. A failure to implement safeguards, in turn, increases the risk that promotion results could be intentionally or inadvertently compromised.",
"To improve and better document State’s compliance with key safeguards governing the Foreign Service promotion process, we recommend that the Secretary of State instruct the Director General of the Foreign Service and Director of the Human Resources Office of Performance Evaluation to take steps to ensure that selection board, performance standards board, and reconstituted board reports are complete and fully document compliance with internal controls, including but not limited to signed oaths and recusal memos.",
"We provided a draft of this report to State for its review and comment. State provided written comments, which are reprinted in appendix II. State concurred with our recommendation to ensure board reports are complete and fully documented. In particular, State noted that, during the course of our review, it examined areas we had brought to the department’s attention, and made adjustments in procedures for filing signed oaths, recusal memos, and board reports. State added that it would continue to improve record-keeping in this regard. State also provided technical comments, which we have incorporated throughout this report as appropriate.\nWe are sending copies of this report to the appropriate congressional committees and the Secretary of State. In addition, the report is available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-8980 or courtsm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.",
"This report examines (1) the Department of State’s (State) process for ranking and promoting Foreign Service personnel, (2) procedural changes State has made to its Foreign Service promotion process in response to identified concerns, and (3) the extent to which updated procedures were consistently followed in 2011 and 2012 and whether any notable concerns about the promotion process remain.\nTo review State’s process for ranking and promoting Foreign Service personnel, we reviewed relevant laws, regulations, and procedures governing State’s promotion and grievance processes, including the Foreign Service Act of 1980, the Foreign Affairs Manual, the Procedural Precepts and Core Precepts for the 2012 Foreign Service Selection Boards, and the training and information materials provided to 2012 selection board members. To understand how these procedures are implemented in practice, we interviewed State officials within the Bureau of Human Resources (HR), including officials from the offices of performance evaluation and grievances. We also interviewed the president and several other officials from the American Foreign Service Association (AFSA), the exclusive bargaining agent for Foreign Service personnel, to understand AFSA’s role in the promotion process. We interviewed four public, or non-State, members of selection boards, which evaluate and rank order candidates for promotion. We reviewed State data on the 2011 and 2012 Foreign Service promotion cycles, and the number, resolution, and status of grievances filed by candidates who were “low ranked” by selection boards in 2011 and 2012. We discussed with State officials how these promotion process and grievance-related data were collected and checked for accuracy. State HR officials told us the promotion data were compiled by HR’s Office of Resource Management and Organizational Analysis. According to HR officials, HR staff members manually enter these data into a system referred to as the Board Maintenance Application. HR Office of Resource Management and Organizational Analysis staff members work with HR performance evaluation staff to verify the number of promotions, as well as the rankings of those promoted, and the number of those recommended for promotion but not promoted. These results are published annually, every spring. For grievance data, the director of State’s grievance staff told us grievance staff obtained the names of every person low ranked or referred to a performance standards board in 2011 and 2012 from HR performance evaluation staff, then cross-checked those names against the names of individuals who had filed grievances. Grievance staff then manually searched the grievance files to determine whether the individuals’ grievances involved low rankings, by year. We determined these data were sufficiently reliable for our purposes.\nTo review the procedural changes State has made to its Foreign Service promotion process in response to identified concerns, we focused on concerns identified since March 2010, when the State Office of Inspector General (OIG) issued its Report of Inspection, “Review of the Integrity and Fairness of the Foreign Service Selection Board Process.” We also focused on State procedural changes made since March 2010. In addition to the OIG’s report, we reviewed the record of proceedings for the Foreign Service Grievance Board’s case 2008-051 from July 2010, which addressed concerns with State’s procedures governing reconstituted boards, which are convened if it is determined a promotion candidate was not properly reviewed. We also reviewed Foreign Service personnel grievance cases related to the promotion process, from 2011 through February 2013. In particular, we reviewed those cases the grievance office had categorized as one of the following grievance types: promotion, low-ranking, performance standards boards (which review low-ranked candidates for possible separation), or separation. We selected these categories after reviewing a spreadsheet State provided that listed all filed grievances by category, as we determined they were most applicable to our review of the promotion process, compared with other categories such as discipline, financial, and leave restoration. We also reviewed all Foreign Service Grievance Board filings related to the same universe of filed grievance cases. In addition, we reviewed selection board recommendations to the Director General from the 2011 and 2012 promotion cycles, which we discuss further below. We also reviewed responses to our online data collection tool, discussed below, that was sent to 2011 and 2012 selection board, performance standards board, and reconstituted board members. To learn about State’s procedural changes developed in response to the OIG’s recommendations, we reviewed State and OIG documents showing actions taken by State to comply with the OIG’s recommendations. We also interviewed State HR officials and officials from the OIG. To examine State actions taken in response to selection board member recommendations to the Director General, we reviewed HR summary memos and cables explaining suggested actions, and interviewed HR officials to discuss the status of these actions. We further discuss these actions in our report’s third objective.\nTo review the extent to which updated procedures were consistently followed in 2011 and 2012, and whether any notable concerns about the process remain, we reviewed selection board and performance standards board records for 2011 and 2012 and reconstituted board records from October 2011 through April 2013. According to State officials, the official reports, referred to as board reports, from these boards are the only records retained; the remaining records are destroyed as a standard practice. We reviewed the three types of board reports within the following timeframes:\nAll 41 selection boards reports from 2011 and 2012, the 2 years subsequent to the Inspector General’s report, to enable us to assess the extent to which State had implemented and consistently followed changes made subsequent to that report. To ensure we reviewed the accurate universe of selection board reports, we compared the list of board reports provided against State cables announcing the results of the promotion process for 2011 and 2012, which also identified all boards convened in 2011 and 2012. This comparison identified no discrepancies.\nAll four performance standards board reports from 2011 and 2012.\nThere were two performance standards board reports each year for 2011 and 2012, contained within a single folder for each year. We received both reports for each year.\nAll 32 board reports for reconstituted boards—convened in response to grievances pertaining to selection board promotion or low-ranking determinations, and convened after October 2011, when State issued new Standard Operating Procedures for these boards, through April 2013. To ensure we reviewed the accurate universe of reconstituted board files within this timeframe, we compared the files provided by State against an inventory list provided by State; identified several discrepancies and resolved them with HR officials; and presented a master list of reconstituted boards to State officials, who confirmed the list reflected all reconstituted boards relating to promotions within our requested timeframe. Near the conclusion of our engagement, we reviewed those reconstituted boards that had taken place following our initial file review.\nTo help conduct our review of the three types of boards, we developed a data collection instrument with data categories reflecting the information required and routinely captured in each type of report. To determine the data included in these reports, we reviewed applicable precepts and standard operating procedures outlining required information, reviewed a sample of the board reports, and discussed the reports with HR officials. The analysts discussed the data categories with two research methodologists and a senior manager and reached agreement on them before coding the reports. For all reports, two analysts reviewed each report jointly. Another independent party reviewed the results of this process after the fact.\nTo summarize and organize the selection boards’ written recommendations or observations to the Director General, two analysts read and entered this information into the data collection instrument. In 41 selection board reports, the team identified 306 separate recommendations or observations. To analyze this written information, the two analysts developed a set of summary statements and higher-level categories to be used for reporting purposes. The summary statements provided a detailed explanation of the nature of the board recommendations or observations, including examples to illustrate what types of recommendations or observations would be coded under these statements. The higher-level categories served as abbreviated headings or titles of these more detailed statements. These statements and categories were based on an inductive exercise involving an in-depth reading and comparison of the board recommendations. The two analysts then tested these statements on an initial set of five board reports, by coding the text in them jointly. The statements and categories were developed iteratively, with modifications made as appropriate. The text was coded “yes” or “no.” If a segment of text was coded as “yes,” it indicated that the particular board had made one or more recommendation that fell into this category. If a recommendation addressed more than one of our categories, we coded it into all applicable categories. The analysts coded the remainder of the reports independently. Once concluded, the analysts met to discuss codes and reconcile disagreements as needed. The two analysts were able to reconcile all disagreements. A third party reviewer reviewed the team’s work and provided several suggestions, informed by discussions with team members, on revisions to some of the categories to more clearly capture how the team defined and interpreted them. Final tallies of the analysis were obtained by counting, for each statement, the number of “yes” and “no” responses and reflecting the number of times a category of recommendation occurred in the 41 reports.\nTo determine whether State was following its procedures for promoting candidates recommended for promotion by selection boards, we reconciled selection board report lists of rank-ordered candidates for promotion against State official promotion announcements. We first identified discrepancies between the two lists by reviewing selection board rank-ordered promotion lists against the State promotion announcements. We provided a copy of our list of discrepancies to HR officials, who provided lists explaining the reasons why certain candidates were removed from promotion lists. Through this process, State accounted for all missing names. To corroborate State’s explanation of why names were removed from promotion lists, we requested documentation from State attesting to the reasons given for these removals for a selected number of these individuals. State provided us with this documentation, and therefore fully accounted for all discrepancies between selection board report lists of rank-ordered candidates for promotion against State official promotion announcements.\nSimilarly, we took steps to compare recusals we found documented in selection board reports against State’s master list of recusal requests. We cross-referenced State’s master list of recusal requests against the recusals documented in board reports. Through this process, we identified discrepancies, namely that four board reports had recusal information that was not reflected in State’s master list and that nine recusal requests included in State’s master list were not documented in the board reports. We discussed and provided specific information on these discrepancies with State officials. State subsequently presented copies of the nine recusal requests that were not initially documented in selection board reports.\nTo supplement our promotion process file review, we distributed an online tool to allow selection board, performance standards board, and reconstituted board members an opportunity to anonymously comment on any actions, behaviors, or other concerns relating to the board on which they served that they believed could have compromised the board’s integrity and fairness. The online tool’s intended use was to gather any information received from selection board members, and, to the extent possible, follow up on any concerns or allegations; it was not intended to present frequencies or tabulations based on the responses we received, or to report comprehensively on the attitudes of board members on the promotion process. We determined this type of online tool was appropriate for this case because of the prior allegations of improper behavior related to the process. Before distributing the online tool, we shared it with three selection board members and incorporated their comments, as appropriate. We also shared the online tool with State and AFSA. We received comments from both State and AFSA; incorporated some of their suggestions, as appropriate; and explained, where applicable, why we did not incorporate certain other suggestions. We requested that State provide us with email addresses for board members from the following board types and within the following timeframes: selection boards in 2011 and 2012, performance standards boards in 2011 and 2012, and reconstituted boards from October 2011 to February 2013, as we distributed the online tool in March 2013. State provided email addresses for all but several of these names; we obtained some of the missing email addresses through our own research and others from AFSA. Through our own cross-referencing of State-provided lists of board members against our lists of boards and board members, we discovered that certain board member email addresses were missing. We requested that State provide email addresses for these names. Overall, we identified a universe of 298 individuals who served on the three types of boards within our specified timeframes. We were unable to contact five of these members for various reasons, including one retired board member for whom State had no email address, and several others due to missing or invalid e-mail addresses.\nWe sent an e-mail with a link to the online tool to 293 board members on March 11, 2013. Responses were accepted through April 7, 2013. We received 206 completed forms. We cannot report a response rate as it is possible that respondents submitted multiple forms or individuals responded who were not board members in 2011 or 2012. Board members could respond anonymously, and some respondents did not provide contact information. We reviewed written responses to identify any obvious or apparent duplicate or multiple entries, and identified one such entry. We reviewed all 206 completed forms and identified four responses indicating a concern or problem with the operation of a particular board. Two of these four responses constituted the one apparent duplicate entry, and pertained to a selection board convened in 2009, which is outside the scope of this engagement. We nonetheless provided this concern to State’s HR staff and the OIG for further review and follow-up as appropriate. The remaining two responses, each of which identified two separate concerns, fell within our engagement’s scope and are discussed in the body of the report. We obtained permission from one respondent to provide the respondent’s two concerns to State’s HR staff and the OIG for further review and follow-up as appropriate.\nWe conducted this performance audit from July 2012 to July 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"",
"The following is GAO’s comment on the letter from the Department of State 1. This statement is incorrect. Although Figure 4 did note that State was able to locate some of the missing documentation in ancillary files, it did not note that this was due to the need to compartmentalize sensitive information.",
"",
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"In addition to the contact named above, Timothy J. DiNapoli (Director), Anthony Moran (Assistant Director), Joe Carney, Martin De Alteriis, Karen Deans, Etana Finkler, Ernie Jackson, Jill Lacey, Mike ten Kate, and Ramon Rodriguez made key contributions to this report."
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"question": [
"What does the Department of State's Foreign Service promotion process consist of?",
"How are candidates evaluated?",
"How does State ensure that all candidates have no outstanding issues?",
"How does State assess candidates for possible separation?",
"How can grievances relating to the promotion process be aired?",
"What has State done in response to OIG and Foreign Service Grievance Board concerns?",
"How did State address the improper introduction of information about candidates?",
"How did State change recusal request procedures?",
"How did State update its board procedures?",
"What other actions did State take as a result of the identified concerns?",
"To what extent did the reviewed boards comply with State's updated procedures?",
"What signified the certification of final results?",
"To what extent did the boards adhere to oath procedures?",
"Why is this lack of documentation concerning?",
"How might this affect the integrity of promotion results?",
"What was GAO asked to do?",
"What does this report cover?",
"How did GAO gather data for this report?"
],
"summary": [
"The Department of State's (State) Foreign Service promotion process includes convening several types of boards to evaluate candidates for promotion and identify other candidates for possible separation from the Service.",
"Selection boards review all candidates and sort them into one of three categories: promotable, mid-ranked, and low-ranked. The selection boards produce rank-ordered lists of those candidates recommended for promotion, and a \"cut line\" is subsequently determined based on the number of available promotion slots.",
"Before announcing promotions, State vets all recommended candidates to determine whether there are outstanding issues, such as a pending investigation, that can lead to their removal from the promotion list.",
"Subsequently, State convenes performance standards boards to assess low-ranked candidates for possible separation from the Service.",
"There are several mechanisms to address grievances relating to the promotion process. For example, State may initiate reconstituted boards to reassess candidates if a board failed to follow the procedures or if the underlying performance information contained omissions or inaccuracies. Employees not satisfied with grievance outcomes can file an appeal with the Foreign Service Grievance Board.",
"In response to concerns identified by the Office of Inspector General (OIG) and Foreign Service Grievance Board in 2010, State has taken a number of actions to strengthen its Foreign Service promotion process internal controls.",
"For example, in response to concerns about improper introduction of information about candidates, State instituted a requirement that board members sign an oath to adhere to the promotion criteria and protect the confidentiality of board materials.",
"State also revised its procedures governing recusal requests, thereby broadening the provisions under which a candidate can request an individual board member's recusal from reviewing their file.",
"In addition, State updated its reconstituted board procedures, outlining a set of required documents, such as signed board member score sheets, to be included in each board's official record.",
"In addition to actions taken in response to others' identified concerns, State initiated other practices to strengthen promotion process safeguards, such as including selection board and reconstituted board member recusal memos in the final board report.",
"GAO found that Foreign Service selection boards, performance standards boards, and reconstituted boards complied with many of State's updated procedures in the 2011 and 2012 Foreign Service promotion cycles, but some board reports had documentation gaps for certain internal controls.",
"For example, all 41 selection board reports we reviewed included a signed memo certifying final results.",
"However, only 29 of 41 selection boards had signed oaths from all board members, and 45 of 122 required oaths were missing from 2012 selection board reports.",
"The absence of a fully documented system of controls increases the risk that intentional or unintentional failures to implement safeguards, by board members or State Human Resources staff, may go undetected and uncorrected.",
"Such a failure to implement safeguards, in turn, increases the risk that the integrity of promotion results could be intentionally or inadvertently compromised.",
"GAO was asked to review the Foreign Service promotion process.",
"This report examines (1) State’s process for ranking and promoting Foreign Service personnel, (2) procedural changes State has made to its Foreign Service promotion process in response to identified concerns, and (3) the extent to which updated procedures were consistently followed in 2011 and 2012 and whether any notable concerns about the promotion process remain.",
"GAO reviewed laws and procedures; analyzed selection, performance standards, and reconstituted board files as well as grievance case files for the 2011 and 2012 promotion cycles; interviewed State officials; and contacted 2011 and 2012 board members to offer them an opportunity to comment on the process."
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GAO_GAO-15-352
|
{
"title": [
"Background",
"Nondepository CDFIs Differ from Other FHLBank Members in Several Ways",
"Collateral Requirements Pose Greatest Challenge for Nondepository CDFIs",
"Although FHLBanks Had Varying Thresholds for Some Membership Requirements, Most Nondepository CDFIs We Interviewed Were Able to Meet the Requirements",
"Certain Membership Requirements Varied",
"Most CDFIs Were Able to Meet Membership Requirements",
"Rates of Nondepository CDFI Membership Were Low",
"Nondepository CDFIs Are Subject to Comparatively More Stringent Collateral Requirements, Which Can Be a Disincentive for Obtaining Membership",
"Eligible Collateral for Nondepository CDFIs Varied among FHLBanks",
"Collateral Requirements for Nondepository CDFIs Are Comparable to Those for Higher-Risk Institutions",
"Lack of Eligible Collateral Viewed as Primary Challenge to Obtaining Advances and Steep Haircuts Viewed as Disincentives",
"Less Than Half of Nondepository CDFI Members Have Borrowed from FHLBanks",
"FHFA and FHLBanks Have Made Efforts to Facilitate Broader Participation of Nondepository CDFIs in the FHLBank System",
"FHFA Final Rule on Membership for Nondepository CDFIs Includes Flexibilities",
"Examinations of FHLBanks Found No Safety and Soundness Concerns with Advance Practices",
"Efforts to Facilitate Nondepository CDFI Participation in the FHLBank System Include Education and Outreach",
"Agency and Third Party Comments and Our Evaluation",
"Appendix I: Objective, Scope, and Methodology",
"Appendix II: Federal Home Loan Bank Collateral Requirements for Nondepository Community Development Financial Institutions and Depository Institutions",
"Appendix III: Federal Home Loan Bank Advance Terms and Borrowing Limits for Nondepository Community Development Financial Institutions and Depository Institutions",
"Appendix IV: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"The CDFI Fund provides certification to CDFIs that meet the six statutory and regulatory criteria of the Fund.on CDFIs that have the primary mission of providing capital and development services to economically distressed communities generally underserved by conventional financial institutions. CDFIs provide products and services (such as mortgage financing for low-income and first-time homebuyers and financing for not-for-profit affordable housing developers) that otherwise may not be accessible in these communities. CDFIs can be for-profit or nonprofit institutions and can be funded by private and public sources. Depository CDFIs such as community development banks and credit unions obtain capital from customers and nonmember depositors. Depository and nondepository CDFIs may obtain funding from conventional financial institutions, such as banks, in the form of loans. In addition, both types of CDFIs may receive funding from corporations, individuals, religious institutions, and private foundations. Finally, CDFIs may apply for federal grants and participate in federal loan programs. For example, Treasury’s CDFI Fund makes grants, equity investments, loans, and deposits to help CDFIs serve low-income people CDFI Fund certification is conferred and communities.administered by the Department of Agriculture and the Small Business Administration. As of December 31, 2014, there were a total of 933 certified CDFIs (411 depository and 522 nondepository).\nOther federal funding sources include loan programs The 12 FHLBanks are regionally based cooperative institutions owned by member financial institutions (see fig. 1). regional FHLBank, a financial institution (such as a nondepository CDFI) must meet certain eligibility requirements and purchase capital stock; thereafter, it must maintain an investment in the capital stock of the FHLBank sufficient to satisfy the minimum investment required for that institution in accordance with the FHLBank’s capital plan.\nOn February 27, 2015, the FHLBank of Des Moines and the FHLBank of Seattle announced that the members of both FHLBanks had ratified an agreement approved by their boards of directors in September 2014 to merge. The FHLBanks anticipate that the merger will be effective by the middle of 2015.\nSingle-family mortgage loans are loans for 1–4 unit properties. risk-management policies of the FHLBank.haircuts based on factors such as risks associated with the member’s creditworthiness, the type of collateral being pledged, and illiquidity of the collateral.",
"The differences among nondepository CDFIs and other FHLBank members range from the degree to which they focus on community development to differences in size and supervision. Two member types— nondepository and depository CDFIs—share a primary community development focus. As noted previously, both types of CDFIs must have a primary mission of promoting community development to be certified by the CDFI Fund. CDFIs serve as intermediary financial institutions that promote economic growth and stability in low- and moderate-income communities. Frequently, CDFIs serve communities that are underserved by conventional financial institutions and may offer products and services that generally are not available from conventional financial institutions. Such products and services include mortgage financing for low-income and first-time homebuyers; homeowner or homebuyer counseling; financing for not-for-profit affordable housing developers; flexible underwriting and risk capital for needed community facilities; financial literacy training; technical assistance; and commercial loans and investments to assist start-up businesses in low-income areas. Although other FHLBank members may provide similar services to similar populations, community development may not be their primary mission.\nNondepository CDFIs are smaller in asset size than most depository institution and insurance company FHLBank members. As of December 31, 2014, active members of the FHLBank System had approximately $20 trillion in assets. As shown in table 1, as of the same date, median assets for nondepository CDFI members (approximately $43 million) were lower than median assets for both depository members (approximately $207 million) and insurance company members (approximately $975 million). The largest nondepository CDFI had about $708 million in assets, while the largest insurance company member had assets of about $393 billion and the largest depository member had assets of about $2 trillion. In addition, the 30 nondepository CDFI members altogether accounted for about .01 percent of the total assets of all active FHLBank members, whereas depository and insurance company members held about 77 percent and about 23 percent of FHLBanks assets, respectively.\nIn addition, nondepository CDFIs are not supervised by a prudential federal or state regulator unlike other FHLBank members. Depository FHLBank members are regulated and supervised by federal and state agencies that have responsibility for helping ensure the safety and soundness of the financial institutions they oversee, promoting stability in the financial markets, and enforcing compliance with applicable consumer To achieve these goals, regulators establish capital protection laws.requirements for banks and conduct on-site examinations and off-site monitoring that assesses their financial condition, including assessing their compliance with applicable laws, regulations, and agency guidance. The insured depository institutions also must submit to their regulators quarterly financial information commonly known as Call Reports that follow generally accepted accounting principles (GAAP). Insurance companies are regulated primarily by state insurance commissioners and are subject to examination. While the CDFI Fund’s review standards are not equivalent to the examination standards applicable to regulated depository institutions, the Fund requires a nondepository CDFI to submit its most recent year-to-date financial statements prepared in conformity with GAAP for certification and funding eligibility. The CDFI Fund also requires nonprofit and for-profit nondepository CDFIs receiving awards to annually submit financial statements—including information on financial position, operations, activities, and cash flows—that have been audited by an independent certified public accountant. However, only a subset of CDFIs receives CDFI Fund awards and is subject to such reporting.\nIn addition to financial statements of individual nondepository CDFIs, other sources can provide information on the financial performance of nondepository CDFIs overall or individually. For example, the CDFI Fund reports on its analysis of financial data from nondepository CDFIs. The CDFI Snapshot Analysis for fiscal year 2012 (the most recent available at the time of our review) notes that community development loan funds, one type of nondepository CDFI, had rates of loan loss (loans that may prove uncollectible) of 1 percent, which compared favorably with depository CDFIs and mainstream financial institutions. A national network of CDFIs reported that its members’ annual net charge-off rate (debts an entity is unlikely to collect) was the same as for all FDIC- insured institutions in fiscal year 2012. It also noted that its members had provided more than $33 billion in cumulative financing for community development activities from their inception through the end of fiscal year 2012. This financing, the network reported, helped to create or maintain nearly 600,000 jobs, support the development or rehabilitation of more than 960,000 housing units, and start or expand nearly 94,000 businesses and microenterprises. And, for a fee, a community development loan fund can be assessed by an independent third party, and receive a financial strength and performance rating.rates a CDFI using a methodology similar to that used by banking regulators.\nIn the case of financial failure, nondepository CDFIs and depository members also undergo different processes for liquidating assets to repay the FHLBanks for any advances. Depository members, including depository CDFIs, are insured by FDIC or NCUA, which means that FDIC or NCUA would serve as the receiver in the event of failure. In a typical bank or thrift failure, FDIC, acting as receiver, is responsible for outstanding advances of the failed institution. FDIC will facilitate a purchase and assumption transaction with another financial institution or sell the failed institution’s assets, including collateral that had been pledged to secure the advances, to mitigate losses to FDIC’s Deposit Insurance Fund.state insured, according to FHFA, the FHLBanks likely would go through the federal bankruptcy process to settle claims should a nondepository CDFI with FHLBank advances fail.",
"Collateral requirements (which must be met to obtain advances) rather than the membership requirements themselves can discourage nondepository CDFIs from seeking FHLBank membership. Because regulations allow the FHLBanks to set their own thresholds for meeting some membership requirements, the requirements varied. The rates of nondepository CDFI membership also varied by FHLBank and were low. The FHLBanks generally impose collateral requirements on nondepository CDFIs that are comparable to those imposed on depository members categorized as higher risk and in some cases, comparable to those imposed on insurance companies. Officials from the nondepository CDFIs we interviewed generally cited steep haircuts (discounts) and the availability of eligible collateral as the primary challenges to obtaining advances; in addition, some viewed the requirements as a disincentive to seeking membership (because advances are a primary benefit of membership).",
"",
"While nondepository CDFIs must meet seven standards for FHLBank membership, the thresholds the FHLBanks set for meeting certain of the requirements varied. The Federal Home Loan Bank Act and FHFA’s regulations establish the membership requirements for nondepository CDFIs. Nondepository CDFIs must be duly organized under tribal law, or the laws of any state or the United States. be certified by the CDFI Fund. make long-term home mortgage loans, which are defined by statute to include loans secured by first liens on residential real property. Under FHFA regulations, institutions satisfy this requirement if they originate or purchase long-term first mortgage loans on single-family or multifamily residential property, or certain farm or business property that also includes a residence, or purchase mortgage pass-through securities representing an undivided ownership in such loans. By regulation, FHFA has defined “long-term” loans to include those with an original term to maturity of 5 years or more. be in a financial condition that would allow advances to be safely made to it. FHFA developed four financial condition standards for the FHLBanks to use in their assessments—a net asset ratio of at least 20 percent; positive average net income over the preceding 3 years; a ratio of loan loss reserves to loans and leases 90 days or more delinquent of at least 30 percent; and an operating liquidity ratio of at least 1.0 for the 4 most recent quarters, and for 1 or both of the 2 preceding years. If the nondepository CDFI met the standards, it would be presumed to be financially sound, and satisfy the requirement. If the CDFI did not meet one or more standards, the CDFI may offer a rebuttal and the FHLBank would perform a separate analysis to determine if the CDFI was financially sound. have management whose character is consistent with sound and economical home financing. Under FHFA’s regulations, an applicant meets this requirement if it certifies to the FHLBank that neither the CDFI nor its senior officials have been the subject of any criminal, civil, or administrative proceedings reflecting upon creditworthiness, business judgment, or moral turpitude in the past 3 years and that there are no known potential criminal, civil, or administrative monetary liabilities, lawsuits, or unsatisfied judgments arising within the past 3 years that are significant to the applicant’s operations. have a home financing policy that is consistent with sound and economical home financing. Under FHFA regulations, applicants meet this requirement if they provide a written justification, acceptable to the FHLBank, explaining how and why their home financing policy is consistent with the FHLBank System’s housing finance mission. have mortgage-related assets that reflect a commitment to housing finance. They are not required to meet the statutory requirement that applies to certain insured depository institutions to hold at least 10 percent of their assets in residential mortgage loans to be eligible for FHLBank membership.\nIn addition, the FHLBanks also must require all new members to purchase capital stock.\nThe FHLBanks have discretion in developing rules to assess compliance with some of the listed requirements. For example, the FHLBanks can set thresholds (such as dollar amounts or percentages) to satisfy requirements for which FHFA has not set thresholds—such as the requirement for making long-term home mortgage loans and the requirement to hold mortgage-related assets.develop its own requirement for membership stock purchases, subject to FHFA approval. We reviewed the three requirements for which the FHLBanks have discretion in making rules and found that the requirements varied across the FHLBanks.\nMaking long-term mortgages. Eight of the 12 FHLBanks we reviewed had not developed a threshold for nondepository CDFIs to satisfy the long-term mortgage requirement, while four had specified a dollar amount or percentage of assets in long-term mortgage loans. FHFA expects that in assessing the applicant, the FHLBanks will assess the extent to which nondepository CDFIs have a commitment to housing finance requirements in light of their unique mission and community development orientation. The four FHLBanks that had quantitative minimums had minimum requirements that ranged from $1,000 to $1 million in dollar amounts, and from 1 percent to 2 percent of total assets. One FHLBank’s stated policy included an exemption from its particular minimum requirement for nondepository CDFIs that plan to incorporate long-term mortgage loans into future business strategies. Another FHLBank that had a dollar minimum recently gave a nondepository CDFI an exemption from the minimum requirement based on the assessment that the CDFI had significant commitment to housing in accordance with regulatory and membership requirements. For the remaining eight FHLBanks that did not set a minimum requirement, nondepository CDFIs can satisfy the long- term mortgage requirement by documenting that they have originated or purchased more than one such loan or qualifying mortgage investment.\nMortgage-related assets. Four of the 12 FHLBanks we reviewed did not have minimum requirements for the mortgage-related asset requirement, 5 had quantitative and qualitative measures (such as an assessment of the CDFI’s housing-related activities and mission), and 3 had only quantitative measures. The highest minimum quantitative requirement for mortgage-related assets as a percentage of total assets was 10 percent. The three FHLBanks with only quantitative requirements had the lowest requirements, with one FHLBank requiring two mortgage-related assets, another requiring $1,000 in mortgage-related assets, and another requiring the lower of 1 percent of total assets or $10 million in mortgage- related assets.\nStock purchases. The amount of stock that members must purchase varied according to each FHLBank’s funding strategy (see table 2). FHLBank members must hold a certain amount of membership capital stock as a continuing condition of membership. Each FHLBank determines as a part of its capital plan the amounts that all members must purchase in membership capital stock and sets its requirement based on the FHLBank’s business model. Five of the 12 FHLBanks we reviewed calculated the membership stock purchase as a percentage of the member’s total assets. The other 7 FHLBanks calculated the purchase as a percentage of a specific asset category, such as mortgage-related assets or certain assets eligible to be pledged as collateral.\nThe FHLBanks also require members to purchase activity-based stock. That is, members must acquire a specific amount of stock based on the product—such as advances or letters of credit—the FHLBank provided to that member. The purchases are specified as a percentage of the dollar amount of each transaction the member conducted with the FHLBank. For example, among the 12 FHLBanks, the purchase requirements on advances ranged from 2 percent to 5 percent. For instance, if a member had a $2 million advance transaction with the FHLBank, it would have to purchase from $40,000 to $100,000 in capital stock.",
"While FHLBank and CDFI industry officials we interviewed cited several membership requirements that could pose a challenge for nondepository CDFI applicants (including financial condition, long-term home mortgage loan, mortgage-related assets, and stock purchase requirements), most of the nondepository CDFIs we interviewed were able to meet these requirements or stated that they would be able to meet the requirements.\nFinancial condition requirements. Officials we interviewed from 9 of the 12 nonmember nondepository CDFIs stated that they would be able to meet the financial condition standards, while 2 stated that they would potentially face challenges with the financial condition standards. In addition to interviewing officials from nondepository CDFIs that were nonmembers, we reviewed the applications of the 27 nondepository CDFIs that were members as of September 2014. Seven of the 27 nondepository CDFIs did not meet at least one of the financial condition standards at the time of their application, but made successful rebuttals and became members.\nMaking long-term mortgages. Of the 12 nonmember nondepository CDFIs we interviewed, officials from 1 cited the “makes long-term home mortgage loans” requirement as a challenge for membership. In addition, officials from 1 of the 10 member nondepository CDFI we interviewed cited this as a challenge, but noted that they received an exemption from the minimum quantitative requirement imposed by the FHLBank. The officials from the remaining 11 nonmember and 9 member CDFIs did not identify this requirement as a challenge. Officials from two FHLBanks stated that CDFIs in general may face challenges meeting this requirement, as some nondepository CDFIs may not make or hold long- term home mortgage loans if they are not involved in mortgage lending.\nMortgage-related assets. Although the mortgage-related asset requirement varies among the FHLBanks, none of the officials from the 12 nonmember nondepository CDFIs we interviewed stated that they would face challenges meeting this requirement.\nStock-purchase requirements. Officials from 1 of the 12 nonmember CDFIs we interviewed stated that the amount of membership stock they would be required to purchase was cost prohibitive, while officials from the 10 member CDFIs we interviewed stated that the amount required was not a challenge to membership. Nondepository member CDFIs we interviewed were able to purchase the required amount of membership stock. Officials from one nonmember nondepository CDFI in the FHLBank-Chicago district said that the CDFI was approved for membership, but did not become a member because the stock purchase requirement was too high. FHLBank-Pittsburgh recently amended its capital plan by lowering the membership and activity-based stock purchase calculations, citing benefits to CDFIs. In addition, FHLBank- Chicago recently reduced its minimum membership stock purchase requirement to make it less costly for nondepository CDFIs and others to join. (We discuss these and other changes later in this report.)",
"The rates of nondepository CDFI membership generally were low, ranging from 2.08 percent to 15.38 percent of nondepository CDFIs in each FHLBank district (see fig. 2). As of December 31, 2014, 30 of the 522 nondepository CDFIs were FHLBank members, and 6 of the 12 FHLBanks had membership rates of less than 5 percent for the nondepository CDFIs in their districts. The number of nondepository CDFI members has increased every year since the first joined in 2010. Forty percent (12 of 30) of the current nondepository CDFI members joined the FHLBank System in 2014. As of the end of 2014, all 12 FHLBanks had at least one nondepository CDFI member; 2 approved their first nondepository CDFI member in 2013 and another 3 did so in 2014.\nAccording to FHFA officials, some nondepository CDFIs may not be good candidates for FHLBank membership. They noted that the majority of nondepository CDFIs make nonhousing loans such as microloans, small business loans, and commercial loans. In addition, FHFA officials stated that many of the nondepository CDFIs engaged in housing-related activities have low asset volumes.",
"Due to the differences between nondepository CDFIs and other FHLBank members discussed earlier, representatives from the FHLBanks stated that nondepository CDFIs have certain risks that depository members do not have. The risks cited included the lack of supervision by a regulator and uncertainty related to the liquidation process in the event of insolvency. As noted previously, the FHLBanks are required by statute and FHFA regulations to develop and implement collateral standards and other policies to mitigate the risk of default on outstanding advances. To address risks associated with nondepository CDFIs, the FHLBanks can place limits on eligible collateral and generally impose collateral requirements on nondepository CDFIs seeking advances that are comparable to those imposed on depository members categorized as higher risk and, in some cases, insurance companies. Some of the CDFIs and FHLBanks we interviewed cited these collateral requirements as a disincentive for nondepository CDFI membership.",
"Although they are allowed by regulation to accept certain types of collateral from all of their members, some FHLBanks have chosen to limit the types of eligible collateral that nondepository CDFIs can pledge. (This is also sometimes the case for other nondepository members such as insurance companies.)\nFHLBanks can accept FHLBank deposits as collateral.\nThe securities collateral FHLBanks can accept includes U.S. Treasury and agency securities, U.S. agency mortgage-backed securities, and privately issued mortgage-backed securities (including residential and commercial).\nThe types of mortgage collateral that FHLBanks can accept include single-family and multifamily mortgage loans; mortgage or other loans issued, insured, or guaranteed by the U.S. government or its agencies; commercial real estate loans; and home equity loans or lines of credit.\nNondepository CDFIs are eligible to pledge FHLBank deposits, securities, and mortgage loans as collateral for advances at all 12 FHLBanks. During the course of our work, three FHLBanks—Atlanta, New York, and Pittsburgh—changed their policies to allow mortgage loans as eligible collateral from nondepository CDFIs. Pittsburgh changed its policies in August 2014, New York in September 2014, and Atlanta in December 2014. All the other FHLBanks have had policies that allowed mortgage loans as eligible collateral from nondepository CDFIs since nondepository CDFIs became eligible for membership in 2010. Officials from FHLBanks in Atlanta, New York, and Pittsburgh stated that due to the different risks posed by nondepository CDFIs, they initially took conservative stances on accepting loan collateral. The risks they cited included the lack of a clear resolution mechanism in the case of bankruptcy and the FHLBank not being able to obtain blanket liens on pledged collateral.\nWithin the general collateral categories (such as securities and mortgage loans), each FHLBank can impose specific collateral eligibility requirements, such as the quality of the collateral. For example, for nondepository CDFIs, one FHLBank disallows nonagency mortgage- backed securities, another FHLBank disallows commercial real estate collateral, and five FHLBanks disallow home equity lines of credit or home equity loans. At two FHLBanks, nondepository CDFIs can pledge mortgage loan collateral only if the CDFIs have certain credit ratings.",
"The collateral requirements—specifically, the pledge method and haircuts—applicable to nondepository CDFIs seeking advances are comparable to those generally imposed on depository members categorized as higher risk and, in some cases, to those imposed on insurance companies. Based on our review of each FHLBank’s policies, all FHLBanks evaluate the creditworthiness and financial condition of their members, including nondepository CDFIs. Factors included in many of the evaluations are capital adequacy, asset quality, management quality, earnings, and liquidity. Additionally, the FHLBanks (with the exception of Topeka) assign credit ratings to their depository members that indicate Of the the creditworthiness and financial condition of these members.11 FHLBanks that assign credit ratings to depository members, 9 also assign credit ratings to nondepository CDFIs, with 2 (Atlanta and San Francisco) using a separate rating system specific to nondepository CDFIs. The remaining FHLBanks (New York and Indianapolis) do not assign credit ratings to nondepository CDFIs. While the metrics and methodology used to evaluate members differ, policies across FHLBanks generally reflect differential treatment between depository institutions and nondepository CDFIs (and other nondepository institutions such as insurance companies). For example, all FHLBanks require nondepository members to deliver collateral but generally only depository members with low credit ratings are required to list or deliver collateral.\nThe FHLBanks differed in the extent to which they varied haircuts (discounts) for nondepository CDFIs and depository institutions. For securities collateral, eight FHLBanks imposed the same haircut on nondepository CDFIs as on depository members for all eligible types of securities collateral. In contrast, four imposed higher haircut ranges on nondepository CDFIs. For loan collateral, six FHLBanks generally applied the same haircuts to nondepository CDFIs and depository institutions. One applied a higher-range haircut for single-family mortgages to nondepository CDFIs than to depository institutions; five FHLBanks applied higher haircut ranges to nondepository CDFIs than to depository institutions; and another FHLBank applied the lower end of the haircut range to nondepository CDFIs.\nFHLBanks generally varied the haircut based on the types and quality of collateral, credit score or financial condition of the member, and pledge method (for loans). In general, haircuts were higher for collateral with lower ratings or of lower quality. See tables 3 and 4 for the specific haircuts each FHLBank imposed on nondepository CDFIs and depository In all cases, each FHLBank institutions for securities and loan collateral.may change these requirements at its discretion. See appendix II for more information on each FHLBank’s credit rating system and collateral requirements for advances, and how they may differ for nondepository CDFIs and depository institutions.\nFour FHLBanks—Des Moines, New York, Pittsburgh, and San Francisco—had conditions on advance terms and borrowing limits specific to nondepository CDFIs. In general, advance terms and conditions varied widely. For example, FHLBanks offered advances with terms to maturity ranging from overnight to 30 years. FHLBanks may establish an overall credit limit for their borrowers. For example, the overall credit limit for FHLBank-Chicago was 35 percent of a member’s total assets. However, the amount a borrower can obtain is also partly dependent upon the amount and value of qualifying collateral available to secure the advance. FHLBanks may impose additional restrictions depending on the financial condition of the borrower, such as restrictions on the type of product, term of advance, and amount of credit available. Examples of specific conditions imposed on nondepository CDFIs by the four FHLBanks include the following:\nFHLBank-Des Moines imposed a maximum amount of borrowing capacity and term available based on member credit ratings. Nondepository CDFIs were subject to a lower borrowing capacity than depository institutions with the same ratings.\nFHLBank-New York limited the maximum advance term to 5 years for nondepository CDFIs.\nFHLBank-Pittsburgh limited the maximum advance term to 2 years for nondepository CDFIs.\nFHLBank-San Francisco had a term limit of 7 years for its nondepository CDFIs.\nFor more information on each FHLBank’s advance terms and borrowing limits for nondepository CDFIs and depository institutions, see appendix III.",
"Officials from most of the nondepository CDFIs we interviewed cited access to low interest-rate advances from the FHLBanks as the primary benefit of membership, and some FHLBanks and nondepository CDFIs officials cited collateral requirements as challenges or disincentives to obtaining advances. Officials from three FHLBanks stated that the lack of eligible collateral was a disincentive for nondepository CDFIs seeking membership.\nOfficials from 21 (10 members and 11 nonmembers) of the 22 nondepository CDFIs we interviewed cited access to low interest-rate advances from the FHLBanks as the primary benefit of membership.\nOfficials from 5 of the 12 nonmember nondepository CDFIs interviewed said that they would not be interested in membership if they could not obtain advances.\nOfficials from 10 FHLBanks and 12 (6 members and 6 nonmembers) nondepository CDFIs stated that lack of eligible collateral was a challenge to obtaining advances for nondepository CDFIs. The reasons the officials provided for lack of collateral eligibility included not possessing mortgage-related collateral, not having unencumbered assets (those free and clear of liens or claims by other creditors), and not having quality collateral that met FHLBank standards.\nFor example, officials from FHLBank-Chicago stated that most nondepository CDFIs possessed assets, such as small business loans, that did not qualify based on statute and regulation as eligible collateral. Officials from four FHLBanks and seven nondepository CDFIs (three members and four nonmembers) stated that the requirement to pledge unencumbered assets was a challenge for nondepository CDFIs. Collateral encumbrance may occur when a CDFI is also a loan consortium that makes loans to borrowers on behalf of its members. Quality of collateral also affected collateral eligibility. For instance, officials from FHLBank-Cincinnati provided an example of a nondepository CDFI member whose collateral consisted exclusively of subprime mortgage loans. Due to the FHLBank’s constraints on exposure to subprime residential mortgage loan collateral (no more than 60 percent of borrowing capacity could stem from these loan types), the FHLBank was not able to accept the loans as collateral.\nSteep haircuts were cited as a disincentive to applying for advances.\nOfficials from 6 (2 members and 4 nonmembers) of the 22 nondepository CDFIs we interviewed cited high haircuts as a disincentive for obtaining advances. For example, officials from a nondepository CDFI member said that their haircuts were very steep and that they likely will not obtain advances again unless the FHLBank eased the requirements. Officials from a nonmember nondepository CDFI in another district stated that the haircut was too restrictive.\nOfficials from all the member nondepository CDFIs we interviewed said that FHLBank membership had not affected their business activities or that they had not considered changing their business activities to better meet the collateral requirements. However, officials from three of the nonmember nondepository CDFIs we interviewed said that they have been taking actions to obtain assets that could be used as eligible collateral. One of these nonmember nondepository CDFIs was buying mortgage-backed securities to better meet collateral requirements. Additionally, officials from five FHLBanks said that their nondepository CDFI members had changed the structure of certain loans or repositioned their assets to create eligible collateral for advances.",
"From October 2010 to September 2014, less than half of the nondepository CDFI members obtained advances from the FHLBanks. Six FHLBanks provided 115 advances totaling about $306.7 million to 12 nondepository CDFIs during this period (see fig. 3). However, two FHLBanks provided 57 advances to four nondepository CDFIs that accounted for almost 98 percent of the total advance amount. Of the 115 advances, approximately 36.5 percent had terms of less than 1 year (including advances with overnight terms), 15.7 percent had terms of more than 1 year to less than 5 years, 44.3 percent had terms of 5 years or longer, and 3.5 percent had open terms.",
"FHFA and FHLBanks have made efforts to broaden the participation of nondepository CDFIs in the FHLBank System. According to FHFA officials, FHFA’s final rule implementing the HERA provisions that allow nondepository CDFI membership in the FHLBank System allows for certain flexibilities in meeting membership requirements. FHFA oversight of FHLBanks did not focus on FHLBanks’ membership approval process or advance and collateral practices as it relates to nondepository CDFIs and did not identify any safety and soundness concerns or action plans. FHFA and the FHLBanks have undertaken several efforts to help promote membership of nondepository CDFIs in the FHLBank System.",
"As noted previously, FHFA’s final rule to implement HERA provisions on nondepository CDFI membership in the FHLBank System allows for certain flexibilities in meeting membership requirements. In 2009, FHFA drafted a proposed rule that sought to amend the membership regulations and issued it for public comment. The substantive issues raised in the comments on membership focused on the criteria that FHFA proposed for FHLBanks to use in evaluating the financial condition of nondepository CDFIs applying for membership. According to FHFA officials, the CDFI community also was concerned about nondepository CDFIs not meeting basic membership requirements, such as making long-term mortgage loans and carrying mortgage-related assets.\nFHFA reviewed the comments and issued a final rule in January 2010. If an applicant cannot meet the presumptive financial conditions, the final FHFA regulations allow nondepository CDFIs to submit additional information demonstrating that the applicant is in sufficiently sound condition to obtain membership and advances. The final rule also did not extend the requirement to demonstrate that 10 percent of their total assets are in residential mortgage loans to nondepository CDFI applicants.",
"FHFA oversight of FHLBanks as it relates to nondepository CDFIs did not focus on membership processes due to the low risk posed, and its oversight of collateral practices did not identify areas of concern. FHFA conducts annual examinations of the FHLBanks that cover these topics, among others. According to FHFA officials, FHFA examines FHLBanks’ membership approval processes to ensure that they comply with FHFA’s eligibility requirements and implement a risk-management process that is intended to mitigate the FHLBanks’ exposure to significant risks, especially legal, credit, and operational risk.\nFHFA reviewed aspects of each FHLBank’s membership process periodically in 2010 through 2013. However, according to FHFA, it did not focus on processes specific to nondepository CDFIs because nondepository CDFIs pose low safety and soundness and credit risks, in aggregate, to FHLBanks due to their low rates of membership and advances. According to FHFA officials, FHFA currently reviews each nondepository CDFI’s application for membership and has not objected to any nondepository CDFI application submitted by the FHLBanks. It primarily reviews applications to gather information about the FHLBanks’ membership approval process.\nIn annual examinations of each FHLBank in 2010 through 2013, FHFA reviewed the FHLBanks’ collateral and advance practices for nondepository CDFIs and did not find any safety and soundness issues. FHFA’s advances and collateral examination manual calls for it to evaluate the FHLBanks’ procedures for analyzing and monitoring members, including nondepository CDFIs, and their outstanding advances. The manual also advises that special attention be given to FHLBanks’ collateral practices for CDFIs because nondepository CDFIs have no dedicated regulator. Furthermore, FHFA advises that FHLBanks’ credit risk-management procedures be tailored to address risks unique to each member type. For example, FHLBanks should consider that nondepository CDFIs likely are covered by federal bankruptcy statutes and not by the same receivership laws as insured depository institutions.",
"FHFA and the FHLBanks have undertaken several efforts to help educate nondepository CDFIs about and promote membership in the FHLBank System. According to FHFA officials, FHFA conducted a training session and webinar on the membership rule in February 2009, followed up on questions from CDFIs about the regulations, and tracked the progress of nondepository CDFIs in gaining membership. Officials from FHFA have made themselves available for questions about and problem solving in relation to the rules. According to FHFA and FHLBank officials as well as nondepository CDFIs we interviewed, FHFA has been encouraging FHLBanks to discuss ways in which they could increase nondepository CDFI membership and access to advances in a safe and sound manner. For example, at a speech to the FHLBank boards and executive management in early 2014, FHFA encouraged all the FHLBanks to meet collectively to discuss collateral practices that might facilitate advance activity with nondepository CDFIs, and emphasized the importance of the FHLBanks’ understanding of CDFI business models and funding needs. According to FHFA officials, as a result of that speech, the FHLBanks held a conference in August 2014 with the nondepository CDFI community to discuss facilitating membership and better understand the business of nondepository CDFIs. As a follow-up to the conference, FHLBank credit officers held nondepository CDFI credit review training in October 2014. Furthermore, the FHFA Director also met with nondepository CDFI officials and trade groups in July 2014.\nIn addition, all FHLBanks performed their own outreach to the nondepository CDFI community. For example, all the FHLBanks met with FHFA and nondepository CDFI members and nonmembers at the August 2014 conference to better understand nondepository CDFIs. Ten of the FHLBanks we interviewed have initiated discussions with and solicited membership applications from nondepository CDFIs since the conference. Some FHLBanks made changes in response to feedback from nondepository CDFI members. As noted previously, three of the FHLBanks that had restrictive collateral eligibility requirements amended these requirements to make obtaining advances easier for nondepository CDFIs. Two FHLBanks also made changes to their capital stock purchase requirements to allow a nondepository CDFI to be able to meet the stock purchase amount. According to the FHLBank officials, FHFA has been supportive of the changes they made to better accommodate nondepository CDFI membership and access to advances. FHFA officials told us that they have continued to encourage the FHLBanks to facilitate broader nondepository CDFI membership and access to advances.",
"We provided a draft of this report to FHFA and the 12 FHLBanks for their review and comment. FHFA and four FHLBanks (Chicago, Cincinnati, Indianapolis, and Topeka) provided technical comments, which we incorporated as appropriate. The other eight FHLBanks did not provide any comments.\nIn its comments, FHLBank-Chicago also stated that our report unfairly compares nondepository CDFIs with depository institutions and that a better comparison would be regulated institutions versus nonregulated or less regulated institutions (because claims would be handled similarly for regulated institutions). Specifically, FHLBank-Chicago noted that an FHLBank likely would go through the federal bankruptcy process to settle claims if a nondepository CDFI with FHLBank credit outstanding failed, whereas a federal or state regulator would facilitate the process to settle claims if a regulated institution such as a bank, credit union, or insurance company with FHLBank credit outstanding failed. However, the purposes of our report explicitly include discussing how nondepository CDFIs differ from other members of the FHLBank System (in particular, depository members) and the membership and collateral requirements for these CDFIs. We understand that risks vary by type of institution and noted several differences—including in supervision and the liquidation of assets—between nondepository CDFIs and other types of FHLBank members in our report. Comparing the collateral requirements for nondepository CDFIs with those for depository institutions enabled us to determine how the FHLBanks address the different risks posed by nondepository CDFIs. Moreover, in terms of resolution treatments, there is no uniform approach to settling claims even within the category of “regulated institutions.” For instance, FHFA stated in one of its advisory bulletins that “FHLBanks face risks lending to insurance companies that differ in certain respects with lending to federally-insured depository institutions” and noted that “laws dealing with a failed insured depository institution are well known and uniform across the country, whereas, the laws dealing with the failure of an insurance company are less well known to the FHLBanks and, though similar, may vary somewhat from state to state.” Therefore, we maintain that our comparisons were fair and made no change to the report in response to this comment.\nIn another comment, FHLBank-Chicago stated that the report implies that by loosening collateral requirements (some of which are dictated by law or regulation), more nondepository CDFIs would be eligible or willing to become FHLBank members. It noted that this was not necessarily the case, as a majority of nondepository CDFIs would not qualify for membership because of their lines of business (small business lending, microlending, and commercial lending) and because they have encumbered assets. We believe that these points are already adequately addressed in our report. Specifically, in the report we note that the types of eligible collateral are dictated by regulation. In addition, we state in the report that FHFA officials told us that some nondepository CDFIs may not be good candidates for FHLBank membership because the majority of nondepository CDFIs make nonhousing loans such as microloans, small business loans, and commercial loans. Furthermore, we note that several FHLBanks and nondepository CDFIs we interviewed told us that the requirement to pledge unencumbered assets was a challenge for nondepository CDFIs. We undertook these interviews to help understand the level of demand for FHLBank membership and obtain views on any challenges associated with obtaining membership and advances. Therefore, we made no change to the report in response to this comment.\nIn its comments, FHLBank-Indianapolis stated that the report could do a better job of making it clear that (1) FHLBanks accept assets as collateral and develop haircut methodologies to comply with regulations and an expectation of no losses in the event of default and (2) pledging illiquid assets can increase the haircut. In response, we added language in the body of the report that reiterated language in our background section stating that FHLBanks are required by statute and FHFA regulations to develop and implement collateral standards and other policies to mitigate the risk of default on outstanding advances. We also added language to the report noting that the illiquidity of assets can affect haircuts.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees and members, the Director of FHFA, the Council of the FHLBanks, and the 12 FHLBanks. This report will also be available at no charge on our website at http://www.gao.gov.\nShould you or your staff have questions concerning this report, please contact me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV.",
"The objectives of this report were to discuss (1) how nondepository community development financial institutions (CDFI) differ from other members of the Federal Home Loan Bank (FHLBank) System, in particular depository members; (2) the membership and collateral requirements for nondepository CDFIs and challenges posed by these requirements; and (3) Federal Housing Finance Agency (FHFA) oversight of FHLBanks in relation to nondepository CDFIs and efforts by FHFA and FHLBanks to increase participation of nondepository CDFIs in the FHLBank System.\nTo describe differences between nondepository CDFIs and other members of the FHLBank System, we reviewed relevant sections of the Housing and Economic Recovery Act of 2008 (HERA) and FHFA’s final rule on nondepository CDFI membership in the FHLBank System. In addition, we reviewed other relevant information from the FHLBanks and CDFI industry, such as reports by the Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) and the Opportunity Finance Network. We determined that these studies were methodologically sound and reliable for our purposes. To compare the asset sizes of different types of FHLBank members (nondepository CDFIs, depository institutions, and insurance companies), we analyzed available data on their assets from FHFA’s membership database as of December 31, 2014. For these institution types, we calculated the distribution of their assets (minimum assets, 25th percentile, median assets, 75th percentile, and maximum assets). To assess the reliability of these data, we reviewed information about the system, interviewed knowledgeable officials, and analyzed the data for logical consistency and completeness. We found that these data were sufficiently reliable for the purpose of comparing the asset sizes of different types of FHLBank members.\nTo address membership and collateral requirements, we reviewed relevant legislation and regulations, such as the Federal Home Loan Bank Act and FHFA’s final rule on nondepository CDFI membership. We also reviewed documentation—such as nondepository CDFI membership applications and available FHLBank guidance on assessing nondepository CDFIs for membership—from each of the FHLBanks to determine membership requirements and identify any differences among FHLBank policies.FHLBank’s requirements for membership and identified differences. For example, in the three areas where FHLBanks had discretion, the analyst determined whether FHLBanks had set a minimum quantitative or qualitative threshold that an applicant needed to meet. A second analyst then verified the accuracy of this information. Nondepository CDFIs are subject to specific financial condition requirements. We requested and received financial data from the CDFI Fund but determined that the dataset did not contain relevant data needed to determine how many nondepository CDFIs could meet these financial condition requirements.\nSpecifically, one GAO analyst reviewed each To determine the number of nondepository CDFIs that were members from calendar years 2010 through 2014, we analyzed data from FHFA’s membership database as of December 31, 2014. To calculate the membership rate (the percentage of nondepository CDFIs in each district that were members), we used (1) data from FHFA’s membership database on the number of members as of December 31, 2014, and (2) data from the CDFI Fund on the total number of nondepository CDFIs as of December 31, 2014. We assessed the reliability of data from both systems by reviewing any relevant documentation, interviewing knowledgeable officials, and analyzing the data for logical consistency and completeness. We determined that the data were sufficiently reliable for the purposes of assessing rates of membership for nondepository CDFIs.\nTo determine each FHLBank’s requirements for obtaining advances and any differences among the FHLBanks, we reviewed relevant documentation such as each FHLBank’s collateral guidelines and product and credit policies. Using these documents, we identified the haircut (discount) for eligible collateral types for depository and nondepository institutions and other collateral requirements, such as the term of advances and collateral pledging methods. Our review of FHLBank documents showed that FHLBanks do not describe their collateral requirements uniformly. Although we took several steps that enabled us to present comparable categories of collateral across the FHLBanks, our analysis did not account for differences in the eligibility criteria for collateral that may be accepted, such as quality of collateral. As a result, the haircuts for different FHLBanks are not comparable. First, we excluded from our analysis the following types of collateral because they were only mentioned in some FHLBanks’ documents: U.S. Treasury separate trading of registered interest and principal securities, agency structured bonds, agency collateralized mortgage obligation accrual bonds, second mortgage-backed securities, student loan asset-backed securities, agricultural real estate loans, land loans, construction loans, student loans, mutual funds, and municipal or state and local securities. Second, because some FHLBanks identified specific haircuts for securities, such as those originating from the Federal Deposit Insurance Corporation, while other FHLBanks listed haircuts for a general category of agency securities, we grouped all the agency securities and provided the range of haircuts. We included in the agency securities category any securities issued or guaranteed by the U.S. government, including those originating from the Federal Deposit Insurance Corporation, National Credit Union Administration, Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Home Loan Banks, and the Small Business Administration. Third, because some FHLBanks identified specific haircuts for specific government-guaranteed loan collateral while others did not, we grouped all government-guaranteed loan collateral together, including loans originating from the Farm Service Agency, Department of Agriculture, Small Business Administration, Federal Housing Administration, and Department of Veterans Affairs. Fourth, because haircuts can vary based on the quality of the collateral pledged, we provided the range of haircuts for each type of collateral accepted by each FHLBank. While we were able to review each FHLBank’s collateral policies and procedures, the confidentiality of such information limited what we could publicly disclose in our report. Specifically, because the collateral haircut policies of the FHLBanks generally are considered proprietary information, we were unable to attribute specific policies to individual FHLBanks. Where appropriate, we used randomly assigned numbers when discussing FHLBank collateral policies to prevent disclosure of FHLBank identities.\nAdditionally, we obtained data from each FHLBank on the amount of advances secured by each nondepository CDFI member from October 2010 to September 2014 (the most recent data available at the time of our request). We assessed the reliability of these data by obtaining information from the six FHLBanks that provided advances to nondepository CDFIs on the system they used to store the data and the procedures in place for recording and ensuring the accuracy of the data. We also reviewed the data for logical consistency and completeness. We determined that the data were sufficiently reliable for reporting the amount of advances obtained by nondepository CDFs. We also interviewed officials from the 12 FHLBanks, 3 trade groups, 10 nondepository CDFIs that were members of the FHLBanks, and 12 nondepository CDFIs that were not members to understand the level of demand for FHLBank membership and obtain views on any challenges associated with membership processes and obtaining advances.\nTo develop the purposive, nonrandom sample of 10 nondepository FHLBank member CDFIs to interview, we selected a nondepository CDFI from each of the 10 FHLBanks that had a nondepository CDFI member as of March 31, 2014 (the most recent data available when we began our work and selected members to interview). In addition to geographic diversity, we sought variation in asset size, financial institution type, and FHLBank advance status. We also selected a purposive, nonrandom sample of 12 nondepository CDFIs that were not members of the FHLBank System, one from each of the 12 FHLBank districts. We selected these 12 from a sample of nondepository CDFIs that were identified during our meetings with member CDFIs and CDFI trade groups as being interested in FHLBank membership. In addition to geographic diversity, we sought variation in asset size when selecting nonmembers to interview. We interviewed officials from all 22 nondepository CDFIs by telephone, focusing on the background of the CDFI and its experience with and opinions of the FHLBank membership and advance processes. The views expressed by the nondepository CDFIs in our sample cannot be generalized to the entire population of nondepository CDFIs.\nTo evaluate FHFA’s oversight, we reviewed relevant laws, legislative history, and regulations (including its final rule on nondepository CDFI membership) to identify FHLBanks’ authority to expand membership to nondepository CDFIs and FHFA’s oversight authority. We also reviewed FHFA examination policies related to membership and collateral requirement to obtain advances. To determine if membership and advance practices were reviewed and there were any findings, we analyzed each FHLBank’s examination results for fiscal years 2010 through 2013 (the most recent examinations available at the time of our request). We interviewed FHFA and the 12 FHLBanks to further understand examination policies and practices for membership and advances and discuss any FHFA efforts to facilitate broader nondepository CDFI participation in the FHLBank System.\nWe conducted this performance audit from May 2014 to April 2015, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"The collateral requirements—specifically the pledge method for loan collateral and haircuts (discounts)—assessed on advances to nondepository community development financial institutions (CDFI) vary from those imposed on depository members. For example, all Federal Home Loan Banks (FHLBanks) require nondepository CDFIs to deliver collateral (a requirement that also would be applied to higher-risk depository institutions), and in some cases, nondepository CDFIs receive higher haircuts than depository institutions. For each FHLBank, we compare the pledge method and haircuts applied to depository institutions and nondepository CDFIs below (see table 5).",
"Most Federal Home Loan Banks (FHLBanks) do not have advance terms and borrowing limits specific to nondepository community development financial institutions (CDFI). However, four FHLBanks (Des Moines, New York, Pittsburgh, and San Francisco) do have specific advance terms and borrowing limits. We summarize the advance terms and borrowing limits for each FHLBank below (see table 6).",
"",
"",
"In addition to the contact named above, Paige Smith (Assistant Director), Akiko Ohnuma (Analyst-in-Charge), Farah Angersola, Evelyn Calderon, Pamela Davidson, Kerri Eisenbach, Courtney LaFountain, John McGrail, Marc Molino, Barbara Roesmann, Jim Vitarello, and Weifei Zheng made key contributions to this report."
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{
"question": [
"What discouraged some CDFI's from seeking FHLBank membership?",
"What are CDFIs?",
"How many CDFIs are involved in the FHLBank system?",
"To what extent do membership requirements pose a challenge for CDFIs?",
"How do CDFIs have different risks than depository members?",
"How have the FHFA and FHLBanks attempted to increase nondepository CDFI participation in the System?",
"How has the FHFA increased outreach?",
"How have FHLBanks attempted to make requirements more accessible for nondepository CDFIs?",
"What did HERA do?",
"What institutions does the System consist of?",
"What was GAO asked to review?",
"What does this report discuss?"
],
"summary": [
"Collateral requirements rather than membership requirements discouraged some nondepository community development financial institutions (CDFI)—loan or venture capital funds—from seeking membership in the Federal Home Loan Bank (FHLBank) System.",
"CDFIs are financial institutions that provide credit and financial services to underserved communities.",
"Less than 6 percent of nondepository CDFIs (30 of 522) were members of the System as of December 2014 (see figure).",
"Requirements for membership (such as stock purchase amounts) can vary where regulation gives FHLBanks discretion, but nondepository CDFIs GAO interviewed generally stated these requirements did not present a challenge.",
"FHLBank officials stated nondepository CDFIs have different risks compared with depository members (for example, nondepository CDFIs are not supervised by a prudential federal or state regulator as are other FHLBank members). Some of the nondepository CDFIs GAO interviewed cited limited availability of eligible collateral and steep haircuts as challenges for obtaining advances and therefore a disincentive to seeking membership.",
"The Federal Housing Finance Agency (FHFA), which oversees the System, and FHLBanks have facilitated efforts to broaden nondepository CDFI participation in the System by educating about and promoting membership to nondepository CDFIs.",
"For example, FHFA officials told us that they encouraged the FHLBanks to hold a conference to discuss nondepository CDFI membership. Officials from 10 FHLBanks also stated that they had solicited applications from CDFIs.",
"In late 2014, several FHLBanks amended stock purchase and collateral requirements to better accommodate nondepository CDFI membership and access to advances.",
"The Housing and Economic Recovery Act of 2008 (HERA) made nondepository CDFIs eligible for membership in the FHLBank System.",
"The System includes 12 regional FHLBanks that make loans, known as advances, to their members at favorable rates.",
"GAO was asked to review the FHLBanks' implementation of HERA provisions relating to nondepository CDFIs.",
"Among other things, this report discusses (1) challenges posed by membership and collateral requirements for nondepository CDFIs, and (2) FHFA and FHLBank efforts to facilitate broader nondepository CDFI participation in the System."
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GAO_GAO-13-835
|
{
"title": [
"Background",
"IRS Budget Formulation and Execution Structures",
"Alignment of Budget Execution and Formulation Processes",
"IRS Can Report Some Program-Level Obligations and FTE Data",
"Obligations and FTE Data Are Available for Some Program Activities, Organizational Entities, and Efforts of Interest with Limitations",
"Funding Streams for Obligations Data Vary in Complexity",
"New Budget Formulation Process Identifies Priorities and Reduces Some Work, but Guidance is Insufficient",
"IRS Identified Potential Savings in Its Base Budget",
"IRS Developed New Revenue Protection and Revenue Enhancement ROI Projections",
"IRS Significantly Improved Its PPACA Cost Estimate, but Did Not Publicly Report Investment Information for the Fiscal Year 2014 Budget Request",
"Updated PPACA Cost Estimate Shows Significant Progress, but a Few Areas for Improvement Remain",
"IRS Did Not Report PPACA Investment Information on the OMB Dashboard Website",
"IRS Expanded Information Reported on Its Major IT Investments in the Fiscal Year 2014 Budget Justification, but Additional Information Would Be Useful",
"IRS Implemented Six of Our Nine Prior Recommendations to Improve the Budget Presentation and Aid Decision Making",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Non-Interactive Version of Figure 1: IRS’s Budget Formulation Structure",
"Budget activity Pre-filing taxpayer assistance and education",
"Filing and account services",
"Investigations",
"Exam and collections",
"Budget activity Regulatory",
"Infrastructure",
"Shared services and support",
"Budget activity Information services",
"Information technology investments",
"Appendix III: Figure 8: Pre-selection Budget Formulation Process—Sample Template",
"Appendix IV: Reliability of Patient Protection and Affordable Care Act Cost Estimate",
"Appendix V: Summary of IRS’s Major Information Technology (IT) Investments",
"Appendix VI: Comments from the Internal Revenue Service",
"Appendix VII: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"",
"IRS formulates its budget at three levels: appropriation account, budget activity, and program activity, as shown in figure 1. (See appendix II for the non-interactive figure of IRS’s budget formulation structure.) The annual budget request for IRS presents funding and FTE data at the appropriation and budget activity levels. IRS formulates its budget to align with its strategic goals, which is an intended outcome of the Government Performance and Results Act of 1993 (GPRA).\nIRS executes its budget by allocating funds from its appropriation accounts to fund centers. Fund centers manage and distribute funds and allocate funds to sub-units, known as cost centers, where funds are obligated.\nIRS’s appropriation accounts align with its organizational structure at the highest level. For example, IRS has an Operations Support appropriation account and an Operations Support commissioner-level organization. In addition, IRS’s organizational structure tracks roughly to its budget execution structure, which is made up of three types of fund centers: (1) support, (2) functional, and (3) operating. (See figure 2.)\nThe lower levels of the budget formulation and budget execution structures include (1) program activities, which break down the budget activities and are listed above; and (2) organizational entities and other efforts of interest, which are not discrete categories and are different perspectives of IRS’s organizational structure. For example, Wage and Investment is one division within IRS and can be referred to as an organizational entity, while identity theft would be considered an area of interest that crosses divisions within IRS, including Wage and Investment.",
"Prior to the preparation of the annual budget request, IRS budget staff ensure that FTE movements between budgetary accounts made during the fiscal year (e.g., shifting staff to work on different issues) match up with base budget resources assigned to each account. This review (which is conducted by the IRS Corporate Budget Office in coordination with business units) is necessary because business units may have added or eliminated staff during the course of the fiscal year, which can result in a misalignment of funding and FTEs during budget formulation. Further, the review ensures that FTEs—which represent the majority of IRS’s budgetary resources—are fully funded by appropriation accounts and that salary and benefits are aligned with current FTE levels.",
"",
"In its annual budget request, IRS provides funding information at the appropriation account and budget activity levels, but not at the more detailed program activity level. IRS officials stated that they could provide more information at the program activity level; however, reporting on requested funding amounts for program activities could limit IRS’s flexibility to reprogram funds given statutory restrictions. Still, as we reported in May 2010, IRS could provide additional information that highlights new program activities or those that are proposed for either expansion or reduction. This more detailed information could increase transparency and demonstrate the agency’s priorities to congressional decision makers.\nAs an alternative to more detailed information on requested funds, IRS Corporate Budget officials told us they could provide prior year obligations and FTE data in greater detail than reported in the annual budget request, including information for some program activities, organizational entities, and other efforts of interest. For eight areas we selected as examples, IRS officials confirmed that they could provide fiscal year 2012 obligations data for six and partial information for one. They could not provide information for one, as shown in table 1.\nAccording to IRS officials, obligations data for identity theft are only partially available because IRS tracks obligations attributed to identity theft from its Wage and Investment fund center, which handles most of its identity theft workload. However, IRS does not track identity theft-related obligations incurred by other IRS business units. According to a senior official, IRS plans to establish a Servicewide internal order code for identity theft at the beginning of fiscal year 2014 because it has become a long-term priority. Officials said they were not able to provide fiscal year 2012 obligations data for the offshore voluntary disclosure program because they had not established a mechanism to track it (in part because the program was operated as a short-term effort in the past and, according to officials, has only recently been made permanent.) IRS has not decided if it will track obligations for the offshore voluntary disclosure program in the future.\nAccording to IRS officials, IRS obligations data for program activities, organizational entities, and other efforts of interest have some limitations. For example, the data do not include indirect costs, including costs associated with IRS-wide functions like human capital management and procurement. In addition, obligations associated with IT are tracked separately from non-IT costs in IRS’s financial management system. For example, non-IT costs for merchant card and basis matching are tracked separately from the related Information Reporting and Document Matching (IRDM) IT system. Furthermore, organizational entities and other efforts of interest are not discrete. Obligations can be analyzed in different ways, such as from an organizational perspective or a program perspective. Different analyses should not necessarily be summed together because they may use different perspectives and, when considered together, might result in overlaps or gaps. For example, organizational entities and other efforts of interest have different perspectives where obligations may be counted towards either. For instance, obligations for the Wage and Investment fund center—an organizational entity—may overlap with related efforts of interest, such as identity theft. Users of IRS obligations data should be cognizant of these limitations.",
"IRS’s obligations data show how the elements of IRS’s budget formulation and budget execution structures described in figures 1 and 2 interact, and how those relationships vary in complexity. The data demonstrate the funding streams for IRS’s obligations: they show which appropriation accounts, budget activities, and program activities in IRS’s budget formulation structure received appropriated funds, as well as which fund centers within IRS’s budget execution structure managed and distributed the funds. Some fund centers in IRS’s budget execution structure receive appropriations from a relatively small number of appropriations accounts, budget activities, and program activities in IRS’s budget formulation structure. For example, as shown in figure 3, IRS obligated about $240 million from the Appeals fund center in fiscal year 2012. While most Appeals fund center resources come from the Appeals program activity, it also receives funding from other parts of IRS’s budget formulation structure, including funds from the International exams program activity.\nObligations data for organizational entities and other efforts of interest can also have a more complex relationship to IRS’s budget formulation structure than the Appeals example shown above. For example, in fiscal year 2012 the Wage and Investment fund center received funding from 3 of IRS’s 4 appropriations accounts, 5 of its 9 budget activities, and 23 of its 83 program activities (see figure 4). In addition, the ease with which IRS can compile obligations data varies: it can be more difficult for IRS to compile obligations data for programs with a more complex relationship to its budget formulation and budget execution structures.",
"For fiscal year 2014, IRS implemented a new, pre-selection budget formulation process to provide senior leadership with the opportunity to screen, prioritize, and select funding proposals before business units prepare detailed business cases. However, we found that in some instances the information was incomplete. Previously, business unit staff and subject matter specialists developed detailed business cases for each proposed initiative. Business cases include detailed narrative descriptions, multi-year cost estimates, and account breakouts. IRS budget officials told us the new process reduces work substantially for business units, since staff no longer need to develop extensive information for each proposal; instead, they only develop full information for proposals approved by senior leadership.\nThe new pre-selection process requires business unit staff to prepare selective, consistent information utilizing templates. (See appendix III for a sample template.) Templates include high level summary information on the purpose of the initiative, the amount of additional funds and FTEs requested, and the estimated impact of the initiative. Management reviews the templates and identifies a preliminary list of approved initiatives. Next, approved initiatives are communicated to business units via a decision document, along with any suggested changes in scope, such as combining initiatives or changing requested FTE or dollar levels. After preliminary approval, business unit staffs prepare detailed business cases for approved initiatives. process.\nBusiness cases may ultimately be included in the budget request.",
"The fiscal year 2014 budget request for IRS shows proposed savings and efficiencies in its base budget in several areas totaling over $217 million as shown in table 2. Some of IRS’s expected fiscal year 2014 savings are anticipated to be achieved through operational changes, such as shifting funds to automate processes and streamlining or consolidating operations and functions to make them more cost-effective.\nIRS’s 2014 fiscal year budget includes the following savings and efficiencies:\nRealizing Personnel Savings: Personnel savings are mainly the result of staff attrition and hiring restrictions.\nReducing IT Infrastructure: Examples of IT infrastructure changes include providing improved data storage capacity, updating computer servers to be more efficient, adopting common technology platforms and a more efficient telecommunications infrastructure, and changing IT contracting practices. For example, IRS is in the process of implementing virtual computer servers for data storage. Also, the IRS is implementing new technologies for sharing computer services across the agency.\nCapturing Savings from Space Optimization: IRS has reduced (or plans to reduce) its office inventory, having selected 123 of its 648 offices to be closed, consolidated, or reduced. These rental savings are the result of attrition, hiring restrictions, and changes in working environments (such as increased telework and development of workspace standards that decrease individual office size). Space optimization savings require a one-time investment of $37.5 million to build out new and consolidated space and relocate employees, resulting in expected future rent savings of $76.7 million annually ($39.2 million net).\nFunding BSM: BSM savings represent differences in projected costs of IT operations from one year to the next, including implementation costs related to the Current Customer Account Data Engine 2; Modernized e-File; Core Infrastructure; and Architecture, Integration, and Management. Implementing Human Capital Efficiencies: Administrative efficiency efforts include the consolidation of employment activities and modifications to training programs. For example, IRS reduced the number of Employment Hiring Centers from 9 to 3. IRS also streamlined processing of requests for personnel-related changes, such as salary increases, transfers, or leaves of absence. In addition, the Employment Operations Unit automated its hiring process to enable electronic completion of pre-hire forms. Some training programs are being modified from classroom training to webinars, reducing travel costs and allowing more employees to attend.\nAchieving e-File Savings: These savings result from labor reductions related to increased use of electronic filing of tax returns and corresponding decrease in paper returns.",
"In its fiscal year 2014 congressional justification, IRS included projected ROI for 10 enforcement initiatives, including two initiatives that used new approaches in estimating potential ROI: revenue protection and revenue enhancement. According to agency budget officials, IRS developed the new ROI methodologies because it did not have enough historical data on these initiatives to use the same methodology used for other initiatives. Since fiscal year 2008, IRS has included ROI projections for new revenue-generating enforcement initiatives in its congressional justification. IRS has generally calculated ROI projections for revenue generating initiatives based on the amount of additional tax collected. For each initiative, IRS calculated an estimate of the potential revenue collected by requested FTEs using 10 years of historical data. Because 10 years of historical data were not available for the revenue protection and revenue enhancement initiatives, IRS developed new methodologies.\nFor example, the fiscal year 2014 budget for IRS requests $101.1 million for an “Improve the Identification and Prevention of Refund Fraud and Identity Theft” initiative. According to IRS, if funded, the initiative would protect revenue because these activities would identify fraudulent returns related to identity theft and resolve cases prior to issuing a refund. To estimate the amount of projected revenue that would be protected, IRS determined the dollar amount of erroneous refunds detected per FTE from the beginning of the 2012 tax filing season through August of that year. As shown in figure 6, IRS estimated the ROI for this initiative to be 6.2 to 1 in fiscal year 2014, rising to 14.4 to 1 in fiscal year 2016.\nThe fiscal year 2014 budget for IRS also requests $51.7 million for a “Leverage Data to Improve Case Selection” initiative. According to IRS, if funded, this initiative would enhance revenue by improving technology that would enable IRS to improve case selection, issue identification, and enforcement case treatment. This technology would also allow IRS to adapt quickly to changing taxpayer behavior and tax code misuse. To estimate the additional amount of projected revenue that would be generated by this initiative, IRS studied the impact of using certain electronically filed data in a new way to examine selected tax returns and found that it could help classifiers detect more noncompliance. Based on the study’s findings, IRS estimated that using certain electronically filed data would increase examination assessments for taxpayers at all income levels, and used that estimate to calculate the amount of additional revenue that could be collected as a result of the “Leverage Data to Improve Case Selection” initiative. As shown in figure 7, IRS estimated an initial cost of $52 million in fiscal year 2014 followed by an estimated ROI of 1.3 to 1 in fiscal year 2015 and 1.5 to 1 in fiscal year 2016.",
"",
"In December 2012, IRS updated the PPACA cost estimate as part of its on-going practice to refine the cost estimate and address our prior recommendation. The updated cost estimate reflects best practices to a much greater extent, as shown in table 3. Unlike previous versions, the updated cost estimate shows significant progress, as it reflects the full- cycle cost of the program, which will total $1.89 billion from fiscal year 2010 through 2026. With this information, budget decision makers can see the amount IRS plans to spend on the multi-year PPACA effort in a particular year, as well as an estimate of costs that remain to be funded in future years. According to the GAO Cost Guide, a reliable cost estimate must be comprehensive, well documented, accurate, and credible. (See appendix IV for our full assessment of the updated PPACA cost estimate.) In June 2012, we reported that IRS’s cost estimate for PPACA did not fully meet best practices for a reliable cost estimate.\nWhen enacted, PPACA contained 47 tax-related provisions that IRS is responsible for implementing with effective dates through 2018. Meeting these statutory requirements has required a significant IT investment in new data models, databases, and IT systems and operations support. IRS’s PPACA cost estimate is important in determining and communicating a realistic view of a program’s likely cost and schedule outcomes that can be used to plan the work necessary to develop, produce, install, and support the program. The cost estimate is also integral to establishing and defending budget requests: it provides context for the $440 million requested for IRS to address PPACA requirements in fiscal year 2014.\nA few areas remain where IRS could continue to improve the reliability of the cost estimate to better meet best practices outlined in the GAO Cost Guide. We found that the cost estimate only partially met best practices for accuracy and credibility. Specifically, we identified three deficiencies in the accuracy of the cost estimate. First, the cost estimate was not fully adjusted for inflation. IRS adjusted future costs for inflation, and documented inflation rates, but reported past costs in current year dollars. Because sunk costs were not adjusted for inflation, their contribution to the cost estimate is higher than it should be. In August 2013, the IRS Chief Financial Officer told us that, as a result of this finding, IRS has already revised the next update to the PPACA cost estimate to adjust sunk costs for inflation. Second, IRS included actual sunk costs in the estimate, but it did not use earned value management—a process for capturing actual costs and comparing them to estimated costs. Earned value management would enable IRS to continuously update the estimate to reflect actual costs. Third, the estimate shows how it varies from a previous estimate, but it does not explain factors behind the variance. If the reasons for cost variances are not captured, estimators cannot identify lessons learned that would improve future estimates.\nWe also identified three deficiencies in the credibility of the cost estimate. First, IRS conducted a sensitivity analysis on two cost drivers (a sensitivity analysis examines the effects on changing assumptions and estimating procedures to highlight elements that are cost-sensitive). However, it is not clear how the two cost drivers were selected for analysis or whether IRS identified the cost elements that were the most sensitive to change. Second, IRS developed multiple risk management plans and conducted a risk and uncertainty analysis, but it is unclear how the risk management plans were applied to address the risks identified in the cost estimate. In addition, IRS incorrectly treated the total funding risk for the entire program as equal to the sum of the risks of individual elements. A proper risk and uncertainty analysis is necessary to correctly assess the variability in the cost estimate due to program risks. Third, IRS did not obtain a second cost estimate. The GAO Cost Guide specifies that producing two cost estimates that are independent of one another is a best practice because the second cost estimate can validate the first and provide an unbiased test of whether the original cost estimate is reasonable.\nWe discussed each of these deficiencies with IRS officials, who stated they gained a better understanding of the criteria in the GAO Cost Guide based on our meeting. Because it provides a sound basis for informed investment decision making, realistic budget formulation, and accountability for results, developing a reliable cost estimate that meets best practices is critical to PPACA’s success.",
"Although the IT systems used to implement PPACA (which IRS refers to as the ACA IT investment) meet the Department of Treasury’s (Treasury) definition of a major investment, IRS reported the investment as a non- major investment in fiscal year 2014. According to agency officials, IRS did not have time to prepare the information that is typically reported for major investments in the President’s fiscal year 2014 budget request. Unlike major investments, non-major investments are not included for public reporting on the OMB IT Dashboard and are also not required to be included in the “Capital Asset Summary,” referred to as an Exhibit 300.\nIn prior years, IRS’s portion of the ACA IT investment was included with related investments that were managed and reported by the Department of Health and Human Services (HHS). HHS reported ACA IT investment information on the Dashboard. In January 2013, at the end of the fiscal year 2014 budget formulation cycle, IRS’s portion of the ACA IT investment was split from HHS’s portion and IRS assumed responsibility for reporting on its portion. The Clinger-Cohen Act of 1996 requires OMB to establish processes to analyze, track, and evaluate the risks and results of major capital investments in information systems and report to Congress on the net program performance benefits achieved as a result of these investments. In addition, OMB’s Capital Programming Guide defines major acquisitions to include capital assets that require special management attention because of high costs, high risk, or a significant role in the administration of agency programs. According to the Treasury budget director and IRS officials, the ACA IT investment is expected to be reported as a major investment in the fiscal year 2015 budget request. IRS and Treasury officials also told us they plan to include an Exhibit 300 and report ACA IT information on the OMB Dashboard.\nNot reporting information on IRS’s ACA IT investment on the Dashboard or in an Exhibit 300 makes it more difficult to monitor and limits transparency. As a result, information about the implementation of PPAA—such as the individual projects that comprise the investment, evaluation history, current Exhibit 300 and cost and schedule variances— is not as readily available to Congress and the general public.",
"In the fiscal year 2014 budget justification, IRS included new, useful information on its major IT investments that was not included in prior budget justifications, such as life-cycle costs, projected useful life of the current asset, anticipated benefits, and how performance will be measured. This additional information is a significant enhancement to information provided in prior budget justifications, and provides decision makers with more context on IRS’s portfolio of IT investments. However, IRS does not provide information on IT investments in a consolidated format. IT is a significant portion—about 20 percent—of the total IRS budget request for fiscal year 2014. It includes approximately $2.6 billion to fund 18 major IT investments and 131 non-major investments. (See appendix V for a summary of the major IT investments.)\nRedacted Exhibit 300s do not include sensitive data, such as estimated obligations for future budget years, names and contact information, and operational risks. in the Exhibit 300, such as the projected useful life of the current asset. However, certain other information (such as the start date, funds obligated through the prior fiscal year, and the number of FTEs represented by current costs) is only available in the Exhibit 300. Additional information (such as percent of life-cycle costs obligated through the prior fiscal year) is not available in either report, but can be calculated with information contained in the Exhibit 300 and budget justification. See table 4 for a general description of the type of information included in the budget justification and Exhibit 300.\nBecause different information exists in different documents, decision makers must access multiple public documents to gain a full understanding of IRS’s IT priorities. For example, if a decision maker was interested in the Modernized e-File (MeF) IT investment, the fiscal year 2014 budget justification would show that the projected useful life of the asset extends to 2019, however, to know the start date of the MeF investment—2001—the decision maker would also need to access the Exhibit 300. Likewise, the decision maker would see that the fiscal year 2014 budget justification shows the estimated life-cycle costs for MeF to be $575 million, however, to know how much has been obligated for the investment from the start date through fiscal year 2012—$304 million— the decision maker would have to access the Exhibit 300 and calculate the amount of funding obligated across prior fiscal years.\nConsolidating key budget and performance information on major IT investments in one budget document (such as the congressional justification) would ensure decision makers have comprehensive, easy to understand information on major IT investments. In particular, consolidating information for complementary data elements (such as start date and projected useful life of the current asset, and amount of funding obligated through prior fiscal years and life-cycle costs) would provide useful context to understand IRS’s progress in implementing long-term IT investments. IRS officials said they can consolidate this information for ease of review.\nGAO’s Standards for Internal Control in the Federal Government states that information should be communicated in a format that enables management and others to carry out their oversight responsibilities.\nFurther, the GPRA Modernization Act of 2010—which can serve as a guide to leading practices for planning at lower levels within federal agencies—requires that agencies consult with relevant committees when developing or making adjustments to their strategic plans and agency priority goals. Consulting with relevant committees regarding IT investments would provide IRS with an opportunity to share performance information and confirm that various committees are getting the types of performance information needed. Congressional staffs have requested comprehensive, easy to understand information on IRS’s IT investments: providing it in a comprehensive, consolidated format could provide them with better information to guide decisions. Congress directed IRS to include a summary of cost and schedule performance information for its major IT investments in its budget justification for fiscal year 2013; in addition, starting in March 2012, IRS was required to submit a report after every quarter with specific information on IRS’s selected major IT investments, including a “plain English” explanation of the cost and schedule for the previous three months and the cost and schedule performance for the upcoming three months. IRS has been submitting these reports and briefing the Appropriations Committees and other congressional stakeholders. Despite the increased information in the budget justification and the new quarterly report, key budget and performance information on all of IRS’s major IT investments remains in various budget documents. Until such data is consolidated, it is less accessible to congressional stakeholders.",
"Since June 2012, IRS implemented six recommendations made in our prior reviews of its budget justification documents. Three of the implemented recommendations resulted in additional information in the budget request, such as actual ROI and linking funding requests for new initiatives to strategic goals and objectives. Enhanced information in the budget request can aid decision making and provide context to Congress regarding how current operations and requests for new funding support IRS priorities. Table 5 summarizes the recommendations implemented by IRS.\nAs shown in table 6, IRS officials agreed with two of the three budget related recommendations that remain open. IRS initially disagreed with our recommendation to modify its funding request for new hires. However, in August 2013, IRS Corporate Budget officials told us that IRS is considering options to implement the recommendation, including possibly describing in the operating plan how it plans to use available funds not needed for new hires in the first year.",
"IRS has taken important steps to include new and useful information in its budget justification to aid Congress and other stakeholders, including new information on actual ROI and enhanced information on major IT investments. In addition, IRS made significant improvements to the PPACA cost estimate, which is integral to accurately informing budget decision makers of the anticipated long-term costs for both implementation and administration of the new health care program. Furthermore, IRS’s new pre-selection process for determining which initiatives to request funding for was reported by officials to be a more efficient method for commencing budget formulation, although enhanced guidance could make it more effective. We also identified some other actions that could improve the budget request and aid Congress in decision making, including (1) improving the accuracy and credibility of the PPACA cost estimate in future updates because it provides the basis for informed investment decision making, realistic budget formulation, and accountability for results, (2) ensuring the ACA IT investment is publicly reported to increase transparency and (3) reporting consolidated information on major IT investments to make the information more accessible.",
"To enhance the budget process and to improve transparency, we recommend the Acting Commissioner of Internal Revenue take the following four actions: Improve guidance given to business units for the pre-selection budget formulation process, emphasizing the importance of information on the estimated impact—qualitative or quantitative—of proposed budget initiatives.\nImprove the accuracy and credibility of future updates to the PPACA cost estimate by taking the following actions to more closely follow best practices outlined in the GAO Cost Guide:\nUse earned value management to capture actual costs and use them as a basis for future updates.\nExplain why variances occurred between the current estimate and previous estimates.\nDocument how cost drivers are selected for future sensitivity analyses.\nConduct future risk and uncertainty analyses consistent with best practices, and develop and document plans to address risks.\nValidate the original cost estimate by preparing a second, independent cost estimate.\nPublicly report the ACA IT investment as a major investment on the OMB IT Dashboard and the fiscal year 2015 budget request, including standard cost, schedule, and performance information.\nReport key data on major IT investments in one consolidated document, such as the congressional justification, in consultation with congressional stakeholders.",
"We provided a draft of this report to the Acting Commissioner of the IRS for his review and comment. We received an email on September 18, 2013 from the Chief Financial Officer, which included an attachment that provided the agency’s comments to our recommendations. This attachment is reprinted in appendix VI. In response to our draft report, the Chief Financial Officer stated that IRS agreed with three of our four recommendations and identified actions planned and taken to address them. For example, IRS agreed to include additional data on its major IT investments in the congressional justification, such as actual obligations for the investment to date. IRS agreed with the majority of the actions associated with our fourth recommendation on improving the accuracy and credibility of future updates of the PPACA cost estimate. IRS disagreed with two actions contained in our fourth recommendation. Specifically, IRS disagreed with our recommended action to use earned value management, a process that would enable IRS to continuously update the cost estimate to reflect actual costs. IRS stated that earned value management is not part of its current program management processes because the cost and burden to use earned value management outweigh the value added. We disagree with IRS’s view as to the benefits of earned value management. GAO has found that programs that establish good earned value management systems realize better project management decision making and fewer cost and schedule overruns. While there is an upfront investment to establish the earned value management system, there are long-term benefits that go beyond the individual project, such as fostering accountability, improving insight into program performance, and providing objective information for managing the program. Further, the OMB Capital Programming Guide states that earned value management is a critical component of risk management for major investments. IRS also disagreed with our recommended action to validate the PPACA cost estimate by preparing a second, independent cost estimate. IRS stated that the cost and burden of having an external organization produce a second, independent cost estimate of the same scope would outweigh the value added. In addition, IRS stated that an external organization would lack the knowledge necessary to produce a reasonable estimate without relying heavily on the IRS group that produced the first estimate. We disagree with IRS’s view. As reflected in the GAO Cost Guide, GAO has found that producing a second, independent cost estimate is considered one of the best and most reliable methods for validating a cost estimate. Without a second, independent cost estimate, decision makers lack insight into a program’s potential costs and may lack confidence that the estimate is reasonable and costs described in the first estimate can be achieved. While preparing a second cost estimate that is independent of the first cost estimate requires additional resources, it is generally based on the same detailed technical and procurement information. Furthermore, an independent cost estimate does not need to be conducted by an external organization, but the estimation team should be outside the acquisition chain and have nothing at stake with regard to program outcome or funding decisions. The major benefit of a second, independent cost estimate is that it provides an objective and unbiased assessment of whether the original estimate can be achieved; reducing the risk that the program will proceed underfunded or costs will exceed its value.\nWe plan to send copies of this report to the Chairman and Ranking Members of other Senate and House committees and subcommittees that have appropriation, authorization, and oversight responsibilities for IRS. We are also sending copies to the Acting Commissioner of Internal Revenue, the Secretary of the Treasury, and the Chairman of the IRS Oversight Board. Copies are also available at no charge on the GAO web site at http://www.gao.gov.\nIf you or your staffs have further questions or wish to discuss the material in this report further, please contact me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VII.",
"We were asked to review the President’s fiscal year 2014 budget request for the Internal Revenue Service (IRS). The objectives of this report were to (1) describe IRS’s capacity to report fiscal year 2012 obligations and full-time equivalent (FTE) data for program activities, organizational entities, and other efforts of interest; (2) assess IRS’s process and the type of information used to prioritize and select new program initiatives; (3) describe proposed base budget savings; (4) describe IRS’s new projected return on investment (ROI) methodologies; (5) evaluate steps IRS took to improve the cost estimate for the Patient Protection and Affordable Care Act (PPACA) in accordance with GAO’s Cost Estimating and Assessment Guide and determine the extent to which IRS is transparently reporting on the Affordable Care Act (ACA) information technology (IT) investment; (6) summarize IRS’s major IT investments and assess the type of information available in the congressional justification; and (7) describe IRS’s progress in implementing our prior budget-related recommendations.\nTo describe IRS’s capacity to report fiscal year 2012 obligations and FTE data, we reviewed documentation related to IRS budget formulation and budget execution, including IRS’s Financial Management Codes Handbook, IRS’s organizational chart, and its fiscal year 2014 congressional budget justification. We also interviewed knowledgeable officials in IRS’s Corporate Budget Office. We selected eight program activities, organizational entities, and efforts of interest for analysis: (1) Appeals, (2) Identity Theft, (3) International Exam and Collections, (4) Merchant Card and Basis Matching and the related Information Reporting and Document Matching (IRDM) IT system, (5) Offshore Voluntary Disclosure Program, (6) Online Services, (7) Telephone and Correspondence Services, and (8) Wage and Investment. We selected this list based on the following criteria: whether it was included in the proposed fiscal year 2014 budget initiatives, whether it was the topic of prior GAO work, and whether the selected list (as a whole) spans most of IRS’s appropriation accounts and encompasses a range of methods by which the data can be obtained from IRS’s financial management system. To determine IRS’s capacity to compile fiscal year 2012 obligations data for these eight items, we interviewed knowledgeable officials in IRS’s Corporate Budget Office. From the eight selected program activities, organizational entities, and other efforts of interest, we selected two illustrative examples to report fiscal year 2012 obligations data and to show how IRS’s budget formulation and budget execution structures interact: Appeals, and Wage and Investment. We selected these two examples largely to demonstrate the differences in structures. While they are both fund centers in IRS’s budget execution structure that manage and distribute funds, Appeals is also a program activity in IRS’s budget formulation structure and shows a relatively simple relationship between these structures. In contrast, Wage and Investment is a complex fund center that receives funding from many segments of IRS’s budget formulation structure. We assessed the reliability of IRS’s fiscal year 2012 obligations data by reviewing relevant IRS documents, including the Financial Management Codes Handbook, as well as prior work we conducted that assesses IRS’s financial statements. We believe that the data are sufficiently reliable for our purposes. We identified some limitations, but they do not affect our illustrative use of the data and are discussed in our report.\nTo assess IRS’s process and the type of information used to prioritize and select new program initiatives, we reviewed IRS documents related to its pre-selection budget formulation process for fiscal year 2014. Documents included guidance from the IRS Corporate Budget Office and pre- selection templates submitted for review by the taxpayer services and enforcement business units to senior leadership between November 2011 and May 2012. We analyzed these submissions for completeness against criteria for budget formulation outlined in OMB Circulars A-94. interviewed IRS officials familiar with the pre-selection process.\nOffice of Management and Budget, Revised, Guidelines and Discount Rates for Benefit- Cost Analysis for Federal Programs, OMB Circular No. A-94, (Revised October 1992). efficiencies, such as human capital, space optimization, and IT infrastructure summaries.\nTo describe IRS’s new projected ROI methodologies (of revenue protection and revenue enhancement) included in the fiscal year 2014 budget request, we discussed the difference between the new methodologies and IRS’s other projected ROI calculations with officials in IRS’s Office of Compliance Analytics and Corporate Budget Office. We also reviewed a related briefing developed by the Office of Compliance Analytics that summarizes the extent to which the use of non-transcribed electronic data impacts the classification of cases.\nTo evaluate steps IRS took to improve the PPACA cost estimate, we compared IRS’s updated PPACA cost estimate, completed in December 2012, with the characteristics of a high-quality cost estimate, identified in the GAO Cost Estimating and Assessment Guide (Cost Guide). Guide identifies four characteristics of a high quality cost estimate. The cost estimate should be (1) comprehensive, (2) well documented, (3) accurate, and (4) credible. We calculated the assessment rating of each criterion within the four characteristics by assigning each an individual assessment rating as follows: does not meet = 1, minimally meets = 2, partially meets = 3, substantially meets = 4, and meets = 5. We then averaged the individual practice scores to determine the overall rating. We shared our preliminary analysis of the updated PPACA cost estimate with program officials. When warranted, we updated our analyses based on the agency’s response and additional documentation provided to us.\nSee GAO, Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs (Supersedes GAO-07-1134SP), GAO-09-3SP (Washington, D.C.: Mar. 2, 2009). perform our assessment, we used relevant criteria on reporting capital investment information, including the Clinger-Cohen Act of 1996 and the OMB Capital Programming Guide.\nTo summarize IRS’s major IT investments (defined by Treasury as investments costing $10 million in either current year or budget year, or $50 million over the 5-year period extending from the prior year through the budget year +2) and to assess the type of information available in the congressional justification, we reviewed fiscal year 2013 and 2014 congressional budget justifications, Exhibit 300s—capital asset summaries—prepared by IRS for major IT investments, as well as IRS and OMB guidance on preparing those documents, such as the Office of Management and Budget Guidance on Exhibits 53 and 300—Information Technology and E-Government. We identified the type of information that is available across budget documents, in particular key information such as cost to date, full time equivalents, life-cycle costs, start date and end date.\nTo describe IRS’s progress in implementing our prior budget-related recommendations, we obtained information from various IRS officials and reviewed relevant documentation, including the fiscal year 2014 congressional budget justification and IRS’s Joint Audit Management Enterprise System (JAMES) reports, which track IRS actions taken to implement GAO recommendations. We then determined which recommendations were implemented.\nWe conducted our work in Washington, D.C., where key IRS officials involved with the budget and IT systems are located.\nWe conducted this performance audit from October 2012 to September 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
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"Figures 9 through 12 outline our assessment of the extent to which IRS’s updated, December 2012 Patient Protection and Affordable Care Act (PPACA) cost estimate meets best practices. This information is repeated in table 7, following the graphics.",
"Total obligations through fiscal year2012 (in millions)\nLifecycle costs (in millions)\nTotal obligations through fiscal year2012 (in millions)\nLifecycle costs (in millions)\nTotal obligations through fiscal year2012 (in millions)\nLifecycle costs (in millions)\nLifecycle costs (in millions)\nTotal obligations through fiscal year2012 (in millions)",
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"In addition to the contact named above, Libby Mixon, Assistant Director; Remmie Arnold, Amy Bowser, Jennifer Echard, Emile Ettedgui, Mary Evans, Chuck Fox, Paul Middleton, Donna L. Miller, Edward Nannenhorn, Karen O’Conor, Sabine Paul, Laurel Plume, Karen Richey, Erinn L. Sauer, Cynthia Saunders, and Robert Yetvin made major contributions to this report."
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"question": [
"How has the IRS changed its PPACA cost estimate?",
"What is distinct about the December 2012 estimate?",
"What areas of improvement remain?",
"What specific areas could use improvement in cost estimates?",
"Why should the IRS have reported IT systems for PPACA?",
"Why did the IRS not include such information in their report?",
"What are the consequences of this omission?",
"What kinds of information did IRS leave out in its budget justification?",
"Why would IRS officials consolidate this information?",
"How would consolidation of data help Congress?",
"Why was GAO asked to review the IRS's budget?",
"How did GAO conduct their review?",
"When did GAO report their preliminary findings?",
"What does this report assess?"
],
"summary": [
"IRS significantly improved its Patient Protection and Affordable Care Act (PPACA) cost estimate.",
"In particular, the December 2012 estimate is more comprehensive, reflecting the full life-cycle cost of the program--estimated at $1.89 billion for fiscal year 2010 through 2026.",
"A few areas of improvement remain, primarily regarding the accuracy and credibility of the cost estimate.",
"For example, IRS showed how the December 2012 estimate differed from the previous estimate, but did not explain the factors that resulted in the variances. In addition, IRS did not obtain a second cost estimate that could be used to assess the reasonableness of the $1.89 billion estimated program costs.",
"Although the information technology (IT) systems for PPACA met dollar thresholds (as outlined in the Department of Treasury's guidance) as a major investment for public reporting, IRS did not report this as such.",
"Officials told GAO they did not have time to prepare the information for the fiscal year 2014 budget justification, but plan to do so for fiscal year 2015.",
"Until IRS publicly reports the IT systems for PPACA as a major investment, transparency about these systems' implementation and administration is limited.",
"Although IRS included new and useful information on its major IT investments in the budget justification (such as life-cycle costs) other important information (such as the start date and percent of life-cycle costs obligated) is reported elsewhere or must be calculated.",
"IRS officials said they could consolidate this information for ease of review.",
"Consolidating key budget and performance data would ensure Congress has comprehensive, easily accessible information on major IT investments to guide decisions.",
"Because of the size of IRS's budget and the importance of its programs, GAO was asked to review the fiscal year 2014 budget request.",
"To address these objectives, GAO reviewed the fiscal year 2014 budget justification, compared the updated PPACA cost estimate to GAO's Cost Estimating and Assessment Guide, and interviewed IRS Corporate Budget officials.",
"In April and May 2013, GAO reported preliminary observations on IRS's budget.",
"Among other things, this report assesses how IRS prioritizes new initiatives; steps IRS has taken to improve the PPACA cost estimate and the reporting transparency of the related IT investment; and the type of information available in the budget justification about major IT systems."
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CRS_R44335
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{
"title": [
"",
"Background",
"The Data Gap",
"Robustness and Fragility: The NOAA NESDIS Independent Review Team Report",
"NOAA Polar Follow On Proposal and Mitigating the Data Gap",
"Polar Follow On as a Robustness Strategy",
"Appropriations for the Polar-Orbiting Weather Satellite Program",
"House Appropriations",
"Senate Appropriations",
"Consolidated Appropriations Act, 2016",
"Outlook"
],
"paragraphs": [
"T he National Oceanic and Atmospheric Administration (NOAA), an agency of the U.S. Department of Commerce, manages the U.S. civilian weather satellite system, which consists of Polar-orbiting Operational Environmental Satellites (POES) and Geostationary Operational Environmental Satellites (GOES). For several years, some have expressed concern about the possibility of a \"data gap,\" which could occur if the newest POES satellite, launched in 2011, fails before its successor is launched and operational sometime in 2017. The Government Accountability Office (GAO) has reported that a polar-orbiting weather satellite data gap would result in less accurate and timely weather forecasts and warnings of extreme weather events, which could endanger lives, property, and critical infrastructure.\nPOES satellites make 14 orbits per day as the Earth rotates 520 miles below, affording a different view with each orbit. A POES satellite provides two complete views of global weather per day. In contrast, GOES satellites are \"parked\" 22,300 miles above the equator and orbit at speeds equivalent to the Earth's rotation, so they maintain their positions and continually provide the same geographic view. NOAA operates two GOES satellites—GOES East and GOES West—that fully cover Alaska, Hawaii, the continental United States, and the Atlantic and Pacific Oceans. Combined, the POES and GOES provide much of the data used for weather forecasting and for identifying severe weather, including tropical storms, hurricanes, and snow storms.\nThis report focuses on NOAA's POES system, now called the Joint Polar Satellite System (JPSS) program. Specifically, it focuses on the circumstances that have led to the potential for a data gap over the next several years and the Administration's strategies to mitigate a data gap and preserve data continuity.\nIn its FY2016 budget justification, NOAA released a new strategy called Polar Follow On (PFO) that would fund two JPSS satellites that would launch in FY2026 and FY2031, as well as other contingency options to mitigate the consequences of a data gap (in the JPSS program, one satellite is currently in orbit and two satellites are under construction and scheduled to launch in FY2017 and FY2022). NOAA requested $380 million as initial funding for PFO in FY2016. House appropriators did not provide any funding for PFO in the House FY2016 appropriations bill for Commerce, Justice, Science, and Related Agencies ( H.R. 2578 ), and Senate appropriators provided $135 million for FY2016 in their bill. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), however, provided $370 million for PFO in FY2016. This report discusses issues surrounding the NOAA PFO strategy and next-generation polar-orbiting weather satellites in light of congressional concern over the future of the program.",
"In the 1990s, the Clinton Administration merged the military and the civilian polar-orbiting weather satellite systems into a single program: the National Polar-orbiting Operational Environmental Satellite System (NPOESS). NPOESS encountered difficulties related to program management, technical challenges, cost growth, and schedule delays. It was ultimately discontinued in 2010.\nFollowing the demise of NPOESS, NOAA and the National Aeronautics and Space Administration (NASA) reorganized their next-generation polar-orbiting weather satellite activities to create the JPSS program separate from the military weather satellite program. NOAA considers Suomi-NPP, launched in October 2011, to be the first next-generation polar-orbiting weather satellite in the JPSS series. Suomi-NPP was originally intended to be part of the NPOESS program and was initially called the NPOESS Preparatory Project satellite. It was designed to be a demonstration satellite to evaluate new instruments, spacecraft, and ground data networks that later were to be part of the NPOESS operational satellites. With the delay and ultimate cancellation of NPOESS, Suomi-NPP took on a different mission and is currently used as an operational satellite, providing weather and climate information as part of the JPSS program.\nThe life-cycle costs for the two JPSS satellites currently under construction, JPSS-1 and JPSS-2, together with Suomi-NPP, will total approximately $11.3 billion.",
"The Suomi-NPP satellite operates in the afternoon orbit, providing full global coverage twice a day. These data increase the timeliness and accuracy of weather forecasts three to seven days in advance of a severe weather event. Other satellites currently in polar orbit, such as EUMETSAT's Metop weather satellites, also provide critical weather information. The current polar-orbiting constellation includes Defense Meteorological Satellite Program (DMSP) satellites that collect weather data primarily for use by the Department of Defense. DMSP satellites also provide early- and mid-morning data to NOAA.\nBecause of NOAA's agreement to share data with EUMETSAT, whose Metop satellites operate in the morning orbit, the data gap risk refers to the afternoon orbit satellite responsibilities. Specifically, the risk of a data gap exists because of the possibility that one or more instruments aboard Suomi-NPP could fail prior to the planned March 2017 launch of JPSS-1 and its six-month period of on-orbit testing or that the JPSS-1 launch could be delayed. The design life for Suomi-NPP is five years (until October 2016), so the data gap could be 11 months if Suomi-NPP fails at the end of its expected life and JPSS-1 launches on time and is operational within 6 months of launch (September 2017). The gap could be longer if Suomi-NPP fails earlier than expected or if JPSS-1 is delayed. It could be shorter if Suomi-NPP operates longer than expected and JPSS-1 launches on schedule.\nFigure 1 shows the \"flyout\" schedule for the JPSS satellites and partner polar-orbiting satellites discussed above. In the figure, the data gap of immediate concern is represented by the white space to the right of the Suomi-NPP bar and to the left of the JPSS-1 bar near the bottom of the illustration. The two bars do not overlap unless the Suomi-NPP mission is extended, as depicted by the dotted arrow extending to the right of the Suomi-NPP bar.\nThe likelihood and duration of a data gap are subject to considerable uncertainty. In written testimony delivered to the Subcommittees on Environment and Oversight of the House Committee on Science, Space, and Technology on December 10, 2015, the NOAA witness stated that \"NOAA's annual lifetime analysis report indicates a high probability (greater than 80 percent) that the expected lifetime of Suomi-NPP will extend beyond JPSS-1 launch and commissioning.\" If Suomi-NPP operated through JPSS-1 launch and commissioning, then no data gap would occur, assuming JPSS-1 was fully operational. At the same hearing, the witness for GAO provided a different scenario:\nAs of December 2014, NOAA officials stated that a 3-month gap was likely based on an analysis of the availability and robustness of the polar constellation. However, we reported that several factors could cause a gap to occur sooner and last longer—potentially up to several years. For example, if [Suomi-NPP] were to fail today—exactly 4 years after its launch—the agency would face a gap of about 23 months before the JPSS-1 satellite could be launched and put into operation. Concerns about a near-term gap will remain until the JPSS-1 satellite is launched and operational. Further, if JPSS-1 fails on launch, there could be a gap until JPSS-2 is launched and operational in mid-2022.\nThose two viewpoints indicate that at the end of 2015, the data gap could range from zero (i.e., best-case scenario and no data gap) to as many as seven years (i.e., Suomi-NPP fails immediately and JPSS-1 fails on launch). For every day that Suomi-NPP continues to function well, the outlook improves; however, the possibility of a multiyear gap draws attention to NOAA's strategy for mitigating such a gap and its long-range planning for polar-orbiting weather satellites over the next several decades.",
"A 2013 report issued by a NOAA-chartered independent review team (IRT) stated that the current JPSS program is \"fragile.\" The report also noted that the future polar program is demonstrably not \"robust.\" These terms have specific meanings in the report: \"the IRT believes that the definition of a robust program is that two failures must occur before a gap is created and an option must be available to return to a 'two failure' condition if a failure occurs.\" Conversely, a fragile program is \"one spacecraft away from catastrophe.\" The report elaborates somewhat on these terms and their meaning; for example, the currently fragile JPSS program is also described as a \"single string system\" in which any number of potential failures could result in a gap with a potential duration of months to years. In contrast, a robust program \"requires multiple overlapping spacecraft developed in a manner that allows downstream components and subsystems to be used as spares for the spacecraft being prepared for launch.\" The IRT report concludes that the ultimate objective of its recommendations should be to establish a robust polar weather program consistent with other programs of critical national importance.\nIn one of its findings, the IRT report noted that the decision to focus the JPSS program on its high-priority weather mission, and to remove instruments that would measure characteristics of the Earth's climate rather than its weather, is helpful in minimizing the potential for a data gap. More specifically, the report stated that the JPSS program should focus uniquely on four high-priority weather instruments, noting that \"this conviction is based upon the belief that nothing should compromise the uninterrupted acquisition of critical JPSS weather data.\" This focus would apply to future polar-orbiting satellites (i.e., JPSS-2, JPSS-3, and JPSS-4), and the report emphasized that inclusion of any non-weather instruments in the JPSS program would create a schedule risk and should not be pursued. A possible consequence of the focus on weather instruments would be the loss of scientific data applicable to climate studies or other scientific pursuits, although it is unclear how that would affect NOAA's overall mission.\nThe IRT observed that the recommendation from its 2012 report to accelerate the schedules for JPSS-1 and JPSS-2 would not be a solution to the possible data gap between Suomi-NPP's end-of-life date and final on-orbit checkout of JPSS-1. Instead, the 2013 report recommended a \"gap-filler\" program. Further, the report recommended that the gap-filler \"free-flyer\" satellite carry only the ATMS and CrIS instruments. If carried out, \"a gap filler would be available to launch before [Suomi-NPP] reaches the end of its mission life and would cover a potential gap from a JPSS-1 launch or early spacecraft failure.\" Additionally, the IRT report observed that a gap-filler plan would move the program closer to the objective of being two failures away from loss of afternoon orbit polar weather data, fulfilling the goal of becoming a robust program.",
"NOAA laid out its strategy for addressing the near-term data gap and for achieving long-term continuity of polar-orbiting weather data in its FY2016 budget request. The proposed Polar Follow On (PFO) program is a line item within the Procurement, Acquisition, and Construction account. NOAA requested $380 million for PFO in FY2016. It estimated that out-year costs would total approximately $8.2 billion for PFO through 2038.\nThe $380 million initial funding request for PFO outlined a three-part strategy for data-gap mitigation. To mitigate the possible loss or degradation of the Advanced Technology Microwave Sounder (ATMS) on JPSS-1—one of four key instruments—NOAA would initiate development of an advanced microwave sounder satellite called the Earth Observing Nanosatellite-Microwave (EON-MW). EON-MW would provide some of the capabilities of ATMS to measure atmospheric temperature and moisture, and it would be hosted on a CubeSat platform. CubeSats are an existing technology, with the potential for expedited launch timelines and cost savings, among other advantages. The NOAA FY2016 budget request included $10 million for EON-MW.\nA second part of the mitigation strategy would address premature failure of JPSS-2. If JPSS-2 were to fail before its expected lifetime, the PFO strategy would be to launch JPSS-3 with only two instruments—ATMS and the Cross-Track Infrared Sounder (CrIS)—rather than the planned four instruments. The two-instrument satellite proposal appears to respond to the IRT's recommendation for a two-instrument \"gap-filler\" mitigation strategy. Should that contingency be exercised, the two-instrument satellite would replace the full JPSS-3 mission. The other two instruments, the Visible Infrared Imaging Radiometer Suite (VIIRS) and the Ozone-Mapping and Profiler Suite-Nadir (OMPS-N), likely would fly aboard JPSS-4.\nA third component of the mitigation strategy is NOAA's proposal to procure six radio occultation (RO) sensors as part of the COSMIC-2 mission, a joint mission with Taiwan. Data from the RO sensors would help to mitigate the loss or degradation of data from ATMS or CrIS sounders on polar-orbiting weather satellites. In addition to mitigating a potential data gap, NOAA states that the COSMIC-2 satellite system is a cost-effective way of obtaining global atmospheric temperature profiles, which would result in more accurate long-range forecasts. NOAA requested an additional $9.9 million in FY2016 to begin purchase of the second set of six sensors to be launched into near-polar orbit in 2019 (the first set of six sensors have been procured and will be launched into low-inclination orbit in 2016).",
"The NOAA FY2016 budget justification provides a similar definition to the IRT's for what constitutes a robust polar-orbiting weather satellite program:\na \"robust\" architecture has two characteristics: (1) two failures must occur to create a gap in data from ATMS and CrIS and (2) the ability exists to restore a two-failure condition within one year of an on-orbit failure.\nThe budget request cites the IRT 2013 report recommendation to achieve JPSS robustness as rapidly as possible and to manage JPSS-2, JPSS-3, and JPSS-4 as an integrated program. NOAA testified in front of the House Committee on Science, Space, and Technology on December 10, 2015, that the PFO plan would achieve a resilient and fault-tolerant position by 2023 (implying robustness) and would secure that position through 2038. Further, the NOAA witness stated that the FY2016 budget request of $380 million \"represents the minimum funding required to achieve robustness at the earliest possible date.\" The NOAA testimony also stated that the EON-MW free flyer would test cutting-edge microwave technology on a proven CubeSat platform, which potentially could lower costs and enable development of more robust systems in the future. In addition, NOAA testified that the launch of EON-MW in 2019 would provide near-term data-gap mitigation if JPSS-1 experienced problems prior to the launch of JPSS-2, which appears to align with the IRT 2013 report recommendation for a free-flyer satellite gap filler.",
"During congressional debate on appropriations in response to the budget request PFO proposal, Members of the House and Senate expressed concerns about the possibility of a data gap in polar-orbiting weather satellites but appeared to take different positions over the best response.",
"House appropriators did not provide any funding for PFO in H.R. 2578 , the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2016. The House Appropriations Committee's report accompanying H.R. 2578 instructed NOAA to develop solutions to mitigate possible data gaps in the polar-orbiting satellites and address the fragility of the JPSS program. The report language did not mention PFO, but it stated that the bill would fully fund COSMIC-2 at $20 million for FY2016 and that it \"underscores the value of COSMIC data as a potential gap filler for the fragile JPSS program.\" Further, the committee would have required a plan for the six additional COSMIC satellites, explaining why the launch of the second set of six sensors was delayed to FY2019 and including an analysis of the potential for acquiring RO weather data from private-sector providers.",
"At the hearing of the Senate Appropriations Committee's Subcommittee on Commerce, Justice, Science, and Related Agencies on February 26, 2015, both Chairman Richard Shelby and Ranking Member Barbara Mikulski expressed concern about whether NOAA would finish existing satellite programs on time and on budget, and about whether a projected gap in polar-orbiting satellite data may impact the U.S. ability to make weather forecasts. In addition to concerns about the near-term data gap, Chairman Shelby also stated that the FY2016 PFO request of $380 million lacked specific detail about the overall cost of the program and that the committee would need more information about spending beyond FY2016.\nIn a written response to questions from Senator Marco Rubio following the hearing, Secretary of Commerce Penny Pritzker acknowledged the consequences of a data gap, asserting that appropriations at the level of the request in FY2016 were needed to operate Suomi-NPP and to develop JPSS-1 and JPSS-2. Secretary Pritzker also stated that if PFO were not funded at the requested level for FY2016, then the risk of a data gap following the launch of JPSS-2 would increase. According to the Secretary, full funding of the request was necessary to achieve polar-orbiting weather satellite robustness by FY2023. Despite Secretary Pritzker's warning about fully funding PFO, the Senate subcommittee provided $135 million for PFO in its bill, and directed NOAA to perform an independent cost estimate of the program within 180 days of enactment.",
"The Consolidated Appropriations Act, 2016, funds the PFO at $370 million, $10 million less than the Administration request. The bill states explicitly that it does not include funding for EON-MW, for which the Obama Administration had requested $10 million for FY2016. By implication, the remainder of the proposal is fully funded. The published explanatory statement states that it retains report language contained in S.Rept. 114-66 and H.Rept. 114-130 , discussed above, so that the Senate requirement for an independent cost estimate of PFO and the House requirement for a plan for the second series of six RO sensors in the COSMIC-2 program are maintained.",
"Funding the PFO at $370 million in FY2016 appears to reflect congressional support of the PFO strategy for NOAA's polar-orbiting weather satellite program. However, Congress likely will continue close scrutiny of the program and oversight of cost and scheduling changes, given the history of NPOESS and JPSS since the mid-1990s.\nIn addition to efficient and effective management, the PFO program's success likely will also hinge on Congress appropriating funding to meet program needs without disrupting the cadence of the procurement, construction, launch, and on-orbit checkout schedule. The multiyear satellite development process could be challenged by the annual appropriations process, which in recent years has included one or more continuing resolutions (CRs) enacted after fiscal year-end on September 30. Often, the CRs maintain funding levels at previous fiscal year levels for months into the new fiscal year. If that were to occur, appropriators might consider adding language to the CR(s) that adjusts funding specifically to meet program needs for satellite development and prevent major delays in program development. That type of language was included for NOAA in the FY2016 CRs, for example.\nBy denying funding for EON-MW in the FY2016 omnibus appropriations bill, Congress effectively disagrees with the Administration's proposal to build a free-flyer EON-MW satellite to mitigate a possible data gap after the launch of JPSS-1. The House appears to favor the use of RO technology as a near-term data-gap mitigation measure. The next set of RO sensors currently are planned as the COSMIC-2 program; however, appropriators in the House asked NOAA to investigate sources of RO data that could be provided by the private sector. Several hearings conducted in 2015 by the House Science and Technology Committee explored the use of commercial data in the NOAA weather enterprise, and NOAA appears to be actively examining the feasibility of commercial data services.\nIf Suomi-NPP remains fully functional for 11 months past its design life and JPSS-1 launches and passes its on-orbit checkout on the current schedule, there will be no data gap in the afternoon orbit coverage, despite the fragility of the current program. The path to a robust program, however, will take many years. If Congress continues to support and fund PFO and if NOAA implements the program as planned, then the polar-orbiting weather satellite system could achieve robustness by 2023. Given that the rubric of robustness and fragility threads through the PFO proposal and in congressional report language accompanying appropriations legislation, congressional oversight of the many factors determining robustness versus fragility likely will be a priority for many years."
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"question": [
"What did NOAA report regarding the expected lifetime of Suomi-NPP?",
"What uncertainties exist regarding a data gap?",
"What would cause a data gap for Suomi-NPP?",
"What would prevent a data gap for Suomi-NPP?",
"What would NOAA's Polar Follow On strategy fund?",
"What is the justification for PFO?",
"What is the definition of a robust program?",
"What is the definition of a fragile program?",
"By when would the PFO plan achieve a robust position?",
"How much funding did NOAA request for PFO in FY2016?",
"How did congresspeople respond to this request?",
"What does the Consolidated Appropriations Act provide?"
],
"summary": [
"In testimony provided to the Subcommittees on Environment and Oversight of the House Committee on Science, Space, and Technology on December 10, 2015, the National Oceanic and Atmospheric Administration (NOAA) indicated a high probability (greater than 80%) that the expected lifetime of Suomi-NPP will extend beyond the JPSS-1 launch and commissioning.",
"The likelihood and duration of a data gap are subject to considerable uncertainty.",
"At the same hearing, the witness for GAO stated that several factors could cause a gap to occur sooner and last longer—potentially up to several years.",
"If Suomi-NPP continues to function until JPSS-1 is fully operational, then no data gap would occur.",
"NOAA released a new strategy called Polar Follow On (PFO) that would fund the third and fourth JPSS satellites and other contingency options to mitigate the consequences of a data gap.",
"The PFO is NOAA's strategy to transition the current JPSS polar-orbiting weather satellite program from its current \"fragile\" state to a \"robust\" state.",
"An independent review team (IRT) for NOAA defined a robust program as one in which two failures must occur before a gap is created and in which an option must be available to quickly return to a two-failure condition if a failure occurs.",
"Conversely, the IRT defines a fragile program as one spacecraft away from catastrophe.",
"NOAA argues that the PFO plan would achieve a resilient and fault-tolerant position by 2023 (implying robustness) and would secure that position through 2038.",
"NOAA requested $380 million as initial funding for PFO in FY2016.",
"House appropriators did not provide any funding for PFO in H.R. 2578, the House FY2016 appropriations bill for Commerce, Justice, Science, and Related Agencies, and Senate appropriators provided $135 million for PFO in their bill.",
"The Consolidated Appropriations Act, 2016 (P.L. 114-113), however, provides $370 million for PFO in FY2016."
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CRS_RL33837
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{
"title": [
"",
"Introduction",
"Background",
"I. Constitutional Provisions",
"Congress's War Powers",
"The Commander-in-Chief Clause",
"II. Repeal of Prior Authorization to Use Military Force",
"Historical Practice",
"Rescinding Military Authorization Versus Cutting Appropriations: Procedural and Other Considerations",
"Legal Consequences of Congressional Rescission of Military Authorization, Absent Additional Congressional Action",
"Judicial Interpretation",
"Implications of the War Powers Resolution",
"Inherent Presidential Authority to Use Military Force Absent Congressional Authorization",
"III. Use of the Power of the Purse to Restrict Military Operations",
"Procedural Considerations",
"Availability of Alternative Funds",
"Redeployment from Iraq: Provisions in the Vetoed Supplemental",
"Criteria Relating to Troops",
"Benchmarks for Iraqi Government and Dates for Redeployment",
"Other Restrictions",
"Provisions from the Enacted Supplemental, P.L. 110-28",
"Provisions from the Consolidated Appropriations Act, P.L. 110-161",
"IV. Limiting Deployment of Military Personnel",
"Analysis and Conclusion"
],
"paragraphs": [
"",
"On May 1, 2007, President George W. Bush vetoed the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, H.R. 1591 , in part because of measures designed to limit the U.S. military role in Iraq. He called the bill \"unconstitutional because it purports to direct the conduct of operations of war in a way that infringes upon the powers vested in the presidency by the Constitution, including as commander in chief of the Armed Forces.\" The next day, the House of Representatives voted to approve the bill by a vote of 222 to 203, failing to muster the two-thirds majority necessary to override the veto. Congress then passed a new version of the supplemental appropriations bill, H.R. 2206 ( P.L. 110-28 ), without providing timetables for withdrawal from Iraq, but conditioning the release of reconstruction assistance to Iraq on achievement of certain benchmarks by the Iraqi government, unless the President waives the requirements. The House of Representatives agreed to vote on a withdrawal deadline when it takes up FY2008 supplemental appropriations, which is expected in September.\nAs Congress considers defense authorization and appropriations bills for FY2008, there may be a renewed focus on whether or to what extent Congress has the constitutional authority to legislate limits on the President's authority to conduct military operations in Iraq. Congress may consider measures, for example, to repeal the authorization to use force in Iraq, to set deadlines for the withdrawal of most troops from Iraq, to set requirements for unit rotations into Iraq, or to make other requirements that could affect the deployment of armed forces to Iraq.\nIt has been suggested that the President's role as Commander in Chief of the Armed Forces provides sufficient authority for his deployment of additional troops, and any efforts on the part of Congress to intervene could represent an unconstitutional violation of separation-of-powers principles. While even proponents of strong executive prerogative in matters of war appear to concede that it is within Congress's authority to cut off funding entirely for a military operation, it has been suggested that spending measures that restrict but do not end financial support for the war in Iraq would amount to an \"unconstitutional condition.\" The question may turn on whether the President's decisions on troop deployment and mission assignment are purely operational decisions committed to the President in his role as Commander in Chief, or whether congressional action to limit the availability of troops and the missions they may perform is a valid exercise of Congress's authority to allocate resources using its war powers and power of the purse.",
"On October 16, 2002, Congress passed and President Bush signed the Authorization for Use of Military Force Against Iraq Resolution of 2002. While the President noted he had sought a \"resolution of support\" from Congress to use force against Iraq, and appreciated receiving that support, he also stated that:\n... my request for it did not, and my signing this resolution does not, constitute any change in the long-standing positions of the executive branch on either the President's constitutional authority to use force to deter, prevent, or respond to aggression or other threats to U.S. interests or on the constitutionality of the War Powers Resolution.\nThe President indicated he would continue to consult with Congress and to submit written reports to Congress every 60 days on matters relevant to the resolution to use force, which authorizes the President to use the armed forces of the United States\nas he determines to be necessary and appropriate in order to (1) defend the national security of the United States against the continuing threat posed by Iraq; and (2) enforce all relevant United Nations Security Council resolutions regarding Iraq.\nThe statute required certain conditions to be met prior to the initiation of military operations and made periodic reports to Congress mandatory, but did not set a timetable or any criteria for determining when to withdraw troops from Iraq. It appears to incorporate future UN Security Council resolutions concerning Iraq that may be adopted by the Security Council as well as those adopted prior to its enactment, effectively authorizing military force not only to compel disarmament but to carry out other functions necessary for achieving the goals adopted or that may be adopted by the Security Council. Thus, it appears that the resolution authorizes force deemed necessary by the President for so long as Iraq poses a continuing threat to the United States and the U.S. military presence is not inconsistent with relevant U.N. resolutions.\nThe resolution does not itself stipulate limitations with respect to the amount of force that may be used or the resources that may be expended to accomplish the authorized objectives; however, Congress may set limits by means of legislation or the budgeting process. The Department of Defense has some latitude regarding how it allocates funds for various operations, and may have additional statutory authority to obligate funds without additional prior express authorization from Congress.",
"At least two arguments support the constitutionality of Congress's authority to limit the President's ability to increase or maintain troop levels in Iraq. First, Congress's constitutional power over the nation's armed forces provides ample authority to legislate with respect to how they may be employed. Under Article I, § 8, Congress has the power \"To lay and collect Taxes ... to ... pay the Debts and provide for the common Defence,\" \"To raise and support Armies,\" \"To provide and maintain a Navy,\" \"To make Rules for the Government and Regulation of the land and naval Forces,\" and \"To declare War, grant letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water,\" as well as \"To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions\" and \"To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States.\" Further, Congress is empowered \"To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers ...\" as well as \"all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.\"\nSecondly, Congress has virtually plenary constitutional power over appropriations, one that is not qualified with reference to its powers in section 8. Article I, § 9 provides that \"No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.\" It is well established, as a consequence of these provisions, that \"no money can be paid out of the Treasury unless it has been appropriated by an act of Congress\" and that Congress can specify the terms and conditions under which an appropriation may be used, so long as it does not impose an unconstitutional condition on the use of the funds.\nOn the executive side, the Constitution vests the President with the \"executive Power,\" Article II, § 1, cl. 1, and appoints him \"Commander in Chief of the Army and Navy of the United States,\" id ., § 2, cl. 1. The President is empowered, \"by and with the Advice and Consent of the Senate, to make Treaties,\" authorized \"from time to time [to] give to the Congress Information on the State of the Union, and [to] recommend to their Consideration such Measures as he shall judge necessary and expedient,\" and bound to \"take Care that the Laws be faithfully executed.\" Id ., § 3. He is bound by oath to \"faithfully execute the Office of President of the United States,\" and, to the best of his \"Ability, preserve, protect and defend the Constitution of the United States.\" Id ., § 1, cl. 8.\nIt is clear that the Constitution allocates powers necessary to conduct war between the President and Congress. While the ratification record of the Constitution reveals little about the meaning of the specific war powers clauses, the importance of preventing all of those powers from accumulating in one branch appears to have been well understood, and vesting the powers of the sword and the purse in separate hands appears to have been part of a careful design.\nIt is generally agreed that some aspects of the exercise of those powers are reserved to the Commander in Chief, and that Congress could conceivably legislate beyond its authority in such a way as to intrude impermissibly into presidential power. The precise boundaries separating legislative from executive functions, however, remain elusive. There can be little doubt that Congress would exceed its bounds if it were to confer exclusive power to direct military operations on an officer not subordinate to the President, or to purport to issue military orders directly to subordinate officers. At the same time, Congress's power to make rules for the government and regulation of the armed forces provides it wide latitude for restricting the nature of orders the President may give. Congress's power of appropriations gives it ample power to supply or withhold resources, even if the President deems them necessary to carry out planned military operations.",
"The power \"To Declare War\" has long been construed to mean not only that Congress can formally take the nation into war but also that it can authorize the use of the armed forces for military expeditions that may not amount to war. While a restrictive interpretation of the power \"To declare War\" is possible, for example, by viewing the Framers' use of the verb \"to declare\" rather than \"to make\" as an indication of an intent to limit Congress's ability to affect the course of a war once it is validly commenced, Congress's other powers over the use of the military would likely fill any resulting void. In practice, courts have not sought to delineate the boundaries of each clause relating to war powers or identify gaps between them to find specific powers that are denied to Congress.\nEarly exercises of Congress's war powers may shed some light on the original understanding of how the war powers clauses might empower Congress to limit the President's use of the armed forces. In the absence of a standing army, early presidents were constrained to ask Congress for support in advance of undertaking any military operations. Congress generally provided the requested support and granted the authority to raise the necessary troops to defend the frontiers from deprivations by hostile Indians and to build a navy to protect U.S. commerce at sea. Congress, in exercising its authority to raise the army and navy, sometimes raised forces for specific purposes, which may be viewed as both an implicit authorization to use the forces for such purposes and as an implicit limitation on their use. On the other hand, Congress often delegated broad discretion to the President within those limits, and appears to have acquiesced to military actions that were not explicitly authorized.\nIn several early instances, Congress authorized the President to use military forces for operations that did not amount to a full war. Rather than declaring a formal war with France, Congress authorized the employment of the naval forces for limited hostilities. The Third Congress authorized the President to lay and enforce embargoes of U.S. ports, but only while Congress was not in session (and embargo orders were to expire 15 days after the commencement of the next session of Congress). The Fifth Congress authorized the President to issue instructions to the commanders of public armed ships to capture certain French armed vessels and to recapture ships from them, and to retaliate against captured French citizens who had seized U.S. citizens and subjected them to mistreatment. Congress also authorized U.S. merchant vessels to defend themselves against French vessels. The Supreme Court treated these statutes as authorizing a state of \"partial war\" between the United States and France. Such an undeclared war was described as an \"imperfect\" war, as distinguished from a \"Solemn\" or \"perfect\" war, declared as such, in that, in the first case, all members of one nation are at war with all members of the other nation; in the second case, those who are authorized to commit hostilities act \"under special authority.\" This suggests an early understanding that Congress's war powers extend to establishing the scope of hostilities to be carried out by the armed forces.\nIn the majority of cases, however, it appears that Congress has given broad deference to the President to decide how much of the armed forces to employ in a given situation. After Tripoli declared war against the United States in 1801 and U.S. vessels were already engaged in defensive actions against them, Congress did not enact a full declaration of war. Rather, it issued a sweeping authorization for the commissioning of privateers, captures, and other actions to \"equip, officer, man, and employ such of the armed vessels of the United States as may be judged requisite by the President of the United States , for protecting effectually the commerce and seamen thereof on the Atlantic ocean, the Mediterranean and adjoining seas,\" as well as to \"cause to be done all such other acts of precaution or hostility as the state of war will justify, and may, in his opinion, require .\" In declaring war against Great Britain in 1812, Congress authorized the President to \"use the whole land and naval force of the United States to carry the same into effect, and to issue to private armed vessels of the United States commissions or letters of marque and general reprisal, in such form as he shall think proper....\"\nThat Congress has traditionally left it up to the President to decide how much of the armed forces to employ in a given conflict need not imply that such deference is constitutionally mandated. The fact that Congress has seen fit to include such language may just as easily be read as an indication that Congress believes that the decision is its to delegate. Under this view, even in the case of a declaration of war, Congress retains the power to authorize the President to use only a portion of the armed forces to engage in a particular conflict. On the other hand, some have argued that the President is authorized to deploy all of the armed forces as he sees fit, with or without an express authorization to use force or a declaration of war. According to this theory, in essence, Congress can stop the deployment of military forces only by cutting appropriations and discharging the troops.\nCongress has also used its authority to provide for the organization and regulation of the armed forces to regulate how military personnel are to be organized and employed. The earliest statutes prescribed in fairly precise terms how military units were to be formed and commanded. For example, the 1798 act establishing the Marine Corps mandated the raising of a corps to consist of \"one major, four captains, sixteen first lieutenants, twelve second lieutenants, forty-eight sergeants, forty-eight corporals, thirty-two drums and fifes, and seven hundred and twenty privates....\" Congress authorized the President to appoint certain other officers as necessary if he were to assign the Marine Corps or any part of it to shore duty, and to assign the detachment to duty in \"forts and garrisons of the United States, on the sea-coast, or any other duty on shore.\" Officers of the Marine Corps could be detached to serve on board frigates and other armed vessels. The Marine Corps was increased in size and reorganized in 1834 to be commanded by a colonel, with the proviso that no Marine Corps officer could be placed in command of a navy yard or vessel of the United States.\nIt appears to have been understood that personnel and units authorized to perform certain duties could not be assigned to perform other duties without authorization from Congress. In 1808, when Congress authorized eight new regiments of specific types and composition, it felt compelled to include language making members of the light dragoon regiment liable to \"serve on foot as light infantry\" until sufficient horses and other accouterments could be provided. The Supreme Court later interpreted an 1802 statute providing for the establishment of the Corps of Engineers, although broadly worded to permit the President to direct that its members serve such duty in such places as he saw fit, to authorize only engineering duties:\nBut, however broad this enactment is in its language, it never has been supposed to authorize the President to employ the corps of engineers upon any other duty, except such as belongs either to military engineering, or to civil engineering.",
"Early in the nation's history, the Commander-in-Chief power was understood to connote \"nothing more than the supreme command and direction of the military and naval forces, as first general and admiral of the confederacy.\" Concurring in that view in 1850, Chief Justice Taney stated:\n[The President's] duty and his power are purely military. As Commander-in-Chief, he is authorized to direct the movements of the naval and military forces placed by law at his command, and to employ them in the manner he may deem most effectual to harass and conquer and subdue the enemy.\nThis formula, taken alone, provides only an approximate demarcation of the line separating Congress's role from the President's. Advocates of a strong role for Congress might characterize a legislative effort to limit the number of troops available in Iraq as placing troops \"by law\" under the President's command, while proponents of a strong executive would likely view it as a limitation on the President's ability to \"employ them in the manner\" he sees fit. With respect to the latter argument, however, it should be noted that the particular question before the Fleming Court did not call into question the extent to which Congress could restrict the manner of employing troops once placed at the command of the President.\nOther early cases demonstrate Congress's authority to restrict the President's options for the conduct of war. In Little v. Barreme , Chief Justice Marshall had occasion to recognize congressional war power and to deny the exclusivity of presidential power. There, after Congress had authorized limited hostilities with France, a U.S. vessel under orders from the President had seized what its commander believed was a U.S. merchant ship bound from a French port, allegedly carrying contraband material. Congress had, however, provided by statute only for seizure of such vessels bound to French ports. Upholding an award of damages to the ship's owners for wrongful seizure, the Chief Justice said:\nIt is by no means clear that the president of the United States whose high duty it is to 'take care that the laws be faithfully executed,' and who is commander in chief of the armies and navies of the United States, might not, without any special authority for that purpose in the then existing state of things, have empowered the officers commanding the armed vessels of the United States, to seize and send into port for adjudication, American vessels which were forfeited by being engaged in this illicit commerce. But when it is observed that [an act of Congress] gives a special authority to seize on the high seas, and limits that authority to the seizure of vessels bound or sailing to a French port, the legislature seems to have prescribed that the manner in which this law shall be carried into execution, was to exclude a seizure of any vessel not bound to a French port.\nAccordingly, the Court held, the President's instructions exceeded the authority granted by Congress and were not to be given force of law, even in the context of the President's military powers and even though the instructions might have been valid in the absence of contradictory legislation.\nIn Bas v. Tingy , the Court looked to congressional enactments rather than plenary presidential power to uphold military conduct related to the limited war with France. The following year, in Talbot v. Seeman , the Court upheld as authorized by Congress a U.S. commander's capture of a neutral ship, saying that \"[t]he whole powers of war being, by the constitution of the United States, vested in congress, the acts of that body can alone be resorted to as our guides in this inquiry.\" During the War of 1812, the Court recognized in Brown v. United States , that Congress was empowered to authorize the confiscation of enemy property during wartime, but that absent such authorization, a seizure authorized by the President was void.\nThe onset of the Civil War provided some grist for later assertions of unimpeded presidential prerogative in matters of war. In the Prize Cases , the Supreme Court sustained the blockade of Southern ports instituted by President Lincoln in April, 1861, at a time when Congress was not in session. Congress had at the first opportunity ratified the President's actions, so that it was not necessary for the Court to consider the constitutional basis of the President's action in the absence of congressional authorization or in the face of any prohibition. Nevertheless, the Court approved the blockade five-to-four as an exercise of presidential power alone, on the basis that a state of war was a fact and that, the nation being under attack, the President was bound to take action without waiting for Congress. The case has frequently been cited to support claims of greater presidential autonomy by reason of his role as Commander in Chief.\nHowever, it should be recalled that where Lincoln's suspension of the Writ of Habeas Corpus varied from legislation enacted later to ratify it, the Court looked to the statute rather than to the executive proclamation to determine the breadth of its application. The Chief Justice described the allocation of war powers as follows:\nThe power to make the necessary laws is in Congress; the power to execute in the President. Both powers imply many subordinate and auxiliary powers. Each includes all authorities essential to its due exercise. But neither can the President, in war more than in peace, intrude upon the proper authority of Congress, nor Congress upon the proper authority of the President....\nThe Chief Justice described the Commander-in-Chief power as entailing \"the command of the forces and the conduct of campaigns,\" but nevertheless agreed that military trials of civilians accused of violating the law of war in Union states were invalid without congressional approval, despite the government's assertion that the \"[Commander in Chief's] power to make an effectual use of his forces [must include the] power to arrest and punish one who arms men to join the enemy in the field against him.\"\nOn the other hand, the Supreme Court has also suggested that the President has some independent authority to employ the armed forces, at least in the absence of contrary congressional action. In the 1890 case of In re Neagle , the Supreme Court suggested, in dictum, that the President has the power to deploy the military abroad to protect or rescue persons with significant ties to the United States. Discussing examples of the executive lawfully acting in the absence of express statutory authority, Justice Miller approvingly described the Martin Koszta affair, in which an American naval ship intervened to prevent a lawful immigrant from being captured by an Austrian vessel, despite the absence of clear statutory authorization. Only one federal court, in an 1860 opinion, has clearly held that in the absence of congressional authorization, the President has authority to deploy military forces abroad to protect U.S. persons (and property). Nevertheless, there historically appears to be some support for this view by both the executive and legislative branches. However, the scope of any such authority remains unclear, as does the degree to which it may be limited by an act of Congress.\nThe expansion of presidential power related to war, asserted as a combination of Commander-in-Chief authority and the President's inherent authority over the nation's foreign affairs, began in earnest in the twentieth century. In United States v. Curtiss-Wright Export Corp , the Supreme Court confirmed that the President enjoys greater discretion when acting with respect to matters of foreign affairs than may be the case when only domestic issues are involved. In that case, Congress, concerned with the outside arming of the belligerents in the war between Paraguay and Bolivia, had authorized the President to proclaim an arms embargo if he found that such action might contribute to a peaceful resolution of the dispute. President Franklin Roosevelt issued the requisite finding and proclamation, and Curtiss-Wright and associate companies were indicted for violating the embargo. They challenged the statute, arguing that Congress had failed adequately to elaborate standards to guide the President's exercise of the power thus delegated. Justice Sutherland concluded that the limitations on delegation in the domestic field were irrelevant where foreign affairs are involved, a result he based on the premise that foreign relations is exclusively an executive function combined with his constitutional model positing that internationally, the power of the federal government is not one of enumerated but of inherent powers, emanating from concepts of sovereignty rather than the Constitution. The Court affirmed the convictions, stating that:\nIt is important to bear in mind that we are here dealing not alone with an authority vested in the President by an exertion of legislative power, but with such an authority plus the very delicate, plenary and exclusive power of the President as the sole organ of the federal government in the field of international relations—a power which does not require as a basis for its exercise an act of Congress, but which, of course, like every other governmental power, must be exercised in subordination to the applicable provisions of the Constitution. It is quite apparent that if, in the maintenance of our international relations, embarrassment—perhaps serious embarrassment—is to be avoided and success for our aims achieved, congressional legislation which is to be made effective through negotiation and inquiry within the international field must often accord to the President a degree of discretion and freedom from statutory restriction which would not be admissible were domestic affairs alone involved. Moreover, he, not Congress, has the better opportunity of knowing the conditions which prevail in foreign countries, and especially is this true in time of war.\nThe case is cited frequently to support a theory of presidential power not subject to restriction by Congress, although the case in fact involved an exercise of authority delegated by Congress. Curtiss-Wright remains precedent admonishing courts to show deference to the President in matters involving international affairs, including by interpreting ambiguous statutes in such a manner as to increase the President's discretion. The case has also been cited in favor of broad presidential discretion to implement statutes related to military affairs. To the extent, however, that Justice Sutherland interpreted presidential power as being virtually plenary in the realms of foreign affairs and national defense, the case has not been followed to establish that Congress lacks authority in these areas.\nThe constitutional allocation of war powers between the President and Congress, where Congress had not delegated the powers exercised by the President, was described by Justice Jackson, concurring in the Steel Seizure Case :\nThe Constitution expressly places in Congress power \"to raise and support Armies\" and \"to provide and maintain a Navy.\" This certainly lays upon Congress primary responsibility for supplying the armed forces. Congress alone controls the raising of revenues and their appropriation and may determine in what manner and by what means they shall be spent for military and naval procurement....\nThere are indications that the Constitution did not contemplate that the title Commander in Chief of the Army and Navy will constitute him also Commander in Chief of the country, its industries and its inhabitants. He has no monopoly of \"war powers,\" whatever they are. While Congress cannot deprive the President of the command of the army and navy, only Congress can provide him any army or navy to command.\nThe Jackson opinion is commonly understood to establish that whatever powers the President may exercise in the absence of congressional authorization, the President may act contrary to an act of Congress only in matters involving exclusive presidential prerogatives.\nPresidents from Truman to George W. Bush have claimed independent authority to commit U.S. armed forces to involvements abroad absent any Congressional participation other than consultation and after-the-fact financing. In 1994, for example, President Clinton based his authority to order the participation of U.S. forces in NATO actions in Bosnia-Herzegovina on his \"constitutional authority to conduct U.S. foreign relations\" and as his role as Commander in Chief, and protested efforts to restrict the use of military forces there and elsewhere as an improper and possibly unconstitutional limitation on his \"command and control\" of U.S. forces. Ever since Congress passed the War Powers Resolution over President Nixon's veto, all Presidents have regarded it as an unconstitutional infringement on presidential powers.\nIn the context of what it terms the \"Global War on Terror,\" the Bush Administration has claimed that the President's commander-in-chief authority entails inherent authority with respect to the capture and detention of suspected terrorists, authority he has claimed cannot be infringed by legislation. In 2004, the Supreme Court avoided deciding whether Congress could pass a statute to prohibit or regulate the detention and interrogation of captured suspects, which the Administration had asserted would unconstitutionally interfere with core commander-in-chief powers, by finding that Congress had implicitly authorized the detention of enemy combatants when it authorized the use of force in the aftermath of the September 11, 2001, terrorist attacks. However, the Supreme Court in 2006 invalidated President Bush's military order authorizing trials of aliens accused of terrorist offenses by military commission, finding that the regulations promulgated to implement the order did not comply with relevant statutes. The Court did not expressly pass on the constitutionality of any statute or discuss possible congressional incursion into areas of exclusive presidential authority, which was seen by many as implicitly confirming Congress's authority to legislate in such a way as to limit the power of the Commander in Chief.",
"While it is well-established that Congress and the President each possess authority on ending a military conflict, issues may arise if the political branches are in disagreement as to whether or how to end a military conflict. Inter-branch disagreement regarding the cessation of hostilities has been a rare occurrence, but it is not unprecedented. In the 110 th Congress, a number of proposals have been introduced that would repeal or establish an expiration date for the Authorization for Use of Military Force against Iraq Resolution of 2002. The following sections discuss the constitutional authority implicated by a repeal of military authorization, procedural, and other considerations involved in rescinding prior military authorization as compared to limiting appropriations, and the legal effect that a repeal would have on continuing hostilities.",
"Although the U.S. Constitution expressly empowers Congress to declare war, it is notably silent regarding which political body is responsible for returning the United States to a state of peace. Some evidence suggests that this omission was not accidental. During the Constitutional Convention, a motion was made by one of the delegates to modify the draft document by adding the words \"and peace\" after the words \"to declare war.\" This motion, however, was unanimously rejected. Convention records do not clearly evidence the framers' intent in rejecting the motion.\nSome early constitutional commentators suggested that the motion failed because the framers believed that the power to make peace more naturally belonged to the treaty-making body, as conflicts between nations were typically resolved through treaties of peace. Although the framers did not specifically empower Congress to make peace, they also did not expressly locate the power with the treaty-making body, perhaps because of a recognition that peace might sometimes be more easily achieved through means other than treaty.\nIt has been suggested that the framers did not allocate an exclusive body with peace-making authority because they believed \"it should be more easy to get out of a war than into it.\" Given the framers' failure to designate a single political branch responsible for returning the country from a state of war to a state of peace, the power to make peace was likely understood to be a shared power, with each branch having the authority on terminating a military conflict. The executive could return the country to a state of peace through a treaty with the warring party, subject to the Senate's advice and consent. Congress could declare peace or rescind a previous authorization to use military force pursuant to its plenary authority to repeal prior enactments, its power to regulate commerce with foreign nations, or its power to make laws \"necessary and proper\" to effectuate its constitutional powers.\nRegardless of the framers' intent, the legislative and executive branches have historically treated peace-making as a shared power. Peace has been declared in one of three ways: (1) via legislation terminating a conflict, (2) pursuant to a treaty negotiated and signed by the executive and ratified following the advice and consent of the Senate, and (3) through a presidential proclamation. All three methods have been recognized as constitutionally legitimate by the Supreme Court, including most clearly in the 1948 case of Ludecke v. Watkins , where the Court plainly stated, \"The state of war may be terminated by treaty or legislation or Presidential proclamation.\" Notably, the Court has recognized that the termination of a military conflict is a \"political act,\" and it has historically refused to review the political branches' determinations of when a conflict has officially ended.",
"As a procedural matter, it is more difficult for Congress to terminate authorization for a military conflict than to limit appropriations necessary for the continuation of hostilities. As in the case of ordinary legislation, congressional declarations of peace and rescissions of military authorization have historically taken the form of a bill or joint resolution passed by both Houses and presented to the President for signature. Like other legislation, such measures are subject to presidential veto, which Congress may override only with a two-thirds majority of each House.\nIn contrast, Congress's ability to deny funds for the continuation of military hostilities is not contingent upon the enactment of a positive law, though such a denial may take the form of a positive enactment. Although the President has the power to veto legislative proposals, he cannot compel Congress to pass legislation, including bills to appropriate funds necessary for the continuation of a military conflict. Thus, while a majority of both Houses would be necessary to terminate military authorization, and a super-majority of both Houses would be required to override a presidential veto, a simple majority of a single House could prevent the appropriation of funds necessary for the continuation of a military conflict. It should be noted, however, that legislation probably would be required to prevent the President from exercising statutory authority to transfer certain funds appropriated to other operations for use in support of the military conflict that Congress was attempting to limit. Like other positive legislation, such a measure would be subject to presidential veto.\nWhile it may be procedurally easier for Congress to refuse appropriations for a military conflict than to rescind military authorization, policy considerations may sometimes make the latter option more appealing. For example, some Members of Congress who support the winding down of a military operation might nevertheless be reluctant to reduce the funds for troops on the battlefield. There might also be concerns over potential effects that a denial of appropriations might have on unrelated military operations. Although appropriations legislation can be crafted to effectively terminate hostilities while permitting funding of force protection measures during the orderly redeployment of troops from the battlefield, such legislation, like other positive enactments, would be subject to presidential veto.\nIn certain circumstances, a President may be more willing to agree to a rescission of military authorization than to an appropriations bill that limits the funding of military operations, particularly if the rescission does not include a deadline for troop withdrawal. Indeed, during the Vietnam War, Congress was able to rescind military authorization at an earlier date than it was able to cut off appropriations. In 1971, Congress passed and President Nixon signed a measure rescinding the 1964 Gulf of Tonkin resolution, which had provided congressional authorization for U.S. military operations against North Vietnam. The Mansfield Amendment, enacted later that year, called for the \"prompt and orderly\" withdrawal of U.S. troops from Indochina at the \"earliest possible date.\" However, these measures did not include a deadline for troop withdrawal. Although U.S. troop presence in South Vietnam diminished considerably pursuant to the Nixon Administration's \"Vietnamization\" strategy even prior to these enactments, the United States continued significant air bombing campaigns in the years following the rescission of military authorization. During this same period, President Nixon vetoed or threatened to veto a number of appropriations bills that would have either prohibited funds from being used for certain military operations in Southeast Asia or required a complete withdrawal of U.S. troops from Vietnam. In 1973, two years after rescinding military authorization, Congress was finally able to enact appropriations limitations, signed by the President, that barred combat operations in Indochina. These appropriations measures were approved only after the signing of a cease-fire agreement with North Vietnam and the withdrawal of U.S. troops from South Vietnam, and served primarily to end the aerial bombing campaign in Cambodia and prevent U.S. forces from being reintroduced into hostilities.\nIn sum, in situations where Congress seeks to prevent the executive's continuation of military combat operations, it may be procedurally easier for Congress to deny appropriations than it would be to statutorily compel a withdrawal from hostilities. However, past experience suggests that, at least in certain circumstances, policy considerations may cause the two branches to view the rescission of military authorization as a more appealing alternative—postponing an inter-branch conflict on appropriations for a later date, enabling Congress to signal its interest in winding down a conflict, and (at least temporarily) preserving the President's discretion as to how the conflict is waged.",
"Although Congress has the power to rescind authorization of a military conflict or enact a declaration of peace, the practical effect that such an action might have on the President's ability to continue a military conflict may nevertheless remain difficult to predict. Historically, courts have been unwilling to interpret a congressional rescission of military authorization as barring the executive from continuing to wage a military campaign, at least so long as Congress continues to appropriate money in support of such operations . Although the War Powers Resolution establishes procedures by which Congress may direct the withdrawal of U.S. troops from military conflicts that lack statutory authorization, the constitutionality and practical effects of these requirements have been questioned. Finally, even in the absence of express congressional authorization, the President may possess some inherent or implied power as Commander in Chief to continue to engage in certain military operations. The following sections explain these points in greater detail.",
"Jurisprudence suggests that courts would not necessarily view a repeal of prior authorization, by itself, as compelling the immediate withdrawal of U.S. forces. As an overarching matter, courts have been highly reluctant to act in cases involving national security, especially when they require a pronouncement as to the legality of a military conflict or the strategies used therein. Many such cases have been dismissed without reaching the merits of the arguments at issue, including when they involve a political question that the judiciary considers itself ill-suited to answer. Legal actions brought by Members of Congress challenging the lawfulness of military actions have had no greater success than suits brought by private citizens. While the courts have suggested a willingness to intervene in disputes between the two branches that reach a legal (as opposed to political) impasse, they have yet to find an impasse on matters of war that has required judicial settlement. In other words, as long as Congress retains options for bringing about a military disengagement but has not exercised them, courts are unlikely to get involved.\nThe Vietnam conflict is the lone instance where Congress repealed military authorization while major combat operations were still ongoing. Although the Nixon Administration significantly decreased the number of U.S. troops present in South Vietnam following the repeal of the Gulf of Tonkin Resolution and enactment of the Mansfield Amendment in 1971, major combat operations continued into 1973, when Congress cut off all funding for military operations in Indochina.\nDuring this period, federal courts heard a number of suits challenging the legality of continued hostilities in the absence of congressional authorization. None of these challenges proved successful, in large part because Congress continued to appropriate money for military operations. It is a well-established principle that Congress's appropriation of funds may serve in some circumstances to confer authority for executive action. Reviewing courts have found this principle no less applicable concerning matters of war. The appropriation of billions of dollars in support of U.S. combat operations in Indochina, even after the repeal of the Gulf of Tonkin resolution, was viewed as congressional authorization for continued U.S. participation in hostilities, regardless of whether some Members of Congress had a motivation for approving continued appropriations other than that reflected in the express language of the enacted legislation.\nCourts have also declined on political question grounds to examine the motives of Congress in choosing to appropriate funds after rescinding direct authorization for U.S. military activities. In the words of one court, any attempt to assess Congress's intentions in appropriating funds, and determining whether such appropriations were truly meant to further continuing hostilities, would necessarily \"require the interrogation of members of Congress regarding what they intended by their votes, and then synthesization of the various answers. To do otherwise would call for gross speculation in a delicate matter pertaining to foreign relations.\" Such an examination of Congress's motivations was deemed beyond the scope of appropriate judicial scrutiny.\nSome argued that Congress's termination of statutory authorization for ongoing hostilities and instruction that the conflict end at the soonest practical date barred the President, at the very least, from \"escalating\" hostilities. Though the Court of Appeals for the Second Circuit suggested in a 1971 case that this argument might be valid, subsequent rulings indicated that the court would only be willing to consider this argument in very limited circumstances. Notably, in the 1973 case of DaCosta v. Laird , the Second Circuit Court of Appeals dismissed a challenge to the President's order to mine the harbors of North Vietnam, where it was argued that this order represented an unlawful escalation of hostilities in light of congressional enactments ordering the withdrawal of U.S. troops at the earliest practicable date. The circuit court dismissed this challenge because it raised a nonjusticiable political question. Deciding such a case would require the court to assess the strategy and tactics used by the executive to wind down a conflict, an assessment it was ill-equipped to make:\nJudges, deficient in military knowledge, lacking vital information upon which to assess the nature of battlefield decisions, and sitting thousands of miles from the field of action, cannot reasonably determine whether a specific military operation constitutes an \"escalation\" of the war or is merely a new tactical approach within a continuing strategic plan. What if, for example, the war \"de-escalates\" so that it is waged as it was prior to the mining of North Vietnam's harbors, and then \"escalates\" again? Are the courts required to oversee the conduct of the war on a daily basis, away from the scene of action? In this instance, it was the President's view that the mining of North Vietnam's harbor was necessary to preserve the lives of American soldiers in South Vietnam and to bring the war to a close. History will tell whether or not that assessment was correct, but without the benefit of such extended hindsight we are powerless to know.\nThough the circuit court did not completely rule out the possibility that a further escalation of hostilities could be deemed unlawful, the court suggested it would be willing to consider such arguments only in the most limited of circumstances. For example, the court suggested that a \"radical change in the character of war operations—as by an intentional policy of indiscriminate bombing of civilians without any military objective— might be sufficiently measurable judicially to warrant a court's consideration.\"\nIn Holtzman v. Schlesinger , decided later that year, the Second Circuit Court of Appeals reversed a lower court decision that had declared unlawful the continued bombing of Cambodia following the removal of U.S. troops and prisoners of war from Vietnam. The circuit court held that it was a nonjusticiable political question as to whether the bombing violated the Mansfield Amendment's instruction that hostilities be terminated at the \"earliest practicable date.\" Comparing the situation with that at issue in DaCosta , the court found that the challenge raised \"precisely the questions of fact involving military and diplomatic expertise not vested in the judiciary.\" Further, even assuming arguendo that the military and diplomatic issues raised by the bombing were judicially manageable, the circuit court found that Congress had authorized the bombing through continued appropriations.\nTaken together, these cases suggest that a reviewing court would probably not interpret a repeal of prior military authorization as requiring the immediate withdrawal of U.S. forces from ongoing hostilities in Iraq. Further, courts may be reluctant to assess whether specific military tactics or strategies pursued by the executive constitute an impermissible \"escalation\" of a conflict in the aftermath of such a repeal. Accordingly, it does not appear that the termination of direct authorization to use force, absent additional action such as the denial of appropriations or possibly the inclusion of an unambiguous deadline for troop withdrawal, would be interpreted by a reviewing court as constraining the executive's ability to continue U.S. combat operations.",
"The consequences of a repeal of an authorization to use military force were arguably made more significant with the enactment of the War Powers Resolution (WPR). Enacted in 1973 over President Nixon's veto, the WPR was an effort by Congress to reassert its role in matters of war—a role that many Members believed had been allowed to erode during the Korean and Vietnam conflicts. Among other things, the WPR establishes a procedure by which Congress may (theoretically) compel the President to withdraw U.S. forces from foreign-based conflicts when a declaration of war or authorization to use military force has been terminated. Specifically, WPR § 5(c) provides that\nat any time that United States Armed Forces are engaged in hostilities outside the territory of the United States, its possessions and territories without a declaration of war or specific statutory authorization, such forces shall be removed by the President if the Congress so directs by concurrent resolution.\nWhile § 5(c) offers a mechanism by which Congress might compel presidential compliance with a law that had rescinded statutory authorization to use military force, its constitutional validity is doubtful given the Supreme Court's ruling in the 1983 case of INS v. Chadha . In Chadha , the Court held that for a resolution to become a law, it must go through the bicameral and presentment process in its entirety. Accordingly, a concurrent or simple resolution could not be used as a \"legislative veto\" against executive action. Although the Chadha Court did not expressly find WPR § 5(c) to be unconstitutional, it was listed in Justice White's dissent as one of nearly 200 legislative vetoes for which the majority had sounded the \"death knell,\" and most commentators have agreed with this assessment. Thus, it seems highly unlikely that the WPR could be used to enforce a congressional repeal of an authorization to use military force in Iraq.\nSection 5(b) of the WPR establishes a requirement for the withdrawal of U.S. troops 60 days after armed forces are introduced without congressional authorization into a situation where hostilities are imminent, unless Congress enacts legislation providing authority for the use of force or extends the deadline. This provision would not appear to supply a means by which Congress could compel the withdrawal of U.S. forces from Iraq, as the introduction of those forces was done pursuant to congressional authorization. Even if Congress were to rescind that authorization, the legality of actions taken pursuant to it would not be nullified. Arguably, however, a substantial increase in troop levels that takes place subsequent to any repeal of the authorization for use of military force against Iraq could trigger the requirements of WPR § 5(b), although it is unclear how large such an increase would need to be before it would be sufficiently \"substantial.\" Congress has in the past enacted or considered legislation declaring the 60-day limit to have taken effect, although apparently with little practical effect. In any case, it appears that WPR section 5(c), which permits Congress to compel the withdrawal of U.S. troops via concurrent resolution, was intended to address situations where Congress desired an end to previously authorized hostilities.",
"Even in the absence of express congressional authorization, it is well-recognized that the President may still employ military force in some circumstances pursuant to his powers as Commander in Chief and his inherent authority in the area of foreign affairs, at least so long as no statute stands in his way. A President would likely argue that this inherent authority would permit him to instruct U.S. forces to engage in certain military operations related to an ongoing conflict, even if statutory authorization for U.S. participation in that conflict had been rescinded. Further, even if Congress were to enact legislation requiring the cessation of military operations after a specified date, it is highly unlikely that this measure would be interpreted to prohibit any and all military operations, specifically as they relate to rescue and evacuation missions. It appears well-understood, at least as a matter of historical practice, that such missions are not intended to be covered under legislation otherwise barring future participation in hostilities.",
"Congress has used its spending power to restrict the deployment and use of the armed forces in the past. In 1973, for instance, after other legislative efforts failed to draw down U.S. participation in combat operations in Indochina, Congress effectively ended it by means of appropriations riders prohibiting use of funds. Section 307 of the Second Supplemental Appropriations Act for Fiscal Year 1973, P.L. 93-50 (1973), stated that, \"None of the funds herein appropriated under this act may be expended to support directly or indirectly combat activities in or over Cambodia, Laos, North Vietnam, and South Vietnam, and after August 15, 1973, no other funds heretofore appropriated under any other act may be expended for such purpose.\" Section 108 of the Continuing Appropriations Resolution for Fiscal Year 1974, P.L. 93-52 (1973), provided that, \"Notwithstanding any other provision of law, on or after August 15, 1973, no funds herein or heretofore appropriated may be obligated or expended to finance directly or indirectly combat activities by United States military forces in or over or from off the shores of North Vietnam, South Vietnam, Laos or Cambodia.\" A year later, Congress passed an authorizing statute, section 38(f)(1) of the Foreign Assistance Act of 1974, P.L. 93-559 (1974), which set a total ceiling of U.S. civilian and military personnel in Vietnam of 4,000 six months after enactment and a total ceiling of 3,000 within one year of enactment.\nA provision of an authorization act, section 404 of the International Security Assistance and Arms Export Control Act of 1976, P.L. 94-329 (1976), comprehensively prohibited using funds for military and paramilitary operations in Angola. It stated that:\nNotwithstanding any other provision of law, no assistance of any kind may be provided for the purpose, or which would have the effect, of promoting, augmenting, directly or indirectly, the capacity of any nation, group, organization, movement, or individual to conduct military or paramilitary operations in Angola, unless and until Congress expressly authorizes such assistance by law enacted after the date of enactment of this section.\nThis section added that if the President determined that the prohibited assistance to Angola should be furnished, he should submit to the Speaker of the House and the Senate Committee on Foreign Relations a report describing recommended amounts and categories of assistance to be provided and identities of proposed aid recipients. This report also was to include a certification of his determination that furnishing such assistance was important to U.S. national security interests and an unclassified detailed statement of reasons supporting it.\nSection 109 of the Foreign Assistance and Related Programs Appropriations Act for Fiscal Year 1976, P.L. 94-330 (1976), signed the same day as P.L. 94-329 , provided that, \"None of the funds appropriated or made available pursuant to this act shall be obligated to finance directly or indirectly any type of military assistance to Angola.\"\nIn the 1980s, various versions of the Boland Amendment were enacted to prohibit using funds for various military activities in or around Nicaragua. For example, section 8066 of the Department of Defense Appropriations Act included in the Continuing Appropriations Resolution for Fiscal Year, 1985, P.L. 98-473 , 98 Stat. 1935 (1984), for example, stated that \"During Fiscal Year 1985, no funds available to the Central Intelligence Agency, the Department of Defense, or any other agency or entity of the United States involved in intelligence activities may be obligated or expended for the purpose, or which would have the effect of supporting, indirectly or indirectly, military or paramilitary operation in Nicaragua by any nation, group, organization, movement or individual.\" This provision stated that after February 28, 1985, the President could expend $14 million in funds if the President made a report to Congress which specified certain criteria, including the need to provide further assistance for military or paramilitary operations prohibited by the Boland Amendment, and if Congress passed a joint resolution approving such action.\nIn the 1990s, Congress enacted section 8151 of the DOD Appropriations Act for Fiscal Year 1994, P.L. 103-139 (1993), which approved using armed forces for certain purposes including combat in a security role to protect United Nations units in Somalia, but cut off funding after March 31, 1994, except for a limited number of military troops to protect American diplomatic personnel and American citizens unless further authorized by Congress. Section 8135 of the DOD Appropriations Act for Fiscal Year 1995, P.L. 103-335 (1994), provided that, \"None of the funds appropriated in this act may be used for the continuous presence in Somalia of United States military personnel, except for the protection of United States personnel, after September 30, 1994.\" In title IX of the DOD Appropriations Act for Fiscal Year 1995, P.L. 103-335 (1994), Congress provided that, \"No funds provided in this act are available for United States military participation to continue Operation Support Hope in or around Rwanda after October 7, 1994, except for any action that is necessary to protect the lives of United States citizens.\"\nThese examples reveal the approaches that Congress has employed to prohibit or restrict using military force. They have ranged from the least comprehensive \"none of the funds appropriated in this act may be used\" to the most comprehensive \"notwithstanding any other provision of law, no funds may be used.\" The phrase \"none of the funds appropriated in this act\" limits only funds appropriated and made available in the act that carries the restriction, but not funds, if any, that may be available pursuant to other appropriations acts or authorizing statutes. To restrict funds appropriated and made available not only in the act that carries the restriction, but also pursuant to other appropriations acts, Congress has used the phrase \"none of the funds appropriated in this act or any other act may be used.\" The most comprehensive restriction is \"notwithstanding any other provision of law, no funds may be used.\" This language precludes using funds that have been appropriated in any appropriations acts as well as any funds that may be made available pursuant to any authorizing statutes including laws that authorize transfers of appropriated or nonappropriated funds.",
"There is a parliamentary impediment to including the phrases \"none of the funds appropriated in this act or any other act may be used\" or \"notwithstanding any other provision of law, no funds may be used\" in a general appropriations bill. House Rule XXI, clause 2, makes subject to a point of order language that changes existing law (i.e., legislation) in a general appropriations bill (i.e., one providing appropriations for several agencies). A bill that appropriates funds for a single purpose or a single agency is not a general appropriations bill to which this restriction applies. The intent of Rule XXI, clause 2 is to separate the authorizing and appropriating functions and place them in separate committees.\nNonetheless, a practice has developed that just as the House may decline to appropriate funds for a purpose that has been authorized by law, it may by limitation prohibit appropriating money in a general appropriations bill for part of a purpose while appropriating funds for the remainder of it. Such a limitation \"... may apply solely to the money of the appropriation under consideration\" and \"... may not apply to money appropriated in other acts.\" Thus, the phrase \"none of the funds appropriated in this act may be used\" is not subject to a point of order, but the phrase \"none of the funds appropriated in this act or any other act may be used\" and the phrase \"notwithstanding any other provision of law, no funds may be used\" do not appear to qualify as permissible limitations in a general appropriations bill and would be subject to points of order under Rule XXI, clause 2 because they are considered legislation. To avoid a point of order, a limitation in a general appropriations bill may not impose new or additional duties on an executive official, may not restrict authority to incur obligations, and may not make an appropriation contingent upon (i.e., \"unless\" or \"until\") the occurrence of an event not required by law. If a Member raises a point of order that language in a general appropriations bill violates Rule XXI, clause 2, and the point of order is sustained by the chair, the legislative language is stricken.\nAlthough legislation in a general appropriations bill is subject to a point of order under Rule XXI, clause 2, a restriction in a House rule is not self-enforcing. Consequently, legislation may be included in a general appropriations bill and become law if no point of order is raised, if a point of order is overruled, or if the House either suspends the rules or agrees to a special order known as a rule reported from the Committee on Rules that waives the point of order against including such legislation.\nLike House Rule XXI, clause 2, Senate Standing Rule XVI also prohibits including legislation in a general appropriations bill, but the Senate rule permits legislation to be included if it is germane to the subject matter of the bill under consideration. If a point of order that language constitutes legislation on an appropriations bill is raised, the proponent of the language may defend it by asserting that it is germane. The question of germaneness is not decided by the presiding officer; it is submitted to the Senate. If a majority of Senators vote that the language in question is germane, it remains in the bill and the point of order that it constitutes legislation is dismissed and is not presented to the presiding officer for a ruling. If a majority of the Senate votes that language is not germane, the presiding officer then rules on whether it constitutes legislation. If the point of order is sustained, the language is removed; if it is overruled, the language remains in the bill and can be enacted.\nAs mentioned earlier, the intent of these House and Senate rules is to separate authorizing and appropriating functions by constraining the bodies from enacting legislation in appropriations bills, but prohibiting use of funds for a purpose or purposes does not contravene the House or Senate rule provided that the prohibition applies only to funds appropriated in the bill being considered.\nBecause an appropriations act generally funds programs for a fiscal year, each provision contained in the act is presumed to be in effect only until the end of the fiscal year. \"A provision contained in an annual appropriation act is not to be construed as permanent legislation unless the language used therein or the nature of the provision makes it clear that Congress intended it to be permanent. The presumption can be overcome if the provision uses language indicating futurity or if the provision is of a general character bearing no relation to the object of the appropriation.... The most common word of futurity is 'hereafter' and provisions using this term have often been construed to be permanent.\" Other words of futurity include \"after the date of approval of this act,\"\"henceforth,\" and specific references to future fiscal years.\nWhile including a word or words of futurity has the effect of making a provision extend beyond the fiscal year covered by an appropriations act, such a provision would constitute legislation that would appear to be subject to a point of order under House Rule XXI, clause 2 and Senate Standing Rule XVI during congressional consideration. If the parliamentary impediments can be overcome, however, such legislation may be enacted and become valid law.",
"A fundamental principle in appropriations law is that appropriations may not be augmented with funds from outside sources without statutory authority.\nAs a general proposition, an agency may not augment its appropriations from outside sources without specific statutory authority. When Congress makes an appropriation, it also is establishing an authorized program level. In other words, it is telling the agency that it cannot operate beyond the level that it can finance under its appropriation. To permit an agency to operate beyond this level with funds derived from some other source without specific congressional sanction would amount to a usurpation of the congressional prerogative. Restated, the objective of the rule against augmentation of appropriations is to prevent a government agency from undercutting the congressional power of the purse by circuitously exceeding the amount Congress has appropriated for that activity.\nWhile no statute in precise terms expressly prohibits augmenting appropriations, the concept is based on some appropriations laws. The Miscellaneous Receipts Statute, 31 U.S.C. § 3302(b), requires that a government official who receives money for the government from any source must deposit it in the U.S. Treasury as soon as practicable without deduction for any charge or claim. Under the Purpose Statute, 31 U.S.C. § 1301, appropriated funds may be used only for the purposes for which they are appropriated. A criminal provision, 18 U.S.C. § 209, prohibits supplementing the salary of an officer or employee of the government from any source other than the United States government.\nAn example of a statute permitting gift funds from other countries to finance a war is section 202 of the Continuing Resolution for Fiscal Year 1991, P.L. 101-403 (1990), passed before the first Gulf war. Section 202 added a new section 2608 to title 10 of the United States Code to authorize any person, foreign government, or international organization to contribute money or real or personal property for use by the Department of Defense. However, before the Department of Defense could spend the funds, they had to be first appropriated by Congress.\nThe Purpose Statute states that funds may be used only for purposes for which they have been appropriated; by implication it precludes using funds for purposes that Congress has prohibited. When Congress states that no funds may be used for a purpose, an agency would violate the Purpose Statute if it should use funds for that purpose; it also in some circumstances could contravene a provision of the Antideficiency Act, 31 U.S.C. § 1341. Section 1341 prohibits entering into obligations or expending funds in advance of or in excess of an amount appropriated unless authorized by law. If Congress has barred using funds for a purpose, entering into an obligation or expending any amount for it would violate the act by exceeding the amount—zero—that Congress has appropriated for the prohibited purpose.\nTo determine whether an agency has violated the Antideficiency Act, it would be necessary to review the language in an appropriations act or authorizing statute that includes a prohibition on using funds for a specific purpose. If an appropriations act prohibits using funds \"in this act\" for a purpose, for example, expending any amount from that act for the prohibited purpose would appear to contravene the Antideficiency Act because Congress has appropriated zero funds for it. Entering into obligations or expending funds, if any, that may be available from a different appropriations act or other fund for that purpose, however, would not appear to be prohibited by the Antideficiency Act; an agency would be able to use funds from sources other than the appropriations act that contains the prohibition or limitation.\nViolating the Antideficiency Act would be significant because it has notification and penalty provisions not found in the Purpose Statute. The Purpose Statute does not expressly provide for penalties; it generally is enforced by imposing administrative sanctions on the officer or employee who violates the statute. The Antideficiency Act, by contrast, contains a provision that not only provides for administrative discipline, including, when circumstances warrant, suspension from duty without pay or removal from office, 31 U.S.C. § 1349, but also one that requires an immediate report of a violation to the President and Congress, 31 U.S.C. § 1351. Moreover, the Antideficiency Act has a criminal penalty provision: Section 1350 of title 31 provides that an officer or employee who \"knowingly and willfully\" violates the act \"shall be fined not more than $5,000, imprisoned for not more than two years, or both.\" Although the act has a criminal provision, no one appears to have been prosecuted or convicted for violating it. Another criminal provision, 18 U.S.C. § 435, not part of the Antideficiency Act, makes punishable by a fine of $1,000, imprisonment of not more than one year, or both, knowingly contracting to erect, repair, or furnish any public building or for any public improvement for an amount more than the amount appropriated for that purpose.\nThe Antideficiency Act prohibits entering into obligations or expending funds in advance of or in excess of an amount appropriated unless authorized by law . One law that authorizes entering into obligations in advance of appropriations is the Feed and Forage Act. Also referred to as Revised Statute 3732, the Feed and Forage Act is part of and an express exception to the Adequacy of Appropriations Act, 41 U.S.C. § 11. Section 11 generally states that no government contract or purchase may be made unless it is authorized by law or is under an appropriation adequate to its fulfillment. The Feed and Forage Act exception authorizes the Department of Defense and the Department of Transportation with respect to the Coast Guard when it is not operating as service in the Navy to make contracts in advance of appropriations for clothing, subsistence, forage, fuel, quarters, transportation, or medical and hospital supplies. Obligations entered into pursuant to Feed and Forage Act authority must not exceed the necessities of the current year. The Secretary of Defense and the Secretary of Transportation immediately must advise Congress of the exercise of this authority and report quarterly on the estimated obligations incurred pursuant to it. Although the Feed and Forage Act authorizes entering into obligations such as contracts, actual expenditures are not permitted pursuant to this authority until Congress appropriates the necessary funds.",
"On May 1, 2007, President George W. Bush vetoed the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, H.R. 1591 . In his veto message, the President said that the bill was objectionable because it would set an arbitrary date to begin withdrawing American forces from Iraq and would micromanage commanders in the field by restricting their ability to fight. He also objected to the inclusion of billions of dollars of spending and other provisions not related to the war. Finally, he asserted that the bill was unconstitutional because it \"purport[ed] to direct the conduct of operations of war in a way that infringes upon the powers vested in the presidency by the Constitution, including as commander in chief of the Armed Forces.\" The next day, the House of Representatives, by a vote of 222 to 203—two-thirds not voting in the affirmative—failed to override the veto.",
"Section 1901 of H.R. 1591 , had it become law, would have provided that none of the funds appropriated or made available in the supplemental appropriations bill or in any other act could be used to deploy any armed forces unit unless the chief of the military department concerned certified in writing to the Committees on Appropriations and the Committees on Armed Services in advance of deployment that the unit was \"fully mission capable\" (i.e., \"capable of performing assigned mission essential tasks to prescribed standards under the conditions expected in the theater of operations, consistent with the guidelines set forth in the Department of Defense readiness reporting system\"). The President would have had the authority to waive the capability requirement on a unit-by-unit basis if he certified in writing to the appropriate committees that deploying a unit that is not fully mission-capable were required for reasons of national security and transmitted a report detailing the reason or reasons.\nUnder section 1902, no funds appropriated or made available in the supplemental or in any other act would have been permitted to be obligated or expended to initiate developing, to continue developing, or to execute any order that would have the effect of extending the deployment of any Army, Army Reserve, or Army National Guard unit beyond 365 days or of any Marine Corps or Marine Corps Reserve unit beyond 210 days. This limitation was not to be construed to require force levels in Iraq to be decreased below the total U.S. force levels in Iraq prior to January 10, 2007. The President would have had the authority to waive this limitation on a unit-by-unit basis by certifying in writing national security reasons and reporting details to the Committees on Appropriations and the Committees on Armed Services.\nPursuant to section 1903, no funds in the supplemental or in any other act were to be available for deploying Army, Army Reserve, or Army National Guard units for Operation Iraqi Freedom if such unit had been deployed within the previous 365 days, or for deploying any Marine Corps or Marine Corps Reserve unit if such unit had been deployed within the previous 210 days. This limitation was not to be construed to require force levels in Iraq to be decreased below the levels in that country prior to January 10, 2007. Like the limitations in sections 1901 and 1902, this one would have been subject to waiver by the President on a unit-by unit basis under the certification and notification procedures prescribed in the earlier limitations.",
"Section 1904 modified House and Senate language relating to Iraqi benchmarks and timetables. It would have required the President by July 1, 2007, to make and report to Congress determinations relating to progress that the government of Iraq is making in meeting benchmarks taken from the House and Senate bills. The President's inability to make any of the determinations relating to the benchmarks was to have resulted in the commencement of troop redeployment from Iraq no later than July 1, 2007, with a goal of completing redeployment within 180 days. If the President were able to make the determinations, the Secretary of Defense would have been required to commence redeploying forces from Iraq not later than October 1, 2007, with a goal of completing redeployment within 180 days. In either case, funds appropriated or otherwise made available in the bill or any other act were to be immediately available to plan and execute a safe and orderly redeployment of the Armed Forces from Iraq.\nSection 1904(a) of H.R. 1591 would have directed the President to determine and report findings to Congress on or before July 1, 2007, that relate to several matters including whether the Iraqi government—\nhas given U.S. and Iraqi forces authority to pursue all extremists and is making substantial progress in delivering Iraqi forces to Baghdad and protecting them from political interference; is making substantial progress in meeting its commitment to pursue reconciliation initiatives, including enacting a hydro-carbon law, adopting legislation for conducting provincial and local elections, reforming current laws governing the de-Baathification process, amending the Iraqi constitution, and allocating Iraqi revenues for reconstruction projects; is making, with U.S. armed forces, substantial progress in reducing the level of sectarian violence in Iraq; and is ensuring the rights of minority political parties in the Iraqi Parliament are protected.\nUnder section 1904(e), after the conclusion of the 180-day redeployment period specified above, the Secretary of Defense would not be permitted to deploy or maintain members of the U.S. armed forces for any purpose other than the following:\nprotecting American diplomatic facilities and American citizens, including U.S. armed forces; serving in roles consistent with customary diplomatic positions; engaging in targeted special actions limited in duration and scope to killing or capturing members of al-Qaeda and other terrorist organizations with global reach; or training members of the Iraqi security forces.\nSection 1904(f) would have required that 50% of funds for assistance to Iraq under the headings \"Economic Support Fund\" and \"International Narcotics Control and Law Enforcement\" was to be withheld from obligation until the President had made a determination that the government of Iraq has met certain benchmarks.\nFinally, Section 1904(h) would have required that, beginning on September 1, 2007, and every 60 days thereafter, the Commander of the Multi-National Forces, Iraq, and the U.S. Ambassador to Iraq were jointly to submit to Congress a report describing and assessing in detail the progress that the government of Iraq is making regarding benchmarks listed in section 1904(a).",
"Section 1311 would have prohibited the use of funds in the supplemental or in any other act to establish any military installation or base for the permanent stationing of U.S. military forces in Iraq or to exercise U.S. control over oil revenues in Iraq. Section 1312 would have denied authority to use funds in the supplemental to contravene several conventions and laws, including the United Nations Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment and 18 U.S. Code section 2340A. This limitation also applied to renditions. Section 1313 contained a requirement for the Secretary of Defense, within 30 days of enactment and every 90 days thereafter, to submit to the congressional defense committees a classified report assessing the individual transition readiness of units of Iraqi and Afghan security forces.",
"The House and Senate agreed to H.R. 2206 , the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Act Appropriations Act, P.L. 110-28 , on May 24, 2007, and the President signed it on May 25. This act provides supplemental funding through September 30, 2007, with no timetable for withdrawing troops. Section 1314 contains the major provisions relating to Iraq; it establishes 18 political and security benchmarks for the Iraqi government to meet. These benchmarks, similar to those that were included in the vetoed H.R. 1591 , include enacting and implementing legislation on de-Baathification and on ensuring equitable distribution of hydrocarbon resources, increasing the number of Iraqi security forces units capable of operating independently, and allocating $10 billion in Iraqi revenues for reconstruction projects, including delivering essential services, on an equitable basis.\nThe President is required to submit reports to Congress by July 15, 2007, and by September 15, 2007, on whether the Iraqi government is making sufficient progress in achieving these benchmarks. Obligation of reconstruction assistance to Iraq in the Economic Support Fund, about $1.6 billion, is prohibited unless the President certifies in both reports that Iraq is making progress on all the benchmarks or waives this requirement with a detailed rationale. The act requires an assessment of progress by the Iraqi government in meeting the benchmarks from the Government Accountability Office and an assessment of combat readiness of Iraqi security forces from an independent private sector entity selected by the Department of Defense.\nP.L. 110-28 does not include criteria relating to United States forces including mission readiness, periods between deployments, and duration of deployments, which were a part of the vetoed H.R. 1591 and could have been waived on a unit-by-unit basis by the President for national security reasons.\nAn earlier version of H.R. 2206 , passed by the House, would have split the total amount into two portions. The first portion, about $47.6 billion, would have been available immediately to fund about two additional months of military operations. The second portion, about $53.2 billion, would have been available only if the President on or before July 13, 2007, submitted a report to Congress detailing progress of the Iraqi government in meeting political and security benchmarks, similar to those that were included in the vetoed H.R. 1591 , and a joint resolution of approval was enacted into law. The Senate passed on May 17, 2007, a version of H.R. 2206 that expressed the sense of Congress in support of United States forces and requested a conference with the House. The House earlier rejected by a vote of 171 to 255 H.R. 2337 , a bill to require the Department of Defense to redeploy service members and contractors from Iraq within 180 days.\nThe rule reported by the Committee on Rules which provided for consideration of H.R. 2206 in the House of Representatives, H.Res. 486 , 110 th Cong., 1 st Sess., makes in order as an amendment the text of H.R. 2451 , which requires withdrawing most United States forces from Iraq by June 28, 2008, when the House considers supplemental appropriations for military operations in Iraq or Afghanistan for FY2008.",
"The Senate on December 18, 2007, and the House the following day passed H.R. 2764 , the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), which the President signed on December 26, 2007. The act provides $70 billion in supplemental appropriations for military activities in Iraq. Language requiring redeployment of U.S. armed forces from Iraq is not included, but Section 609 of Division L of the act mandates that the Secretary of Defense should report to Congress on progress toward stability in Iraq within 60 days after enactment and every 90 days thereafter. The Secretary's reports should address several matters including measures of political stability, primary indicators of the degree of security in Iraq, estimated strength of the insurgency, criteria for assessing capabilities and readiness of Iraqi military forces and police, and an assessment of U.S. military requirements, including planned force rotations through the end of calendar year 2008. The supplemental funds for these military activities and the report requirement were part of a floor amendment that the Senate agreed to by a vote of 70 to 25 on December 18.\nEarlier that day, the Senate rejected an amendment that would have expressed the sense of the Senate that the missions of U.S. armed forces in Iraq should change to more limited ones announced by the President in a September 13, 2007, address to the nation—counterterrorism operations; training, equipping, and supporting Iraqi forces; and the necessary mission of force protection, with the goal of completing that transition by the end of 2008. The vote was 50 to 45, with 60 votes required for passage. An amendment that would have directed the President to commence redeploying U.S. armed forces from Iraq within 90 days after enactment and prohibited funding continued deployments in Iraq after nine months from the enactment date except for limited missions also did not pass by a vote of 24 to 71. Because these amendments did not get 60 votes, they were withdrawn under the terms of the unanimous consent agreement.\nOn November 14, 2007, the House by a vote of 218 to 203 and 1 present passed H.R. 4156 , the Orderly and Responsible Iraq Redeployment Appropriations Act, 2008, that would have provided $50 billion in supplemental funds for military activities in Iraq. A provision would have directed the President within 30 days after enactment to commence an immediate and orderly redeployment of U.S. armed forces from Iraq with a goal of completing a transition to a limited presence and missions not later than December 15, 2008. After concluding the transition, the Secretary of Defense would have been able to deploy or maintain U.S. armed forces in Iraq only to protect U.S. diplomatic facilities, U.S. armed forces, and American citizens; to conduct limited training, equipping, and providing logistical support to Iraqi security forces; and to engage in targeted counterterrorism operations against al-Qaeda, al-Qaeda infiltrated groups, and other terrorist organizations in Iraq.\nOther provisions of House-passed H.R. 4156 would have prohibited using funds for any treatment or technique not authorized in the Army Field Manual or in contravention of some statutes enacted to implement the U.N. Convention Against Torture and denied funds to deploy any U.S. armed forces unit to Iraq unless the President certified it as fully mission capable or waived the certification requirement for national security reasons. They also would have mandated reports on plans to achieve the transition of the U.S. mission in Iraq, on performance measures for military and political stability in Iraq, and on a comprehensive regional stability plan for the Middle East.\nThe Senate on November 16, 2007, rejected a motion to close further debate on a motion to proceed to H.R. 4156 by a vote of 53 to 45, with 60 needed for passage.",
"The Constitution accords Congress with ample authority to regulate the use of military personnel. Among other things, Congress is designated with the power \"To raise and support Armies;\" \"To provide and maintain a Navy;\" \"To make Rules for the Government and Regulation of the land and naval Forces;\" and \"To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States.\" In the 110 th Congress, several legislative proposals have been introduced that would limit the deployment of certain military personnel to Iraq. Some have argued that congressional action limiting the use of particular troops during wartime would, at least in certain circumstances, infringe upon the President's authority as commander in chief to conduct a military campaign in a manner that he deems appropriate.\nAs a matter of historical practice, Congress has occasionally imposed limitations and other requirements on the deployment of U.S. troops, including during wartime. These limitations have been effectuated either through the statutory prohibition on the use of military personnel for a particular purpose, or via the denial of appropriations in support of a particular operation. The following are examples in which Congress has limited the President's ability to use particular military personnel for certain purposes:\n1915— The Army appropriations act restricted Army tours of duty in the Philippines to two years and tours in the Canal Zone to three years, unless the servicemember requested otherwise or in cases of insurrection or actual or threatened hostilities. The restriction was amended in 1934 to provide for two-year tours and in both areas as well as certain other foreign duty stations. The restriction was repealed in 1945, and replaced with a requirement for the Secretary of Defense to report twice annually to the Armed Services committees regarding regulations governing the lengths of tours of duty for the Army and Air Force outside the continental United States. 1933— The Treasury and Post Office Appropriation Act for FY1934, provided that \"Assignments of officers of the Army, Navy, or Marine Corps to permanent duty in the Philippines, on the Asiatic Station, or in China, Hawaii, Puerto Rico, or the Panama Canal Zone shall be for not less than three years. No such officer shall be transferred to duty in the continental United States before the expiration of such period unless the health of such officer or the public interest requires such transfer, and the reason for the transfer shall be stated in the order directing such transfer.\" 1940— The Selective Training and Service Act of 1940 provided that \"Persons inducted into the land forces of the United States under this Act shall not be employed beyond the limits of the Western Hemisphere except in the Territories and possessions of the United States, including the Philippine Islands.\" 1945— In an act extending the Selective Training and Service Act until the end of World War II, as determined by the earlier of dates proclaimed by the President or by concurrent resolution by both Houses of Congress, provided that no inductee under the age of nineteen \"shall be ordered into actual combat service until after he has been given at least six months of [appropriate] military training....\" 1948— The Selective Service Act of 1948 provided that eighteen- and nineteen-year old enlistees for one-year tours could not be assigned to land bases outside the continental United States. 1951— The Universal Military Training and Service Act of 1951 required inductees, enlistees, and other persons called to active duty to receive at least four months' \"full and adequate\" training prior to deployment overseas, and prohibited the expenditure of funds to transport or maintain a servicemember overseas in violation of the provision. 1956— 10 U.S.C. § 6015 prohibited assignment of female servicemembers to duty on combat aircraft and all vessels of the Navy. 10 U.S.C. § 6018 prohibited the assignment of Navy officers to shore duty not explicitly authorized by law. 1985— The National Defense Authorization Act, 1985 prohibited the expenditure of funds to support an end strength of U.S. Armed Forces personnel stationed in NATO countries above a level of 326,414. The measure was later modified to reduce the level further but to provide waiver authority to the President to increase the force level to up to 311,855, upon notification to Congress, if he determined the national security interests required exceeding the ceiling. 1992— The National Defense Authorization Act for FY1992 prohibited the use of appropriated funds to support an end strength level of members of the Armed Forces of the United States assigned to permanent duty ashore in nations outside the United States at any level in excess of 60 percent of the end strength level of such members on September 30, 1992, with exceptions in the event of declarations of war or emergency.\nThe precise scope of Congress's ability to limit the deployment of U.S. military forces has not been ruled upon by the courts, and it is therefore unclear whether legislative measures limiting the use of particular military personnel during wartime would ever be deemed to be an unconstitutional infringement upon the President's authority as Commander in Chief. Nonetheless, historical practice suggests that, at least in some circumstances, Congress may oblige the President to comply with certain requirements on the deployment of particular military personnel, including during periods of armed conflict.",
"Much of the historical debate over war powers has taken place in the context where a President has initiated the use of military force with ambiguous or no congressional authorization, which is not the case here. There is no obvious reason, however, to suppose that Congress's constitutional power to limit hostilities depends on whether the hostilities were initiated with Congress's express approval at the outset. Likewise, it does not seem consistent to suggest that Congress's authority to limit the scope of hostilities may be exercised validly only at the initiation of hostilities, without opportunity for changing course once troops are engaged.\nIn modern times, federal courts have been reticent to decide cases involving war powers on the merits, including those involving appropriations measures. However, in discussing whether a particular challenge raises non-justiciable political questions involving matters textually committed to the political branches by the Constitution, courts have generally reiterated the understanding of a shared allocation of war powers. That is, it is generally agreed that Congress cannot \"direct campaigns,\" but that Congress can regulate the conduct of hostilities, at least to some degree, and that Congress can limit military operations without the risk of a presidential veto by refusing to appropriate funds.\nIn 1970, in response to a challenge related to the Vietnam conflict, a federal district court expounded on the theme of congressional authority, with particular reference to Congress's appropriations power:\nThe power to commit American military forces under various sets of circumstances is shared by Congress and the Executive.... The Constitutional expression of this arrangement was not agreed upon by the Framers without considerable debate and compromise. A desire to facilitate the independent functioning of the Executive in foreign affairs and as commander-in-chief was tempered by a widely shared sentiment opposing the concentration of unchecked military power in the hands of the president. Thus, while the president was designated commander-in-chief of the armed forces, Congress was given the power to declare war. However, it would be shortsighted to view Art. I, § 8, cl. 11 as the only limitation upon the Executive's military powers.... [I]t is evident that the Founding Fathers envisioned congressional power to raise and support military forces as providing that body with an effective means of controlling presidential use thereof. Specifically, the House of Representatives ... was viewed by the Framers as the bulwark against encroachment by the other branches. In The Federalist No. 58 (Hamilton or Madison), we find:\nThe House of Representatives cannot only refuse, but they alone can propose, the supplies requisite for the support of government. They, in a word, hold the purse—that powerful instrument by which we behold in the history of the British Constitution, an infant and humble representation of the people gradually enlarging the sphere of its activity and importance, and finally reducing, as far as it seems to have wished, all the overgrown prerogatives of the other branches of the government. This power over the purse may, in fact, be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people, for obtaining a redress of every grievance, and for carrying into effect every just and salutary measure.\nDespite Congress's well-established authority over appropriations, it has been argued that the power of the purse cannot be wielded in such a way as to fetter the discretion of the Commander in Chief. Congress's power of the purse is subject to the same constitutional restrictions as any other legislative enactment, including those that affect allocation of powers among the three branches. That is, Congress cannot use appropriations measures to achieve unconstitutional results, although it might, in some circumstances, achieve a similar result simply by failing to appropriate money. The doctrine of \"unconstitutional conditions,\" most frequently applicable to laws conditioning benefits for states or private citizens on their relinquishment of constitutional rights, is said to apply as well to legislation authorizing presidential action. This notion, however, adds little to the analysis. Congress has ample constitutional authority to enact legislation that restricts the scope of military operations. If Congress can enact a limitation on the conduct of military operations directly, it can do so through appropriations. The larger question remains whether the limitation enacted amounts to an unconstitutional usurpation of the actual conduct of war.\nSome commentators agree that Congress has the authority to cut off funds for military operations entirely, but assert that a partial cut-off or limitation on the use of funds would amount to an unconstitutional condition by interfering with the President's authority to conduct battlefield operations. There has been some suggestion in the past that the President's responsibility to provide for troops in the field justifies further deployments without prior authorization from Congress, with some arguing that the President has an independent implied spending power to carry out these responsibilities. These arguments do not easily square with Congress's established prerogative to limit the scope of wars through its war powers, and do not conform with Congress's absolute authority to appropriate funds.\nCongress has frequently, although not invariably, acceded to presidential initiatives involving the use of military force. While a history of congressional acquiescence may create a gloss on the Constitutional allocation of powers, such a gloss will not necessarily withstand an express statutory mandate to the contrary. It does not appear that Congress has developed a sufficiently consistent or lengthy historical practice to have abandoned either its war power or its authority over appropriations. The executive branch has objected to legislative proposals it views as intrusive into presidential power, including conditions found in appropriations measures. And it remains possible to construe the function of \"conducting military operations\" broadly to find impermissible congressional interference in even the most mundane statutes regulating the armed forces. To date, however, no court has invalidated a statute passed by Congress on the basis that it impinges the constitutional authority of the Commander in Chief, whether directly or indirectly through appropriations. In contrast, presidential assertions of authority based on the Commander-in-Chief Clause, in excess of or contrary to congressional authority, have been struck down by the courts.\nOn the other hand, Presidents have sometimes deemed such limitations to be unconstitutional or merely precatory, and have at times not given them the force of law. In other words, Administrations have relied on an argument based on the doctrine of \"unconstitutional conditions\" to justify the President's authority to reject a limitation on national security spending while continuing to spend the funds. Whether or not the President is constitutionally entitled to spend funds without adhering to relevant legislative conditions appears to be an issue unlikely to be resolved by the courts.\nIn sum, it seems that under the constitutional allocation of powers Congress has the prerogative of placing a legally binding condition on the use of appropriations to regulate or end the deployment of U.S. armed forces to Iraq. Such a prohibition seems directly related to the allocation of resources at the President's disposal, and would therefore not appear to interfere impermissibly with the President's ability to exercise command and control over the U.S. armed forces. Although not beyond question, such a prohibition would arguably survive challenge as an incident both of Congress's war power and of its power over appropriations."
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"question": [
"When did President Bush authorize military force against Iraq?",
"How has Congress funded the continuation of the Iraq War?",
"At what point did Congress include provisions for ending military operations in Iraq?",
"What was the President's response to the bill?",
"What is the current dispute regarding constitutionality?",
"What are the specific issues under debate?",
"What information is provided at the beginning of this report?",
"What does this report discuss regarding the repeal of the AUMF?",
"What does this report discuss regarding funding?",
"How does the report provide historical examples?",
"Does Congress have power to limit the availability of troops?"
],
"summary": [
"On October 16, 2002, President Bush signed the Authorization for Use of Military Force Against Iraq Resolution of 2002.",
"Since the March 2003 invasion of Iraq, Congress has enacted appropriation bills to fund the continuation of the Iraq war, including military training, reconstruction, and other aid for the government of Iraq.",
"In April, 2007, however, Congress passed a supplemental appropriations bill to fund the war that contained conditions and a deadline for ending some military operations.",
"The President vetoed the bill, arguing in part that some of its provisions are unconstitutional.",
"The current dispute is centered on whether Congress has the constitutional authority to legislate limits on the President's authority to conduct military operations in Iraq, even though it did not initially provide express limits.",
"Specific issues include whether Congress may, through limitations on appropriations, set a ceiling on the number of soldiers or regulate which soldiers the President may assign to duty in Iraq, and whether an outright repeal or expiration of the authorization for use of military force (AUMF) against Iraq would have any effect.",
"This report begins by providing background, discussing constitutional provisions allocating war powers between Congress and the President, and presenting a historical overview of relevant court cases.",
"It discusses Congress's power to rescind prior military authorization, concluding, in light of relevant jurisprudence and the War Powers Resolution, that the repeal of the AUMF, absent the further denial of appropriations or the establishment of a specific deadline for troop withdrawal, would likely have little, if any, legal effect on the continuation of combat operations.",
"The report discusses Congress's ability to limit funding for military operations in Iraq, examining relevant court cases and prior measures taken by Congress to restrict military operations, as well as possible alternative avenues to fund operations if appropriations are cut. There follows a summary of relevant measures included in the vetoed FY2007 supplemental appropriations bill, H.R. 1591, and the enacted act, H.R. 2206.",
"The report provides historical examples of measures that restrict the use of particular personnel, and concludes with a brief analysis of arguments that might be brought to bear on the question of Congress's authority to limit the availability of troops to serve in Iraq.",
"Although not beyond debate, such a restriction appears to be within Congress's authority to allocate resources for military operations."
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GAO_GAO-14-62
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{
"title": [
"Background",
"Overview of the TECS System",
"Overview of TECS Modernization, Management Structure, and Acquisition Approach",
"DHS Governance and Oversight of Major IT Programs",
"GAO Previously Reported on DHS’s Management of IT Investments, Including TECS Modernization",
"CBP TECS Modernization Scope Defined, Schedule and Cost of Both Modernization Programs Are Unclear",
"CBP Has Defined the Scope of Its TECS Modernization Program; but Schedule and Cost Commitments Are Uncertain",
"ICE Established TECS Modernization’s Scope, Schedule, and Costs, but Technical Issues Have Caused ICE to Overhaul Its Design and Commitments",
"TECS Modernization’s Risk Management Is Generally Consistent with Leading Practices, but Requirements Management Has Had Mixed Results",
"CBP and ICE Have Generally Implemented Risk Management Practices",
"CBP Has Developed a Risk Strategy and Inventory, but Has Not Identified or Escalated All Known Risks",
"ICE Has Developed a Risk Strategy and Inventory, but Has Not Identified All Known Risks",
"CBP and ICE Requirements Management Processes and Practices Are Largely Consistent with Leading Practices, but Were Established after Requirements Activities Were Underway",
"CBP’s Requirements Management Is Largely Consistent with Leading Practices, but Developed after Key Requirements Activities Were Performed",
"ICE Mismanaged Requirements in the Past, but Recently Issued a Process to Improve Its Management Moving Forward",
"DHS’s Governance Bodies Have Taken Actions Aligned with Leading Practices, but Incomplete and Inaccurate Data Have Limited Their Effectiveness",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Comments from the Department of Homeland Security",
"Appendix III: Description of Key Systems and Data on Legacy TECS",
"Appendix IV: Description of CBP’s Five TECS Modernization Projects",
"Appendix V: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments",
"GAO’s Mission",
"Obtaining Copies of GAO Reports and Testimony",
"Order by Phone",
"Connect with GAO",
"To Report Fraud, Waste, and Abuse in Federal Programs",
"Congressional Relations",
"Public Affairs"
],
"paragraphs": [
"DHS’s mission is to lead the unified national effort to secure the United States by preventing and deterring terrorist attacks and protecting against and responding to threats and hazards to the nation. As part of that mission, DHS is responsible for ensuring that the nation’s borders are safe and secure, that they welcome lawful immigrants and visitors, and that they promote the free flow of commerce. Within the department, CBP is responsible for customs, immigration, and agricultural processing at ports of entry. ICE is responsible for the investigation and enforcement of border control, customs, and immigration laws.",
"TECS is an information technology (IT) and data management system that supports DHS’s core border enforcement mission. According to CBP, it is one of the largest, most important law enforcement systems currently in use, and is the primary system available to CBP officers and agents from other departments for use in determining the admissibility of persons wishing to enter the country. In addition, it provides an investigative case management function for activities carried out by ICE agents, including money-laundering tracking and reporting; telephone data analysis; and intelligence reporting and dissemination.\nOver time, TECS has evolved into a multifaceted computing platform that CBP describes as a system of systems. This mainframe-based system interfaces with over 80 systems from within DHS, and federal departments and their component agencies, as well as state, local, and foreign governments. It contains over 350 database tables, queries and reports (e.g., querying law enforcement records to determine if a traveler appears on a terrorist watch list), and multiple applications (e.g., ICE’s existing investigative case management system). CBP agents and other users access TECS via dedicated terminals. The system is managed by CBP’s Office of Passenger Systems Program Office and is currently hosted at CBP’s datacenter.\nBy 2015, CBP estimates that TECS will contain over 1.1 terabytes of data, including over 46 million lookout records—nearly 25 million records relating to the travel documents of permanent residents and refugees, and the border-crossing history for close to a billion travelers. On a daily basis, the system is used by over 70,000 users and handles more than 2 million transactions—including the screening of over 900,000 visitors and approximately 465,000 vehicles every day. In addition, federal, state, local, and international law enforcement entities use TECS to create and disseminate alerts and other law enforcement information about “persons of interest.” Ten federal departments and their numerous component agencies access the system to perform a part of their missions. Figure 1 shows the federal departments and component agencies that use TECS. Appendix III contains a description of the key systems and data resident on the existing (legacy) platform.\nThe current TECS system uses obsolete technology, which combined with growing mission requirements, have posed operational challenges for CBP and others. For example, users may need to access and navigate among several different systems to investigate, resolve, and document an encounter with a passenger. In addition, CBP identified that TECS’ search algorithms do not adequately match names from foreign alphabets. TECS’ obsolescence also makes it difficult and expensive to maintain and support. For example, DHS estimates that TECS’s licensing and maintenance costs are expected to be $40 million to $60 million per year in 2015.",
"In 2008, DHS initiated efforts to modernize TECS capability by replacing the mainframe technology, developing new applications and enhancing existing applications to address expanding traveler screening mission needs, improving data integration to provide enhanced search and case management capabilities, and improving user interface and data access. DHS plans to migrate away from the existing TECS mainframe by September 2015 to avoid significantly escalating support costs.\nThe modernization effort is managed by two program offices—CBP and ICE—working in parallel, with each having assumed responsibility for modernizing the parts of the system aligned with their respective missions. CBP’s modernization program office organizationally resides within its Office of Information and Technology’s Passenger Systems Program Office. This office is responsible for systems that support DHS’s and CBP’s screening and processing of travelers at U.S. ports of entry, including TECS. ICE’s TECS modernization program office resides within ICE’s Office of Chief Information Officer. It is responsible for modernizing ICE’s IT systems, adapting and conforming to modern IT management disciplines, and providing IT solutions throughout ICE. Homeland Security Investigations Executive Steering Committee provides oversight to the ICE TECS Mod program, including approval and prioritization of requirements, functionality, and decisions on cost, schedule, and performance.\nAs of July 2013, CBP’s program office consisted of approximately 80 staff, split roughly evenly between government and contractor staff, and ICE’s program office consisted of about 74 staff—of which 19 are government and 55 are contractors.\nIn June 2008, CBP awarded a 1-year development contract for its modernization program. From 2009 to 2012, CBP continued its relationship with the same contractor, but awarded a different contract for development services across a range of CBP IT programs. This contract was managed by the Passenger Systems Program Office. The development contractor is to provide, among other things, requirements analysis, system development, and testing; system component migration from development to testing and subsequently to production; operation and maintenance; technical reviews participation; and the development of related documentation as needed. CBP exercised its options on this contract from 2009 to 2012. In January 2013, CBP had issued a new contract for development services, but canceled the award shortly thereafter to make revisions. CBP officials said that the program continues to move forward with plans to complete the development contract award and plans to award the new contract during the fall of 2013. Until then, CBP is continuing to work with the existing contractor. In addition, CBP also contracted separately with other vendors for computer hardware (e.g., servers), as well as for program management support, financial support services, and communications services.\nThe ICE program office’s contracting strategy includes the government as the primary integrator of multiple contractors. ICE awarded its development contract in September 2011. The contract was a 1-year contract with four 1-year option years. The development contractor is to provide, among other things, software design and development services, testing services, information security controls, and technical support. In addition, ICE has established separate contracts for training, data migration, and program management support.",
"DHS’s Office of the Chief Information Officer (CIO) and the Office of the Under Secretary for Management play key roles in overseeing major acquisition programs like TECS Mod. For example, the CIO’s responsibilities include setting departmental IT policies, processes, and standards; and ensuring that IT acquisitions comply with DHS IT management processes, technical requirements, and approved enterprise architecture, among other things. Within the Office of the CIO, the Enterprise Business Management Office has been given primary responsibility for ensuring that the department’s IT investments align with its missions and objectives. As part of its responsibilities, this office periodically assesses IT investments to gauge how well they are performing through a review of program risk, human capital, cost and schedule, and requirements.\nIn October 2011, DHS’s Under Secretary for Management established the Office of Program Accountability and Risk Management (PARM). The office is to ensure the effectiveness of the overall program execution governance process and has the responsibility for developing and maintaining DHS’s Acquisition Management Directive. It is also responsible for providing independent assessments of major investment programs—called a Quarterly Program Accountability Report, and identifying emerging risks and issues that DHS needs to address.\nIn December 2011, DHS introduced a new initiative to improve and streamline the department’s IT program governance. This initiative established a tiered governance structure for program execution. Among other things, this new structure includes a series of governance bodies, each chartered with specific decision responsibilities for each major investment. Among these are executive steering committees, which serve as the primary decision-making authorities for DHS’s major acquisition programs. The steering committees, which are generally chaired by officials from the DHS agency responsible for the acquisition, are responsible for providing guidance to program management offices, approving program milestone documentation, and making important program execution decisions, as requested by the program manager and/or key stakeholders.\nIn September 2011, ICE chartered an executive steering committee responsible for overseeing its TECS modernization program. ICE’s committee is chaired by the Deputy Associate Director of Homeland Security Investigations and includes voting representation from CBP, as well as other stakeholders. Members include DHS’s CIO and Chief Financial Officer, stakeholder groups (such as U.S Citizenship and Immigration Services), and CBP’s TECS Mod Program Manager. The steering committee has been meeting since December 2011.\nIn early 2013, CBP developed an executive steering committee with responsibility for overseeing its TECS modernization effort. It held its first governance meeting in February 2013 and is chaired by CBP’s Assistant Commissioner, Office of Information and Technology, and Chief Information Officer/Lead Technical Authority. Members include DHS’s Under Secretary for Science and Technology, CIO, and Chief Financial Officer; as well as representatives from stakeholder groups and ICE’s TECS Mod Program Manager.\nFigure 2 shows the relationships between the oversight and governance boards involved with the two programs.",
"We have previously reported on DHS’s management of its major investments generally, and the management and development of TECS modernization specifically.\nIn July 2012, we reported that DHS had introduced a new IT governance framework that was generally consistent with recent Office of Management and Budget guidance and with best practices for managing projects and portfolios identified in our IT Investment Management framework. Specifically, of the nine practices in the framework, we found that the department’s new governance framework partially addressed two and fully addressed seven others. For example, consistent with Office of Management and Budget guidance calling for the CIO to play a significant role in overseeing programs, DHS’s draft procedures required that lower-level boards overseeing IT programs include the DHS CIO, a component CIO, or a designated executive representative from a CIO office. In addition, consistent with practices identified in the framework, DHS’s draft procedures identified key performance indicators for gauging portfolio performance. However, it had not completed its policies and procedures, because, according to department officials, the focus had been on piloting the new governance process. We recommended that DHS finalize associated policies and procedures, and fully follow best practices for implementing the process. DHS concurred with our recommendations.\nRegarding the performance of the TECS modernization effort, in a September 2012 report, we noted that CBP’s program encountered delays because program officials needed to develop new requirements to accommodate users’ requests to interface with an additional system. Additional delays were caused by questions about whether the system duplicated functions performed by another agency system. We recommended that DHS guidance address shortcomings and develop corrective actions for all major IT investment projects having cost and schedule shortfalls, including TECS Mod. DHS agreed with our recommendation. In September 2011, we reported that CBP modernization program officials reported delays in completing required program documentation due, in part, to their not understanding the approval processes at the department level. We further noted that, although the program had recently been reviewed and approved by the DHS acquisition review board, CBP’s program office had not completed the required acquisition plan the board typically uses to evaluate system effectiveness and alignment with the agency’s mission. In addition, the program had not yet completed privacy impact assessments that covered the entire program. We recommended that DHS address these shortfalls and the department concurred.",
"CBP has defined the scope for its modernization program, but its schedule and cost continue to change and are being revised. Further, ICE is overhauling the scope, schedule, and cost of its program after discovering that its initial solution is not technically viable. Thus, it is unclear whether these programs are on track to deliver planned functionality by September 2015.",
"CBP has defined the scope of its program to include the replacement of its aging current mainframe-based platform with a mixture of hardware, and custom-developed and commercial software. Further, CBP plans to move data from the legacy TECS system to databases hosted at DHS’s data centers and to use DHS’s network infrastructure. CBP expects that its modernization efforts will yield certain improvements over the existing system, including the following.\nEnhancements to TECS’ search algorithms to better match names from foreign alphabets; address gaps in current processes that could result in missing a person of interest. This includes an improved ability for inspectors to update information on travelers at air and sea borders at the time of encounter. Improvements in the flow and integration of data between CBP and its partner agencies and organizations. This is intended to aid the agency’s inspectors by providing timely, complete, and accurate information about a traveler during the secondary inspection process.\nCBP planned to develop, deploy, and implement these capabilities incrementally across five projects from 2008 to 2015.\nSecondary Inspection: This project is to support processing of travelers referred from primary inspection for either enforcement or administrative reasons. According to CBP, this project’s functionality was fully deployed to all air and sea ports of entry in 2011, and was fully deployed to all land ports of entry in 2013.\nHigh Performance Primary Query and Manifest Processing: This project is intended to improve TECS data search results in order to expedite the processing of manifests from individuals traveling to the United States on commercial or private aircraft, and commercial vessels. It is to be fully operational by March 2015.\nTravel Document and Encounter Data: This project is intended to improve CBP’s ability to query and validate travel documentation for both passengers and their means of conveyance. It is to be fully operational by March 2015.\nLookout Record Data and Services: This project is intended to improve the efficiency of existing data screening and analyses capabilities. It is to be fully operational by March 2015.\nPrimary Inspection Processes: This project is intended to modernize the overall inspection process and provide support for additional or random screening and communication functions. It is to be fully operational by March 2015.\nAs part of each of these projects, CBP is also developing an online access portal, called TECS Portal, for authorized users to access information remotely using a modern web- browser, along with security and infrastructure improvements, and the migration of data from the current system to databases in the new environment at the DHS datacenter. Ultimately, TECS Mod functionality is to be deployed to over 340 ports of entry across the United States.\nTo date, Secondary Inspection is operational approximately 6 months earlier than was estimated in the program’s 2012 acquisition program baseline. In addition, CBP reports that a portion of the High Performance Primary Query and Manifest Processing project is also operational. The remaining projects are all scheduled to be operational by March 2015. Appendix IV provides additional information about these projects.\nHowever, the program is revising its schedule and cost baselines, making its remaining commitments uncertain. Specifically, the program is revising its acquisition program baseline for a second time in under a year. In particular, CBP revised the program’s initial acquisition program baseline in November 2012, establishing new commitments for the program’s cost and schedule for each of the projects, as well as the program overall. According to program officials in June 2013, CBP is in the process of again revising its program baseline, and plans to do so by September 2013. Officials explained that this time, CBP is revising its commitments to reflect actual cost and schedule data gathered since its last revision.\nThe completion dates for each of CBP’s five projects have changed over time. Specifically, four of the projects are scheduled to be delivered later than originally planned and one project—Primary Inspection Processes— is scheduled to be completed ahead of the initial schedule. For example, according to the October 2009 program plan, Secondary Inspection was to be operational in September 2012. That operational date was then modified in the program’s acquisition program baseline (which was approved in October 2010) to be June 2013 (9 months later than originally scheduled). Then, in May 2011, CBP notified DHS that it was going to miss the deadline for several of its schedule milestones, including Secondary Inspection. As a result, CBP revised its schedule baseline for TECS Mod in November 2012; the new operational date for the project was to be March 2014. That date was reiterated in the CBP- ICE Joint Integration Process document, signed by CBP and ICE program management, upon its release in April 2013. However, shortly thereafter, the program again revised the operational date to be September 2013. Figure 3 illustrates the changes to CBP’s schedules for the five projects over time.\nExacerbating the rebaselining and the schedule changes over time is the fact that CBP has not fully developed its master schedule to manage work activities and to monitor the program’s progress. Our research has identified, among other things, that a key element associated with a complete and useful schedule or roadmap for executing a program such as TECS Mod is to logically sequence all work activities so that start and finish dates of future activities, as well as key events based on the status of completed and in-progress activities, can be reliably forecast. While the program office has developed high-level schedules for each of its projects, officials explained that the program has not fully defined and documented all the linkages between work activities within the individual project schedules, nor have they defined dependencies that exist between projects in the master schedule. The program’s master schedule provided to us in May 2013 showed that approximately 65 percent of CBP’s remaining work activities were not linked with other associated work activities. Without these linkages, activities that slip early in the schedule do not transmit delays to activities that should depend on them, and a critical path cannot be determined, which means that management is unable to determine how a slip in the completion date of a particular task may affect the overall project schedule. Moreover, as of June 2013, the program had not yet developed a detailed schedule for the last project, Primary Inspection Processes, nor had it completed a detailed schedule for parts of the second project, High Performance Primary Query. Instead of managing from a fully developed master schedule, officials explained that they manage the program according to the milestones in the program’s acquisition program baseline, and do so by sharing information about project and program dependencies at meetings between project teams. However, the lack of a complete schedule raises questions about the validity of the milestones in its acquisition program baseline, and the certainty of the program’s schedule commitments.\nFurthermore, the program’s current schedule assumes the concurrent delivery of four of the five projects. As we have previously reported, the concurrent development of system components (e.g., the five TECS modernization projects) introduces risks that could adversely impact program cost and schedule. Such risks include the contention for limited resources. For the CBP TECS modernization program, these risks may be realized. In particular, program officials told us that development work for the Primary Inspection Processes was halted because of anticipated funding shortfalls due to sequestration. However, when the funding shortfalls were not realized, the program was unable to initiate Primary Inspection Processes development because, according to the Passenger Systems Program Office Executive Director, the program’s contractor resources had been diverted to other projects and shifting those resources back to Primary Inspection Processes would affect work on these projects. The Executive Director further stated that if work on Primary Inspection did not begin by January 2014, the program would not meet its operational date of September 2015.\nProgram officials said that reasons for the schedule weaknesses include a lack of appropriate and skilled resources. Specifically, program officials stated that the program has only two staff members with skills needed to develop and maintain the schedules, and that fully documenting all the dependencies would be time consuming and not worth the effort because in their view, the limitations in the integrated master schedule were not sufficient to warrant the additional resources that would be necessary to fix them. However, without a complete and integrated master schedule that includes all program work activities and associated dependencies, CBP is not in a position to accurately determine the amount of time required to complete its TECS modernization effort and develop realistic milestones. Moreover, the program does not have a basis for guiding the projects’ execution and measuring progress, thus increasing the agency’s risk of not meeting the program’s completion dates.\nSimilar to TECS Mod’s schedule milestones, the program’s cost estimates have also changed as a result of rebaselining, and are currently being revised. The program’s current baselined life-cycle cost estimate is approximately $724 million, including $31 million for planning management, $212 million for development, and $481 million for operations and maintenance. However, as previously stated, the program is in the process of revising its estimate. As of August 2013, the program reported that it had expended about $226 million—approximately $170 million for planning/program management and development/acquisition, and $56 million for operations and maintenance.\nWhile officials reaffirmed their intention to complete the whole program by the 2015 deadline, the program faces the risk of not doing so because its specific schedule milestones for each of the projects are based on incomplete schedule information and concurrency among the projects has resulted in competition for the same contracting resources. Moreover, while the program is pending rebaselining, it is unclear when the program actually intends to deliver functionality, or how much it will cost to do so.",
"ICE initially defined the scope of its TECS modernization effort to include specific law enforcement and criminal justice information functions; tools to support ICE officers’ collection of information, data analysis, and management operations; enhanced capabilities to access and create data linkages with information resources from elsewhere in DHS and other law enforcement agencies; and capabilities to better enable investigative and intelligence operations, corresponding management activities, and information sharing. Further, ICE established plans to deliver functionality in two phases, Core Case Management and Comprehensive Case Management, each of which was to contain several releases. Specifically:\nPhase 1: Core Case Management: This phase was to encompass all case management functions currently included in the existing system. ICE planned to develop and deploy these functions in three releases beginning in 2009, and was scheduled to deploy Release 1 by December 2013, with additional releases following about every 12 months, in order to achieve independence from the existing TECS platform by September 2015. Specific capabilities that were to be provided include: basic electronic case management functions, including opening cases, performing supervisory review of cases, and closing cases within the system; development of reports for use as evidentiary material in court proceedings arising from ICE agents’ investigations; maintenance of records relating to the subjects of ICE investigations; and audit capabilities to monitor system usage.\nPhase 2: Comprehensive Case Management: This phase was to expand on the features delivered as part of phase one and to be delivered in four increments starting in 2016, with an estimated completion date in fiscal year 2017.\nRegarding costs, ICE’s baselined life-cycle cost estimate is approximately $818 million, including about $17 million for planning, roughly $328 million for development and acquisition, and approximately $473 million for operations and maintenance.\nHowever, in 2012 the program began to experience technical issues, which resulted in a delay of approximately 7 months and the deferral or removal of functionality from Release 1. Specifically, ICE decided in 2012 that Release 1 would only provide functionality for the “person” type of subject records; all the other types of subject records have been deferred to future releases. Then, in October 2012, the agency conducted a review of the program’s remaining work for Release 1 to determine whether, in light of increasing rates of program defects and a slowdown in the program’s overall progress, ICE was positioned to deliver Release 1 as planned. Based on the review results, the agency deferred or eliminated approximately 3,000 out of the 4,300 in-scope requirements (about 70 percent of the original total) in order for the program to meet its planned schedule commitments. Such functionality includes the capability to perform supervisory review of cases and certain electronic notifications and alerts.\nFaced with continuing technical issues and related delays, ICE’s program manager said that the program initiated a second program review in January 2013 at the direction of its executive steering committee and with participation from the program office, the contractor, and Homeland Security Investigations. Based on the review results, the program office determined in June 2013 that the system under development was not technically viable and would not be fielded as part of ICE’s final solution due to ongoing technical difficulties relative to the user interface, access controls, and case-related data management. Instead of continuing with the current technical solution, the program manager explained that, after having spent approximately $19 million in acquisition/development costs on the original solution, the program would seek alternatives and start over. The program manager said ICE is now assessing such alternatives, including a revised technical approach offered by the current development contractor, as well as other off-the-shelf solutions in use at other agencies. According to the program manager, significant portions of the previous solution’s data migration and infrastructure-related components might be salvaged for reuse in whatever new solution is chosen. But, depending on the approach selected, most of the user interfaces, security components, and business rules that have been developed for the program to date are unlikely to be reused.\nThe program manager stated that the program intends to decide which course it will pursue by October 2013, and based on that decision, it will update the program’s life-cycle cost estimate, schedule, and requirements documents (as needed). Further, he stated that ICE intends to proactively revise its May 2011 acquisition program baseline before it breaches at the end of December 2013 and reaffirmed the agency’s intention to deploy a solution by the 2015 deadline. In the meantime, according to the program manager, ICE has largely halted development work and it will be January 2014 at the earliest before any new development work begins. Given the time lost in developing the current technical solution, as well as the already reduced program scope, ICE cannot say what specific features it will release to users, what its schedule for deploying this functionality will be, or how much such efforts will cost. Without clearly defining these commitments, ICE is at risk of not achieving independence from the existing system by 2015.",
"Both agencies have generally implemented risk management practices, but they have had mixed results in managing requirements for their programs. While they have managed many of the risks in accordance with recognized leading practices, neither agency has identified all known risks and escalated them for timely review by senior management. Further, while CBP’s requirements management processes and practices are largely consistent with leading practices, key requirements activities were well underway before such practices were established. In addition, ICE was operating without documented requirements management guidance for several years, and its requirements development and management activities were mismanaged as a result. ICE has recently developed guidance that is consistent with leading practices, but has not yet implemented it.",
"Risk management is a process for anticipating problems and taking appropriate steps to mitigate risks and minimize their impact on project commitments. According to relevant guidance, effective risk management practices include, among other things: establishing and documenting risk management strategies; assigning roles and responsibilities for managing risks; creating a risk inventory, documenting all risks in it, prioritizing them, and developing plans to mitigate them; and regularly tracking the status of risks and mitigation efforts, including the documentation of triggers to escalate risks for review by senior management.",
"Of the four leading practices, CBP fully implemented two practices and partially implemented two practices (see table 1). Specifically, it has documented a risk management strategy and established roles and responsibilities for managing risks. However, while the agency established a risk inventory, it has not identified all of the risks facing the program. In addition, CBP only partially implemented tracking of risks because it did not define thresholds for risks that would trigger the automatic review by senior management and thus did not always escalate risks to senior management’s attention, and because it does not identify all information necessary for tracking risks.\nReasons why concerns we identified were not documented as risks, include the program office officials’ view that the limitations in the integrated master schedule were not sufficient to warrant the additional resources that would be necessary to fix them, and that the lack of a fully defined schedule was not a program risk, as well as the existing contractor’s lack of skills and capability to implement earned value management. However, both an integrated master schedule and earned value management are important tools for effective program management and oversight, and the absence of such capabilities increases the risk that a program like TECS will not deliver its intended capabilities within cost and schedule commitment. Therefore, until all of the risks have been captured in the risk inventory with the necessary information to track the status, thresholds have been defined to trigger review by senior management, and relevant risks have been escalated to senior management in a timely manner, key decision makers will be less than fully informed. Further, the program will likely continue to experience the types of problems discussed earlier in this report.",
"ICE fully implemented two of the leading risk management practices and partially implemented two others (see table 2). Specifically, it defined and documented a risk management strategy, and established roles and responsibilities for risk identification, tracking, and monitoring. The program office has also established a risk inventory with mitigation plans, but it has not identified all of the known risks. Further, while ICE has tracked the status of risks and mitigation efforts, it has not always followed its own processes for escalating risks outside of the program for senior management’s attention.\nAccording to ICE officials, they did not document the problems with the requirements backlog and technical solution in the program’s risk inventory because they did not want to make the risks visible until they understood the full extent of their scope, and they only included the risks in the inventory after attempts to address the problem failed. However, key to effective risk management is early identification of risks, so that they are known and visible as early as possible in order to manage and mitigate them, and ultimately, minimize impact to the program. Until all risks are captured in the risk inventory, thresholds are defined, and risks are shared with senior management in a timely manner, the program may continue to experience additional requirements and technical problems discussed earlier in this report.",
"Well-defined and managed requirements are a cornerstone of effective system development and acquisition efforts. According to recognized guidance, a documented and disciplined process for developing and managing requirements can help reduce the risk of developing a system that does not meet user needs, cannot be adequately tested, and does not perform or function as intended. Such a process includes, among other things, establishing a process for developing and managing requirements to ensure that requirements are identified, reviewed, and controlled; assigning and defining the roles and responsibilities for all those involved in requirements management activities; eliciting user needs, translating them into requirements, and analyzing them to ensure that each requirement is unique, unambiguous, and testable; and defining a disciplined change control process.",
"Of the four practices for requirements management, CBP fully implemented three and partially implemented one other (see table 3). Specifically, it established a requirements management process, assigned roles and responsibilities for requirements development and management activities, and defined a change control process. However, although CBP elicited user needs and translated them into requirements, CBP could not document how and if each requirement was analyzed to ensure that it is unique, unambiguous, and testable.\nAlthough CBP’s current requirements process largely addresses the leading practices, it was not established until March 2012, and so therefore was not used to guide requirements development for the majority of the program. Specifically, prior to March 2012, the program used the Passenger Systems Program Office requirements guidance for requirements elicitation and documentation, which, according to officials, was too generic to meet the needs of the program. In particular, the guidance allowed each of the projects to develop requirements independently of each other, and document them without standardization. According to CBP officials, the requirements for the projects that were developed earlier in the program—such as Secondary Inspection and High Performance Primary Query—were not as consistently well-formed or detailed as subsequent projects because of the lack of a rigorous process. Without well-defined and implemented processes for analyzing requirements to ensure that they are unique, unambiguous, and testable, CBP risks TECS Mod not performing as intended in the users’ environments, or taking longer to develop and test.",
"For several years, ICE operated without an established requirements management process, which resulted in significant problems for the program. Although the agency began development of requirements in June 2009, the program did not have a documented requirements management process in place to guide its activities until March 2011, when ICE issued a requirements management process that reflected the program’s initial intent to use a traditional system development approach. However, that process became outdated a few months later in October 2011 when the program transitioned to an Agile development methodology. Rather than refine or replace its newly-issued requirements management process, officials proceeded without one until the current requirements management documents were issued in March 2013. As shown in table 4, ICE’s requirements development and management activities during this time only partially satisfied one of the four leading practices, and did not satisfy the other three.\nAs a result of these limitations, program officials told us that they and their contractor did not complete work on over 2,500 requirements that were necessary for Release 1 to function properly. This lapse was not identified until fall 2012, when system prototypes, which had previously passed individual component tests, were combined and then tested in an end-to- end manner for the first time in ICE’s integrated test environment. According to ICE’s Program Manager, the system failed such testing because of the unaccounted-for requirements. Analysis performed by the program revealed that it would take an additional 10 months of work to address the missing requirements. In order to meet its schedule commitments, ICE decided to eliminate or defer about 70 percent of the original requirements for Release 1. This in turn has contributed to the difficulties the agency faces in delivering the entire modernized system before the 2015 deadline.\nIn March 2013, ICE documented a new requirements management process for the Agile software development methodology it had adopted, and further established a change control board and standard operating procedure for managing changes to program requirements. Collectively, these two documents address all four of the leading practices called for in guidance as described below.\nICE has defined a requirements management process that describes the practices to ensure requirements are elicited, reviewed, approved, and documented. For example, it describes the structure and tools to be used to organize and maintain the various types of requirements.\nThe requirements management process identifies roles and responsibilities for requirements management. Specifically, the Requirements Manager, among other things, plans requirements management activities throughout the project development life cycle and maintains the requirements management strategy. The requirements analysts, among other things, participate in the elicitation, analysis, and refinement of program requirements. The requirements leads represent the needs of the product owner and the delivery team, and provide input on the prioritization of requirements.\nThe requirements management process describes how user needs are to be collected and translated into requirements. The process also describes the attributes of a good requirement, including that it should be, among other things: (1) necessary—unique and not redundant to another requirement; (2) clear—not possible to interpret in more than one way and not in conflict with or contradictory to another requirement; and (3) verifiable—can be tested to determine whether or not the requirements is met. ICE has a defined change control process. Specifically, its new change control board standard operating procedure describes a process to ensure that (1) the process for system change requests is standardized, (2) system change requests are routed to appropriate staff for approval, (3) system change requests are processed in a timely manner, and (4) system change requests can be tracked.\nThese requirements management processes are essential to ensure that the TECS Mod system meets mission needs, performs as intended, and avoids the additional costly and time-consuming rework that the program has recently experienced.",
"Leading practices that we and others have identified note that oversight is a critical element of an investment’s life cycle, and that to be effective, oversight and governance bodies should, among other things, monitor a project’s performance and progress toward predefined cost ensure that corrective actions are identified and assigned to the appropriate parties at the first sign of cost, schedule, and/or performance problems; ensure that these corrective actions are tracked until the desired outcomes are achieved; and rely on complete and accurate data to review the performance of IT projects and systems against stated expectations, including comparing estimated schedule time frames to actual schedule (including schedule slippages and/or compressions) and comparing estimated costs with funds spent or obligated to date, any changes in funding, and the impact of these changes.\nAs previously mentioned, DHS IT investments such as the two TECS modernization programs are overseen by governance bodies at multiple levels across DHS, including each programs’ Executive Steering Committees and DHS’s Office of the CIO. While the programs’ steering committees have the authority to oversee all aspects of the execution of the programs between gates, the Office of the CIO provides department-level oversight.\nTo their credit, these governance bodies have taken actions to address three of the four leading practices. Specifically,\nCBP’s steering committee implemented two practices, although it is too soon to determine whether it has effectively implemented one of the other two practices; ICE’s steering committee implemented three practices; and the Office of the CIO implemented three practices.\nTable 5 shows whether or not each of the three governance bodies met the leading practices for performing oversight.\nAs shown in the table, the governance bodies implemented three of the four leading practices:\nCBP Executive Steering Committee. This body has implemented two leading practices: it monitors the program’s performance and ensures corrective actions are identified. Specifically, it was chartered earlier this year and, as of June 2013, it has met three times since its formation. In these meetings, the committee reviewed the program’s cost and schedule performance, and assigned related action items to the appropriate individuals for closure. For example, during the February 2013 meeting, the committee discussed risks that could affect the program’s cost and schedule, and created an action item for the program manager to discuss risk mitigation strategies with the Component Acquisition Executive. The CBP Performance Manager stated that this action item was completed as of July 2013. In addition, the steering committee tracked action items from its initial meetings, but since there have only been three meetings as of June 2013, it is too soon to determine whether the committee is doing so consistently. ICE Executive Steering Committee. This body has implemented three leading practices: it monitors the program’s performance, ensures corrective actions are identified, and generally tracks the action items to completion. For example, it discussed the program’s cost and schedule performance in eight of the nine meetings since its inception in September 2011, has directed that actions be taken to address known issues, and generally tracked the action items to completion. Specifically, in a February 2013 meeting, the committee discussed schedule slippage and issues with cost estimates, and created an action item for the program to provide the committee estimated start and completion dates for a new life-cycle cost estimate. This action item was confirmed as “in progress” at the April 2013 meeting.\nThe Office of the CIO. This office implemented three of the leading practices. Specifically, regarding monitoring, its Enterprise Business Management Office performs program health assessments to monitor an IT program’s performance through a review of program risk, human capital, cost and schedule, contract oversight, and requirements. The assessment results in a weighted score between 1 and 100 that is then converted to the five-level CIO risk rating published on the Office of Management and Budget’s IT Dashboard. The frequency at which the office performs these assessments is based on each program’s CIO rating of high, medium, or low risk. For example, it reviews high-risk programs monthly, medium-risk programs at least quarterly, and low-risk programs on a semiannual basis. When rating the TECS Mod programs, the Office of the CIO rated ICE’s program as medium risk in March 2013 and CBP’s program as moderately low risk in January 2013, which are the most recent ratings, as of July 2013.\nThe Office of the CIO identifies corrective actions during the program health assessments and ensures the actions are tracked to closure through its TechStat review process. The CIO rating is used as one criterion to determine whether the program will be subject to a review. Any program that receives a high-risk rating is a candidate for a TechStat. As part of this process, the office assigns and follows up on corrective actions. However, neither program has been the subject of a TechStat because, as of July 2013, neither program was considered high risk.\nIn addition, PARM monitors the performance of major acquisition programs across DHS in order to identify any emerging risks and issues (such as cost and schedule problems), and then provides data to decision makers. In doing so, the office assesses programs against 15 separate criteria, similar to what is assessed in the program health assessment, including risk and requirements management, and cost and schedule performance, and creates a Quarterly Program Accountability Report. The report describes programs’ value-to-risk ratio and, according to an agency official, is used as a tool to assess program risks and issues. PARM has created three of these reports thus far, but comparing the reports is difficult as the office changed the criteria and methodology to incorporate lessons learned. In the report for the third and fourth quarter of fiscal year 2012, the office rated both programs as high value, low risk.\nHowever, while the governance bodies had taken actions to oversee the TECS modernization programs, the lack of complete, timely, and accurate data have affected their ability to make informed and timely decisions, thus limiting their effectiveness in several cases. For example:\nSteering committees. In an April 2013 meeting, the CBP program manager briefed the steering committee on its target milestone dates; even though the agency told us a month later that it had not fully defined its schedule, raising questions about the completeness and accuracy of the proposed milestone dates upon which the committee bases its oversight decisions. Similarly, in a February 2013 ICE steering committee meeting, the office of the CIO noted that the agency’s program-provided life-cycle cost estimate was out of date and that a new one was needed before the program’s cost and schedule performance could be measured accurately.\nThe Office of the CIO. In its most recent program health assessments, the Enterprise Business Management Office partially based its rating of moderately low risk on CBP’s use of earned value management; however, the program manager stated to us that the CBP program is not utilizing earned value management because neither they nor their development contractor had the capability to do so. Similarly, even though ICE had not reported recent cost or schedule data for its program—an issue that may signal a significant problem—OCIO rated ICE’s program as medium risk. The reliance on incomplete and inaccurate date raises questions about the validity of the risk ratings.\nPARM. In the most recent Quarterly Program Accountability Report issued in early July 2013, PARM rated programs both as high value with low risk. However, CBP’s low-risk rating is based in part on the program’s master schedule and acquisition program baseline; however, as we stated earlier, problems with the agency’s schedule raise questions about the validity and quality of those milestones. Further, the low-risk rating it issued for ICE is based, in part, on PARM’s Quarterly Program Accountability Report for April through September 2012, which rated the program’s cost performance with the lowest possible risk score. Yet, during that same time period, program documents show that cost and schedule performance was declining and varied significantly from its baseline. According to program documents, as of June 2012, TECS Mod had variances of 20 percent from its cost baseline and 13 percent from its schedule baseline. Moreover, both the cost and schedule estimates underlying the baseline were outdated.\nFurther, the Quarterly Program Accountability Report is not issued by PARM in a timely basis, and as such, it is not an effective tool for decision-makers. For example, the most recent report was published on July 7, 2013, over 9 months after the reporting period ended. Since then, ICE has experienced the issues with its technical solution described earlier in this report; and, as discussed, these issues have caused the program to halt development and replan its entire acquisition. As a result, the newly-issued issued report is not reflective of ICE’s current status, and thus is not an effective tool for management’s use.\nUntil these governance bodies base their reviews of performance on timely, complete, and accurate data, they will be limited in their ability to effectively provide oversight and to make timely decisions.",
"After spending millions of dollars and over 4 years on TECS modernization, it is unclear when it will be delivered and at what cost. While CBP’s program has partially delivered one of the five major projects that comprise the program, program commitments are currently being revised, project milestones have changed over time, and the master schedule used by the program to manage its work activities and monitor progress has not been fully developed. These limitations raise doubts about the validity of the program’s schedule commitments and greatly impact the program’s ability to monitor and effectively manage its progress. A complete and integrated schedule provides the basis for valid schedule commitments; therefore it is important that as CBP revises its commitments, it ensure that its master schedule accurately reflects the work to be done, as well as the timing, sequencing, and dependencies between them. Moreover, ICE’s program has made little progress in deploying its modernized case management system, and is now completely overhauling its original design and program commitments, placing the program in serious jeopardy of both not meeting the 2015 deadline and delaying the deployment of needed functionality. It is therefore imperative that the agency quickly develop and execute its revised strategy for implementing TECS Mod—including the functionality to be delivered, when it will be delivered, and how much it will cost.\nFurther, while both agencies have defined key practices for managing risks and requirements, the programs were not actively managing all risks and key requirements practices were developed after several key activities were performed. ICE in particular operated for years without a requirements management process, which resulted in poorly defined and incomplete requirements, and ultimately in costly rework and delays. Therefore, going forward, it is important that the programs implement these critical practices to help ensure that the program delivers the functionally needed to meet mission requirements and minimizes the potential for additional costly rework.\nMoreover, while DHS’s various governance bodies are generally following leading practices, they rely on data that are sometimes incomplete or inaccurate. Thus, it is important that DHS ensure that oversight decisions are based on complete and accurate program data. Until DHS’s governance bodies are regularly provided complete and accurate data for use in their performance monitoring and oversight duties, its oversight decisions may be based on incorrect or outdated data and, therefore, may be flawed or of limited effectiveness.",
"To improve DHS’s efforts to develop and implement its TECS Mod programs, we recommend that the Secretary of Homeland Security direct the CBP Commissioner to ensure that the appropriate individuals take the following four actions: 1. develop an integrated master schedule that accurately reflects all of the program’s work activities, as well as the timing, sequencing, and dependencies between them; 2. ensure that all significant risks associated with the TECS Mod acquisition are documented in the program’s risk and issue inventory inventory—including acquisition risks mentioned in this report report— and are briefed to senior management, as appropriate; 3. revise and implement the TECS Mod program’s risk management strategy and guidance to include clear thresholds for when to escalate risks to senior management, and implement as appropriate; and 4. revise and implement the TECS Mod program’s requirements management guidance to include the validation of requirements to ensure that each is unique, unambiguous, and testable.\nWe further recommend that the Secretary of Homeland Security direct the Acting Director of ICE to ensure that the appropriate individuals take the following three actions: 1. ensure that all significant risks associated with the TECS Mod acquisition are documented in the program’s risk and issue inventory—including the acquisition risks mentioned in this report— and briefed to senior management, as appropriate; 2. revise and implement the TECS Mod program’s risk management strategy and guidance to include clear thresholds for when to escalate risks to senior management, and implement as appropriate; and 3. ensure that the newly developed requirements management guidance and recently revised guidance for controlling changes to requirements are fully implemented.\nWe also recommend that the Secretary of Homeland Security direct the Under Secretary for Management and acting Chief Information Officer to ensure that data used by the department’s governance and oversight bodies to assess the progress and performance of major IT program acquisition programs are complete, timely, and accurate.",
"In written comments on a draft of this report, DHS agreed with seven of our recommendations and disagreed with one. The department described actions planned and underway to address the seven recommendations, and noted that it is committed to continuing its work toward full operational capability of its TECS Mod programs to enhance functionality for CBP, ICE, and other departments and agencies that have access to the system. The department also provided technical comments, which we incorporated as appropriate.\nRegarding our recommendation that CBP develop an integrated master schedule that accurately reflects all of the program’s work activities, as well as the timing, sequencing, and dependencies between them, DHS stated that CBP’s Office of Information and Technology believes that the current master schedule in use provides the requisite amount of visibility into program work activities, and that it considers the program’s scheduling efforts to be sound. Further, DHS stated that the timing and sequencing of TECS Mod’s key activities, as well as the dependencies of activities, are tracked via the program schedule. We do not agree that CBP’s current schedule provides either adequate visibility into program work activities, or that it includes the logical sequence of all key work activities, as well as the dependencies among them. As we state in our report, CBP had yet to define a detailed schedule for significant portions of the program. Moreover, approximately 65 percent of CBP’s remaining work activities were not linked to other associated work activities; therefore the program’s critical path could not be determined. As a result of these weaknesses, management is unable to determine how a slip in the completion date of a particular task may affect the overall project schedule. DHS also stated that CBP’s schedule is reviewed bi-weekly at integrated project team meetings, as well as monthly at the CIO program management reviews to track status and upcoming milestones. However, given the issues with the schedule reflected in this report, using the current, incomplete schedule to track progress is not effective.\nWhile DHS concurred with our recommendation that it ensure that data used by the department’s governance and oversight bodies to assess the progress and performance of major IT program acquisitions are complete, timely, and accurate, DHS stated that it has already taken such steps, citing its enterprise Decision Support Tool, the DHS Investment Management System, and the reporting of program cost, schedule, and operation performance information on the Information Technology Dashboard. On this basis, DHS requested that the recommendation be considered resolved and closed. However, while we acknowledge that these tools are currently in place, we identified instances where DHS governance and oversight bodies were acting on information that was not complete, timely, or accurate, despite the presence of the tools and systems cited by DHS in its response. As we go forward with our follow- up activities for this report, we plan to monitor DHS’s progress in improving the quality of data used in its assessments of major IT acquisition programs.\nFinally, DHS stated that our draft report did not adequately recognize the progress made by CBP’s TECS Mod program, specifically citing the strength of the program’s risk and requirements management practices and schedule, as well as the fact that the program has already implemented certain functionality. We did report that (certain weaknesses notwithstanding) CBP’s approach to risk and requirements management was generally consistent with leading practices. However, we also found significant deficiencies with CBP’s master schedule for TECS Mod. Further, we noted that the Secondary Inspection project was already operational at air and sea ports of entry across the country, and was operational at land ports of entry by September 2013 - approximately 6 months earlier than estimated. We also revised the report to reflect that a portion of the modernized High Performance Primary Query Service are currently in use to recognize additional CBP progress.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to interested congressional committees and the Secretary of Homeland Security. This report will also be available at no charge on our website at http://www.gao.gov.\nIf you or your staffs have any questions on matters discussed in this report, please contact me at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V.",
"The objectives of our review were to (1) determine the scope and status of the two Department of Homeland Security (DHS) TECS Modernization (TECS Mod) programs, (2) assess selected Customs and Border Protection (CBP) and Immigration and Customs Enforcement (ICE) program management practices for TECS Mod, and (3) assess the extent to which DHS is executing effective executive oversight and governance of the two TECS Mod programs.\nTo address our first objective, we reviewed a range of documentation from both programs, including each program’s functional requirements documents; their respective acquisition program baselines and associated program cost and schedule estimates; program planning documents, such as program management plans and test and evaluation master plans; as well as the results of oversight reviews of both programs from July 2011 to June 2013. To assess the scope of each program, we determined what functionality each program had committed to provide, and analyzed pertinent documentation, such as program management plans, mission needs statements, concept of operations documents, and operational requirements documents (among others) to determine whether those commitments had changed over time. We also compared the schedule and cost commitments listed in the programs’ initial documentation with subsequent baselines to establish the degree to which each program and its component subprojects had experienced changes in their start dates, completion dates, and estimated costs. Further, we corroborated statements made by CBP officials regarding the lack of completeness in their program master schedules by reviewing the completeness of their master schedule. Specifically, we examined the relationships that CBP documented (defined) between work activities within its master schedule for each project and the program overall. We used spreadsheet formulas to calculate what percentage of work activities linked to other work activities, and what percentage did not. We also interviewed relevant DHS officials to clarify and/or confirm information in the documents we reviewed and to more fully understand each program’s scope and status.\nTo address our second objective, we examined program documentation, such as risk management and requirements management plans and processes, and compared them to relevant guidance from leading practitioners.\nRisk management: We compared relevant documentation, such as the CBP TECS Modernization Risk Management Plan and the ICE TECS Modernization Risk Management Plan, to relevant risk management guidance to identify any variances. We focused on the extent to which: (1) a risk management strategy had been established, (2) roles and responsibilities for risk management activities had been defined and assigned, (3) a risk inventory has been created that includes plans for mitigating risks, and (4) the status of risks and mitigation efforts is regularly tracked. We also reviewed lists of identified risks found in risk inventories, and minutes from meetings at which risks were identified, monitored, and closed. We compared risks identified by us during the course of our work to the risks in the risk inventories to determine the extent to which all key risks were being actively managed. We also reviewed briefings provided at executive steering committee meetings to ascertain the extent to which program risks were disclosed at these reviews. Further, we discussed actions recently taken and planned to improve risk management activities within both CBP and ICE. To assess the reliability of the risk tools, we analyzed the nature and quality of access controls for both the CBP and ICE risk inventories to ensure that the data in the inventories were reliable for our purposes. To assess the reliability of the information in the risk inventories we used in this report, we interviewed knowledgeable agency officials about the nature and quality of controls over both the CBP and ICE inventories, and reviewed the information in the inventories to identify missing or invalid data entries. We found that sufficient controls were in place, and we therefore determined that the information is sufficiently reliable.\nRequirements management: We compared relevant requirements management documentation, such as the CBP TECS Mod Requirements Management Plan, the Passenger Systems Program Office’s Change Management Process and Procedure, the ICE TECS Modernization Requirements Management Plan, and the ICE Change Control Board Standard Operating Procedure, to relevant requirements development and management guidance to identify any variances. We focused on the extent to which: (1) a process for developing and managing requirements had been established; (2) roles and responsibilities for requirements management practices had been defined and assigned; (3) user needs had been elicited, translated into requirements, and then analyzed to ensure that each requirement was unique, unambiguous, and testable; and (4) a change control process had been defined. We analyzed agency documentation showing the implementation of these activities, including evidence of requirements elicitation, analyses, review, and approval, as well as examples of change request documents. We interviewed program officials regarding the reasons for variances between the guidance and documentation and the status of actions recently taken and planned to improve requirements management activities within both CBP and ICE.\nTo address our third objective, we analyzed documentation including executive steering committee meetings results, and reviewed program assessments from DHS’s Office of the Chief Information Officer and DHS’s Program Accountability and Risk Management office, and compared the results to relevant guidance such as our Information Technology Investment Management Framework to determine the extent to which DHS is providing effective executive oversight and guidance to the two TECS Mod programs. In addition, we compared the outputs of these governance structures (such as briefing slides, meeting minutes, and action items) to the ESC charters, and compared reports and assessments prepared by DHS governance bodies to DHS’s guidance for conducting such assessments. We also interviewed relevant officials from CBP, ICE, and DHS, as appropriate.\nWe conducted this performance audit from December 2012 to September 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"",
"TECS is a border enforcement system that supports the sharing of information about people seeking entry into the country. The system interfaces with several law enforcement systems and federal agencies, and supports the screening of people and conveyances who are inadmissible or may pose a threat to the country. In addition, it provides an investigative case management function for activities including money- laundering tracking and reporting; telephone data analysis; and intelligence reporting and dissemination. The following table provides a description of key systems and data associated with the passenger screening processes within TECS.",
"CPB plans to deliver the following capabilities incrementally across five projects by September 2015. Specifically,\nSecondary Inspection: This project is to support processing of travelers referred from primary inspection for either enforcement or administrative reasons. The modernized version of Secondary Inspection, according to CBP, is to streamline the processing of encounters by eliminating the need for users to navigate through complex system menus to perform tasks, and minimize redundant data entry, as well as to simplify the interface so that all of the information is presented on a single screen. This project is to also provide web-based interface access to information such as relevant laws, policies, and forensics. In addition, this project is to provide a means to record the outcome of each inspection. According to CBP, Secondary Inspection is currently operational at all air, land, and sea ports of entry.\nHigh Performance Primary Query and Manifest Processing: This project is intended to improve TECS data search results in order to expedite the processing of manifests from individuals traveling to the United States on commercial or private aircraft, and commercial vessels. CBP plans to migrate the mainframe-based lookout records and other data to the modernized infrastructure, and replace the 1980s era databases and queries with modernized tools for the primary inspection process. It is to be fully operational by March 2015.\nTravel Document and Encounter Data: This project is intended to improve CBP’s ability to query and validate travel documentation for both passengers and their means of conveyance (whether people enter the country by air, sea, or land—by foot or in a vehicle). It is intended to modernize existing travel document data presented during primary and secondary inspections. It will also provide web-based interfaces intended to allow quick access to a passenger’s complete travel history, while also implementing appropriate data access restrictions and privacy protections in compliance with agencies’ data policies. It is to be fully operational by March 2015.\nLookout Record Data and Screening Services: This project is intended to improve the efficiency of existing data screening and analyses capabilities by providing a means to quickly create, update, and send and receive lookout record data to external agencies, such as the law enforcement community. It is to be fully operational by March 2015.\nPrimary Inspection Processes: This project is intended to modernize the overall inspection process and provide support for additional or random screening and communication functions. CBP states that this project will upgrade lookout record alarms and alerts sent to air, sea, and land primary and secondary workstations to ensure the safety of inspection officers. In addition, the project will modernize the user interfaces for alternate inspections—any inspection that is not conducted at an air, sea, vehicle, or pedestrian primary inspection location. It is to be fully operational by March 2015.",
"",
"",
"In addition to the contact name above, individuals making contributions to this report included Deborah Davis (Assistant Director), Kara Epperson, Rebecca Eyler, Daniel Gordon, Dave Hinchman (Assistant Director), Sandra Kerr, Jamelyn Payan, and Jessica Waselkow.",
"The Government Accountability Office, the audit, evaluation, and investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability.",
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"Connect with GAO on Facebook, Flickr, Twitter, and YouTube. Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts Visit GAO on the web at www.gao.gov. .",
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{
"question": [
"How have CBP and ICE revised their programs?",
"What does CBP's program address?",
"What is the timeline for this program?",
"What has CBP accomplished thus far?",
"What are the faults of this program?",
"How has ICE's program progressed?",
"What is the timeline for ICE's program?",
"What are the risks of ICE's current trajectory?",
"How successful have CBP and ICE been in managing their programs?",
"What specifically have been their faults in program management?",
"What have been the faults of CBP?",
"What have been the faults with ICE?",
"Specifically, what happened as a result of ICE not completing part of its work?",
"What progress has ICE made regarding implementing leading practices?",
"How has DHS overseen the TECS Mod programs?",
"What are the shortcomings of this oversight?",
"What is one specific example of how this oversight is based on incomplete data?",
"Why is it important that these governance bodies use reliable data?",
"What is TECS?",
"How is TECS used?",
"Why has TECS become increasingly difficult to maintain?",
"How has DHS responded to these difficulties?"
],
"summary": [
"Customs and Border Protection (CBP) has defined the scope for its TECS (not an acronym) modernization (TECS Mod) program, but its schedule and cost continue to change; while Immigration and Customs Enforcement (ICE) is overhauling the scope, schedule, and cost of its program after discovering that its initial solution is not technically viable.",
"CBP's $724 million program intends to modernize the functionality, data, and aging infrastructure of legacy TECS and move it to DHS's data centers.",
"CBP plans to develop, deploy, and implement these capabilities between 2008 and 2015.",
"To date, CBP has deployed functionality to improve its secondary inspection processes to air and sea ports of entry and, more recently, to land ports of entry in 2013.",
"However, CBP is in the process of revising its schedule baseline for the second time in under a year. Further, portions of CBP's schedule remain undefined and the program does not have a fully developed master schedule. These factors increase the risk of CBP not delivering TECS Mod by its 2015 deadline.",
"Regarding ICE's $818 million TECS Mod program, it is redesigning and replanning its program, having determined in June 2013 that its initial solution was not viable and could not support ICE's needs. As a result, ICE halted development and is now assessing design alternatives and will revise its schedule and cost estimates.",
"Program officials stated the revisions will be complete in December 2013.",
"Until ICE completes the replanning effort, it is unclear what functionality it will deliver, when it will deliver it, or what it will cost to do so, thus putting it in jeopardy of not completing the modernization by its 2015 deadline.",
"CBP and ICE have managed many risks in accordance with some leading practices, but they have had mixed results in managing requirements for their programs.",
"In particular, neither program identified all known risks and escalated them for timely management review.",
"Further, CBP's guidance defines key practices associated with effectively managing requirements, but important requirements development activities were underway before these practices were established.",
"ICE, meanwhile, operated without requirements management guidance for years, and its requirements activities were mismanaged as a result.",
"For example, ICE did not complete work on 2,600 requirements in its initial release, which caused testing failures and the deferral and deletion of about 70 percent of its original requirements.",
"ICE issued requirements guidance in March 2013 that is consistent with leading practices, but it has not yet been implemented.",
"The Department of Homeland Security's (DHS) governance bodies have taken actions to oversee the two TECS Mod programs that are generally aligned with leading practices. Specifically, DHS's governance bodies have monitored TECS Mod performance and progress and have ensured that corrective actions have been identified and tracked.",
"However, the governance bodies' oversight has been based on sometimes incomplete or inaccurate data, and therefore the effectiveness of these efforts is limited.",
"For example, one oversight body rated CBP's program as moderately low risk, based partially on the program's use of earned value management, even though program officials stated that neither they nor their contractor had this capability.",
"Until these governance bodies base their performance reviews on timely, complete, and accurate data, they will be constrained in their ability to effectively provide oversight.",
"DHS's border enforcement system, known as TECS, is the primary system available for determining admissibility of persons to the United States.",
"DHS's border enforcement system, known as TECS, is the primary system available for determining admissibility of persons to the United States.",
"It has become increasingly difficult and expensive to maintain because of technology obsolescence and its inability to support new mission requirements.",
"Accordingly, in 2008, DHS began an effort to modernize the system. It is being managed as two separate programs working in parallel by CBP and ICE."
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CRS_RS21261
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{
"title": [
"",
"Introduction",
"Hague Convention",
"Rights of Custody vs. Rights of Access",
"Exceptions to a Child's Prompt Return",
"Current U.S. Laws",
"International Child Abduction Remedies Act (ICARA)25",
"International Parental Kidnapping Crime Act (IPKCA)29",
"Fugitive Felon Act39",
"Extradition Treaties Interpretation Act of 198840",
"Admiral James W. Nance and Meg Donovan Foreign Relations Authorization Act, Fiscal Years 2000 and 200141",
"Immigration and Nationality Act (INA), as Amended44"
],
"paragraphs": [
"",
"International child abduction is not new. However, one can argue that incidents of child abduction continue to increase due to the ease of international travel as well as an increase in bicultural marriages. Parental child abduction across international boundaries often garners global attention and demands for international solutions. Since 1988, the Hague Convention on the Civil Aspects of International Child Abduction (\"Hague Convention\" or \"Convention\") has been the principal mechanism for enforcing the return of abducted children to the United States. While the Convention promotes the prompt return of an abducted child, it does not impose criminal sanctions on the abducting parent. Moreover, the Convention's available remedies do not apply to nations that fail to participate. The Convention's procedures are inapplicable and unenforceable in nonsignatory nations. As such, parents and governments must often embark on the difficult and sometimes impossible task of seeking other means of resolving international child custody disputes with such nations.",
"The Hague Convention protects children from wrongful removal across international borders and provides procedures to aid in their safe return. The Convention's platform is intended to guarantee that one signatory nation will respect and follow the custody rights and laws of all other signatory nations. The signatory nations are Anguilla, Argentina, Australia, Austria, the Bahamas, Belgium, Belize, Bermuda, Bosnia-Herzegovina, Brazil, Bulgaria, Burkina Faso, Canada, the Cayman Islands, Chile, Colombia, Costa Rica, Croatia, Czech Republic, Cyprus, Denmark, Dominican Republic, Ecuador, El Salvador, Estonia, the Falkland Islands, Finland, France, Germany, Greece, Guatemala, Honduras, the Hong Kong Special Administrative Region, Hungary, Iceland, Ireland, the Isle of Man, Israel, Italy, Latvia, Lithuania, Luxembourg, Macau, Former Yugoslav Republic of Macedonia, Malta, Mauritius, Mexico, Monaco, Montenegro, Montserrat, Morocco, the Netherlands, New Zealand, Norway, Panama, Paraguay, Peru, Poland, Portugal, Romania, San Marino, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, St. Kitts and Nevis, Sri Lanka, Sweden, Switzerland, Trinidad and Tobago, Turkey, Ukraine, the United Kingdom, Uruguay, the United States, Venezuela, and Zimbabwe.\nThe Hague Convention does not act as an extradition treaty, nor does it purport to adjudicate the merits of a custody dispute. It merely provides a civil remedy designed to preserve the status quo by returning an abducted child to the country of his or her \"habitual residence\" and allowing the judicial authorities in that country to adjudicate the merits of a custody dispute. As such, the proceeding is brought in the country to which the child was abducted or in which the child is retained. Although domestic relations involve issues typically governed by state law, the federal statute implementing the Hague Convention explicitly confers jurisdiction on the federal courts.",
"Procedures and remedies available under the Convention differ depending on the parental rights infringed. Under Article 3 of the Hague Convention, the removal of a child is \"wrongful\" when \"it is in breach of rights of custody attributed to a person, an institution or any other body, either jointly or alone, under the law of the State in which the child was habitually resident immediately before the removal or retention;\" and \"at the time of removal or retention those rights were actually exercised, either jointly or alone, or would have been so exercised but for the removal or retention.\"\nThus, there are two elements to a claim that the child's removal was \"wrongful\" under Article 3: (1) the removal was in breach of \"rights of custody\"; and (2) those rights were \"actually exercised\" at the time of the removal, or would have been but for the removal.\nArticle 5 in turn defines \"rights of custody,\" and distinguishes those rights from \"rights of access\":\n(a) \"rights of custody\" shall include rights relating to the care of the person of the child and, in particular, the right to determine the child's place of residence;\n(b) \"rights of access\" shall include the right to take a child for a limited period of time to a place other than the child's habitual residence.\nCritically, the treaty provides for the return of the child only if a parent's custody rights have been violated. Parents deprived of their rights of access have the less robust remedy provided for in Article 21 of \"mak[ing] arrangements\" with the Department of State to secure effective exercise of their rights.\nCountries utilize an array of orders in child custody disputes. Courts must determine whether an order confers a right of custody or a lesser right of access under the Convention. For example, until recently, federal courts disagreed on what type of right is conferred by a ne exeat , or \"no exit,\" order, which grants one parent the right to veto another parent's decision to remove their child from his or her home country. In Abbott v. Abbott , the U.S. Supreme Court resolved the circuit split by finding that such an order confers a right of custody, thus triggering enforceability under the Convention. In making its decision, the Court relied on the Convention's text and purpose to deter child abductions, deferred to the executive branch's treaty interpretation, and consulted international case law to establish a uniform interpretation. It is important to note that the Court's decision is limited to ne exeat orders. While the ne exeat -physical custody arrangement is a common one, it is not the only one implemented by courts in child custody disputes. Therefore, courts will have to address which side of the access-custody line any other arrangements may fall. The Court also did not address the broader issue of whether the child must be returned to his home country, instead noting that there are exceptions to the general remedy of a child's prompt return.",
"The Central Authorities, appointed by each respective signatory nation, cooperate with one another to discover the location of the wrongfully retained child, to prevent harm to the child, and to ensure the prompt return of the child. Signatory nations do not have to automatically return the child to his or her place of habitual residence; discretionary exceptions exist that enable the child to remain with the removing parent. For example, Article 4 of the Convention establishes that if the child is over age 16 at the time of the original taking or retention, or becomes 16 at any time after the taking, the Convention does not apply. Also, if the custody rights involved are those of visitation (\"access,\" as they are termed in the Convention), the Central Authority may facilitate and secure those rights, but under Article 21, a violation of visitation rights does not trigger procedures to require the child's return.\nOther requests for returns may be affected by discretionary factors. It is within the judge's discretionary power under Article 12 to refuse return of the child if the child has become settled in the new environment and more than one year has passed from the date of the taking or detention. If more than one year has passed and the reason for the delay was concealment of the child's location, the petition to enforce a U.S. custody order may still be considered under the argument that the one-year limit should be tolled due to the abducting parent's conduct, as equity demands no one profit from his or her own wrongdoing.\nDiscretion is also afforded under Article 13 if the child is deemed mature enough to voice a preference for staying, or if there is a grave risk of harm to the child if returned. Children as young as nine have been found mature enough to have their wishes considered. Finally, return may also be refused if it would be against the fundamental principles of human rights and freedoms in the requested state to return the child. Signatory countries have rendered a wide variation of decisions interpreting these discretionary criteria. There is also a marked variance in the rate of return among the different signatory countries.\nThe Hague Convention attempts to prevent Central Authorities in the requested states from making judgments based upon cultural principles of the child's origin country by abandoning the method of using the child's \"best interests\" to justify keeping the wrongfully retained child in the respective state. The Hague Convention bases its terms on civil, not criminal international law, and therefore criminal liability and extradition provisions do not fall within its scope.\nAlthough the Hague Convention contains certain limitations, it apparently offers the greatest chance for a prompt return of a wrongfully removed child. The difficulty with parental international child abductions lies in the fact that many countries do not participate in the Hague Convention, and when a parent takes a child to a non-Hague contracting state, governments of the nations involved are not obligated to assist in the child's return. Some countries refuse to participate in the Hague Convention because they do not believe in the automatic return of the child; rather they presume that the determination of the child's best interests should occur within their own jurisdiction and under their own laws. An analysis of the child's best interests considers the religious and social values of the respective countries involved, but religious and cultural tensions between these countries and Western-culture family law often render negotiations nearly impossible.",
"Law enforcement in the United States historically viewed parental kidnapping as a private family matter that did not require outside involvement. This belief has changed, resulting in the enactment of several laws that recognize the seriousness and criminality of parental kidnappings. Presently, law enforcement agents with arrest warrants seek out parents who have violated a custody decree by taking a child out of the state or country. Difficulties arise when parents take children out of the country because foreign courts have no obligation to enforce American custody decrees or abide by American laws. Even though the United States has difficulty enforcing parental kidnapping laws abroad, these laws can act as useful mechanisms to facilitate solutions to international child abductions.",
"On April 29, 1988, the same day the United States became a signatory to the Hague Convention, Congress enacted the International Child Abduction Remedies Act (ICARA). ICARA empowers state and federal courts to hear cases under the Convention and allows the Central Authority access to information in certain American records regarding the location of a child and abducting parent. In the United States, the Office of Children's Issues (OCI) in the Department of State serves as the Central Authority in instances where children are wrongly removed from the United States. A parent seeking the return of a child who the parent claims has been wrongly abducted may apply to the \"Central Authority\" of the child's habitual residence or of any other signatory nation to the Hague Convention. Unfortunately, the Hague Convention and ICARA cannot function as remedies in a situation that involves a nonsignatory nation of the Hague Convention, and U.S. courts have dismissed complaints made under ICARA for failure to state a claim because of the involvement of a nonsignatory nation.",
"The International Parental Kidnapping Crime Act (IPKCA) criminalizes the removal of a child from the United States with \"the intent to obstruct the lawful exercise of parental rights.\" The term \"parental rights\" refers to the right to joint or sole physical custody of a child obtained through a court order, a legally binding agreement between the involved parties, or by operation of law. A parent can use IPKCA as an affirmative defense, and it will not detract from the provisions of the Hague Convention. Defendants have challenged the constitutionality of IPKCA, questioning the vagueness of the act and claiming that it violates the free exercise of religion, but U.S. courts have upheld it.\nIPKCA may provide the potential to prosecute wrongful acts of parents, but it cannot guarantee the return of children from foreign countries where their parents wrongfully removed them. For example, in United States v. Amer , Ahmed Amer abducted his two children to Egypt and was given custody in an Egyptian court. His wife, who previously had been given custody in a U.S. court, filed a complaint with the Federal Bureau of Investigation (FBI). Upon Ahmed's return to the United States, he was arrested on charges of international parental kidnapping in violation of IPKCA. Ahmed was sentenced to 24 months' imprisonment and a one-year term of supervised release under the special condition that he return the abducted children to the United States. When Ahmed began his supervised release term, he expressed an unwillingness to return his children to the United States.",
"The Fugitive Felon Act enhances states' abilities to pursue abductors beyond state and national borders by permitting the FBI to investigate cases that would otherwise fall under state jurisdiction. The act also authorizes the use of Unlawful Flight to Avoid Prosecution (UFAP) warrants in parental kidnapping cases.",
"The Extradition Treaties Interpretation Act of 1988 authorizes the United States to interpret extradition treaties listing \"kidnapping\" as encompassing the offense of parental kidnapping.",
"Section 236 of the Admiral James W. Nance and Meg Donovan Foreign Relations Authorization Act, Fiscal Years 2000 and 2001, requires both parents or legal guardians to execute a passport application for a minor under age 14. In addition, the individual executing the application must provide documentary evidence demonstrating that the individual has either (1) sole custody of the child or (2) the other parent's consent to the passport's issuance. However, it should be noted that passport controls may be ineffective under some circumstances, as some abductors are dual nationals or citizens of the country to which they are returning. Therefore, the child may also be a citizen of the other country. If a dual national, the child is eligible for passports from both the United States and the other country of nationality.",
"The Immigration and Nationality Act (INA) provides that any alien who, in violation of a custody order issued by a U.S. court, takes or retains a child out of the United States, may be excluded from the United States. The exclusion applies only to aliens, not to U.S. citizens, and does not apply if the child is taken to or kept in a county that has ratified the Hague Convention. The exclusion ceases to apply when the child is surrendered. This exclusion can also be applied to relatives or friends who assist in keeping the child abroad. This act may give the U.S.-based parent leverage in negotiating for the child's return if the alien parent needs to reenter the United States for any reason."
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{
"question": [
"Why are international child custody disputes likely to increase?",
"What can be the outcome of such disputes?",
"What is the mechanism for returning abducted children to the United States?",
"What does the treaty cover?",
"How does Congress address the fact that the Convention does not impose criminal sanctions?",
"What is the Convention?",
"In what country does the proceeding take place?",
"What courts are responsible for the proceedings?",
"How have federal courts ruled on the scope of this jurisdiction?",
"When is the Hague Convention not applicable?",
"Under the Convention, what do signatory nations not have to do?",
"What must courts consider in determining the applicability of the Convention?",
"What is an example of how rights of access come into play?",
"How has the Supreme Court decided such cases in the past?",
"What are the limitations of such precedent?",
"Why can the Convention’s procedures and remedies differ?"
],
"summary": [
"International child custody disputes are likely to increase in frequency as the global society becomes more integrated and mobile.",
"A child custody dispute between two parents can become a diplomatic imbroglio between two countries.",
"Since 1988, the Hague Convention on the Civil Aspects of International Child Abduction (\"Hague Convention\" or \"Convention\") has been the principal mechanism for enforcing the return of abducted children to the United States.",
"While the treaty authorizes the prompt return of the abducted child, it does not impose criminal sanctions on the abducting parent.",
"Congress, to reinforce the Hague Convention, adopted the International Parental Kidnapping Crime Act of 1993 to impose criminal punishment on parents who wrongfully remove or retain a child outside U.S. borders.",
"The Convention does not act as an extradition treaty, nor does it purport to adjudicate the merits of a custody dispute. It is a civil remedy designed to preserve the status quo by returning an abducted child to the country of his or her \"habitual residence\" and allowing the judicial authorities in that country to adjudicate the merits of a custody dispute.",
"As such, the proceeding is brought in the country to which the child was abducted or in which the child is retained.",
"Although domestic relations involve issues typically governed by state law, the federal statute implementing the Hague Convention explicitly confers jurisdiction on the federal courts.",
"Federal courts continue to address the scope of this jurisdiction. In Chafin v. Chafin, the U.S. Supreme Court found that a child's return to her country of habitual residence does not render an appeal moot. In other words, an appellate court retains jurisdiction to review a lower court's decision as to the child's habitual residence.",
"The Hague Convention is not always applicable in international child custody cases.",
"Signatory nations do not have to automatically return a child to his or her place of habitual residence, as discretionary exceptions exist that enable the child to remain with the removing parent.",
"Courts must determine whether a particular order confers a right of custody or a lesser right of access.",
"For example, federal courts disagreed on what type of right was conferred by a ne exeat, or \"no exit,\" order granting one parent the right to veto another parent's decision to remove their child from his home country.",
"In Abbott v. Abbott, the U.S. Supreme Court resolved the circuit split by finding that such an order confers a right of custody, thus triggering enforceability under the Convention.",
"However, it is important to note that this decision was limited to ne exeat orders. As such, courts will have to address which side of the access-custody line any other arrangements may fall.",
"Also, procedures and remedies available under the Convention differ depending on the parental rights infringed."
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GAO_GAO-13-520
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{
"title": [
"Background",
"Corporate Income Tax",
"Past Studies Estimating Corporate Effective Tax Rates Used a Range of Data Sources and Methodologies for a Variety of Reasons",
"Alternative Corporate Effective Tax Rates Are Designed to Address Different Questions",
"Data from Schedule M-3 of the Federal Corporate Income Tax Return Allow for More Accurate Comparisons of Effective Tax Rates Based on Alternative Reporting Rules",
"Various Measures of Taxes and Income Have Been Used to Estimate Effective Tax Rates",
"The Average Effective Tax Rates for Profitable Large Corporations Were Well Below the Statutory Rate and Well Below the Effective Rates for All Large Corporations in Tax Years 2008 through 2010",
"The Average Effective Tax Rates Based on Book Income Are Lower When Unprofitable Corporations Are Excluded",
"The Average Effective Tax Rates for Profitable Corporations Were Well Below the Federal Statutory Rate Even When Foreign and State and Local Income Taxes Were Included",
"Financial and Tax Reporting Differ in Terms of Entities Included, Fundamental Treatment of Other Items, and Periods in which Certain Income and Expense Items Are Recorded",
"Agency Comments",
"Appendix I: Summary of Selected Past Estimates of Average Effective Tax Rates Based on Financial Statement Data",
"Appendix II: Copy of IRS Form 1120, Schedule M-3 (Tax Year 2010)",
"Appendix III: Detailed Data on Book-Tax Differences for Tax Year 2010",
"Book amount temporarily lower than tax amount",
"Appendix IV: Descriptions of Income and Expense Items with the Largest Book-Tax Differences",
"Appendix V: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"",
"The base of the federal corporate income tax includes net income from business operations (receipts, minus the costs of purchased goods, labor, interest, and other expenses). It also includes net income that corporations earn in the form of interest, dividends, rent, royalties, and realized capital gains. The statutory rate of tax on net corporate income ranges from 15 to 35 percent, depending on the amount of income earned. The United States taxes the worldwide income of domestic corporations, regardless of where the income is earned, with a foreign tax credit for certain taxes paid to other countries. The timing of the tax liability depends on several factors. For example, income earned not by the domestic corporation, but by a foreign subsidiary is generally not taxed until a distribution—such as a dividend—is made to the U.S. corporation.\nAt about $242 billion, corporate income taxes are far smaller than the $845 billion in social insurance taxes and $1.1 trillion in individual income taxes that the Office of Management and Budget (OMB) estimates were paid in fiscal year 2012 to fund the federal government. Figure 1 shows the relative distribution of federal taxes.\nFigures 1 and 2 show the trend in corporate income tax revenues since 1950. According to tax experts, corporate income tax revenues fell from the 1960s to the early 1980s for several reasons. For example, corporate income became a smaller share of gross domestic product (GDP) during these years, partly due to the fact that corporate debt, and therefore deductible interest payments, increased relative to corporate equity, reducing the tax base. In addition, tax expenditures, such as more generous depreciation rules also grew over that period.1980s, the corporate income tax has accounted for about 6 to 15 percent Since the early of federal revenue. Consequently, although not the largest, it remains an important source of federal revenue. Relative to GDP, the corporate income tax has ranged from a little over 1 percent to just under 2.7 percent during those same years, as shown in figure 2. The Congressional Budget Office (CBO) recently projected that despite the recent uptick, corporate income tax revenue for the next 10 years as a percentage of GDP is expected to stay within this same range.\nBusinesses operating as publicly traded corporations in the United States are required to report the income they earn and the expenses (including taxes) they incur each year according to two separate standards. First, they must produce financial statements in accordance with generally accepted accounting principles (GAAP), based on standards established by the Financial Accounting Standards Board. Income and expense items reported in these statements are commonly known as book items. Second, in general, domestic corporations, including publicly traded corporations, must file corporate income tax returns on which they report income, expenses, and tax liabilities according to rules set out in the Internal Revenue Code (IRC) and associated Department of Treasury regulations.\nThe measurement of business net income is inherently difficult and some components of both tax and book net income are estimates subject to some imprecision. (Net income equals total income minus expenses.) One important source of imprecision is the difficulty of measuring costs associated with the use of capital assets. Both book and tax depreciation rules allocate capital costs over the expected useful lives of different types of assets. The actual useful life of specific assets may differ from the expected lives used for purposes of either book or tax depreciation. reported on their federal tax return for that year. In financial statements, income tax expense includes the estimated future tax effects attributable to temporary differences between book and tax income.\nPrior to 2004, corporations were required to reconcile their book net income with tax net income reporting on Schedule M-1 of their income tax returns by comparing the book and tax return amounts of a limited number of income and expense items. Concern over the growing difference observed between pretax book net income and tax net income and the lack of detail available from the Schedule M-1 on the sources of these differences led to the development of the more extensive reporting on book-tax differences that is now required on Schedule M-3. One important concern with Schedule M-1 arose from the fact that GAAP governing which components of large multinational corporate groups need to be included in financial statements differ from tax rules that specify which of those components need to be included in consolidated tax returns. Consequently, the financial statement data that taxpayers reported on their M-1s could relate to a much different business entity from the one covered by the tax return. A Schedule M-3 filer is now required to report the worldwide income of the entity represented in its financial statements and then follow a well-defined series of steps— subtracting out income and losses of foreign and U.S. entities that are included in the financial statements but not in consolidated tax returns; adding in the income and losses of entities that are included in consolidated tax returns but not in financial statements; and making other adjustments to arrive at the book income of tax-includible entities. The Schedule M-3 also requires filers to report many more specific income and expense items according to both financial statement and tax rules than the M-1 required. The items causing the largest book-tax differences are identified later in this report. (See app. II for a copy of the Schedule M-3.)",
"",
"Effective tax rates on corporate income can be defined in a variety of ways, each of which provides insights into a different issue. These rates fall into two broad categories—average rates and marginal rates. An average corporate effective tax rate, which is the focus of this report, is generally computed as the ratio of taxes paid or tax liabilities accrued in a given year over the net income the corporation earned that year; it is a good summary of the corporation’s overall tax burden on income earned during that particular period. “Burden” in this context refers to what the corporation remits to the Treasury, also called statutory burden. However, statutory burden may differ from economic burden, which measures the loss of after-tax income due to a tax. The economic burden of some or all of the taxes on a corporation may be shifted to the firm’s customers or workers, as well as to other firms and other workers. Any remaining burden is borne by the corporation’s shareholders or other owners of capital. A marginal effective tax rate focuses on the tax burden associated with a specific investment (usually over the full life of that investment) and is a better measure of the effects that taxes have on incentives to invest. Effective rates differ from statutory tax rates in that they attempt to measure taxes paid as a proportion of economic income, while statutory rates indicate the amount of tax liability (before any credits) relative to taxable income, which is defined by tax law and reflects tax benefits and subsidies built into the law. The statutory tax rate of 35 percent applying to most large U.S. corporations is sometimes referred to as the “headline rate,” because it is the rate most familiar to the public.",
"Until recently, data constraints have inhibited comparisons of effective tax rate estimates based on the alternative reporting systems. Access to tax return data is tightly restricted by law; consequently, most researchers who have estimated average effective tax rates for U.S. corporations have used either firm-level or aggregated data compiled from corporate financial statements for their measures of both tax liability and income. Even those with access to tax data could not easily determine how effective tax rates based on financial statements would differ from those based on actual tax returns because, as noted above, the scope of the business entity represented in a corporation’s financial statement can be quite different from that covered by its consolidated federal tax return.\nResearchers with access to data from Schedule M-3 and other parts of corporate income tax returns will now be able to directly compare effective tax rates based on the different data sources for a consistent population of large corporate income taxpayers, as we do in the following section.",
"The two essential components of a methodology for estimating an average effective tax rate are the measure of tax liabilities to be used as the numerator of the rate and the measure of income to be used as the denominator.\nA common measure of tax liability used in estimates based on financial statement data has been the current tax expense—either federal only or worldwide (which comprises federal, foreign, and U.S. state and local income taxes); however, some studies have used the total tax expense, and others have used cash taxes paid during the year. Corporations that filed Schedules M-3 for tax year 2010 reported a total of $185 billion in current U.S. federal income tax expense and $225 billion in total federal income tax expense, compared to the total of $187 billion in actual tax paid after credits that they reported owing IRS for that year.data from IRS do not include a measure of cash taxes paid.\nThe typical measure of income for effective tax rate estimates based on financial statements has been some variant of pretax net book income. Figure 3 shows the value of this book income measure for corporations that filed Schedules M-3 for tax year 2010 and shows the separate values for profitable and unprofitable filers. Profitable filers had aggregate pretax net book income of $1.4 trillion while unprofitable filers had losses totaling $315 billion, resulting in total net book income of $1.1 trillion for the full population. As these numbers suggest, average effective tax rates can vary significantly depending on the population of corporations covered by the estimate. The inclusion of unprofitable firms, which pay little if any actual tax, can result in relatively high estimates because the losses of unprofitable corporations greatly reduce the denominator of the effective rate. Such estimates do not accurately represent the tax rate on the profitable corporations that actually pay the tax. Some prior studies have excluded unprofitable corporations; others have not.\nFigure 3 also shows the value of two income measures defined by tax rules for the same population of taxpayers. The first measure, income (loss) before net operating loss deductions and special deductions, is the tax return measure to which Schedule M-3 filers are required to reconcile their net book income (we refer to this measure as net tax income). It represents total income minus all deductions, except for losses carried over from other tax years and the special deductions relating to intercorporate dividends. The positive values of this measure for profitable filers, negative values for unprofitable filers, and net value for all filers are all of a lower magnitude relative to book net income.measure shown in figure 3 is taxable income, which equals net tax income minus losses carried over from other years and special deductions. Taxable income is higher than tax net income for the full population of Schedule M-3 filers, even after the additional deductions, because it is defined to be no less than zero. Therefore there are no current-year losses to offset positive income amounts. For the profitable subpopulation taxable income is lower than net tax income.",
"For tax year 2010, profitable Schedule M-3 filers actually paid U.S. federal income taxes amounting to 12.6 percent of the worldwide income that they reported in their financial statements (for those entities included in their tax returns). This tax rate is slightly lower than the 13.1 percent rate based on the current federal tax expenses that they reported in those financial statements; it is significantly lower than the 21 percent effective rate based on actual taxes and taxable income, which itself is well below the top statutory rate of 35 percent.tax rate cannot be explained by income taxes paid to other countries. Even when foreign, state, and local corporate income taxes are included in the numerator, for tax year 2010, profitable Schedule M-3 filers actually paid income taxes amounting to 16.9 percent of their reported worldwide income.",
"All of the effective tax rates based on book income for profitable filers are lower than the equivalent measures computed for all Schedule M-3 filers, shown on the right side of figure 4, because the inclusion of losses reduces the aggregate income for all Schedule M-3 filers. This difference was particularly large for tax year 2009 because the aggregate losses of unprofitable filers were considerably larger in that year than in 2010. Aggregate book losses were even larger for tax year 2008; however, because these losses more than offset the income of profitable corporations, resulting in an overall net loss, we could not compute meaningful average effective tax rates based on book income for all corporations for that year.\nWith access to only aggregated data, we were not able to provide any information on the distribution of effective rates across individual filers; however, past work we have done suggest that there could be significant variation in effective rates across taxpayers.effective tax rates for different types of corporations, such as U.S. controlled corporations and foreign controlled corporations.",
"Past empirical studies comparing average effective tax rates across countries have focused on worldwide taxes (which add foreign and state and local income taxes to federal income taxes in the numerator). Our estimates for these worldwide rates ranged between 2 to 6 percent higher than the U.S. federal rates we present above, but the relationships between the different measures (total, current, and actual) within each year remained similar. (See fig. 5.) It is difficult to make close comparisons between our results and estimates from prior studies based on financial statement data because most of the latter estimates are averaged over multiple years for which we have no data. (See fig. 9 in app. I.) Our estimated rates for the full population of filers for tax year 2010 are generally lower than the estimates presented in earlier studies while our estimated rates for other years are generally higher.",
"As noted above, it can be difficult to compare financial statements with tax returns because entities included under each type of reporting can differ. IRS developed Schedule M-3 Part I to help delineate book-tax differences related to consolidation and to standardize the definition of the financial, or book, income of the tax consolidated group. As shown in figure 6, for tax year 2010 Schedule M-3 filers reported that they earned a total of $1.3 trillion from U.S. and foreign entities that were included in their consolidated financial statement but not in their consolidated tax returns (which, therefore, had to be subtracted out on the Schedule M-3). They also reported $420 billion in losses from such entities. (These losses also had to be subtracted out, meaning that net income increased by $420 billion.) In contrast, they reported less than $10 billion in either income or losses from entities that are included in their tax returns but not in their financial statements. These corporations also reported $762 billion in positive adjustments and $20 billion in negative adjustments relating to transactions between excluded and included entities. The corporations must also report several other types of adjustments, such as for any difference between the time period covered by their financial statements and the period covered by their tax years, that they make in order to arrive at a final amount that represents the net book income or loss of all of their entities that are included in their tax returns. For tax year 2010, this population of Schedule M-3 filers reported a total of $1.1 trillion in net book income for entities included in their tax returns and a total of $300 billion in losses for such entities.\nSchedule M-3 Parts II and III report book-tax differences related to income and expenses, respectively, for the tax consolidated group only. The largest category of differences for both income and expense items was “other.” IRS officials told us that their reviews of the detailed documentation that filers are required to submit along with their Schedules M-3 indicate three broad subtypes of reporting in these other categories: 1. Some common income and expense categories have no line of their own on the M-3, so they have to be reported as other. This was the case for research and development expenses prior to 2010; those expenses now have their own line. 2. Taxpayers report miscellaneous items in these categories but do not provide details on what they include. 3. Taxpayers record items in these categories that clearly should have been reported on more specific lines of the M-3. The officials suggested some taxpayers do this because they do not take the time or trouble to fill out the form properly; others may be trying to hide details from the IRS.\nAs a consequence, there is over-reporting in the two “other” categories and under-reporting in some of the more specific categories. Figures 7 and 8 identify the 10 largest categories of book-tax differences for both income and expense items in tax year 2010.\nBook-tax differences caused by the inclusion of an income or expense item by one accounting system but not the other are known as permanent differences. One of the largest permanent book-tax income differences reported in tax year 2010 arose from the section 78 gross-up, as shown in figure 7. Section 78 of the IRC requires U.S. corporations electing to claim the foreign tax credit to gross-up (i.e., increase) their dividend income by the amount of creditable foreign income taxes associated with Given that corporations are not required to the dividends they received. make this type of adjustment for book income purposes, the amount of any gross-up is a permanent positive difference between tax income and book income.\n26 U.S.C. § 78. Section 902 of the IRC permits a U.S. corporation that owns at least 10 percent of the voting stock of a foreign corporation to take an indirect credit for foreign income taxes associated with dividends that it receives from that foreign corporation. 26 U.S.C. § 902. particular category. Similarly, the negative differences represent the sums across all filers with net negative differences.\nThe magnitudes of some book-tax differences varied significantly between 2006 and 2010.For example, the excess of tax depreciation over book depreciation increased from about $69 billion in 2006 to over $145 billion in 2010. As another example, the excess of tax income over book income relating to the section 78 gross-up increased from about $36 billion in 2006 to over $77 billion in 2010.\nAs the details presented in figures 7 and 8 indicate, the direction of the book-tax differences in all of the income and expense categories varies across corporations. The book amount is greater for some corporations, while the tax amount is greater for others. As a consequence, the aggregate net difference in many categories (shown in tables 1 and 2 in app. III) are significantly smaller than the absolute value of the differences. Moreover, the net difference is positive for some categories and negative for others. The offsetting of negative and positive differences across categories and across corporations within categories means that the relatively small difference between aggregate net book income ($833 billion) and aggregate net tax income ($737 billion) for the population of Schedule M-3 filers for tax year 2010 may hide considerable differences between book and tax income and between effective tax rates based on book income and those based on tax income for individual corporations. Given the aggregate nature of our data, we were not able to examine the range of potential differences across corporations.",
"We provided a draft of this report to IRS on April 25, 2013, for review and comment. After reviewing the draft report, IRS provided technical comments which we incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to interested congressional committees, the Secretary of the Treasury, the Commissioner of Internal Revenue, and other interested parties. In addition, the report also will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-9110 or whitej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V.",
"Results from past studies, presented in Figure 9, use financial statement data to estimate average effective tax rates for U.S. corporations, employed pretax worldwide book income as the denominator of their effective rate, and covered at least one tax year since 2001. As indicated in the figure, these studies used a variety of measures of worldwide taxes for their numerator. Five of the estimates were based on data that excluded all corporations with negative book income. Most of the studies reported their results as averages across multiple years.\nOther recent studies used aggregate measures of tax receipts received by the U.S. Treasury and profits before taxes from the Bureau of Economic Analysis’s (BEA) National Income and Product Account (NIPA) data to estimate average corporate effective tax rates. The BEA profits measure is created using an aggregate income amount using tax data adjusted by two components: inventory valuation adjustment and capital consumption adjustment. Due to the aggregate nature of the profits before taxes, the denominator includes corporations with positive and negative profits before taxes. Another recent study by Citizens for Tax Justice and the Institute on Taxation and Economic Policy used financial statement data but focused on the effective rate of the federal income tax on U.S. domestic income, rather than worldwide taxes on worldwide income. They estimated a three-year (2008 to 2010) average effective tax rate of 18.5 percent for a sample of 280 of the largest U.S. corporations.",
"Appendix II: Copy of IRS Form 1120, Schedule M-3 (Tax Year 2010)",
"",
"",
"Appendix IV: Descriptions of Income and Expense Items with the Largest Book-Tax Differences Description Differences in this category and the one below relating to Form 4797 arise from differences in book and tax reporting of gains or losses arising from the sale or other disposition of business assets. One such difference arises when accumulated tax depreciation for an asset is higher than accumulated book depreciation, which would make the gain upon sale higher for tax purposes than book purposes.\nCertain qualified interest income, such as that from municipal bonds, is exempt for tax purposes but must be reported as income in financial statements. Also some items may be treated as interest income for tax purposes but as some other form of income for financial accounting purposes.\nCost of goods sold comprises numerous items, some of which have their own lines on the M-3, like depreciation and stock options expense, and other which do not. Among the differences reported on this line are those relating to differences in inventory accounting.\nThis line includes any difference between the amount of foreign dividends that corporations report on their tax returns and the amounts they report in their financial statements, unless those dividends have already been taxed by the United States.\nThis line relates to differences between the book and tax treatment of any interest owned by the filer or a member of the U.S. consolidated tax group that is treated as an investment in a partnership for U.S. income tax purposes (other than an interest in a disregarded entity).\nThis line relates to differences between the treatment of income and losses from equity investments under financial statement rules and tax accounting rules .\nSee description relating to income statement disposition of assets.\nSection 902 of the Internal Revenue Code (IRC) permits a U.S. corporation that owns at least 10 percent of the voting stock of a foreign corporation to take an indirect credit for foreign income taxes associated with dividends that it receives from that foreign corporation. Section 78 of the IRC requires U.S. corporations electing to claim the foreign tax credit to gross up (i.e., increase) their dividend income by the amount of creditable foreign income taxes associated with the dividends they received.\nThis line covers differences in the book and tax reporting of capital gains, other than those arising from partnerships and other pass-through entities.\nOne reason for differences on this line is that certain amounts that are treated as tax deductions for tax purposes are treated as some other form of expense for financial accounting purposes, or vice versa.\nFor tax purposes a firm depreciates its assets using the modified accelerated cost recovery system method, which allows the write-off of an asset at a much faster rate than straight-line depreciation, the most commonly used method for financial accounting purposes.\nThis category covers differences in book and tax amortization rules for items other than those relating to goodwill or acquisition, reorganization and start-up costs.\nUnder Generally Accepted Accounting Principles, firms are required to estimate the proportion of sales that will ultimately become uncollectible and expense this amount in the same period as the recognition of the sale in revenue. In contrast, for tax purposes firms must wait until a specific receivable is known to be uncollectible before it can be deducted.\nDescription Prior to 2002, goodwill was amortized over a maximum of 40 years for book purposes; after 2001 financial accounting changed to the impairment method, whereby goodwill is only written down if it is judged by management and auditors to be impaired. For tax purposes, goodwill was not deductible prior to 1994; since 1994 goodwill must be amortized over 15 years. These differences between book and tax treatments can be either temporary or permanent.\nThis line covers all expenses attributable to any pension plans, profit-sharing plans, or any other retirement plans.\nA stock option expense generally is recorded in a financial statement as the estimated fair value of the option over the period of time that the stock option vests. The exercise of the stock option does not affect the corporation’s net book income. In contrast, the IRC recognizes two types of stock options—qualified and nonqualified stock options. Firms cannot take deductions for qualified stock options (unless the stock is held for less than 2 years), although recipients get special beneficial tax treatment. For nonqualified stock options, the firm granting the option can deduct the fair market value when the recipient has an unrestricted right to the property and the fair market value can be reasonably ascertained.\nThis line shows the difference between the amounts of foreign income taxes that corporations report as expenses in their financial statements and the amounts that they claim as deductions for tax purposes. U.S. corporations typically claim foreign tax credits, rather than deductions, for most of the foreign income taxes they pay. Consequently, the book tax expenses typically far exceed the tax deductions.\nExamples of the types of compensation that taxpayers are required to report on this line are payments attributable to employee stock purchase plans, phantom stock options, phantom stock units, stock warrants, stock appreciation rights, and restricted stock, regardless of whether such payments are made to employees or non-employees, or as payment for property or compensation for services.",
"",
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"In addition to the contact named above, James Wozny (Assistant Director), Elizabeth Fan, Robert MacKay, Donna Miller, Karen O’Conor, Max Sawicky, and Andrew J. Stephens made key contributions to this report."
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"How do researchers estimate ETRs?",
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"What is a common measure of income?",
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"Effective tax rates (ETR) differ from statutory tax rates in that they attempt to measure taxes paid as a proportion of economic income, while statutory rates indicate the amount of tax liability (before any credits) relative to taxable income, which is defined by tax law and reflects tax benefits and subsidies built into the law.",
"Lacking access to detailed data from tax returns, most researchers have estimated ETRs based on data from financial statements.",
"A common measure of tax liability used in past estimates has been the current tax expense--either federal only or worldwide (which comprises federal, foreign, and U.S. state and local income taxes).",
"The most common measure of income for these estimates has been some variant of pretax net book income.",
"GAO was able to compare book tax expenses to tax liabilities actually reported on corporate income tax returns.",
"Given the difficult budget choices Congress faces and its need to know corporations' share of the overall tax burden, GAO was asked to assess the extent to which corporations are paying U.S. corporate income tax.",
"In this report, among other things, GAO (1) defines average corporate ETR and describes the common methods and data used to estimate this rate and (2) estimates average ETRs based on financial statement reporting and tax reporting.",
"To conduct this work, GAO reviewed economic and accounting literature, analyzed income and expense data that large corporations report on the Schedules M-3 that they file with Internal Revenue Service (IRS), and interviewed IRS officials."
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CRS_RL34701
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{
"title": [
"",
"Introduction1",
"Process",
"The New Member States",
"Albania11",
"Domestic Reforms",
"Public Support for NATO Membership",
"Defense Reforms and Ability to Contribute to Allied Missions",
"Regional Issues",
"Croatia17",
"Domestic Reforms",
"Public Support for NATO Membership",
"Defense Reform and Ability to Contribute to Allied Missions",
"Regional Issues",
"The Candidate State",
"Macedonia23",
"Domestic Political Issues",
"Defense Reform and Capacity to Contribute to Allied Missions",
"Name Dispute",
"Enlargement Costs29",
"U.S. Policy31",
"Future Candidates for Future Rounds?",
"Georgia34",
"Ukraine45",
"Ukrainian Public Opinion and NATO Membership",
"Lack of Unity Within NATO on a MAP for Ukraine",
"Outcomes, Prospects, and Russia's Reaction49",
"Russia's Reaction",
"Other Countries",
"Policy Considerations56",
"Conclusion"
],
"paragraphs": [
"",
"On April 2-4, 2008, NATO held a summit in Bucharest, Romania. A principal issue was consideration of the candidacies for membership of Albania, Croatia, and the Former Yugoslav Republic of Macedonia (FYROM). The allies issued invitations to join the alliance to Albania and Croatia. Greece blocked an invitation to Macedonia because of a dispute over Macedonia's name. The invitations initiated the third round of enlargement in the post-Cold War era. In 1997, NATO invited Poland, the Czech Republic, and Hungary to join the alliance; they were admitted in 1999. In 2002, the allies invited Bulgaria, Romania, Lithuania, Latvia, Estonia, Slovenia, and Slovakia to join the alliance; they were admitted in 2004. These last two rounds of enlargement were \"strategic\" in the sense that the new members' territory lay in regions that Russia once deemed critical to its own national interest, and in the sense that the region had been intensely involved in conflict for much of modern European history. In addition, several of these countries are sizeable, with considerable armed forces and significant resources.\nAlbania and Croatia are small countries, with correspondingly small militaries. Croatia was part of the former Yugoslavia, a communist state that kept the Soviet Union at arms' length and had reasonably friendly relations with the west. Albania, also once a communist state during the Cold War, was for many years the most isolated country in Europe. With the collapse of Yugoslavia and the end of the Cold War, these countries put themselves on the path to democracy and made commitments to join western institutions. The two countries had aspirations to join both the European Union and NATO. Albania and Croatia, in the sense of their military importance and their general resources, would not represent a \"strategic\" presence in the alliance, although their consistent contributions to NATO operations have been lauded. However, due to the continuing instability in the region, further stirred by Serbia's and Russia's sharply negative reaction to Kosovo's independence, the two countries are a potential factor for stabilization in southeastern Europe.\nToday, NATO's purpose extends well beyond the mission of collective defense of the Cold War era. Although collective defense remains a core function, the allies now undertake missions against terrorism and proliferation of weapons of mass destruction. A global military reach is necessary for such missions. The former Bush Administration had pressed the allies to develop more mobile forces, ones able to deploy over long distances and sustain themselves. Some smaller member states, such as Albania and Croatia, as NATO members are expected to develop \"niche\" capabilities, such as special forces or troops able to contain a chemical weapons attack or to participate in NATO collective security missions, such as its stabilization and peacekeeping operation in Kosovo although both have contributed troops to the NATO mission in Afghanistan.\nSeveral allied governments believe that the overall pace of NATO enlargement is too compressed and for the future wish to consider first how to resolve a complex range of issues. These governments tend to argue that other issues—the calming of nationalist emotions in Serbia, an overall improvement in NATO-Russian relations, and coming to grips with the wide-ranging problems in energy security—must first be resolved before considering new countries for membership.",
"The Washington Treaty of 1949, NATO's founding instrument, does not describe detailed qualifications for membership. It does require that member states be democracies and follow the rule of law. It also requires that they take steps to strengthen their militaries and refrain from the use of force in settling disputes outside the treaty framework. Article X of the Treaty leaves the door open to any states able to meet the general qualifications for membership, including a contribution to the security of other member states. The process by which governments interested in membership may join has been refined since the end of the Cold War. In 1994 NATO established the Partnership for Peace (PfP), a program in which non-member states might train with NATO forces, participate in peacekeeping or other allied activities, and seek avenues to draw closer to the alliance. Some countries, such as Austria, participate in the PfP program but are not necessarily interested in membership.\nIn 1995 NATO published a Study on NATO Enlargement . The report remains the most detailed public roadmap for governments wishing to enter NATO. It describes the need for candidate states to develop democratic structures and a market economy, respect human rights and the rights of ethnic minorities, and build a military capable of contributing to collective defense. In the 1995 study, NATO included other requirements, principally the need to settle all disputes, such as border demarcations, with neighboring countries. The Balkan conflicts of the 1990s gave this requirement special significance. With the collapse of the Soviet Union, NATO has also become a collective security as well as a collective defense organization. Prospective members must develop military forces trained for peacekeeping and state-building, as well as for collective defense.\nAfter the admission of Poland, the Czech Republic and Hungary in 1999, the allies, led by the United States, developed a more detailed process for prospective members. This process, called the Membership Action Plan (MAP), lays out in considerable detail specific steps that a government must follow to become a member. Such steps might include laws designating its parliament as having civilian oversight of the military, or the downsizing and professionalization of a large military, or the settlement of a border dispute with a neighbor. Each country's MAP is classified, as is its evaluation by the allies. During the 2003-2004 round of enlargement, the MAP was made available to the United States Senate for review.\nSome allies have criticized the MAP process. They contend that it is primarily a creation of the United States and that the ultimate decision on whether MAP requirements are met is made principally in Washington. They say, for example, that the full range of qualifications outlined in the MAP in the 2003 round of enlargement was not adequately assessed for several states that became members of the alliance. They contend, therefore, that designation of candidate states as prospective members is above all a political process and that actual accomplishment of requirements is secondary to the will of the alliance's leader. U.S. officials dispute this characterization.\nFor a candidate state to have been invited to join the alliance at Bucharest, consensus among the 26 member governments was necessary to approve an invitation. Each candidate was considered separately. One or more votes against a state would have blocked that state's progress to the next stage in the process of becoming a member. It was Greece's opposition to Macedonia that resulted in Skopje's failure to obtain an invitation. In March 2008, Greek Prime Minister Karamanlis said, \"No solution—no invitation.\" There were other issues under discussion as well. According to some officials in allied states, Albania and Macedonia continued to have problems of governance and issues detrimental to internal political comity. At the same time, the three governments had evidently made considerable progress in military reform, and their populations generally supported NATO membership, although by a somewhat narrow majority in Croatia.\nAfter issuing official invitations to Albania and Croatia at the April Bucharest summit, on July 9, 2008, the allies signed accession protocols for their entry into NATO. The protocols outlined NATO's expectations of the two prospective members. The protocols were deposited with each allied government and member governments began their constitutional processes to amend the Washington Treaty and admit a new state or states.\nIn some member states, such as the United Kingdom, the government had the authority to determine whether the executive alone may decide to admit a state nominated for entry, or instead, if issues of broad significance are involved, may send the protocol to parliament for approval. At the other end of the spectrum, the Netherlands has a meticulous, time-consuming process involving a parliamentary study and debate before a final vote is taken. NATO hoped to admit prospective candidate states at its 60 th anniversary summit scheduled to be held on the French-German border on April 4-5, 2009. By the end of March 2009, all 26 member states had ratified the accession protocols. Croatia did have a maritime border dispute with Slovenia and although Slovenia's parliament had ratified the protocols, there had been a movement in the parliament to hold a national referendum on Croatia's accession not only to NATO but also to the EU in response to the unsettled maritime border dispute. That issue was resolved just before the NATO summit.\nOn April 1, 2009, in a ceremony at the Department of State, the Ambassadors of Albania and Croatia deposited the ratified documents with the United States and officially became the 27 th and 28 th members of the Alliance. In a ceremony at the NATO summit in Strasbourg, France on April 4, the two newest members took their seats at the NATO table.\nThe United States Senate has the constitutional authority to give its advice and consent by a two-thirds majority to the amendment of any treaty. In the case of NATO enlargement, it must decide whether to amend the Washington Treaty to commit the United States to defend additional geographic territory. The Senate Foreign Relations Committee is the committee that holds the initial authority to consider the issue. For an enlargement of the NATO treaty, both the Senate Foreign Relations Committee and the full Senate may decide whether to vote on candidate states separately or all together. During the previous two rounds of enlargement, House and Senate committees held hearings on enlargement. One purpose of the hearings is to create more widespread knowledge of possible pending new obligations of the United States government. In the past, committees have also discussed such issues as the costs of enlargement, the qualifications of the candidate states, regional security implications of enlargement, implications for relations with Russia, and new issues in NATO's future, such as the viability of new missions.\nOn September 10, 2008, the Senate Foreign Relations Committee held a hearing on the accession of Albania and Croatia to NATO. In his opening remarks, Senator Dodd, acting Chairman of the Committee, congratulated both candidates for the progress they had made in attempting to secure NATO membership and stated that both Albania and Croatia would be a force for stability in the Balkans. He reminded the committee that \"to undertake a commitment to mutual defense is one of the more serious steps any government can take. Therefore we must consider ... the nature of the allies we are embracing.\" Senator Dodd was particularly interested in whether both candidates had achieved acceptable levels of reform in the areas of democratic elections, rule of law, treatment of minorities, economic development, civilian control of the military, and the resolution of all territorial disputes with their neighbors. Appearing before the Committee, Daniel Fried, Assistant Secretary of State for European and Eurasian Affairs, stated that both Albania and Croatia had made \"enormous steps forward in becoming stable democracies and instituting significant reforms\" in many of the areas highlighted by Senator Dodd. On September 25, 2008 the Senate, by division vote (Treaty Number 110-20), ratified the accession protocols.",
"",
"Albania was one of the first countries in central and eastern Europe to seek NATO membership after the fall of communism in the region in 1989-1991. Albania's membership candidacy had been evaluated by the allies using a number of criteria, such as the state of its political and economic reforms, public support for NATO membership, defense reforms and ability to contribute to allied missions, and Albania's role in its region. However, NATO's decision on Albania's candidacy was in the end a political judgment of NATO member states on whether Albania's membership would contribute to their security.",
"Most observers believe that the main challenges to Albania's candidacy were questions about the pace of its political reforms. Albania's current government is led by the center-right Democratic Party of Albania (DPA), which formed a coalition with several smaller parties after the country's 2005 parliamentary elections. The government is led by longtime DPA leader and Prime Minister Sali Berisha. In the past, Berisha has often been criticized for having a harsh and uncompromising leadership style, although observers have noted that he has tried to moderate this image since the 2005 elections.\nSince its first multiparty election in 1991, Albanian politics have been marked by fierce political conflict between parties and factional struggles within them. In Berisha's previous tenure as Prime Minister, public order collapsed completely for several months in 1997 after the failure of financial pyramid schemes. Since 1991, both the DPA and the other chief Albanian party, the Socialist Party of Albania, have lost elections and often refused to concede defeat, charging fraud and other irregularities. Aside from the issue of political civility, Albania has had significant legal and institutional shortcomings. Two key issues cited by U.S., NATO, and Albanian leaders themselves are electoral reform and judicial reform. The Albanian parliament has been drafting new legislation on these issues, but progress has been slow. Moreover, observers note that passing laws is one thing; implementing them effectively is another.",
"Public support in Albania for the country's membership in NATO has been very high, with public opinion polls showing as many as 96% of those polled in favor. All major Albanian political parties across the political spectrum favored NATO membership.",
"Albania has made significant progress in military reforms. However, the country's small size and weakened economy will likely prevent it from making a large contribution to the alliance's military capabilities. With the assistance of the United States and other NATO countries, Albania is trying to develop a small, efficient, well-trained force that can operate effectively with NATO. The current strength of Albania's armed forces is 11,020 troops. By the time the country's restructuring effort is over in 2010, it will comprise about 10,000 men. Albania is devoting a significant share of its meager resources to defense spending. Albania's 2007 defense budget was $208 million, representing about 1.8% of the country's Gross Domestic Product (GDP). In 2008, Albania was projected to spend 2.01% of GDP on defense, just above the 2% recommended by NATO for member states, although achieved by only seven of the 26 allies.\nAs in the case of the previous rounds of enlargement, NATO has encouraged candidate states to develop \"niche\" capabilities to assist NATO missions. Albania has focused on creating a Rapid Reaction Brigade, military police, special operations forces, explosive ordnance disposal teams, engineers, and medical support units. Albania says it plans to have 40% of its land forces ready for international missions. Eight percent of the total forces would be deployable at any one time, and the remaining would be available for rotations, according to Albanian officials. Independent assessments of Albania's reform progress note that the country is committed to carrying out these reforms, despite facing severe practical and financial limitations.\nAlbanian leaders contend that their country has already acted for years as a de facto NATO ally. Albanian forces participated in SFOR, the NATO-led peacekeeping force in Bosnia, and are part of the current EU force there. Albania has deployed a company-sized force of about 140 men as part of ISAF, the NATO-led stabilization force in Afghanistan. It has deployed a military medical team to ISAF jointly with Macedonia and Croatia. Albanian troops have also served as part of the U.S.-led coalition in Iraq.\nAlbanian defense officials concede that Albania will continue to need bilateral assistance for some time to be able to participate in international missions. Much of its hardware comes as a result of international donations, and it lacks sufficient logistical capabilities, which require the assistance of allied countries when Albania's forces are deployed abroad.",
"Albania has no outstanding territorial issues with its neighbors. Albania was one of the first countries to recognize Kosovo's independence after the former Serbian province declared it on February 17, 2008. This has increased tensions in its relations with Serbia. Albanian leaders have repeatedly said that they do not support merging their country with Kosovo and ethnic Albanian-majority parts of Macedonia in a \"Greater Albania.\" Indeed, U.S. and EU officials often praise Albania for its moderate stance on the Kosovo issue.\nSince 2003, Albania has participated with Croatia and Macedonia in the U.S.-sponsored Adriatic Charter, which promotes cooperation among the three countries in defense reforms and other areas in order to boost their NATO membership prospects. Albania participates in other regional fora, including the Southeast Europe Defense Ministerial (SEDM) and the Southeastern Europe Brigade (SEEBRIG).\nAlbanian officials say that their membership in NATO will stabilize the region by anchoring the alliance more firmly in southeastern Europe. Membership would also give pause to extremist forces in Serbia, they say. Moreover, they contend that it will encourage pro-western forces in Serbia, showing that if they follow the course of the Adriatic Charter countries, their country too can be part of the Euro-Atlantic community.",
"NATO countries evaluated Croatia's request to join the alliance using a number of criteria, such as the state of its political and economic reforms, public support for membership, progress on defense reforms and ability to contribute to allied missions, and whether Croatia plays a positive role in its region. In the final analysis, however, NATO member states made a political judgment on whether Croatia's membership will contribute to their security.",
"Croatia's progress on political and economic reforms has been generally considered to be very good and has not been an obstacle to its NATO candidacy. Croatia has been conducting membership negotiations with the European Union since October 2005. In its November 2007 progress report on Croatia's candidacy, the European Commission found that Croatia has met the political criteria for EU membership. The report praised the progress Croatia has made in reforming its judiciary and fighting corruption. Croatia has also made progress in minority rights, and to a lesser extent, the return of Serb refugees to their homes. Over 300,000 Serb refugees fled or were driven from their homes during the 1991-1995 war between Croatian and local Serb forces backed by neighboring Serbia. About half that number have returned, according to the Croatian government. The EU report noted that Croatia is a functioning market economy but stressed the need for further structural reforms, less state interference in the economy, and a better public administration and judicial system.",
"Public support had been identified as perhaps the biggest weakness of Croatia's candidacy. Public opinion polls from early 2008 showed support for NATO membership barely exceeding 50% of the population, despite active efforts of the Croatian government to boost public awareness of the benefits of NATO membership. After an attack by a Serbian mob on the Croatian embassy in Belgrade following Kosovo's declaration of independence from Serbia in February 2008, this figure increased to over 60%. Those opposing NATO membership believed that it would engage Croatia in international conflicts against its will and that NATO would demand bases in Croatia. Through continuing public relations efforts, the Croatian government had tried to allay these fears and boost public support for NATO membership. Despite the efforts of the Croatian government, it has been reported that the actual accession of Croatia on April 1, 2009 took place with very little fanfare in Croatia.\nThe largest party in the governing coalition, the Croatian Democratic Community (HDZ), strongly supported NATO membership for Croatia. Since the 1999 death of its founder, longtime Croatian strongman Franjo Tudjman, the HDZ has transformed itself from a nationalist, quasi-authoritarian party to a democratically-oriented, pro-European center-right political force. Croatia's leading opposition party, the Social Democratic Party, supports NATO membership, but called for a public referendum on the issue. In any case, Prime Minister Sanader ruled out a referendum on NATO membership during the country's November 2007 parliamentary elections and afterward. The HDZ's coalition partner, the Croatian Peasants' Party-Croatian Social Liberal Party (HSS-HSLS) once supported a NATO referendum, but dropped its demand when it formed a coalition government with the HDZ. An effort by anti-NATO activists to collect enough signatures from Croatian voters to force a referendum failed by a large margin.",
"Croatia has made progress on defense reforms, according to most observers. Croatia is moving from the relatively large, territorially-based conscript army that it had during its war with Serbian forces in the 1990s to a smaller, more professional, more deployable force. Croatia ended conscription at the beginning of 2008. Croatia's active duty armed forces total 17,660 men, of which 12,300 are in the Army. By 2010, Croatia plans to have 8% of its land forces deployed in international forces or ready for such deployments. Croatian defense officials say that it is their goal ultimately to have 40% of their forces able to be deployed for international missions. Croatia's 2008 defense expenditures amounted to 1.81% of GDP. By 2010, Croatia plans to spend 2% of its GDP on defense, the level recommended by NATO for member states, although currently reached by only 7 of the 26 allies.\nAs noted above, NATO has encouraged candidate states to develop \"niche\" capabilities to assist NATO missions. To this end, Croatia is developing a special operations platoon, a demining platoon, and plans to acquire two helicopters for NATO-led operations. It also plans to contribute a motorized infantry company, a nuclear, chemical and biological weapons defense platoon, and an engineering platoon. However, some independent assessments question whether Croatia has committed the financial resources necessary to carry out its planned reforms.\nCroatia has about 270 troops in Mazar-e-Sharif and Faizabadan in northern Afghanistan, as part of the NATO-led ISAF stabilization force. Croatia heads an Operational Mentoring and Liaison Team (OMLT) that trains Afghan army units. Croatia says that its forces in Afghanistan operate free of the caveats that limit the deployment and activities of the ISAF contingents of some other countries. It also participates in a military medical team with Albania and Macedonia. Croatia did not support the U.S. invasion of Iraq in 2003 and it has had no troops in the U.S.-led coalition there. Croatia will likely continue to need support from its allies to be able to participate in international missions, in part due to a lack of logistical capabilities that limit its capacity to deploy and sustain its forces.",
"Croatia has no major conflicts with its neighbors although a dispute with Slovenia over the maritime boundary between the two countries continued to cloud their relations. In August 2007, the two countries agreed to refer the dispute for arbitration to the International Court of Justice at The Hague. Relations with Serbia improved greatly after democratic governments came to power in both countries in 2000. Since then, Croatia has also played a largely positive role in Bosnia and Herzegovina, encouraging ethnic Croats there to work within the Bosnian political system rather than seek intervention by Croatia. On March 19, Croatia extended diplomatic recognition to Kosovo.\nSince 2003, Croatia has participated with Albania and Macedonia in the U.S.-sponsored Adriatic Charter, which promotes cooperation among the three countries in defense reforms and other areas in order to boost their NATO membership prospects. Croatia participates in other regional fora, including the Southeast Europe Defense Ministerial (SEDM) and the Southeastern Europe Brigade (SEEBRIG).",
"",
"Since joining NATO's Membership Action Plan (MAP) in 1999, Macedonia has worked closely with NATO on a broad array of reforms. Macedonia's efforts have been backed by a strong domestic majority (90% by some polls) favoring membership in NATO. In addition to consultative mechanisms under the MAP process, Macedonia hosts a NATO liaison office in Skopje that provides advice on military reforms and support to NATO-led Balkan operations. At a January 2008 meeting to review NATO's progress report on Macedonia's 9 th MAP cycle, NATO representatives praised Macedonia's progress in implementing political, economic, and military reforms, but noted that \"more needs to be accomplished.\" Although details of the reports under the MAP process remain classified, media reports, summary analyses, and comments by government officials have indicated a mixed picture for Macedonia but with notable progress achieved in the months and weeks before the Bucharest summit.",
"Among the most important factors that has weighed on Macedonia's NATO candidacy prospects has been the state of its political reforms. NATO has identified reform priorities in Macedonia to include \"efforts to meet democratic standards, support for reducing corruption and organized crime, judicial reform, improving public administration, and promoting good-neighborly relations.\" Throughout much of 2007, political conflict across the spectrum of political parties in Macedonia caused substantial deadlock in parliament, and even led to a physical confrontation in parliament that fall. The net result was stalled progress on passing key reform measures, including bills relating to implementation of the Ohrid Framework Agreement (the 2001 accord that ended a near-civil war in Macedonia). Shortly before the Bucharest summit, the Macedonian government nearly fell after an ethnic Albanian party briefly left the coalition. Following the summit, a majority in the Assembly voted to dissolve the parliament and hold snap elections on June 1. The election resulted in a crushing victory for Prime Minister Gruevski and his nationalist VRMO-DPMNE party, which won an absolute majority in the parliament and formed a coalition with an ethnic Albanian party, the Democratic Union for Integration. National elections were again held in early April 2009 that were, according to most observers, better organized and carried out. NATO's political reform priorities identified for Macedonia tracked closely with the country's EU accession prospects as well. Macedonia has been formally designated as an EU candidate country. The European Commission has praised Macedonia's achievements, but expressed concern that political tensions continued to delay important political and legal reforms and undermining the functioning of political institutions. Reflecting these concerns, the EU has not yet set a start date for accession talks. This unfulfilled goal remains a priority for Macedonia.",
"Macedonia has an extensive track record of implementing broad defense reforms, advancing security cooperation regionally, and contributing to global missions. The Army of the Republic of Macedonia (ARM) has been undergoing a major restructuring effort toward a smaller, lighter, and fully professional force under a streamlined command structure. From a 2007 strength of about 11,000, Macedonia continues to downsize its forces to reach about 8,000 active troops by the end of 2008, to increase the deployability of its forces, and to eliminate conscription. Macedonia's restructuring effort has focused on developing niche capabilities for use in allied operations such as special forces—including special purpose units for counter-insurgency and unconventional operations—and military police. Macedonia has sustained its contributions to numerous international missions, and has taken measures to reduce limitations, or caveats, on the use of its troops. Its current contributions include a 170-strong infantry unit providing security to the NATO ISAF headquarters in Kabul, Afghanistan; about 30 military personnel to the EU force in Bosnia; and a 77-strong special operations unit in Baghdad as part of U.S.-led operations in Iraq. As noted, Macedonia continues to host a NATO headquarters presence in Skopje for the alliance's Balkan operations, mainly in Kosovo. In 2007, it took a leading role in coordinating activities of the U.S.-Adriatic Charter.",
"A longstanding unresolved dispute with Greece, a NATO ally, became closely intertwined with Macedonia's prospects for an invitation at the 2008 NATO Bucharest summit. The two countries have been in disagreement over Macedonia's use of the name \"Macedonia\" since 1991, and have met intermittently with U.N. Special Representatives since 1995 in order to reach a mutually acceptable solution to the dispute. U.N. Envoy and U.S. diplomat Matthew Nimetz has continually hosted talks with Greece and Macedonia since January 2008. With a greater sense of urgency to resolving the dispute, Nimetz floated several new proposals on resolving the dispute but further talks with the parties, however, could not produce an agreement.\nWhile this dispute had long been kept on a separate track from Macedonia's Euro-Atlantic aspirations, the two issues became inextricably linked in the run-up to the Bucharest summit. Athens maintained that it could not support Macedonia's NATO candidacy if no mutually acceptable agreement on the name issue was reached. Since NATO operates by consensus, the Greek position made clear that a veto would be tabled. In contrast, Macedonia's government insisted that it has made numerous concessions already, and that linking its accession prospects to the bilateral name dispute would be unacceptable and would violate an interim accord agreed to by both sides in 1995. After the Bucharest summit, U.S. and other officials continued to urge both parties to engage in the Nimetz process in order to reach a compromise agreement. NATO noted with regret that talks to resolve the Macedonia name issue had not produced a successful outcome. Alliance members agreed to extend an invitation to Macedonia \"as soon as a mutually acceptable solution to the name issue has been reached\" and said they expected talks on the name issue to be \"concluded as soon as possible.\" This was again urged at the 2009 NATO summit in Strasbourg/Kehl.",
"NATO member states contribute to the activities of the alliance in several ways, the chief of which is through the deployment of their own armed forces, funded by their national budgets. Certain commonly conducted activities, however, are paid for out of three NATO-run budgets. These three accounts—the civil budget, the military budget, and the security investment program—are funded by individual contributions from the member states. The countries' percentage shares of the common funds are negotiated among the members, and are based upon per capita GDP and several other factors.\nDuring the period leading up to first round of enlargement in central and eastern Europe in 1999, analysts estimated the cost of adding new members at between $10 billion and $125 billion, depending upon different threat scenarios and accounting techniques. Some Members of Congress expressed concern over these cost projections and were also worried that the United States might be left to shoulder a large share of the expenditures; they questioned whether existing burdensharing arrangements should continue and suggested that the European allies should be encouraged to assume a larger financial share for the security of the continent. However, a NATO study estimated that enlargement would require only $1.5 billion in common funds expenditures over 10 years, and DOD concurred. It was further forecast that the 2004 round of enlargement would cost a similar amount, \"with greater benefits\" to U.S. security. In addition, the inclusion of ten new contributors to the NATO common funds actually reduced the percentage shares of the established members—including the United States.\nIn preparation for the NATO summit in April 2009, NATO staff prepared estimates of the total cost and the cost-sharing implications of a new round of enlargement. NATO staff concluded, and allies informally agreed, that the methodologies and assumptions used to estimate costs and cost sharing arrangements in prior rounds of enlargement were still valid, and that the addition of new members in 2009 would not entail significant costs. The main expenses likely to be charged directly to the alliance's common military budget would be for air defense upgrades, improvement of in-country facilities, mainly airfields, for deployment, and the procurement of secure communications between NATO headquarters in Brussels and Mons, and capitals of the new member countries. Any other common-funded projects in new member states would be assessed and funded in terms of their contributions to NATO capabilities or support to ongoing missions and are not directly attributable to enlargement. In recent years, the cost issue in general has received relatively little attention from policymakers and the media. The focus has instead been on 1) specialized capabilities that new—and existing—members can bring to the alliance, and 2) member states' willingness to contribute military assets to alliance operations, particularly in Afghanistan.",
"The former Bush Administration, and apparently the new Obama administration, reflected the general NATO view that the door to NATO must remain open to qualified states. Since the Clinton Administration, U.S. officials have supported the idea of a Europe \"whole and free.\" While NATO remains an organization for the defense of the United States, Canada, and the European allies, it has increasingly developed a political agenda. For example, NATO allies have routinely discussed such matters as energy security, piracy, and disaster relief, and, until August 2008, a range of political issues with Russia through the NATO-Russia Council. The United States designed the MAP process, and takes a leading role in requiring candidate states to develop a professional military, democratic structures, a transparent defense budget process, civilian control of the military, and free market structures. The former Bush Administration also supported the entry of new European NATO member states into the European Union as a means to build stability.\nLike the former Administration, the new Obama administration supported invitations to Albania, Croatia, and Macedonia. While U.S. officials acknowledged that all three states must continue to improve their militaries and their political institutions, they also believe that each state had made considerable progress over the last several years. U.S. officials also contended that the three governments would contribute to the political stabilization of southeastern Europe.\nThe former Bush Administration viewed NATO's long-term membership roster in terms broader than that of some allies. For instance, the United States strongly supported the entry of countries such as Georgia and Ukraine and argued that Georgia and Ukraine should be invited to join the MAP process. In the days leading to the Bucharest summit, former President Bush made a highly visible tour of Georgia and Ukraine, where he touted their qualifications for the MAP. While some allies appeared to view Russia's August 2008 invasion of Georgia and ongoing political instability in Ukraine as cause to further oppose granting the MAP to these countries, the Administration continued to advocate for a MAP for Georgia and Ukraine. Administration officials argued that although both countries faced significant challenges to meeting the requirements for full NATO membership, they should be granted a clear roadmap to membership as offered by the MAP. During the 2008 U.S. presidential campaign, both candidates expressed their support for Georgia and Ukraine and both candidates expressed the desire to see both nations offered membership action plans at the NATO Foreign Ministers meeting in December 2008, an action that was not taken by the ministers.\nAs with the former Administration, the Obama Administration also appears to support the idea of a \"NATO with global partners.\" This idea does not necessarily imply membership for countries beyond the Euro-Atlantic region. Instead, the former and current Administrations have sought, for example, to engage such countries as Australia, New Zealand, and Japan in the effort to stabilize Afghanistan, but do not actively promote their membership in the alliance.\nThe allies have extended Partnership for Peace status to a number of central Asian governments, a move that successive U.S. governments have supported. There are several reasons for this policy, even though some of these governments are not democratic: the PfP was originally intended as a mechanism to better integrate former Soviet Republics into the west and the United States and its allies wished to encourage greater respect for human rights and nascent democratic practices in central Asia; these governments have since provided logistical support to allied operations in Afghanistan; and several of these countries are key to the development of greater energy security because of their oil and natural gas resources and the pipelines that cross their territory.",
"",
"After Georgia's \"rose revolution\" of late 2003 brought a new reformist government to power, Georgia placed top priority on integration with NATO. Georgia began sending troops to assist NATO forces in Kosovo in 1999 and had pledged to send troops to assist the International Security Assistance Force (ISAF) in Afghanistan. In 2007, Georgia became the third largest contributor (behind the United States and Britain) to coalition operations in Iraq, with a deployment of 2,000 troops. Georgia joined NATO's Partnership for Peace program in 1994. At the NATO Summit in Prague in November 2002, Georgia declared that it aspired to NATO membership. Although some alliance members initially appeared more confident than others that Georgia had made adequate progress, a consensus was reached in September 2006 to offer Georgia an \"Intensified Dialogue\" of stepped-up consultations to assist the country in furthering its aspirations for alliance membership. On February 14, 2008, the Senate approved S.Res. 439 (sponsored by Senator Lugar), which urged NATO to award a MAP to Georgia and Ukraine as soon as possible.\nUntil the August 2008 conflict with Russia, Georgia had made progress in creating a free market economy, resulting in GDP growth of 12.4% in 2007. The Russia-Georgia conflict in August 2008, however, reportedly reduced Georgia's GDP growth for 2008 to 3.5%. In order to increase interoperability with NATO forces and contribute to NATO operations, the Georgian military had undertaken major efforts to re-equip with western-made or upgraded weapons, armor, aviation, and electronic equipment. Georgia's Strategic Defense Review suggested that the country eventually might be able to contribute to NATO by developing a niche capability in mountain combat training.\nSome observers in Georgia and the west have argued that NATO's failure to offer Georgia a Membership Action Plan at the April 2008 NATO summit emboldened Russia's aggressiveness toward Georgia and may have been an enabling factor in Russia's August 2008 invasion of Georgia. Others consider that NATO's pledge that Georgia eventually would become a member, as well as Georgia's ongoing movement toward integration with the west, spurred Russian aggression. Georgian President Saakashvili argued on August 10, 2008 that Russia wanted to crush Georgia's independence and end its bid to join NATO. France and Germany, which had voiced reservations at the April 2008 NATO summit about extending a MAP to Georgia, argued even more forcefully against admitting Georgia after the crisis, citing both the higher level of tensions over the separatist regions, Georgia's military incursion into South Ossetia, and the danger of war with Russia. Although the United States strongly supported a MAP for Georgia at the April 2008 NATO summit, the conflict with Russia in August 2008 placed this prospect on indefinite hold.\nNATO condemned Russia's August 2008 military incursion into Georgia as disproportionate and the subsequent recognition of Abkhazia and South Ossetia's independence as violating Georgia's territorial integrity. The alliance announced on August 19, 2008 that it was temporarily suspending meetings of the NATO-Russia Council and that it was forming a NATO-Georgia Council to discuss Georgia's post-conflict democratic, economic, and defense needs. The Council's inaugural meeting was held in Tbilisi on September 15, 2008 as part of a visit by the North Atlantic Council ambassadors and Secretary-General Jaap de Hoop Scheffer. A communique adopted at the inaugural meeting reaffirmed NATO's commitment to Georgia's sovereignty and territorial integrity, and stressed that NATO would continue to assist Georgia in carrying out the reform program set forth in Georgia's Individual Partnership Action Plan (IPAP) with NATO.\nAt the December 2008 NATO foreign ministerial meeting, the issue of offering a MAP to Georgia was sidestepped and the members instead offered an Annual National Program of stepped-up assistance to help Georgia move toward eventual NATO membership. A session of the NATO-Georgia Commission also was held, during which the foreign ministers assured Georgia that NATO would provide \"further assistance to Georgia in implementing needed reforms as it progresses towards NATO membership.\" The foreign ministers stated that they were closely watching Georgia's democratic reform progress. In the security realm, the ministers called for Georgia to undertake a \"lessons-learned process from the recent conflict,\" and to incorporate the lessons into a planned \"review of security documents.\" They also urged Georgia to continue reforms in military personnel management, in the transparency of the defense budget, and in the interoperability of its forces with NATO forces. They announced that NATO would increase staffing at its liaison office in Tbilisi.\nAt the February 20, 2009, meeting of the NATO-Georgia commission, NATO and Georgian defense ministers discussed recovery assistance to Georgia and Russia's construction of military bases in the breakaway regions. Addressing an associated meeting of NATO defense ministers, Secretary-General Jaap de Hoop Scheffer stated that \"we have seen [Russia's] recognition of South Ossetia and Abkhazia. We see [Russia's] intention of establishing bases there.... And it is crystal clear that we do not agree with Russia there.... We should use the NATO-Russia Council ... to discuss these things where we fundamentally disagree.\"\nAt the NATO foreign ministers' meeting on March 5, 2009, the Alliance agreed to reopen NATO-Russia Council talks, although the communique stressed that the forum would be used to press Russia to abide by the Russia-Georgia ceasefire accords and to rescind its diplomatic recognition and basing arrangements with Abkhazia and South Ossetia. Secretary of State Clinton stressed that the renewal of dialogue in the NATO-Russia Council did not spell any less commitment by NATO for eventual Alliance membership for Georgian and Ukraine. In associated meetings of the NATO-Georgia and NATO-Ukraine commissions, she \"reiterated ... the United States' firm commitment to each of those nations moving toward NATO membership and our equally strong commitment to work with them along with NATO to make clear that they should not be the subject of Russian intimidation or aggression. But I think ... there are benefits to reenergizing the NATO-Russia Council.... I don't think you punish Russia by stopping conversations with them about ... the failure to comply with the requirements set forth by the OSCE and others concerning their actions in Georgia.\"\nLithuania's foreign minister reportedly argued that the renewal of NATO-Russia Council meetings was premature because Russian behavior had not adequately changed, but conceded that, rather than blocking an Alliance consensus, Lithuania would call for such meetings to address issues of Georgia's territorial integrity. At a meeting of the NATO-Georgia Commission the same day, the Alliance discussed progress in developing a Annual National Program for Georgia.\nMost Georgians have appeared to support NATO membership. According to a plebiscite held at the same time as the January 2008 presidential election, 77% of Georgian citizens who voted answered affirmatively that Georgia should join NATO. The majority of opposition parties also supports Georgia's eventual accession to NATO. Among those opposing further Georgian moves toward Alliance membership, Irina Sarishvili (who ran as a losing candidate in the January 2008 presidential election) attempted to gain signatures before the August conflict for a voter referendum on proclaiming Georgia a neutral country. She warned that Russia would retaliate against Georgian membership in NATO by never permitting Georgia to peacefully regain authority over Abkhazia and South Ossetia. More recently, Labor Party leader Shalva Natelashvili has called for Georgia to proclaim itself a non-aligned state. Some Georgians oppose joining NATO because they allege that the Alliance will condition membership on Georgia accepting the independence of the separatist regions.\nAssessing the situation, a Polish \"think-tank\" asserted that \"the conflict ... is the principal, though not the only, cause of the significant slowdown in the process of Georgia's and Ukraine's integration with NATO,\" so that membership is likely set back for years. The conflict heightened doubts among many NATO members about how Georgia's degraded armed forces could contribute to Alliance security, about the trustworthiness of the Georgian leadership, given questions about how the conflict escalated, and about providing Alliance security guarantees to a country with unresolved territorial disputes.\nThe NATO-Georgia Commission has continued to meet on a regular basis to address those issues that Georgia would have otherwise addressed had it been granted a MAP. For now, NATO will continue to work with Georgia through the Commission and is unlikely to raise the MAP or membership issue for Georgia any time soon.",
"Ukraine participates in NATO's Partnership for Peace program and has an \"Intensified Dialogue\" with NATO on possible future membership in NATO and related reforms. On January 15, 2008, President Viktor Yushchenko, Prime Minster Yuliya Tymoshenko, and parliament speaker Arseniy Yatsenyuk sent a letter to NATO Secretary General Jaap de Hoop Scheffer requesting a Membership Action Plan (MAP) for Ukraine at the NATO summit in Bucharest. On March 17, 2008 President Yushchenko and Prime Minister Tymoshenko sent letters to De Hoop Scheffer, German Federal Chancellor Angela Merkel, and French President Nicolas Sarkozy reiterating Ukraine's request for a MAP.\nSupporters of a MAP for Ukraine believe that it is important to give the pro-western government in Kiev a strong signal of support for its Euro-Atlantic aspirations. They say that Ukraine's membership would be a way to incorporate the country more fully into the Euro-Atlantic community of democratic values, as part of the overall U.S. foreign policy goal of creating a Europe \"whole and free.\" Those who view Russia as a potential threat to European security see Ukraine's future membership in NATO as a guarantee against possible Russian attempts to revive its \"empire.\" However, Ukraine's future MAP candidacy faces several challenges.",
"One key challenge to Ukraine's desire for a MAP is the current lack of consensus on NATO membership in Ukrainian society. Public opinion polls have shown that less than one-third of the population supports NATO membership at present. Ukrainian public opinion, on this as on other issues, is split largely along regional lines. Persons living in southern and eastern Ukraine tend to oppose NATO membership. People in these regions, whether ethnic Russians or Ukrainians, tend to be Russian-speaking, are suspicious of Ukrainian nationalism, and support close ties with Russia. They are largely opposed to NATO membership because they fear that it will worsen ties with Russia. Many supporters of NATO membership are from western Ukraine, where Ukrainian-speakers dominate, suspicion of Russia is substantial, and support for a western orientation for Ukraine is high. However, western Ukraine is considerably less populous than eastern Ukraine, where most of the country's industrial capacity is concentrated.\nIn addition to pro-Russian sentiment, many people in these regions and elsewhere retain bad memories of the Soviet invasion of Afghanistan, in which Ukrainian draftees were forced to participate. They fear that NATO membership could embroil them in Afghanistan again, and in similar conflicts in distant parts of the world. Ukraine's participation in the U.S.-led coalition in Iraq in 2003-2004 was politically unpopular in Ukraine. President Yushchenko withdrew Ukraine's troops from Iraq shortly after taking office in 2005.\nPresident Yushchenko strongly supports NATO membership for Ukraine. Prime Minister Yuliya Tymoshenko often lukewarm in her support for closer ties with NATO, nevertheless joined Yushchenko in signing letters to NATO in January and March 2008 supporting MAP for Ukraine. The Party of Regions, the largest opposition party, and the Communist Party are strongly opposed to NATO membership. After the January 2008 letter, they blocked the Ukrainian parliament from conducting business, in protest against Yatsenyuk's signature of the document. The parliament resumed operations on March 6, 2008, after it passed a resolution stating that the parliament would consider legislation to join NATO only after a public referendum approved NATO membership.\nUkrainian leaders acknowledge that an effective public information campaign is needed to boost support in Ukraine for NATO membership. A lack of domestic consensus on NATO membership could make it difficult for future Ukrainian governments to consistently fulfill the terms of a MAP. In February 2008, perhaps in an effort to defuse domestic and Russian criticism over his decision to seek a MAP, President Yushchenko said that Ukraine will not allow the establishment of NATO bases on Ukrainian soil. He noted that the Ukrainian constitution does not permit the establishment of foreign military bases in Ukraine, with the temporary exception of Russia's current Black Sea naval base, the lease for which runs out in 2017.",
"Before the January 2008 letter by Ukraine's top three leaders, U.S. officials warned that there must be support for the MAP \"across the government spectrum,\" that Ukraine must continue defense reforms, and that Ukraine needs to conduct a serious information campaign to educate the public on NATO. They warned that Ukraine must \"have its act together\" on these issues and not make \"premature appeals\" for membership. The January 2008 letter to the NATO Secretary General appeared to remove this objection for the United States. During a visit to Kiev on April 1 to meet with President Yushchenko, President Bush strongly supported granting a MAP to Ukraine at the Bucharest summit.\nKey European NATO allies were reluctant to consider a MAP for Ukraine at Bucharest in part because they felt that Ukraine's qualifications for a MAP were weak, and in part because they are concerned about damaging relations with Russia. On March 6, German Foreign Minister Frank-Walter Steinmeier said, \"I cannot hide my skepticism\" about Ukraine's chances for a MAP. At the NATO foreign ministers' meeting, French Foreign Minister Bernard Kouchner and other European leaders stressed the need for maintaining good relations with Moscow.",
"The allies declined to offer Ukraine a MAP at the Bucharest summit. However, in the Summit communique, the allies praised Georgia's and Ukraine's \"valuable contributions to Alliance operations,\" and declared that \"we support these countries' applications for MAP.\" In unprecedented language, the alliance pledged that Georgia and Ukraine would eventually become members of NATO without specifying when that might happen. The allies also said that the question of MAPs for Kiev and Tbilisi could be revisited at the NATO Foreign Ministers' meeting in December 2008, a decision that eventually did not take place.\nThe ambiguous result of the 2008 Bucharest summit caused varying reactions within Ukraine. President Yushchenko and the Ukrainian government hailed the summit as a key stepping-stone on Kiev's path toward NATO membership, pointing in particular to the commitment made to admit Ukraine into the alliance. In contrast, Yanukovych and the opposition applauded the denial of a MAP at the summit, viewing it as a blow to Yushchenko's pro-NATO policy.\nEuropean NATO countries that opposed a MAP for Ukraine were even more reluctant to agree to one after the conflict between Russia and Georgia, fearing a sharp deterioration in relations with Moscow and perhaps even being embroiled in a military conflict with Russia. On the other hand, supporters of a MAP for Ukraine believed that a MAP would have sent a strong warning signal to Russia to not repeat the use of such aggressive tactics. It would also have signaled NATO's rejection of Moscow's assertion of a sphere of influence in post-Soviet countries.\nAnother issue that had an impact on Ukraine's MAP prospects was the instability of Ukraine's government. Between September and December 2008, Ukraine's pro-western government teetered on the verge of collapse. The key problem had been the escalating tension between Prime Minister Tymoshenko and President Yushchenko, due to conflicting political ambitions, divergent policy preferences, and intense personal antipathy. Indeed, Tymoshenko's decision in early 2008 to support a MAP may have been primarily a tactical effort to improve the domestic political climate in Ukraine rather than part of a coherent foreign policy strategy.\nOn December 2, 2008, NATO foreign ministers again declined to offer a MAP to Ukraine but agreed to work with Ukraine on \"Annual National Programs\" within the framework of the existing NATO-Ukraine Commission, which assists Ukraine's defense reform efforts. This approach may provide a way for Ukraine to make progress toward its NATO aspirations without calling it a MAP. However, France and Germany have warned strongly against viewing the compromise as a shortcut to NATO membership for the countries, saying that a MAP would still be required for that. On March 5, 2009, the NATO-Ukraine Commission met at the foreign ministers' level to discuss Ukraine's development of its first Annual National Program.\nThe issue of NATO membership has faded from Ukraine' s political agenda in 2009, due to its failure to secure a MAP and the more urgent problems posed by the global financial crisis. If President Yushchenko is not reelected in elections currently scheduled for October 2009, which appears likely given his current single-digit support levels in opinion polls, the new president may downplay or even renounce the current government's MAP aspirations. Of the two leading candidates, Viktor Yanukovych, head of the Party of Regions is opposed to a MAP, and Prime Minister Tymoshenk advocacy of a MAP has faded as her short-lived political detente with Yushchenko has collapsed.",
"Russian leaders appeared dissatisfied with the 2008 Bucharest summit outcome, despite the fact that neither Georgia nor Ukraine were offered a MAP. Then-President Putin reacted harshly to NATO's pledge of eventual membership for Ukraine. Russia has viewed the former Soviet republic as lying within its sphere of influence, in which western countries and institutions should play little role. NATO, as a military alliance, is viewed with particular suspicion. On February 14, 2008, in response to a question about possible Ukrainian membership in NATO, then-President Putin warned that Russia might be forced to take military countermeasures, including aiming missiles against Ukraine, if Kiev hosted foreign bases or joined the U.S. missile defense project. On April 11, 2008 Chief of the Russian General Staff General Yuriy Baluyevsky warned that Russia would take military and \"other measures\" if Ukraine joined NATO.\nIn his September 10, 2008, testimony on the accession of Albania and Croatia before the Senate Foreign Relations Committee, Secretary Fried stated that \"NATO has unfinished business in Georgia and Ukraine... Neither nation is ready for NATO membership now. The question is whether these countries should have the same prospects to meet NATO's terms for membership as other European nations. This is why the United States supports approving both countries entry into NATO's Membership Action Plan.\" In his statement, Secretary Fried also noted that \"we seek good relations with Russia. We take into account Russia's security concerns. But we also take account of the concerns and aspirations of people who live in the countries around Russia. Free people have the right to choose their own path.\"",
"In addition to Georgia and Ukraine, other countries that currently participate in the Partnership for Peace program could seek full membership in NATO in the future. In the western Balkan region, these include Serbia, Montenegro, and Bosnia-Herzegovina. At the Bucharest summit, the alliance invited Montenegro and Bosnia-Herzegovina to begin an Intensified Dialogue with NATO, an interim step relating to membership aspirations. Both countries also agreed to develop concrete relations with the alliance through Individual Partnership Action Plans (IPAP). At Bucharest, NATO offered to consider an Intensified Dialogue with Serbia, should Belgrade request one. However, a lack of political consensus in Serbia over possible NATO membership may delay Serbia's progress. Kosovo is also likely to seek closer ties with NATO, perhaps at first through PfP.\nSeveral allied governments believe that the overall pace of NATO enlargement is too compressed, and wish to consider first how to resolve a complex range of issues. In their view, the next round should go more slowly. These governments tended to oppose placing Georgia and Ukraine in the MAP at Bucharest, and contend that other issues—the calming of nationalist emotions in Serbia, an overall improvement in NATO-Russian relations, and coming to grips with the wide-ranging problems in energy security—must first be resolved before considering new countries for the MAP.",
"As in previous rounds of enlargement, a range of political factors attends consideration of the candidate states' application for membership. Beyond the qualifications achieved by a candidate state in the MAP process, such matters as the stabilization of southeastern Europe, Russia's voice in European security, and bilateral relations between a member state and a candidate state also come into play.\nStability in southeastern Europe is an issue of great importance both to NATO and the European Union, and current member governments believe that enlargement can serve this goal. NATO's decision to go to war against Serbia in 1999 to stop ethnic cleansing in Kosovo, and the alliance's subsequent creation of its Kosovo Force (KFOR) to contribute to Kosovo's stability are evidence of this point. Further evidence is the EU's decision to lead Kosovo's \"supervised independence.\" Both Serbia and Russia reacted strongly against Kosovo's independence, declared on February 17, 2008. The United States and most EU governments recognized Kosovo's independence the following week. On February 21, 2008 the U.S. embassy in Belgrade was attacked, as was the Croatian embassy, and part of the Slovenian embassy was sacked and burned. Serbian police reportedly stood by while mobs carried out these attacks.\nSerbian government leaders have vowed never to accept Kosovo's independence, and some may be complicit in stirring up unrest among the Serbian minority in northern Kosovo. Nonetheless, despite strong disagreement with EU and NATO member states over Kosovo, Serbia seeks integration into Europe through EU membership and supports building closer relations with NATO through the Partnership for Peace program. However, as indicated earlier, public opposition within Serbia to full NATO membership means political support for an intensified dialogue with NATO may be lacking.\nAs discussed earlier, Russia's opposition to the candidacies of Ukraine and Georgia for the MAP has been shrill and threatening. Prime Minister Putin has said that Russia will target nuclear weapons on Ukraine should it ever become a member of NATO. Russia has reduced natural gas supplies to Ukraine and Georgia several times in the last several years, ostensibly because the two countries would not agree to pay a market price, but also as a likely act of intimidation. Russia has also posed other obstacles to improved relations with NATO. Estonian officials contend that cyber attacks on computers in Estonian banks and governmental offices in spring 2007 originated from within the Russian government. Georgian officials also allege that cyber attacks on Georgian government websites during the August 2008 conflict originated in Russia.\nThe August 2008 conflict between Russia and Georgia has also led to renewed discussion within NATO over the alliance's collective defense clause, enshrined in Article 5 of the North Atlantic Treaty. Article 5, considered by most to be the defining feature of the alliance, obligates allies to defend against an armed attack on NATO soil. Observers disagree as to whether Russia would have invaded Georgian territory had Georgia been a NATO member, and as to how NATO would have responded in the case of such an event. However, the conflict has provoked more serious consideration both of the possibility of armed conflict between NATO and Russia and of NATO's willingness to respond in the event of a similar attack on a NATO ally. The Baltic states and Poland have voiced particular concern regarding the credibility of Article 5 as a guarantor of collective defense. Debate over Article 5 stands to intensify as NATO considers further enlargement within areas considered by Russia as falling within its traditional sphere of influence and as Russia seeks to exert influence in these areas.",
"Most allies seem to believe that although Albania's and Croatia's militaries and resources are modest, both countries' membership in the alliance could lead to greater stability in southeastern Europe, especially given the independence of Kosovo and the enduring hostility to NATO of important political factions in Serbia. Additionally, the United States and several other leading governments in the alliance expect new member states to develop niche capabilities to contribute to NATO operations around the world. More broadly, U.S. officials continue to view NATO as the primary institutional mechanism to ensure transatlantic security. They argue that although NATO's primary purpose is the defense of its members, the alliance has become a force for peace throughout Europe.\nNATO is facing current and future challenges that may shape any following rounds of enlargement. An ongoing strategic concern of the alliance is the stabilization of Afghanistan, which has become the alliance's most important mission. In addition, NATO faces other issues such as global terrorism, cyber-attacks, and strategically, two of the most important, energy security and relations with Russia. Gazprom, Russia's national energy company, has been making strong efforts to control parts of Europe's oil and natural gas distribution network. Even without such control, much of Europe and the Caucasus depend upon Russia for portions of their energy supply. Gazprom's repeated supply disruptions to customer countries underscore a stark reality: Russia can cut off a vital lifeline if it so desires. Countermeasures—new pipelines skirting Russia and drawing supplies from a range of sources, and conservation—will require years of planning and implementation, probably at great expense. Some allies believe that energy security must be enhanced before new members in succeeding rounds may be extended invitations to join, particularly if they are vulnerable to Russian pressure. Concurrent efforts to improve relations with Russia are likely to be a centerpiece of European allies' policy during this period.\nAppendix A. Legislation on Enlargement in the 109 th and 110 th Congresses\nThe Senate has assented to all five rounds of NATO enlargement. Congress has played a particularly active role in shaping the alliance's eastward expansion since the end of the Cold War. In the NATO Participation Act of 1994 (title II of P.L. 103 - 447 ), Congress for the first time authorized the president both to assist designated former Soviet Bloc countries to become full NATO members and to provide excess defense articles, international military education and training, and foreign military financing assistance to these countries. In subsequent legislation in 1996, 1998, and 2002, Congress further encouraged and endorsed NATO's eastward enlargement, while outlining the conditions under which such enlargement should take place.\nBefore ratifying the treaty protocols enabling the alliance's 1998 and 2004 enlargements, the Senate broke with past practice, subjecting its approval of the protocols to several conditions. One such condition, as articulated in the Senate's resolutions of ratification for both enlargements, requires the president to submit to the appropriate congressional committees a detailed report on each country being actively considered for NATO membership before beginning accession talks and to submit updated reports on each country before signing any protocols of accession. Specifically, these reports are to include an evaluation of how a country being actively considered for NATO membership will further the principles of NATO and contribute to the security of the North Atlantic area; an evaluation of the country's eligibility for membership, including military readiness; an explanation of how an invitation to the country would affect the national security interests of the United States; a U.S. government analysis of common-funded military requirements and costs associated with integrating the country into NATO and an analysis of the shares of those costs to be borne by NATO members; and a preliminary analysis of the budgetary implications for the United States of integrating that country into NATO.\nMembers of the 109 th and 110 th Congresses expressed continued support for NATO enlargement. On September 29, 2006, toward the end of the 109 th Congress, Senator Richard Lugar introduced S. 4014 , the Freedom Consolidation Act of 2006. The bill, expressed support for NATO enlargement and designated Albania, Croatia, Georgia, and Macedonia as eligible to receive assistance under the NATO Participation Act of 2004, passed the Senate on November 16, 2006. S. 4014 was referred to the House International Relations Committee but was not taken up before the end of the 109 th Congress.\nIn the 110 th Congress, both chambers passed successor bills to the bill that passed the Senate in the 109 th Congress. The NATO Freedom Consolidation Act of 2007, introduced by Senator Lugar on February 6, 2007, passed the Senate by unanimous consent on March 15, 2007. A companion bill, H.R. 987 , introduced by Representative John Tanner in the House on February 12, 2007, passed the House on March 6. President Bush signed it into law ( P.L. 110 - 17 ) April 9, 2007. The NATO Freedom Consolidation Act of 2007 reaffirmed the United States' \"commitment to further enlargement of the North Atlantic Treaty Organization to include European democracies that are able and willing to meet the responsibilities of membership...\" The act called for the \"timely admission\" of Albania, Croatia, Georgia, the \"Republic of Macedonia (FYROM),\" and Ukraine to NATO, recognizes progress made by Albania, Croatia, and Macedonia on their Membership Action Plans (MAPs), and applauds political and military advances made by Georgia and Ukraine while signaling regret that the alliance has not entered into a MAP with either country. Congress also affirms that admission of these five countries into NATO should be \"contingent upon their continued implementation of democratic, defense, and economic reform, and their willingness and ability to meet the responsibilities of membership in [NATO] and a clear expression of national intent to do so.\"\nIn addition to expressing support for the candidacies and potential candidacies of Albania, Croatia, Georgia, Macedonia, and Ukraine, the NATO Freedom Consolidation Act of 2007 authorized FY2008 appropriations for security assistance to each of these countries. This assistance would be consistent with the conditions set by the NATO Participation Act of 1994, which limit the types of security assistance offered by the United States to prospective NATO member states to the transfer of excess defense articles (as determined under section 516 and 519 of the Foreign Assistance Act), international military education and training (as determined under chapter 5 of part II of the Foreign Assistance Act), and foreign military financing assistance (as determined under section 23 of the Arms Export Control Act). According to the NATO Participation Act, security assistance should encourage joint planning, training, and military exercises with NATO forces, greater interoperability, and conformity of military doctrine.\nBoth the Senate and House expressed further support for a strengthening of Allied relations with Georgia and Ukraine, passing companion resolutions expressing strong support \"for [NATO] to enter into a Membership Action Plan with Georgia and Ukraine.\" The resolutions drew attention to contributions made by Georgia and Ukraine to the collective security of the alliance, and highlighted progress made in each country towards a stronger relationship with NATO. In what could Have been an effort to address some European allies' concern that a MAP would be understood as a guarantee of future NATO membership, the resolutions explicitly stated that a MAP did not ensure membership. On September 9, 2008, in response to the August conflict between Russia and Georgia, Representative John Shimkus (IL) introduced H.Con.Res. 409 , expressing the support of the Congress for awarding a membership action plan (MAP) to Georgia and Ukraine at the NATO Foreign Ministers meeting in December 2008. Although the U.S. government continued to express its support for such a decision, some European allies reinforced their position that it would not be an appropriate time to extend such as invitation. They cited the uncertainty over the Georgian political situation as well as the internal political turmoil within the government coalition in Ukraine. As noted earlier, a MAP was not extended to either Georgia or Ukraine in 2008 and is not on the agenda for NATO thus far in 2009.\nNeither the NATO Freedom Consolidation Act nor the accompanying Senate Foreign Relations Committee Report directly addressed potential concerns regarding burden-sharing within the alliance or the effect a further round of enlargement might have on relations with Russia. However, Members of the 110 th Congress had expressed such concerns in several congressional hearings, and Members on the United States congressional delegation to the NATO Parliamentary Assembly are said to have discussed these issues with their European counterparts, as well as with officials in Albania, Croatia, and Macedonia."
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"question": [
"What did NATO consider at its 2008 summit?",
"What was the outcome of this summit?",
"Why was Macedonia excluded?",
"How did Albania and Croatia become members?",
"What was the ratification process?",
"What is the implication of Albania and Croatia's inclusion?",
"What are some possible advantages to their inclusion?",
"What is Congress' stance toward NATO enlargement?",
"How did it make this support official?",
"What is the process for new states to be admitted?",
"How did Congress consider the accession of Albania and Croatia?",
"When did the Senate ratify the accession?",
"What have been factors in the debate over NATO enlargement?",
"Are these costs expected to be at play in the current round?",
"What is a NATO Membership Action Plan?",
"How did the NATO summit debate Membership Action Plans?",
"What was the outcome of this debate?",
"How did the August 2008 conflict change the membership prospects of Georgia and Ukraine?",
"What was the Bush Administration's stance on MAPs?"
],
"summary": [
"At the April 2-4, 2008 NATO summit in Bucharest, Romania, a principal issue was consideration of the candidacies for membership of Albania, Croatia, and Macedonia.",
"The allies agreed to extend invitations to Albania and Croatia.",
"Although the alliance determined that Macedonia met the qualifications for NATO membership, Greece blocked the invitation due to an enduring dispute over Macedonia's name.",
"After formal accession talks, on July 9, 2008, the foreign ministers of Albania and Croatia and the permanent representatives of the 26 NATO allies signed accession protocols amending the North Atlantic Treaty to permit Albania and Croatia's membership in NATO.",
"To take effect, the protocols had to be ratified, first by current NATO members, then by Albania and Croatia. On April 1, 2009, the two countries formally became the 27th and 28th members of the Alliance when the Ambassadors of the two nations deposited the ratified instruments of accession at the State Department. On April 4, 2009, Albania and Croatia were welcomed to the NATO table at a ceremony held at the NATO summit in Strasbourg, France.",
"Both nations are small states with correspondingly small militaries, and their inclusion in NATO cannot be considered militarily strategic.",
"However, it is possible that their membership could play a political role in helping to stabilize southeastern Europe.",
"Over the past 15 years, Congress has passed legislation indicating its support for NATO enlargement, as long as candidate states meet qualifications for alliance membership.",
"On April 9, 2007, former President Bush signed into law the NATO Freedom Consolidation Act of 2007 (P.L. 110-17), expressing support for further NATO enlargement.",
"For states to be admitted, the Senate must pass a resolution of ratification by a two-thirds majority to amend NATO's founding treaty and commit the United States to defend new geographic space.",
"On September 10, 2008, the Senate Foreign Relations Committee held a hearing on the accession of Albania and Croatia as a prelude to Senate ratification.",
"On September 25, 2008, the Senate by division vote (Treaty Number 110-20) ratified the accession protocols.",
"On September 25, 2008, the Senate by division vote (Treaty Number 110-20) ratified the accession protocols.",
"However, the costs of the current round were expected to be minimal.",
"The MAP is generally viewed by allies and aspiring alliance members as a way station to membership. However, it is not an invitation to join NATO, and it does not formally guarantee future membership.",
"Another issue debated at the Bucharest summit was NATO's future enlargement and the question of offering Membership Action Plans (MAP) to Georgia and Ukraine.",
"However, despite strong U.S. support, the allies decided after much debate not to offer MAPs to Georgia and Ukraine at Bucharest. Opponents cited internal separatist conflicts in Georgia, public opposition to membership in Ukraine, and Russia's strong objection to the two countries' membership as factors influencing their opposition.",
"The allies pledged that Georgia and Ukraine would eventually become NATO members but did not specify when this might happen.",
"The former Bush Administration supported granting MAPs to Georgia and Ukraine. Both the Senate and House passed resolutions in the 110th Congress urging NATO to enter into MAPs with Georgia and Ukraine (S.Res. 439 and H.Res. 997, respectively)."
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{
"title": [
"",
"Introduction",
"Fundamentals of Patent Acquisition",
"Contemporary Challenges for the USPTO",
"Backlog of Applications",
"Patent Quality",
"Previous Initiatives",
"Patent Application Backlog Reduction Stimulus Plan",
"Patent Prosecution Highway",
"Enhanced First Action Interview Pilot Program",
"Three-Track Initiative",
"Patent Quality Metrics",
"Congressional Issues and Options"
],
"paragraphs": [
"",
"Growing recognition of the crucial role that technological innovation plays in the U.S economy has led to increased congressional activity with respect to the intellectual property laws. As evidenced by patent reform proposals currently before the 112 th Congress, the operation of the U.S. Patent and Trademark Office (USPTO) is among the subjects of legislative interest. Stakeholders have expressed concerns over a number of issues, including the USPTO's backlog of filed but unexamined applications, as well as the quality of the patents issued by the agency.\nSome knowledgeable observers have expressed concern that the USPTO does not possess the capability to process the large number of patent applications that it receives. The growing backlog of applications awaiting examiner review could potentially lead to long delays in the time the USPTO requires to grant patents. Extended USPTO delays in reviewing applications may increase industrial uncertainty about whether a patent will cover a particular technology or not. Lengthy approval delays may also decrease the usefulness of the patent system for industries subject to a brisk pace of technological change, as a patent on an invention that is rapidly becoming obsolete has limited value.\nThe USPTO has long strived to approve only those patent applications that meet the statutory requirements for obtaining a patent. Because they meet all the requirements imposed by the Patent Act, quality patents may be dependably enforced in court and employed as a technology transfer tool. In contrast, improvidently granted patents may require firms to spend considerable resources either obtaining a license or mounting a legal challenge to the patent. Some commentators believe that within an era of increasingly complex, fast-moving technology, the task of issuing quality patents on a consistent basis presents a considerable challenge to the USPTO.\nThe USPTO has actively engaged in efforts to address its application backlog and concerns over patent quality, and more generally to improve contemporary patent administration. A number of USPTO initiatives have responded to perceived concerns about the patenting process. Among them are\nThe Patent Application Backlog Reduction Stimulus Plan, which allows an individual who has filed multiple pending applications to receive expedited review of one patent application when he agrees to withdraw another, unexamined application. The Patent Prosecution Highway (PPH), which potentially applies to inventors who have filed patent applications in multiple countries. If the inventor receives a favorable ruling from the patent office of the country where he filed first, he may request expedited review in other patent offices participating in the PPH. The Enhanced First Action Interview Pilot Program, which allows participants to conduct an interview with the patent examiner early in the application review process. The \"Three-Track Initiative,\" under which applications would be placed into one of three queues: prioritized examination, traditional examination, or delayed examination.\nThe Adoption of Metrics for the Enhancement of Patent Quality, which endeavors to improve USPTO mechanisms for measuring the quality of patent examination.\nThis report reviews a number of recent USPTO initiatives designed to enhance the patent application review process. It begins by offering a brief review of patent acquisition proceedings as well as challenges faced by the USPTO. This report then reviews the innovation policy issues that are implicated by patent administration policies. Recent USPTO initiatives are then discussed. The report closes by reviewing possible congressional options.",
"The U.S. Constitution provides Congress with the power \"To promote the Progress of Science and useful Arts, by securing for limited Times to ... Inventors the exclusive Right to their ... Discoveries....\" In accordance with the Patent Act of 1952 (the \"Patent Act\"), an inventor may seek the grant of a patent by preparing and submitting an application to the USPTO. Under current law, each application is then placed into queue for eventual review by officials known as examiners.\nThe USPTO publishes most, but not all, pending patent applications \"promptly after the expiration of a period of 18 months\" from the filing date. Among the applications that are not published prior to grant are those that the applicant represents will not be the subject of patent protection abroad. In particular, if an applicant certifies that the invention disclosed in the U.S. application will not be the subject of a patent application in another country that requires publication of applications 18 months after filing, then the USPTO will not publish the application.\nUSPTO officials known as examiners then determine whether the invention disclosed in the application merits the award of a patent. The USPTO examiner will consider a number of legal requirements, including whether the submitted application fully discloses and distinctly claims the invention. In particular, the application must enable persons skilled in the art to make and use the invention without undue experimentation. In addition, the application must disclose the \"best mode,\" or preferred way, that the applicant knows to practice the invention.\nThe examiner will also determine whether the invention itself fulfills certain substantive standards set by the patent statute. To be patentable, an invention must meet four primary requirements. First, the invention must fall within at least one category of patentable subject matter. According to the Patent Act, an invention that is a \"process, machine, manufacture, or composition of matter\" is eligible for patenting. Second, the invention must be useful, a requirement that is satisfied if the invention is operable and provides a tangible benefit. Third, the invention must be novel, or different, from subject matter disclosed by an earlier patent, publication, or other state-of-the-art knowledge. Finally, an invention is not patentable if \"the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.\" This requirement of \"nonobviousness\" prevents the issuance of patents claiming subject matter that a skilled artisan would have been able to implement in view of the knowledge of the state of the art.\nIf the USPTO allows the patent to issue, its owner obtains the right to exclude others from making, using, selling, offering to sell or importing into the United States the patented invention. Those who engage in those acts without the permission of the patentee during the term of the patent can be held liable for infringement. Adjudicated infringers may be enjoined from further infringing acts. The patent statute also provides for an award of damages \"adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer.\"\nThe maximum term of patent protection is ordinarily set at 20 years from the date the application is filed. At the end of that period, others may employ that invention without regard to the expired patent. Although patent term is based upon the filing date, the patentee gains no enforceable legal rights until the USPTO allows the application to issue as a granted patent. A number of Patent Act provisions may modify the basic 20-year term, including examination delays at the USPTO and delays in obtaining marketing approval for the patented invention from other federal agencies.\nLike most rights, those provided by a patent are not self-enforcing. Patent owners who wish to compel others to respect their proprietary interests must commence enforcement proceedings, which most commonly consist of litigation in the federal courts. Although issued patents enjoy a presumption of validity, accused infringers may assert that a patent is invalid or unenforceable on a number of grounds. The Court of Appeals for the Federal Circuit (Federal Circuit) possesses nationwide jurisdiction over most patent appeals from the district courts. The Supreme Court enjoys discretionary authority to review cases decided by the Federal Circuit.",
"",
"The growing popularity of the patent system has placed strains upon the resources of the USPTO. During 2010, the USPTO received 520,277 applications—an increase of 7.8% from the 482,871 applications it received during the 2009 fiscal year. The increase in filings is substantial when viewed over a longer time frame. For example, the number of applications filed in 2005 was 417,508; and 293,244 applications were filed at the USPTO in 2000.\nThe USPTO has candidly admitted that \"the volume of patent applications continues to outpace our capacity to examine them.\" As a consequence, the USPTO reportedly holds an inventory in excess of 1.2 million patent applications that have yet to be reviewed by an examiner. In addition, a USPTO examiner in 2009 would not review a patent application until, on average, 25.8 months after it was filed. The \"first action pendency\" during 2000 was 13.6 months. Many observers believe that if current conditions continue, the backlog and delay are likely to grow at the USPTO in coming years.\nLong delays for patent approvals may negatively impact high technology industries by increasing uncertainty about the availability and scope of patent rights. For market segments that feature a rapid pace of innovation and short product cycles, such as consumer electronics, lengthy USPTO delays may also significantly devalue the patent right. Put simply, by the time a patent issues, the entire industry might have moved on to more advanced technologies. Commerce Secretary Gary Locke reportedly described the length of time the USPTO requires to issue patents as \"unacceptable,\" explaining that \"[t]his delay causes uncertainty for inventors and entrepreneurs and impedes our economic recovery.\" USPTO Director David Kappos recently opined that \"[e]very quality patent application that sits on the shelf represents jobs not created.\"\nIn addition, under current law, USPTO delays may qualify certain patents for an extension of term. For example, if the UPSTO does not respond to an application within 14 months of the day it is filed, the term of a patent that results from that application is extended by one day for each day of delay. Given that the average first action pendency is now almost 26 months, this rule of \"Patent Term Adjustment\" may cause many U.S. patents to have a term that exceeds 20 years. A patent with a longer term may be of greater value to its proprietor, but also may impact the ability of others to develop competing products.",
"Many observers believe that the USPTO should only issue patents on inventions that meet each of the statutory criteria. Quality patents are said to enhance predictability within the marketplace by clarifying the ownership and scope of private rights associated with particular inventions. When inventors, investors, managers, and other stakeholders possess confidence that patents are reliably enforceable, they are said to have increased incentives to innovate, to finance research and development, and to bring new technologies into the marketplace.\nIn contrast, poor patent quality may encourage activity that is not socially productive. Private parties may be required to engage in extensive due diligence efforts in order to determine whether individual issued patents would be enforced by a court or not. Entrepreneurial speculators may find it easy to obtain patents that can then be enforced against manufacturers and service providers. Patent owners and investors may also be negatively impacted. A patentee may make managerial decisions, such as building production facilities or hiring workers, based upon their expectation of exclusive rights in a particular invention. If a patent is declared invalid by a court, the patent owner—along with his financial backers—is stripped of this intellectual property right without compensation.\nThe goal of consistently high levels of patent quality may pose a considerable challenge for the USPTO. Increasingly complex technologies appear to have resulted in patent applications that are both lengthy and potentially more difficult for examiners to parse. In addition, technological innovation is today a global phenomenon that is occurring at an increasingly rapid pace. As compared to previous years, USPTO examiners may face more difficulty in locating the most pertinent documents that describe the state of the art. Of course, the increasing number of patent applications—along with a large backlog of unexamined applications—also potentially impacts the ability of the USPTO to maintain high levels of patent quality.",
"The USPTO has developed a number of initiatives in order to address modern challenges of patent administration. The agency has hired many new examiners, including 1,193 in 2006; 1,215 in 2007; and 1,211 in 2008. The significance of this hiring rate should be assessed in view of the fact that in 2009, the total size of the patent examining corps was 6,242. The recent economic downturn has caused the USPTO to limit new hiring, however. As the title of recent congressional testimony of the Government Accountability Office indicates—\"Hiring Efforts Are Not Sufficient to Reduce the Patent Application\" —many observers are of the view that \"[d]ue to both monetary and infrastructure constraints, the USPTO cannot simply hire examiners to stem the tide of applications.\"\nThe USPTO also proposed rules with respect to claims and so-called continuing applications that were designed to reduce its examination burdens. These rules would have limited the number of claims that could be filed in a particular patent application, unless the applicant supplied the USPTO with an \"Examination Support Document\" in furtherance of that application. They would have also limited the ability of applicants to re-file their applications—an opportunity more technically termed a \"continuing application\"—absent a petition and showing by the patent applicant of the need for such an application. These rules never came into effect due to a temporary court ruling enjoining their implementation. In the face of considerable opposition to these rules by many members of the patent bar and innovative firms, the USPTO announced on October 8, 2009, that it was rescinding the rules package entirely.\nThe USPTO has continued to press forward with a number of additional initiatives. The remainder of this report reviews several of these programs.",
"In November, 2009, the USPTO announced a \"Patent Application Backlog Reduction Stimulus Plan.\" Under that program, an applicant may choose to abandon a previously filed application that the USPTO has not yet reviewed. If the applicant does so, he may select another application to be examined on an expedited basis. According to the agency, the Plan \"allows applicants having multiple applications currently pending before the USPTO to have greater control over the priority with which their applications are examined while also stimulating a reduction of the backlog of unexamined patent applications pending before the USPTO.\"\nFor its supporters, the advantage to the USPTO of the Patent Application Backlog Reduction Stimulus Plan is straightforward—the voluntary removal of unexamined applications from its backlog. Inventors might also benefit from obtaining more prompt review of a particular patent application. For example, an inventor may believe that one application relates to a technology that is particularly significant to his business plans, while the marketplace outlook of the invention claimed in another application is poor. In that circumstance, he may be well-served by expediting consideration of the former application while abandoning the latter.\nThe Patent Application Backlog Reduction Stimulus Plan was originally restricted to applicants that qualified as \"small entities\"—a category that generally consists of individuals, small business concerns, and nonprofit organizations. The USPTO subsequently allowed any applicant to participate in the Plan. All applicants are limited to 15 individual uses of the Plan—that is to say, the abandonment of 15 unexamined applications in exchange for expedited review of 15 other applications.\nThe USPTO will continue to operate the Patent Application Backlog Reduction Stimulus Plan until December 31, 2011, or until 10,000 applications have received expedited review. The USPTO retains the option of further extending the Plan, however. In view of applicant use of the Plan, the limitation of 10,000 applications may not be significant. Reportedly the Plan has thus far been the subject of only limited participation. It should be appreciated, however, that the Plan remains a relatively recent initiative and that innovative industry may make greater use of it in the future.",
"There is no uniform, global patent system. Patents issued by the USPTO have no effect in other countries. Conversely, patents issued by foreign patent offices are not legally operative in the United States. For the most part, patents must be obtained on a nation-by-nation basis. An individual or firm that develops a new technology, and that seeks protection in more than one country, must therefore file multiple patent applications claiming the same invention. In turn, the patent offices of different nations must commit significant effort towards examining applications that are identical or similar to those filed elsewhere.\nThe Patent Prosecution Highway (PPH) is an initiative intended to rationalize and expedite multinational patent acquisition in light of these legal realities. The PPH consists of a series of bilateral arrangements between the patent offices of a number of nations. In broad outline, the PPH designates one national office as the Office of First Filing (OFF) and the other as the Office of Second Filing (OSF). If the OFF approves of at least one claim, then the applicant may request that the OSF \"fast track\" the examination of corresponding claims in an application filed before that agency.\nConsider, for example, the PPH arrangement between the USPTO and Canadian Intellectual Property Office (CIPO). Suppose that a pharmaceutical firm initially files an application at the USPTO, and then subsequently files at the CIPO, claiming the same chemical compound. The USPTO subsequently issues an \"Office Action\" approving the U.S. application. The firm may then contact the CIPO and request expedited review of the Canadian application.\nThe PPH potentially allows inventors to obtain patents more promptly and efficiently. Each participating patent office may also potentially benefit from the work previously done by another office. For example, examiners in the OSF may be able to take advantage of work done by examiners in the OFF—including searches of the relative technical literature and analysis of the applicant's invention—when conducting their own review of the application.\nAlthough this worksharing benefit is potentially substantial, the various PPH initiatives by no means guarantee that a favorable result at the USPTO will be followed elsewhere. Differences in the patent laws of different nations, or simply a differing assessment of the merits of the case by a foreign patent examiner, may potentially lead to rejections overseas even though a U.S. patent was granted. Nonetheless, the allowance rate of some foreign applications that have been previously approved in the United States is reportedly higher than average.\nThe USPTO has currently entered into PPH arrangements with over a dozen foreign patent offices, including the European Patent Office and the patent offices of Australia, Canada, Germany, Japan, Korea, and the United Kingdom. A number of bilateral PPH arrangements exist between two foreign patent offices as well. For example, the European and Japanese Patent Offices currently operate a PPH between them. Certain of these programs have been established as pilot programs and could potentially be discontinued in the future.",
"Patent applicants generally interact with the USPTO through the exchange of formal correspondence with an examiner. At times, applicants may wish to discuss their application with the examiner in person, telephonically, or even through the exchange of email. In patent parlance, each of these less formal exchanges is termed an \"interview.\" Agency policy stipulates that an interview will generally not be held prior to the initial written communication by the examiner to the applicant (the \"First Office Action\").\nThe USPTO has explored an alternative to this longstanding procedure though an \"Enhanced First Action Interview Pilot Program.\" Applicants that choose to participate receive a Pre-Interview Communication providing the results of a technical literature search conducted by the examiner. The applicant may then conduct an interview with the examiner with the hope of expediting approval of the application. This program originally applied only to certain divisions of the USPTO, but was recently extended to cover the entire agency under the title \"Full First Action Interview Pilot Program.\"\nThe USPTO reports that this pilot program has yielded several benefits to participants, including the ability to advance prosecution of an application, resolve issues one-on-one with the examiner, and potentially facilitate early allowance. The program has been operated on a provisional basis, and was recently extended through May 16, 2012, with future extensions possible.",
"The USPTO recently announced a \"Three-Track Initiative\" that would place each patent application into one of three separate queues. Through this mechanism, inventors could pay a surcharge to obtain more prompt review of their applications; or alternatively delay examination and the payment of corresponding fees for those services. According to the White House report \"A Strategy for American Innovation: Securing Our Economic Growth and Prosperity,\" the Three-Track Initiative \"will allow applicants to prioritize applications, enabling the most valuable patents to come to market within 12 months.\"\nUnder current procedures, the USTPO dockets each patent application in the order it was received. Some regulatory exceptions to this general practice allow inventors to both expedite and delay review of their applications, however. Inventors must ordinarily petition the USPTO to obtain this distinct treatment.\nAn inventor may currently expedite USPTO review of his application by filing a \"petition to make special\" under the agency's accelerated examination program. This program aspires to complete examination of applications within 12 months of the filing date. A patent application must have no more than 20 claims to participate in the program. In addition, applicants must submit a \"support document\" reporting the results of a preexamination search for prior art references and explaining why their invention is patentable over these references. A fee of $130 applies, although the USPTO waives the fee if the invention will enhance the quality of the environment, relates to the development or conservation of energy resources, or contributes to counterterrorism.\nThe USPTO will also expedite review of the application for applicants 65 years or older, or for those in poor health such that they might not be able to assist in the prosecution of their applications if that procedure ran its normal course. The USPTO also operates a \"Green Technology Pilot Program\" that allows applications relating to clean technologies, such as environmental quality, energy conservation, development of renewable energy resources, and greenhouse gas emission reductions. This program is set to expire on December 31, 2011, although it may be extended further in the future. No fee or support document is required under either of these programs.\nThe USPTO also allows inventors to delay review of their applications. In order to defer, the applicant must pay an additional $130 processing fee and, at the outset, choose the number of months of deferral. The maximum period of deferral is 36 months. Applicants have reportedly used this procedure infrequently.\nAs noted, the USPTO is contemplating a Three-Track Initiative that would provide additional mechanisms for governing the review of patent applications. Under this system, the USPTO would place all applications into one of three distinct separate queues: an accelerated Track One; traditional examination in Track Two; and a deferral of examination in Track Three. Entering Track One would require a prioritized examination fee of $4,000. The application would then be placed within a docket designed to provide a final disposition of the application within twelve months of the prioritized status grant. A Track One application must have no more than four independent claims and thirty claims total. Prioritized status is forfeited if the applicant ever requests an extension of time to respond to a USPTO communication.\nIn contrast, if an inventor requests that a particular application be deferred, it is placed in Track Three. The inventor must request that the application be examined within 30 months from the filing date. Upon receipt of such a request, the USPTO will place the application into queue for review by an examiner.\nThe remaining option, Track Two, includes applications that have been neither prioritized nor deferred. Track Two applications would be docketed immediately and will be reviewed by an examiner in the order in which they are received.\nThe Three-Track Initiative would also significantly change USPTO procedures with respect to applications that were first filed outside the United States—for example, at the European Patent Office or the Japanese Patent Office. The USPTO currently does not consider the national origin of the application when it is placed into queue for examination. Under the proposal, an application will only be placed into one of the three tracks if it was originally filed in the United States. Applications that were originally filed abroad would not be docketed for examination at all. The USPTO would take no action on a foreign-origin application until it received copies of (1) the prior art search conducted by the foreign office, (2) the initial communication of the foreign office to the USPTO, and (3) the applicant's reply to that communication.\nAn example illustrates the working of this procedure. Suppose that a German inventor filed an application at the European Patent Office on December 1, 2011. On December 1, 2012, the inventor then files the same application at the USPTO. Under the Three-Track Initiative, the USPTO would not consider the application until the European Patent Office had conducted a search of the literature, communicated its initial review of the European application to the applicant, and received a reply from the applicant. In contrast, an application that was first filed in the USPTO—by a U.S. or foreign citizen—would be placed on one of the three tracks immediately.\nThe USPTO initially planned to implement Track One of the Three-Track Initiative as of May 4, 2011. However, on April 29, 2011, the USPTO announced that it would delay implementation of the program due to reduced spending authority in the Full-Year Continuing Appropriations Act of 2011. According to USPTO Director David Kappos, \"[w]ithout the resources to hire a sufficient number of examiners to implement Track One, we must postpone the effective date of the program until we are in a position to implement it successfully while ensuring there will be no adverse impact on non-prioritized examination applications.\"\nAccording to the USPTO, the Three-Track Initiative \"recognizes that the traditional 'one-size-fits-all' examination timing may not provide applicants much opportunity to choose the examination timing they need.\" The Three-Track Initiative has nonetheless attracted controversy. Some observers believed that the program might favor larger or wealthier firms over start-ups or smaller enterprises. Others were concerned that if industry made significant use of Track One, the ability of the USPTO to review Track Two applications might be diminished.\nThe disparate treatment of applications based on the office of first filing has also aroused controversy. According to the USPTO, this \"proposal would increase the efficiency of examination of [foreign] applications by avoiding or reducing duplication of efforts by the office of first filing and the USPTO.\" The USPTO also noted that \"major patent filing jurisdictions like the Japanese and European patent office[s] have already adopted office-drive systems in which they address the applications for which they are the office of first filing.\"\nThe United States is a signatory to the Paris Convention for the Protection of Industrial Property and also a member state of the World Trade Organization. Article 2 of the Paris Convention and Article 3 of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) requires that nationals of foreign signatory states be treated as well as U.S. citizens. Even if the Three-Track Initiative may be justified under these measures, some observers have expressed concerns that \"placing foreign nationals at a distinct disadvantage in their pursuit of patent rights in the U.S. ... could trigger, among other things, the imposition of new barriers for U.S. inventors to obtain patent rights in foreign jurisdictions.\"",
"The USPTO has for many years maintained an internal quality control group that monitors the quality of the patent examination process by reviewing a sample of approved patents. In 2011, the USPTO endeavored to increase the effectiveness and transparency of its quality review procedure through the implementation of new metrics that measure patent quality. These metrics were designed to \"reveal the presence of quality issues during examination\" and \"aid in identification of their sources so that problems may be remedied by training....\"\nThe USPTO identified seven individual metrics that are then tallied to produce a composite score. The seven metrics are: (1) the correctness of the final decision on the application (i.e., whether the examiner properly allowed or rejected the application), (2) the propriety of the examiner's actions taken during the course of the examination, (3) the degree to which the examiner's initial search of the technical literature comports with best agency practices, (4) the extent to which the examiner's initial review of the application follows best agency practices, (5) whether global USPTO data indicates compact, robust prosecution, (6) an external survey of patent applicants and practitioners, and (7) an internal survey of patent examiners. The USPTO displays the seven individual metrics, as well as the calculated composite metric, on the \"Data Visualization Center\" or \"dashboard\" portion of its website.\nThe new USPTO metrics have, for the most part, been positively received by the patent bar. As explained by Douglas K. Norman, President of the Intellectual Property Owners Association, \"metrics for measurement of appropriate indicia of patent quality, as well as their collection, reporting, review and analysis, are fundamental to evaluating the success of patent systems in issuing quality patents.\" However, some commentators believe that certain of the metrics may not always reflect an accurate and efficient review of a patent application and have suggested that other metrics—such as the outcomes of patent litigation—might also be introduced.",
"At the same time the USPTO has engaged in changes to its administrative practices in order to address concerns over its backlog of unexamined applications and to improve patent quality, the 112 th Congress is engaged in extensive patent reform discussions. Two bills, H.R. 1249 and S. 23 , each titled the American Invents Act, would make a number of changes to current patent law. Reform proposals within these bills bear upon the ability of the USPTO to develop and implement new initiatives.\nIn particular, both H.R. 1249 and S. 23 propose that the USPTO be given the authority to \"set or adjust by rule any fee established or charged by the Office.\" Any fees set must, in the aggregate, cover the estimated costs of the agency's services. Under H.R. 1249 , USPTO authority to set fees terminates six years following the enactment of the statute; S. 23 does not include a sunset provision. This proposal would provide the USPTO with greater flexibility to adjust its fee schedule absent congressional intervention. This capacity may provide the agency with heightened capability to develop new initiatives without need for congressional activity.\nThe statutory authority of the USPTO to promulgate regulations pertaining to patent law procedures and substantive law also bears upon current patent administration reform efforts. Current law provides the USPTO with the ability, among others, to establish regulations that \"govern the conduct of proceedings\" before it. However, it should be appreciated that \"Congress has not vested the [USPTO] with any general substantive rulemaking power....\" Certain of the predecessor versions of the America Invents Act would have enhanced the USPTO's regulatory authority. For example, in the 110 th Congress, H.R. 1908 would have allowed the USPTO to \"promulgate regulations to ensure the quality and timeliness of applications and their examination....\" However, in the 112 th Congress, neither H.R. 1249 nor S. 23 includes such a provision. USPTO experience with current and future initiatives may provide Congress with guidance over the most appropriate scope of that agency's regulatory authority.\nNew realities within the intellectual property environment, including a growing number of patent applications, increasingly complex technologies, and heightened user demand for prompt and accurate patent services have encouraged the USPTO to innovate in recent years. Reforms to longstanding patent examination practices were introduced in an effort to maintain high levels of patent quality and to reduce the backlog of applications awaiting review by the examiner corps. Along with judicial opinions and potential legislative reforms, the recent USPTO initiatives form a notable part of the changing patent landscape within the United States."
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"question": [
"What has characterized congressional interest in the U.S. Patent and Trademark Office?",
"What are the challenges currently faced by the USPTO?",
"What has been the response to this backlog?",
"What are the concerns regarding agency accuracy?",
"What is the Patent Application Backlog Stimulus Reduction Plan?",
"What is the Patent Prosecution Highway?",
"What is the Enhanced First Action Interview Pilot Program?",
"What is the Three-Track Initiative?",
"What is the Adoption of Metrics for the Enhancement of Patent Quality?",
"How would the patent reform issues affect the USPTO?",
"How would these reforms give the USPTO the ability to act more flexibly?",
"What other discussions are at play?"
],
"summary": [
"Congressional interest in the operation of the U.S. Patent and Trademark Office (USPTO) has been demonstrated by extensive discussion of patent reform proposals that would impact that agency.",
"An increasing number of patent applications filed each year, the growing complexity of cutting edge technology, and heightened user demands for prompt and accurate patent services are among the challenges faced by the USPTO.",
"Stakeholders have expressed concern over the agency's large backlog of patent applications that have been filed but have yet to receive examiner review.",
"Others have expressed concerns about the agency's accuracy in approving applications only on those inventions that fulfill the statutory requirements to receive a patent.",
"The Patent Application Backlog Stimulus Reduction Plan, which allows an individual who has filed multiple applications to receive expedited review of one patent application when he agrees to withdraw another, unexamined application.",
"The Patent Prosecution Highway, which allows certain inventors who have received a favorable ruling from the USPTO to receive expedited review from foreign patent offices.",
"The Enhanced First Action Interview Pilot Program, which allows applicants to conduct an interview with patent examiners early in the review process.",
"The \"Three-Track Initiative,\" under which an application would be placed into one of three queues: prioritized examination, traditional examination, or delayed examination.",
"The Adoption of Metrics for the Enhancement of Patent Quality, which endeavors to improve USPTO mechanisms for measuring the quality of patent examination.",
"A number of patent reform issues under consideration by the 112th Congress would potentially impact upon the ability of the USPTO to respond to changing circumstances in the intellectual property environment.",
"In particular, two bills before the 112th Congress, H.R. 1249 and S. 23, would grant the USPTO the ability to set its own fees, potentially allowing the agency to act in a more flexible manner.",
"In addition, discussion persists over whether the USPTO should have greater ability to engage in substantive rulemaking."
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{
"title": [
"",
"Introduction",
"Establishment of the MRA",
"Subsequent MRA Legislation",
"Appropriations Acts: Administrative Provisions Related to Unexpended Balances and Deficit Reduction",
"Other MRA Legislation Introduced",
"Appropriations and Allocations: Timing Differences with the Overall Fiscal Year Appropriation and Individual Member Calendar Year Authorization",
"Fiscal Year Appropriations: Funding History",
"Individual MRAs for Members: Formula and Authorized Levels Since 1996",
"112th Congress: Resolution Reducing Individual Authorizations",
"113th Congress: Multiple Influences on Individual Authorized Levels",
"114th Congress",
"115th Congress",
"Guidelines, Operations, and Sources of Regulations",
"\"Dear Colleague\" Letters Related to the MRA",
"Categories of Spending",
"Statements of Disbursements: Online Publication and CSV Availability",
"The MRA in Historical Practice: An Analysis of Spending in Selected Years",
"Methodology",
"Findings",
"Appendix. Examples of Legislation Introduced Affecting the MRA by Type"
],
"paragraphs": [
"",
"Congressional office spending has been a regular topic of interest to academics, interest groups, newspapers, and constituents for many years. It is a topic frequently mentioned in newspaper articles that address individual Member spending or generally discuss financial accountability among elected officials, and it has been examined by watchdog organizations and interest groups covering congressional spending on internal operations generally. A few scholars have also examined how Members typically spend their office allowances, analyzing spending within broader theories of representation. Individual office spending may be as varied as the districts Members represent. Factors affecting spending include the tenure or interests of the Member, levels of casework, geography, unexpected events, and even the congressional calendar.\nWhile Representatives have a high degree of flexibility to operate their offices in a way that supports their congressional duties and responsibilities, they must operate within a number of restrictions and regulations. The Members' Representational Allowance (MRA), the allowance provided to Members of the House of Representatives to operate their DC and district offices, may only support Members in their official and representational duties. It may not be used for personal or campaign purposes. Additional regulations or restrictions regarding reimbursable expenses may be promulgated by the Committee on House Administration, the Commission on Congressional Mailing Standards, also known as the Franking Commission, and the Committee on Standards of Official Conduct, and may be found in a wide variety of sources, including statute, House rules, committee resolutions, the Members' Handbook , the Franking Manual, the House Ethics Manual, \"Dear Colleague\" letters, and formal and informal guidance.\nThis report provides a history of the MRA and overview of recent developments. It also demonstrates actual MRA spending patterns in recent years for all voting Members who served for a defined period. Spending and practices across offices and across time vary, and an examination of additional Congresses would be required for a more complete picture of congressional office spending patterns.",
"The MRA, which was first authorized in 1996, was preceded by multiple allowances for each Member covering different categories of spending—including the former clerk hire allowance, official expenses allowances, and official mail allowance. The establishment of the MRA followed efforts by the House, dating back to the late 1970s, to move to a system of increased flexibility and accountability for Member office operations.\nIn September 1995, the Committee on House Administration authorized the consolidation of these allowances. Subsequently, in November 1995, the FY1996 Legislative Branch Appropriations Act combined the separate appropriations for personal office staff, official office expenses, and mail costs into a single new appropriations heading, \"Members' Representational Allowances.\" According to the House Appropriations Committee report on the FY1996 bill, the consolidation was adopted to simplify Members' accounting practices and allowed Members to more easily show savings achieved when they did not spend all of their allowance. Subsequent legislation in 1996 further defined the MRA and made it subject to regulations and adjustments adopted by the Committee on House Administration. Additional provisions included in the FY2000 Legislative Branch Appropriations Act amended language regarding official mail and repealed obsolete language and terms.",
"",
"Since the MRA's establishment, appropriations acts funding the legislative branch have contained—or continued, in the case of a continuing resolution—a provision requiring unused amounts remaining in the MRA be used for deficit reduction or to reduce the federal debt.\nThis provision was included in legislative branch appropriations bills reported by the House Appropriations Committee in FY1999 and since FY2002. In some years prior to consideration of FY2002 funding, it was added by amendment, including\nH.Amdt. 458 (403-21, Roll no. 415) to H.R. 1854 , 104 th Congress (Legislative Branch Appropriations Act, 1996); H.Amdt. 1245 (voice vote) to H.R. 3754 , 104 th Congress (Legislative Branch Appropriations Act, 1997); H.Amdt. 287 (voice vote) to H.R. 2209 , 105 th Congress (Legislative Branch Appropriations Act, 1998); H.Amdt. 166 (voice vote) to H.R. 1905 , 106 th Congress (Legislative Branch Appropriations Act, 2000); and, H.Amdt. 865 (voice vote) to H.R. 4516 , 106 th Congress (Legislative Branch Appropriations Act, 2001).",
"In addition to the appropriations language, numerous bills and resolutions addressing the MRA have been introduced (for examples, see tables in the Appendix ). This legislation has generally fallen into three major categories:\nAttempts to change the MRA procedure or regulate, prohibit, authorize, disclose, or encourage the use of funds for a particular purpose. Stand-alone legislation that would govern the use of unexpended balances, including language to require these funds to go toward deficit reduction. Bills or resolutions that would limit or change the g rowth of overall MRA or adjustment among Members.\nMRA-related amendments have also been offered to the legislative branch appropriations bills. These include\nH.Amdt. 213 , which was offered to H.R. 3219 , the FY2018 legislative branch appropriations bill, increasing funding for the Government Accountability Office, offset by a reduction in the Members' Representational Allowance, which failed by voice vote. H.Amdt. 214 , which was offered to H.R. 3219 , the FY2018 legislative branch appropriations bill, relating to the use of the Members' Representational Allowance for Member security, was agreed to by voice vote. H.Amdt. 642 , which was offered to H.R. 4487 , the FY2015 Legislative Branch Appropriations Act, on May 1, 2014. This amendment, which would have prohibited the use of the MRA for leased vehicles, excluding mobile district offices and short-term vehicle rentals, was not agreed to by a recorded vote (Roll no. 188). H.Amdt. 1284 , which was offered to H.R. 5882 , the FY2013 Legislative Branch Appropriations Act, on June 8, 2012. This amendment, which would have prohibited paid advertisements on any internet site other than an official site of the Member, leadership office, or committee involved, was not agreed to by a recorded vote (Roll no. 375). H.Amdt. 708 , which was offered to H.R. 2551 , the FY2012 Legislative Branch Appropriations Act, on July 21, 2011. The amendment, which prohibited the use of funds to make any payments from any MRA for the leasing of a vehicle in an amount that exceeds $1,000 in any month, was agreed to by voice vote. This language was included in P.L. 112-74 and subsequent legislative branch appropriations acts. H.Amdt. 709 and H.Amdt. 710 , which also proposed restrictions on the MRA, failed by voice vote.",
"Funding is provided on a fiscal year (beginning October 1) basis and a single total amount for all Members is provided under the appropriations heading, \"Members' Representational Allowances,\" within the House account \"Salaries and Expenses\" contained in the annual legislative branch appropriations bills.\nAllowance or authorization levels for individual Members of the House are authorized in statute and are regulated and adjusted by the Committee on House Administration pursuant to 2 U.S.C. 4313 et seq. and House Rule X(1)(j). The individual MRAs for the 441 Members, Delegates, and the Resident Commissioner are authorized for periods that correspond closely to the sessions of Congress—from January 3 of each year through January 2 of the following year.\nIn addition to the complexity involved in different time frames and split responsibilities—with the appropriation on a fiscal year determined by the Committee on Appropriations, and the authorization roughly following the calendar year as allocated by the Committee on House Administration—the House has indicated that the total authorized level for all MRAs may be more than the total appropriation due to projections on spend-out rates. The FY1997 report accompanying the legislative branch appropriations bill, for example, stated\nMany Members do not expend their full allowance. That is why the Committee bill does not fully fund this account. The frugality of those Members is already projected in the bill presented by the Committee. Since these prospective savings are already taken in the bill, they reduce the need for appropriated funds and, therefore, contribute directly to the reduction in federal spending and consequently lower the projected deficit. If the Committee bill were to fully fund the Members' Representational Allowance, the amount appropriated would have to be increased by $27 million. Thus, the account is underfunded by almost 7%.\nA similar discussion of the use of prior spending patterns in the determination of MRA appropriations levels was included in numerous other House reports, particularly in the first few years of the MRA. It was also discussed during a hearing on the FY2009 legislative branch appropriations requests.\nPursuant to law, late-arriving bills may be paid for up to two years following the end of the MRA year. The permissibility of payment for late-arriving bills does not provide flexibility in the timing of the obligation, a point emphasized in the Members' Congressional Handbook , which states: \"all expenses incurred will be charged to the allowance available on the date the services were provided or the expenses were incurred\" and the \"MRA is not transferable between years.\"",
"The MRA is funded in the House \"Salaries and Expenses\" account in the annual legislative branch appropriations bills. One single line-item provides funding for all Members' MRAs.\nThe MRA funding level peaked at $660.0 million in FY2010. It was subsequently reduced to $613.1 million in FY2011 (-7.1%), and then to $573.9 million in FY2012 (-6.4%). The FY2012 funding level was continued in the FY2013 continuing resolution ( P.L. 113-6 ), not including sequestration or an across-the-board rescission (-5.2%). The FY2014 level of $554.3 million was continued in the FY2015 act ( P.L. 113-235 ) and the FY2016 act ( P.L. 114-113 ).\nAt an April 20, 2016, markup of the FY2017 bill, the House Appropriations Committee Legislative Branch Subcommittee recommended a continuation of this level. At the May 17, 2016, full committee markup, an amendment offered by Representative Farr to increase this level by $8.3 million, to $562.6 million (+1.5%), was agreed to. This level was included in the House-passed FY2017 bill ( H.R. 5325 ). H.R. 5325 was not enacted, however, this increase was provided in the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), which was enacted on May 5, 2017.\nThe FY2017 level was continued for FY2018. The FY2019 level of $573.6 million represents an increase of $10.998 million (+2.0%). This funding is separate from an allowance for interns in Member offices ($8.8 million was provided in the FY2019 legislative branch appropriations act for up to $20,000 per office).\nFigure 1 shows the appropriation for the overall MRA account for all Members from FY1996 through FY2019 in current and constant dollars. The FY2019 funding level is\napproximately equivalent to the funding level provided when the account was established in FY1996, when adjusted for inflation; approximately 6% below the $609.0 million provided in FY2009, not adjusted for inflation; and approximately 13% below the peak funding provided in FY2010, not adjusted for inflation.\nFigure 1 also shows that the MRA is the largest category of appropriations within the House of Representatives, regularly comprising approximately 50% of House appropriations.",
"The MRA for each Member is set by the Committee on House Administration based on three components: personnel, official office expenses, and official (franked) mail. The personnel allowance component is the same for each Member. The office expenses and mail allowances components vary from Member to Member. The office expense component includes a base amount; a mileage allowance, which is calculated based on the distance between a Member's district and Washington, DC; and an office space allowance, which is based on the cost of office space in a Member's district. The official mail component is calculated based on the number of nonbusiness addresses in a Member's district. The three components result in a single MRA authorization for each Representative that can be used to pay for official expenses. Table 1 demonstrates the variation in authorization levels that resulted from this formula since 1996. Figure 2 presents this information graphically.",
"In the 112 th Congress (2011-2012), the House agreed to H.Res. 22 , which reduced the amount authorized for salaries and expenses of Member, committee, and leadership offices in 2011 and 2012. This resolution, agreed to on January 6, 2011, stated that the MRA allowances for these years may not exceed 95% of the amount established for 2010. Individual MRAs, which reflect authorized levels from January 3 of each year through January 2 of the following year, subsequently were reduced, resulting in a total reduction of 11.08% from 2010 to 2012.",
"Individual authorization levels for 2013 (January 3, 2013-January 2, 2014), which were affected by both redistricting and sequestration, were reduced by a total of 8.2% according to the Statement of Disbursements . For legislative year 2014 (January 3, 2014-January 2, 2015), each Member's MRA increased by 1%.",
"The FY2015 MRA appropriations level remained unchanged from FY2014, and Members' individual allowances were continued from legislative year 2014 to 2015.\nThe FY2016 MRA appropriations level remained unchanged from FY2014 and FY2015, although Members' individual allowances for legislative year 2016 were increased by 1.0%.",
"The FY2017 MRA appropriations level increased by +1.5% from FY2016. According to the Statement of Disbursements , each Member's authorization for 2017 was increased \"by approximately 3.9% of the average MRA.\" This resulted in an average increase of approximately $47,000.\nA shooting on June 14, 2017, at a practice for the Congressional Baseball Game, which wounded one Member of Congress, two U.S. Capitol Police (USCP) officers, and two members of the public in Alexandria, VA, had an impact on consideration of MRA funding for FY2018.\nThe report accompanying the legislative branch appropriations bill ( H.R. 3162 ), in addition to addressing funding for the Capitol Police and the House Sergeant at Arms, indicated that the Appropriations \"Committee has provided resources necessary to support the Committee on House Administration's plan to increase Member's Representational Allowance (MRA) by $25,000 per account this year for the purpose of providing Member security when away from the Capitol complex.\"\nThe House approved the MRA authorization increases when it agreed to H.Res. 411 , by unanimous consent, on June 27, 2017.\nAs stated above, during consideration in the House of the FY2018 legislative branch appropriations bill ( H.R. 3219 ) on July 26, 2017, two amendments related to the MRA were offered: H.Amdt. 214 was agreed to by voice vote, and H.Amdt. 213 failed by voice vote.\nSubsequently, on July 28, 2017, House Sergeant at Arms Paul D. Irving issued a \"Dear Colleague\" letter announcing that his office \"will assume the cost of and oversee future District Office security upgrades, maintenance, and monthly monitoring fees.\" These upgrades were previously supported through the MRA.\nOn August 15, 2017, the Committee on House Administration issued a \"Dear Colleague\" letter announcing updates to the Members' Congressional Handbook incorporating these and other changes. The MRA remains available for security measures necessitated by official duties as discussed in the letter and the Handbook .\nThe FY2018 act continued the FY2017 level of $562.6 million. According to the Statement of Disbursements , the \"Members' Representational Allowance for 2018 utilizes each Member's 2017 amount and increases that amount by $25,000.\"",
"Expenses related to official and representational duties are reimbursable under the MRA in accordance with the regulations contained in the Members' Congressional Handbook .\nThe Handbook , for example, states that a\nMember is personally responsible for the payment of any official and representational expenses incurred that exceed the provided MRA or that are incurred but are not reimbursable under these regulations.\nCertain expenses, including personal expenses, greeting cards, alcoholic beverages, and most gifts and donations, are also not reimbursable. The MRA is not transferable between years, and unspent funds from one year cannot be obligated in any subsequent year.\nOther limitations on the use of official funds are also contained in House Rule XXIV.",
"\"Dear Colleague\" letters—which are distributed among Members, committees, and officers—frequently mention the MRA. These \"Dear Colleague\" letters have announced changes in the dissemination of information or the processing of vouchers, elaborated on procedures, reminded Members and staff of guidelines on the use of funds, and asked for support for MRA legislation.\nThe Committee on House Administration, for example, has distributed regular annual \"Dear Colleagues\" announcing or explaining regulations, such as those pertaining to end-of-year expenses, district office space, and travel. Other letters have been issued regarding allowable franking and MRA expenses for the annual Congressional Art Competition or travel for a Member's funeral service, as well as reminders of prohibited expenses. The letters have explained the implication of new regulations, rulings, or decisions on MRA spending. They also have summarized changes to the Statement of Disbursement s .",
"House spending is categorized by the standard budget object classes used for the federal government. These may include\npersonnel compensation; personnel benefits; travel; rent, communications, and utilities; printing and reproduction; other services; supplies and materials; transportation of things; and equipment.\nThe disbursement volumes also contain a category for franked mail.\nCertain costs are not included in the MRA and will not be reflected in these totals. The costs include the salaries of Members and certain benefits—including any government contributions toward health and life insurance and retirement—for both Members and staff. Additionally, the range of items that may be covered by an office, as well as staff pay ceilings, have changed over time. The MRA also does not reflect spending by House officers and legislative branch agencies in support of Member offices.",
"The Statements of Disbursements are published as House documents and were historically available in bound volumes. Beginning with the disbursements for the quarter ending September 30, 2009, the Statements have been posted on the House of Representatives website, House.gov. Beginning with disbursements covering January-March 2016, this website provides SOD information in a sortable CSV (comma-separated values) format.",
"This section examines the use of the MRA in practice in recent years.",
"Disbursement information for each authorization year may appear in Statements for 12 quarters, since, as discussed above, late-arriving bills may be paid for up to two years following the end of the MRA year (although unspent funds from one year cannot be obligated in any subsequent year). For example, while Members could only obligate 2011 MRA expenditures from January 3, 2011, until January 2, 2012, late-arriving receipts could be paid through the quarter ending December 31, 2013. While some bills, particularly from outside vendors, may be settled up to eight quarters after the end of the MRA year, the vast majority of billing occurs during the session or in the quarter immediately following the close of the MRA year. Billing for some categories—like personnel compensation—is almost entirely within the disbursements for the calendar year of study. By examining volumes from subsequent quarters, in addition to those from the authorization year, it is possible to provide a more complete picture of spending patterns.",
"Numerous characteristics of individual congressional districts or Member preferences can influence spending priorities, which is reflected in the flexibility provided to Members in establishing and running their offices. Despite some variations, the data, however, show a relative consistency in the overall allocation of MRA resources by category of spending both across Members and over time.\nTable 2 provides a distributional analysis of office-level data.\nAs with the figures on House-wide total Member office spending in Figure 3 , the office-level data indicate that personnel compensation is by far the largest category of expense for Member offices. Spending on personnel as a percentage of total spending varied (as seen in the differences between the maximum and minimum percentages), but many offices clustered near the mean (i.e., the median and mean were close in all years).\nData on other categories of spending also demonstrate that, while variations exist across offices, similar patterns have developed across the House.\nTable 3 shows spending as a proportion of the total individual authorization.\nFigure 3 demonstrates aggregate House spending in these years. As with the data on office-level spending in Table 2 , the aggregate data indicate that personnel compensation is the largest category of MRA-related expenses.",
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{
"question": [
"What is the MRA?",
"When was the MRA authorized?",
"How do representatives use the MRA?",
"How did the appropriation for the MRA change from FY2010 to later fiscal years?",
"How did the appropriation change for FY2017?",
"How did the appropriation change for FY2018?",
"How did the appropriation change for FY2019?",
"What has been the effect of the reduction in the MRA appropriation?",
"How have individual MRAs changed?",
"What is H.Res. 22?",
"What does this report address?",
"What members do the data exclude?",
"What information does the data provide?",
"What does the data demonstrate?"
],
"summary": [
"Members of the House of Representatives have one consolidated allowance, the Members' Representational Allowance (MRA), with which to operate their offices.",
"The MRA was first authorized in 1996 and was made subject to regulations and adjustments of the Committee on House Administration.",
"Representatives have a high degree of flexibility to use the MRA to operate their offices in a way that supports their congressional duties and responsibilities, and individual office spending may be as varied as the districts Members represent.",
"The appropriation for the MRA decreased from a high in FY2010 of $660.0 million to $554.7 million in FY2014, FY2015, and FY2016.",
"For FY2017, the MRA level was increased by $8.3 million, to $562.6 million (+1.5%).",
"This level was continued for FY2018.",
"The FY2019 level of $573.6 million represents an increase of $10.998 million (+2.0%).",
"The reduction in the overall MRA appropriation from its FY2010 peak has corresponded with a reduction to the individual MRA authorization for each Member, which is available for expenses incurred from January 3 of each year through January 2 of the following year.",
"Individual MRAs were further reduced 6.4% in 2012 and 8.2% in 2013, before increasing 1.0% in 2014 and remaining flat in 2015. The 2016 allowances increased by 1.0%. The individual 2017 allowances initially increased by 3.9% from 2016, and then by another $25,000 when the House agreed to H.Res. 411. In 2018, individual allowances were increased by $25,000.",
"In the 112th Congress, the House agreed to H.Res. 22, which reduced the amount authorized for salaries and expenses of Member, committee, and leadership offices in 2011 and 2012. This resolution, agreed to on January 6, 2011, stated that the MRA allowances for these years may not exceed 95% of the amount established for 2010.",
"This report provides a history and overview of the MRA and examines spending patterns in recent years.",
"The data exclude nonvoting Members, including Delegates and the Resident Commissioner, as well as Members who were not in Congress for the entirety of the session.",
"Information is provided on total spending and spending for various categories, including personnel compensation; travel; rent, utilities, and communications; printing and reproduction; other services; supplies and materials; equipment; and franked mail.",
"The data collected demonstrate that, despite variations when considering all Members, many Members allocate their spending in a similar manner, and spending allocation patterns have remained relatively consistent over time."
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GAO_GAO-17-293
|
{
"title": [
"Background",
"BSEE Leadership Has Started Several Initiatives to Improve the Bureau’s Safety and Environmental Oversight Capabilities but Its Actions Have Hindered Progress",
"Limited Efforts to Obtain and Incorporate Input from Regional Personnel Hindered the Development and Implementation of Risk-Based Inspection Initiative",
"BSEE Leadership Began a New Initiative to Develop a Risk-Based Inspection Program, but the Initial Approach Had Several Deficiencies",
"Limited Efforts to Obtain and Incorporate Input Hindered BSEE’s Ability to Identify and Remediate Deficiencies in Its Risk-Based Inspection Program",
"Coordination Problems Hindered BSEE’s Environmental Stewardship Efforts",
"BSEE Leadership Has Made Limited Progress in Implementing Strategic Initiatives to Improve Its Internal Management",
"BSEE Leadership Began Initiatives to Improve Bureau Internal Management Capabilities but Has Not Fully Implemented Them",
"BSEE Has Not Fully Implemented Its Enterprise Risk Management Framework",
"BSEE Has Not Implemented Program Performance Measures",
"By Not Fully Implementing Internal Management Initiatives, BSEE Management Demonstrates Limited Leadership Commitment",
"BSEE Employee Engagement Initiative and IPRA Process Assessment Have Not Addressed Factors Contributing to Long-Standing Trust Concerns between Headquarters and the Regions",
"BSEE Has Not Developed an Employee Engagement Strategy",
"BSEE’s IPRA Pilot Assessment Did Not Address Unclear and Conflicting Guidance",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Comments from the Department of the Interior",
"Appendix II: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"BSEE’s mission is to promote safety, protect the environment, and conserve resources offshore through vigorous regulatory oversight and enforcement. BSEE’s headquarters—located in Washington, D.C., and Sterling, Virginia—is responsible for setting national program policy to meet the bureau’s mission. BSEE’s three regional offices—the Gulf of Mexico regional office in New Orleans, Louisiana; the Pacific regional office in Camarillo, California; and the Alaska regional office in Anchorage, Alaska—are responsible for executing oversight of oil and gas activities, such as conducting inspections of all facilities on the OCS. The five district offices that the Gulf of Mexico regional office oversees are the Houma, Louisiana; Lake Jackson, Texas; Lafayette, Louisiana; Lake Charles, Louisiana; and New Orleans, Louisiana district offices.\nThe Outer Continental Shelf Lands Act of 1953, as amended, (OCSLA) requires Interior to inspect each offshore oil and gas facility at least once per year. OCSLA also authorizes Interior to conduct periodic unscheduled—unannounced—inspections of these facilities. BSEE carries out these inspections on behalf of the Secretary throughout America’s 1.7 billion acres of the OCS. BSEE’s Office of Offshore Regulatory Programs is responsible for overseeing the bureau’s national inspection program, which is carried out by the bureau’s regional offices. During inspections, BSEE inspectors scrutinize all safety system components designed to prevent or ameliorate blowouts, fires, spillages, or other major accidents. Additionally, inspectors check for compliance with current plans, lease terms, and appropriate stipulations. During inspections, BSEE inspectors check for installation, operation, and maintenance of all appropriate safety and antipollution devices. They perform the inspections, in part, by using a checklist derived from regulated safety and environmental requirements. If an inspector identifies a regulatory violation at an offshore facility, BSEE issues a citation to the operator known as an incident of noncompliance (INC) in response to operator violations of safety or environmental standards. An INC may be issued in the form of (1) a warning, (2) an order to shut down a particular component of the facility (when it can be shut down without affecting the overall safety of the facility or operations), or (3) an order to shut down an entire drilling rig or production platform in cases when the violation could result in serious consequences to the environment or human health and safety, such as a fire or spill. Operators generally have 20 days to correct the violation and notify Interior that the violation was corrected.\nBSEE is responsible for ensuring compliance with OCSLA and provisions of other federal laws, including the National Environmental Policy Act (NEPA). BSEE’s Environmental Compliance Division establishes national strategic goals, programs, and procedures to increase the accuracy, effectiveness, and consistency of all bureau environmental compliance policies and initiatives. BSEE’s Office of Environmental Compliance, located in the Gulf of Mexico regional office, is staffed by environmental engineers, scientists, and specialists who are responsible for BSEE’s NEPA compliance program, as well as field and office environmental compliance verification.\nWe have previously reported on Interior’s challenges with managing federal oil and gas resources. In September 2008 and July 2009, we found shortcomings in Interior’s ability to ensure that royalty payment data were reasonable and complete. In addition, in March 2010, we found that Interior’s policies and practices did not provide reasonable assurance that oil and gas produced from federal leases was being accurately measured and that Interior experienced challenges hiring, training, and retaining qualified staff to provide oversight and management of oil and gas operations on federal lands and waters. Further, we have reported that organizational transformations are not simple endeavors and require the concentrated efforts of both leaders and employees to realize intended synergies and accomplish new organizational goals. We were also concerned about Interior’s ability to balance continued delivery of services with transformational activities in view of the department’s history of management problems and challenges in the human capital area.\nIn December 2015, BSEE issued its Fiscal Year 2016–2019 Strategic Plan. BSEE’s strategic plan identifies strategic goals to improve its operations—including safety and environmental oversight—as well as its internal management. BSEE’s key strategic initiatives to improve safety and environmental oversight include developing a risk-based inspections program and promoting environmental stewardship. BSEE’s key strategic initiatives to improve its internal management include enhancing decision making as well as communication and transparency.",
"BSEE leadership has started several initiatives to improve its safety and environmental oversight capabilities but its limited efforts to obtain and incorporate input from within the bureau have hindered its progress. Since 2012, BSEE has sought to augment its annual inspection program with a risk-based inspection program, but limited efforts to obtain and incorporate input from experienced regional personnel have hindered BSEE’s ability to develop and implement the risk-based program. Additionally, in 2016, BSEE conducted an environmental stewardship initiative comprised of two simultaneous environmental risk reduction efforts, but these efforts were overlapping, fragmented, and uncoordinated, which reduced the effectiveness of the initiative and hindered the implementation of identified improvements.",
"Since it was established as a separate bureau in 2011, BSEE leadership has continued an initiative begun by its predecessor to transition the bureau’s inspection program to a risk-based approach. In 2012, BSEE leadership started a new initiative that included the development of a risk model and an approach for inspecting production facilities based on the risk they pose. However, BSEE leadership’s limited efforts to obtain and incorporate input from regional staff and management during development of the program led to poor pilot results. As a result, BSEE has changed the focus of the program and reduced expectations for its initial approach to risk-based inspections.",
"Interior’s efforts to conduct oversight based on risk date back to the 1990s. In 1998, MMS, BSEE’s predecessor organization, contracted for a study from Carnegie Mellon University to develop a model to target inspections of offshore facilities based on risk. MMS did not implement the model at the time because it was too complex, according to BSEE officials. In 2009, one year prior to the Deepwater Horizon incident and the dissolution of the MMS in 2010, the Gulf of Mexico Regional Office piloted a risk-based inspection strategy in the Houma, Louisiana and Lake Jackson, Texas districts that regional management recommended for immediate implementation. However, BSEE officials told us that the 2010 Deepwater Horizon incident and Interior’s 2010 Safety and Environmental Management System (SEMS) regulation prompted the bureau to reconsider approaches to conducting risk-based inspections. Since 2011, when it was established as the successor to MMS, BSEE has highlighted in every Interior budget justification for the bureau its ongoing efforts to identify and increase oversight of the highest-risk facilities and operators. Additionally, BSEE affirmed its intentions in its 2016-2019 Strategic Plan to develop this risk-based inspection capability as part of its National Inspection Program.\nBeginning in 2012, BSEE began an initiative to develop an approach for conducting inspections of offshore facilities based on the level of risks they posed. Specifically, BSEE engaged Argonne National Laboratory (Argonne) to develop a quantitative model to serve as the foundation of BSEE’s risk-based inspection capability. The model ranks offshore production platforms according to five indicator factors: (1) whether the facility is a major complex, (2) whether the facility’s slot count is 15 or greater, (3) the number of inspections resulting in an INC in the previous year, (4) whether the facility experienced an incident—such as an explosion, fire, fatality, or injury—in the previous year, and (5) whether the facility experienced an incident in the previous 2 years. BSEE intended to use risk-based inspections to augment the required annual inspections by using the results of the Argonne model to identify facilities for supplemental multi-day inspections focusing on each facility’s risk management strategies. According to 2015 BSEE documentation on its risk-based approach, the bureau planned to eventually shift inspection resources from lower-risk facilities to higher-risk facilities and transition the overall inspection program from annual compliance inspections to a risk-based approach to more effectively use BSEE’s available inspection resources.\nHowever, to date, BSEE has not successfully implemented this supplemental risk-based inspection capability in the 5 years since taking over the initiative from MMS. BSEE leadership led the development of the risk-based program; however, according to officials, leadership developed the program with little input from regional personnel. Officials in the Gulf of Mexico region with knowledge and experience conducting previous risk-based inspection efforts told us they were not apprised of key program products until those products were well under development and were given little opportunity to provide comment on them. As a result, BSEE first identified deficiencies with its risk-based program during pilot testing in 2015, rather than working closely with experienced regional personnel earlier in the process to obtain their input to identify potential deficiencies and remediate them during program development. For example, BSEE identified deficiencies in three components of its proposed inspection program: (1) an underlying risk model for ranking all production platforms, (2) the annual inspection planning methodology, and (3) the facility-specific inspection protocol.\nRisk Model. BSEE regional officials who have longstanding experience evaluating offshore risk told us that the model is not sophisticated enough to identify platforms for risk-based inspection planning, and that they could have identified its deficiencies earlier in the program development process. Specifically, they said that the model does not contain sufficient information to target facilities for additional risk-based inspections. For example, Argonne’s model does not incorporate risk factors such as a facility’s change in ownership status or operator bankruptcy—factors that BSEE regional officials told us can be correlated with higher risk, as operators tend to reduce expenditures on maintenance at these times. Additionally, the model does not account for the severity of incidents of noncompliance—for example, whether an incident results in shutting down a facility or a warning—or the quantity assessed—such as whether a facility was cited many times or once in a single inspection. Some BSEE regional officials considered these types of operator performance and risk- related intelligence to be as, or more, important for identifying high- risk facilities than the five factors assessed by the model.\nBSEE headquarters worked directly with Argonne on the risk model, and although headquarters officials said they included regional personnel, they did not provide us with evidence of efforts they made to include those personnel or obtain their input on the risk model’s initial development. BSEE headquarters officials told us that Argonne reached out periodically to senior regional personnel, but they did not specify when the laboratory conducted such outreach, what contributions regional personnel made, or whether regional personnel raised concerns during Argonne’s outreach. Conversely, BSEE regional personnel told us that BSEE headquarters did not inform them of the development of a risk model or ask them for input leading up to the pilot.\nInspection Planning Methodology. In 2015, BSEE outlined an inspection planning methodology founded on Argonne’s quantitative risk model that describes how BSEE would target and plan supplemental safety inspections for offshore production platforms. BSEE’s inspection planning methodology prescribes the use of two additional categories of information, alongside Argonne’s model, to select production platforms for supplemental risk-based inspections. Specifically, it states that BSEE would use the model’s ranking to identify the 20 percent of platforms that pose the highest risk. BSEE would then consider information on operator performance—reported hydrocarbon releases, number of incidents of noncompliance assessed in each category, and the quality of SEMS audit reports— and other risk-related intelligence—including proximity to shore, production rates, and inspector assessment of overall safety—to further narrow the selection of high-risk facilities.\nBSEE planned to test its inspection planning methodology by selecting and conducting five pilot inspections in late 2015 and early 2016. According to BSEE’s program deployment and implementation plan, the bureau applied Argonne’s model to identify the pilot inspections in the Lafayette district. However, although BSEE’s inspection planning methodology prescribed the incorporation of additional information on operator performance and other risk-related intelligence in its selection of pilot facilities, a BSEE regional official told us that during the Risk Based Oversight Team’s discussions, BSEE leadership relied heavily on the risk model alone. Furthermore, although regional personnel participated on the Risk Based Oversight Team when it selected the pilots, a regional official told us they were largely sidelined during the discussions. As a result, regional officials told us the pilot selections were not among the highest risk facilities. For example, three of the top five facilities BSEE selected were idle and not producing and therefore were not inspected as part of the pilot. By going against BSEE’s inspection planning methodology, BSEE leadership appears to have excluded the input of regional personnel, undercutting the pilot effort and raising questions about whether the bureau’s leadership has the commitment necessary to enable the successful implementation of its risk-based program.\nInspection Protocol. BSEE’s inspection planning methodology also specified that the Risk-Based Oversight Team should develop an inspection protocol in advance of conducting risk-based inspections that is tailored to each facility and describes the roles and responsibilities of personnel, including what components and safety systems will be reviewed or tested. Additionally, BSEE’s program methodology describes the protocol for deliverables and the dissemination of the inspection results.\nHowever, BSEE did not establish a clear pilot inspection protocol for the inspection team and operator for the first pilot, which led to confusion for BSEE personnel and the operator. Specifically, BSEE officials involved in the inspection told us that headquarters did not inform inspection team members of their responsibilities, resulting in ineffective use of time. In turn, for the second pilot inspection, BSEE officials told us that BSEE leadership asked regional personnel to develop the inspection protocol. Officials told us that the second pilot inspection was an improvement over the first because personnel were better prepared to carry out their responsibilities. However, officials said the inspection proved to be more time consuming than BSEE expected, particularly when compared to the time required to conduct a typical annual inspection. Specifically, according to one official, the inspection team needed between 500 and 600 total work hours to complete the pilot inspection, in part due to the time required in developing a facility-specific protocol. For comparison, the official told us that a typical annual inspection of a deep water platform requires about 100 total work hours. In addition, the official told us that annual inspections are a more comprehensive review of a facility’s safety systems because inspectors test and validate all necessary components, whereas a risk-based inspection considers only specific aspects of safety performance culture. Therefore, it is not clear whether risk-based inspections, as performed during the pilot, have proven to be a more effective method for evaluating safety relative to annual inspections.\nAdditionally, BSEE’s inspection planning methodology prescribes that the Risk-Based Oversight Team provide final pilot reports to the operators of the facilities at the earliest opportunity. However, according to officials, BSEE did not provide the operator of the first pilot facility with a report of its findings. Similarly, they said BSEE did not provide a report to the operator of the second pilot facility, only a verbal debrief until the operator requested a report through BSEE’s regional office. Because BSEE did not provide formal reports to operators included in the both pilots in a timely manner, a BSEE debrief noted that one of the operators was confused about the final results of the inspection. The purpose of the risk-based inspection initiative is to provide operators with the opportunity to address issues and improve their safety management systems, for which they need timely access to inspection results.\nBSEE headquarters led the development of the inspection planning methodology and the facility-specific inspection protocol without obtaining and incorporating input from regional personnel who had knowledge and experience conducting risk-based inspection efforts. The Gulf of Mexico region was to evaluate risk routinely when planning inspections since at least the year 2000, because BSEE’s inspection policy stipulates that the region is to conduct supplemental unannounced inspections based on a quantitative and qualitative assessment of risk. In addition, BSEE’s inspection policy states that the bureau is to evaluate quantitative and qualitative risk assessment criteria to determine whether a facility’s annual scheduled inspection should be a complete inspection or an inspection of a selected sample of safety components. Furthermore, personnel from that region conducted a risk-based inspection pilot in 2009 in the Houma, Louisiana, and Lake Jackson, Texas, districts that regional management recommended for immediate implementation. Nevertheless, regional officials who had knowledge of the 2009 pilot said that BSEE headquarters led and developed the first facility- specific inspection protocol without their input.\nAccording to officials, BSEE headquarters proceeded with pilot inspections before regional personnel had the opportunity to raise concerns about the risk model, the inspection planning methodology, and the facility-specific inspection protocol. As a result of these deficiencies, officials involved in the first pilot inspection described it as a failure that produced few, if any, results. Only after the first pilot did BSEE leadership begin to engage regional personnel and incorporate their input on the program, according to officials. In response to the deficiencies BSEE identified during the first two risk-based pilot inspections, in July 2016, BSEE revised the risk-based inspection program based on a proposal that regional personnel told us they developed, which incorporates a risk- based methodology that they had previously used in the Gulf of Mexico. Specifically, to supplement the facility-based approach that BSEE leadership had been developing since 2012 based on Argonne’s risk model, BSEE regional personnel proposed reconstituting an inspection methodology that MMS used prior to the Deepwater Horizon incident called “blitz” inspections. Blitz inspections focus on specific facility components—such as compressors, generators, or cranes—that the bureau determines are high-risk based on analyses of trends in incidents. Officials told us that they added this tier of inspections because it allowed them to target risk across more facilities in less time than is required for comprehensive risk-based facility inspections. Specifically, BSEE intends for a typical round of blitz inspections to encompass approximately 50 facilities for 2 to 3 hours each. Under the initial program methodology developed by BSEE leadership, BSEE stated that it would be able to use the facility-based methodology as a systematic way of deciding where to commit annual inspection resources. However, officials said the bureau now anticipates using the risk-based methodology to target no more than five facilities per year, instead of the more than 20 per year officials originally estimated. Instead, BSEE’s revised program methodology will use both blitz inspections and facility-based inspections based on Argonne’s model. BSEE’s current plans are to conduct additional pilots under the revised program methodology prior to implementation in fiscal year 2017.",
"In July 2003, we found that when implementing large-scale management initiatives, a key practice is involving employees to obtain their ideas and gain their ownership by incorporating employee feedback into new policies and procedures. We found that employee involvement strengthens the process and allows them to share their experiences and shape policies, and that in leading organizations, management and employee representatives work collaboratively to gain ownership for these changes. Further, management’s responsibility to develop policy and programs in a collaborative manner is established in both BSEE’s internal policy and federal internal control standards. BSEE’s inspection policy states that headquarters is responsible for coordinating the development of national inspection policy, including taking into account region-specific circumstances. BSEE regional leadership is responsible for administering and implementing the inspection policy; therefore, logically, regional leadership would be a key contributor to helping develop BSEE inspection policy. In addition, under the Standards for Internal Control in the Federal Government, management should internally communicate the necessary quality information to achieve its objectives. For example, quality information is communicated down, across, up, and around reporting lines to all levels of the entity, and management receives such information about the entity’s operational processes that flows up the reporting lines from personnel to help management achieve the entity’s objectives. Therefore, systematic input from within the entity would help it achieve its objectives.\nHowever, BSEE management made limited efforts to obtain and incorporate input from regional personnel in developing the three components of the risk-based inspection program, which contributed to deficiencies that led to an unsuccessful pilot, and ultimately, BSEE has been unable to achieve its goal of implementing a systematic risk-based inspection program. Without an Interior organizational unit at a higher level than BSEE (i.e., higher level oversight independent from BSEE) establishing a mechanism for BSEE management to obtain and incorporate input from personnel within the bureau, BSEE’s risk-based inspection program could experience continued delays and implementation problems.",
"BSEE leadership initiated two simultaneous Environmental Stewardship efforts to reduce environmental risks related to U.S. offshore oil and gas operations, but the efforts were partially overlapping, fragmented, and uncoordinated, which reduced the value of the outputs. In 2015, BSEE leadership sought to establish a baseline for environmental risks associated with U.S. offshore oil and gas operations and measure the effectiveness of its environmental protection functions and environmental stewardship priorities to better implement BSEE’s mission. These efforts included (1) identifying potential environmental risks associated with offshore oil and gas operations; (2) identifying current BSEE functions meant to regulate and manage those risks; (3) linking BSEE environmental stewardship priorities to specific industry activities and associated risks; and (4) identifying potential environmental stewardship gaps where BSEE functions might not be fully addressing industry activities with high environmental risk. These efforts were led and coordinated by BSEE leadership in the Environmental Compliance Division at headquarters, which BSEE created in 2015 to establish national strategic goals and procedures for the bureau’s environmental compliance activities.\nAs part of the Environmental Stewardship initiative, BSEE conducted two environmental risk reduction efforts. Specifically, in December 2015, BSEE headquarters engaged Argonne to conduct an Environmental Risk Assessment, and in February 2016, established an internal Environmental Stewardship Collaboration Core Group (Core Group) comprised of BSEE personnel. In July 2016, both Argonne and the Core Group produced final reports summarizing their findings. Both reports found that some of BSEE’s activities, such as those focused on safety oversight, were not clearly linked to environmental stewardship. Additionally, Argonne also reported that some environmental protection and stewardship activities are not described in sufficient detail in BSEE regulations, policies, and interagency agreements. Argonne recommended that BSEE clarify functions that primarily focus on safety to explicitly identify environmental protection as an aspect of safe operations. Likewise, the Core Group found that some programs’ relationships to environmental stewardship might not always be readily apparent to program staff or more broadly within BSEE.\nThe efforts were overlapping because BSEE leadership tasked both Argonne and the Core Group with the same five objectives to identify: (1) linkages and gaps in BSEE’s environmental stewardship of offshore oil and gas operations, (2) all environmental risks in offshore oil and gas operations, (3) mitigations already in place to reduce the identified environmental risks, (4) stewardship priorities for the Environmental Compliance Division; and (5) opportunities for improvement of BSEE environmental stewardship.\nHowever, the efforts were also fragmented because BSEE leadership did not effectively coordinate the execution of these efforts, which hindered information sharing between Argonne and the Core Group that could have enhanced the value of each effort’s report. Instead, both efforts were executed simultaneously with little evidence of information sharing or communication. For example, Argonne presented its work at the Core Group’s initial meeting in February 2016; however, at that time, Argonne had not yet completed the majority of its contracted tasks. BSEE officials involved in the Core Group also told us that Argonne did not contribute to the Core Group activities throughout the effort. According to BSEE officials, Argonne’s findings were added to the Core Group report by bureau leadership following the completion of the Core Group’s assessment and without discussion or assessment by Core Group team members. Similarly, some officials involved in the Core Group said that BSEE headquarters did not communicate the objectives of the Argonne effort, thereby limiting the ability of the Core Group to coordinate with Argonne to maximize its results.\nFurthermore, Argonne did not have access to bureau information and personnel that could have enhanced its efforts. Argonne’s report stated that BSEE regional experts had information and technical knowledge that could be used to review their assumptions and to identify additional industry activities for analysis. Argonne also stated that it may have over- or underestimated potential risks, and did not determine the effectiveness of BSEE’s environmental stewardship activities. In turn, Argonne recommended BSEE regional subject matter experts review its analysis regarding the assumptions used in the risk evaluation and repeat the risk characterization using parameters that regional experts determine to be more appropriate. Because Argonne was aware of the limitations of its assessments, Argonne recommended that BSEE regional experts redo and validate these assessments. In addition to its report, Argonne provided the bureau with a spreadsheet-based risk assessment tool for BSEE to use during office verification and field monitoring. However, given Argonne’s concern about the accuracy of its analysis, BSEE plans to review and verify Argonne’s work.\nIn addition to its report, the Core Group established a bureau-wide definition for environmental stewardship and BSEE leadership drafted three work plans. The work plans include one plan to promote environmental stewardship on a continuous basis, one work plan to redo Argonne’s analysis, and another to create a manual with environmental compliance standard operating procedures for several of its core functions. BSEE anticipates that this work will be ready for management review in January 2017.\nBSEE headquarters was responsible for coordinating with Argonne officials to ensure they had access to BSEE subject matter experts during the assessment, especially for the risk characterization and ranking task. Because effective coordination did not occur, the resources used to do these two simultaneous analyses were not used efficiently. BSEE’s National Environmental Compliance Policy calls for coordination within the bureau when developing national policies and procedures. When BSEE initiated these efforts, bureau policy stated that communication and coordination within the Bureau and with external stakeholders is an essential component of success for its environmental division. In April 2016, BSEE updated its national policy but maintained an emphasis on good coordination across the bureau. Specifically, the current policy states that the Environmental Compliance Division collaborates within the bureau on national efforts to develop goals and policies. Furthermore, communication is an element of good federal internal controls. Under the Standards for Internal Control in the Federal Government management should internally and externally communicate the necessary quality information to achieve the entity’s objectives. Because BSEE management tasked both environmental risk response efforts with the same objectives and did not effectively communicate information to coordinate the efforts, the efforts overlapped and ultimately delivered few results that BSEE can implement immediately. Without higher level oversight within Interior establishing a mechanism for BSEE management to obtain and incorporate input from personnel within the bureau and any external parties, such as Argonne, that can affect the bureau’s ability to achieve its objectives, BSEE’s Environmental Stewardship efforts are likely to experience continued implementation and efficacy problems.",
"Since 2013, BSEE began four strategic initiatives to improve its internal management, but their successful implementation has been hindered by limited leadership commitment and not addressing factors contributing to trust concerns. In 2013 and 2014, BSEE leadership began initiatives— development of an enterprise risk management framework and performance measures, respectively—to improve its decision making capabilities—but has not fully implemented them. By not fully implementing internal management initiatives, BSEE management demonstrates limited leadership commitment. In 2016, BSEE conducted initiatives—an employee engagement effort and an assessment of its Integrity and Professional Responsibility Advisor—to enhance communication and transparency, but these do not address key factors that contribute to long-standing trust concerns within the bureau.",
"BSEE leadership began initiatives to improve bureau internal management capabilities but has not fully implemented them. In 2013, BSEE began an initiative to develop an ERM framework but has not fully implemented it as a management tool. In 2014, BSEE began an initiative to develop performance measures for its programs but has not implemented any measures.",
"BSEE has made some progress over the past 3 years in implementing an ERM framework but has not completed the actions necessary to fully implement it. In 2013, BSEE began an initiative to develop and implement an ERM framework to provide enduring management of internal and external risks that threaten achievement of BSEE’s mission. The Office of Management and Budget defines ERM as an effective agency-wide approach to addressing the full spectrum of the organization’s risks by understanding the combined impacts of risks as an interrelated portfolio, rather than addressing risks only within silos (i.e., viewing problems in isolation). BSEE’s Fiscal Year 2016-2019 Strategic Plan identifies the integration of enterprise risk management into bureau-wide decision making as a key initiative to meet BSEE’s strategic goal to enhance decision making through the collection, management, and analysis of high-quality information. In conjunction with a contracted ERM support consultant, BSEE developed an iterative ERM cycle that includes six steps: (1) establish an ERM program, (2) identify individual risks and group them into strategic risks, (3) prioritize risks, (4) develop risk treatments, (5) implement selected risk treatments, and (6) monitor performance.\nBSEE completed the first three of these six steps in its iterative ERM cycle. BSEE officials told us that they had taken actions on the other three steps. Specifically: 1. Establish an ERM program: BSEE established an ERM charter in 2014 and drafted an ERM Handbook and Bureau Manual Chapter to guide ERM activities in April 2016 but has not finalized or distributed them throughout the bureau. 2. Identify individual risks and group them into strategic risks: In 2014, BSEE identified 12 strategic risks that cover the lifecycle of BSEE operations. 3. Prioritize risks: In 2014, the bureau prioritized its strategic risks, according to BSEE ERM planning documentation. BSEE assessed each strategic risk by evaluating the potential severity and likelihood of a failure event occurring and ranked them based on the results. 4. Develop risk treatments: BSEE planned to verify the prioritization of its top several strategic risk treatments by July 2016 but did not do so. BSEE officials told us that the bureau halted ERM implementation while it acquired automated ERM software. However, in November 2016, BSEE determined that it would reinitiate ERM implementation simultaneous to the implementation of software. BSEE now plans to complete evaluation of risk treatments in March 2017. 5. Implement selected risk treatments: BSEE planned to finalize a plan for its prioritized risk treatments by August 2016 but did not do so because of the aforementioned temporary halt to ERM implementation. BSEE officials told us that the bureau has implemented some risk treatments. BSEE now plans to finalize its risk treatment plan in March 2017. 6. Monitor performance: BSEE plans to begin monitoring the performance of its risk treatments following their implementation. BSEE intended to promulgate a monitoring plan by October 2016 but did not do so because of the aforementioned temporary halt to ERM implementation. BSEE now plans to complete its monitoring plan in March 2017.\nAs part of its ERM initiative, BSEE is assessing the risks posed by its relationships with other agencies. BSEE’s Fiscal Year 2016-2019 Strategic Plan identified reviewing the efficacy and implementation of current interagency relationships as a key initiative to support its strategic goal of maintaining productive relationships with external entities. In 2015, BSEE’s ERM support consultant assessed existing interagency relationships by prioritizing the 35 known memorandums of agreement, understanding, and collaboration based on the risk exposure they pose to the bureau. Of these 35 interagency memorandums, BSEE’s consultant determined that 11 created a significant or moderate increase in risk exposure to the bureau. For example, the consultant determined that a memorandum of understanding with BOEM to carry out assigned responsibilities under the agreement between the U.S. and Mexico concerning transboundary hydrocarbon reservoirs in the Gulf of Mexico created the greatest risk exposure to BSEE. BSEE has developed a plan to update one of these agreements but has not developed any specific plans to complete revisions for the other 10.\nIn 2016, BSEE began developing a systematic process for lifecycle management of interagency agreements and to improve the bureau’s awareness of existing agreements and their implementation status, among other things. For example, BSEE has developed four criteria for prioritizing interagency agreements in need of update. BSEE also identified additional interagency agreements not identified by the bureau’s ERM consultant. BSEE planned to assess and prioritize the risks posed by these newly discovered agreements by October 2016, but the bureau now plans to do so in March 2017. BSEE also plans to implement a bureau manual chapter and handbook that outlines a lifecycle interagency agreement management process in June 2017.",
"Since 2012, BSEE has highlighted the need to develop and implement performance measures to inform management decision making. Specifically, BSEE’s October 2012 Strategic Plan - Fiscal Years 2012- 2015 stated that the bureau must develop performance measures to assess the results of its programmatic efforts as well as its ability to reduce the risks of environmental damage and accidents. Additionally, the October 2013 Director’s Intent message—which outlined the BSEE Director’s multi-year priorities—reaffirmed this need, stating that BSEE must measure to make informed management decisions and that to do so it must set key performance targets and measures, consistent with its strategic plan, and use them to guide its actions and decisions.\nBSEE’s initiative to develop performance measures has been comprised of three sequential efforts, none of which have resulted in the implementation of performance measures. In July 2014, the bureau initiated the first of three formal efforts to develop performance measures. Specifically, BSEE contracted with a consultant to reassess its existing performance management system and update it as needed to ensure managers can make informed data-driven decisions. However, BSEE terminated the contract in January 2015 because, according to BSEE officials, leadership determined that the bureau needed to complete its ongoing internal organizational restructuring prior to developing programmatic performance measures.\nIn December 2015, BSEE began its second effort, using the same consultant under a separate contract to develop performance measures for the national programs it established during its organizational restructuring—investigations, environmental compliance, and enforcement, as well as its Integrity and Professional Responsibility Advisor (IPRA). Specifically, the contract stipulated that the consultant analyze program objectives and components, develop potential performance measures, identify data sources and data collection requirements, and coordinate with BSEE officials to establish objectives for each measure. In March 2016, the consultant delivered a report to BSEE that identified 12 performance measures—5 for investigations, 3 for environmental compliance, 2 for enforcement, and 2 for the IPRA. However, BSEE headquarters officials told us that they are not implementing the measures and plans developed by the consultant due to a variety of factors, such as data availability limitations. For example, one proposed measure included a methodology to assess the effectiveness of issuing civil penalties to operators for safety or environmental infractions as a deterrent to committing future infractions. However, BSEE headquarters officials stated that the bureau does not issue enough civil penalties to conduct such an assessment—that is, the universe of available data to assess is too small. BSEE headquarters officials told us that the bureau did not implement the consultant-developed measures, but rather that those measures are informing BSEE’s third effort to develop performance measures.\nIn 2016, BSEE initiated a third effort to develop performance measures by providing a framework for considering performance management. Specifically, in January 2016—simultaneous to the aforementioned consultant’s performance measure development effort—BSEE finalized a fiscal year 2016 work plan for the implementation of a revised performance management framework to include the identification of performance measures to help leadership gauge progress against the bureau’s strategic plan. BSEE headquarters officials told us that this initiative, which is being conducted internally by BSEE personnel, represents the beginning of a multi-year effort to implement a performance management system. BSEE initially planned to finalize its internally-developed list of performance measures in February 2016, but did not meet this deadline. Additionally, BSEE headquarters officials told us that in June 2016, the bureau narrowed the scope of the initiative from a comprehensive set of performance measures to no more than three performances measures per program. These officials explained that this was a more feasible scope given the difficulties in obtaining management commitment as well as the technical complexity of the initiative. As of August 2016, BSEE had developed 17 draft performance measures, but bureau leadership has repeatedly missed deadlines to review them. BSEE headquarters officials told us that, subsequent to leadership approval, the bureau plans to pilot these measures and develop others in upcoming years. In December 2016, BSEE completed a fiscal year 2016 Baseline Performance Measure Report that discusses these 17 measures and the bureau’s plans for future iterations of their development.",
"We have previously reported on BSEE’s struggles to effectively implement internal management initiatives. Specifically, in February 2016, we found that since its inception in 2011, BSEE had made limited progress in enhancing the bureau’s investigative, environmental compliance, and enforcement capabilities. More than 2 years into its restructuring effort—and more than 5 years after the Deepwater Horizon incident—the bureau had not completed the underlying policies and procedures to facilitate the implementation of its national programs for these three capabilities. Moreover, we found that BSEE continues to face deficiencies in each of these capabilities that undermine its ability to effectively oversee offshore oil and gas development. As a result, among other things, we recommended that Interior direct BSEE to complete the policies and procedures for these three capabilities. Interior agreed that additional reforms—such as documented policies and procedures—are needed to address offshore oil and gas oversight deficiencies, but Interior neither agreed nor disagreed with our recommendation.\nLikewise, with regard to its ongoing strategic initiatives, more than 3 years have passed since BSEE initiated the development of its ERM framework, and more than 2 years have passed since BSEE prioritized the strategic risks it faces. However, BSEE has yet to develop, implement, and monitor risk treatments to even the highest priority risks. Moreover, more than 4 years have passed since BSEE identified the development and implementation of performance measures as an organizational need. In that time, BSEE initiated several efforts to develop and implement such measures, and although BSEE has developed measures, it has yet to fully implement any.\nIn our 2013 High-Risk update, because progress had been made in one of the three segments we identified in Interior’s Management of Federal Oil and Gas Resources on our 2011 High-Risk List—reorganization of its oversight of offshore oil and gas activities—we narrowed the scope of the high-risk area to focus on the remaining two segments (revenue collection and human capital). One of our five criteria for assessing whether an area can be removed from our high-risk list is leadership commitment— that is, demonstrated strong commitment and top leadership support. An example of leadership commitment is continuing oversight and accountability. In our 2015 High-Risk update, we determined that Interior had met our criteria for leadership commitment because Interior had implemented a number of strategies and corrective measures to help ensure the department collects its share of revenue from oil and gas produced on federal lands and waters and was developing a comprehensive approach to address its ongoing human capital challenges. However, BSEE leadership has not demonstrated continuing oversight and accountability for implementing internal management initiatives, as evidenced by its limited progress implementing key strategic initiatives as well as its inability to address long-standing oversight deficiencies. BSEE leadership has consistently stated that it prioritized internal management initiatives by citing their importance in strategic plans and budget justifications. For example, BSEE’s fiscal year 2017 budget justification states that three key initiatives will inform the implementation of the bureau’s Fiscal Year 2016-2019 Strategic Plan: (1) refinement of a comprehensive set of output and outcome based performance measures; (2) implementation of an ERM framework to facilitate information sharing and identify the risk relationships among and within programs; and (3) implementation of its national program manager model to ensure consistency across regions. According to the budget justification, these initiatives support both effective decision making and assessment of BSEE’s progress in meeting its priorities. However, BSEE leadership has not fully implemented actions to demonstrate the commitment necessary to enable the successful implementation of such initiatives. Without higher-level oversight within Interior addressing leadership commitment deficiencies within BSEE—including by implementing internal management initiatives and ongoing strategic initiatives (e.g., ERM and performance measure initiatives)—in a timely manner, the bureau is unlikely to succeed in implementing internal management initiatives, including its key strategic initiatives for ERM and performance measures, in a timely manner.",
"In 2016, BSEE conducted two initiatives—one on employee engagement and an assessment of its IPRA—to enhance communication and transparency, but these initiatives have not achieved results or addressed factors that contribute to trust concerns within the bureau.",
"BSEE’s Fiscal Year 2016-2019 Strategic Plan discusses improving employee engagement—generally defined as the sense of purpose and commitment employees feel toward their employer and its mission—to foster a culture of collaboration within BSEE by, among other things, enhancing trust and implementing an internal communications approach that encourages dialogue and sets expectations for sharing accurate and timely information. A 2015 bureau strategic planning summary document stated that there is a lack of trust and respect between and among headquarters, regions, and the districts. Additionally, a 2013 BSEE internal evaluation found that some outside the bureau commented that BSEE does not appear to trust its own personnel. We have previously found that communication from management—as reflected by employee responses in the Federal Employee Viewpoint Survey—is one of the six strongest drivers of employee engagement. BSEE Federal Employee Viewpoint Survey data for 2013, 2014, and 2015 indicate that approximately one-third of BSEE respondents were not satisfied with information received from management regarding organizational activities (32.9, 31.1, and 32.9 percent, respectively). Likewise, less than half were satisfied with information received from management regarding organizational activities (41.7, 46.1, and 43.7 percent, respectively).\nAccording to some BSEE officials from across the bureau, the need to improve trust and communication are interconnected. Some senior BSEE officials throughout the organization told us that poor communication from headquarters has exacerbated trust issues between headquarters and the regions (including districts) that have existed since the 2010 Deepwater Horizon incident. As previously discussed, BSEE leadership’s safety and environmental stewardship initiatives have had limited success, largely due to poor communication and coordination between headquarters and the regions. BSEE officials from across the bureau told us that the poor communication between headquarters and the regions led to a deficit of trust vertically throughout the bureau. They also told us that because BSEE headquarters was newly established as part of the reorganization of MMS in 2010 following the Deepwater Horizon incident, there were not many existing relationships between headquarters and regional personnel. BSEE regional officials told us of specific examples in which BSEE headquarters did not communicate certain information to the regions, which has exacerbated the existing trust concerns, including the following examples:\nBSEE leadership reorganized its Pacific region with a structure that does not align directly with the bureau’s national program manager model and did not communicate the reasons why. One of the guiding principles of BSEE’s organizational restructuring was consistency, but limited communication regarding BSEE’s reorganization of its regions led some to believe that BSEE headquarters was not abiding by this principle. According to senior BSEE officials, the bureau restructured the Pacific Region—which includes 42 permanent full time equivalent positions—due to management problems with some personnel. They told us that to maintain an appearance of impartiality during the reorganization of the Pacific Region, BSEE contracted with a consultant to recommend a new organizational structure. In turn, the consultant recommended changes to address a lack of leadership and ineffective communication in the region, which BSEE officials told us influenced the new regional structure. However, this new structure does not include offices that correspond to the new national programs established during BSEE’s organizational restructuring— investigations, environmental compliance, and enforcement. BSEE leadership officials told us that the small relative size of the Pacific Region necessitated a unique structure. Conversely, the Gulf of Mexico region—an organization more than 10 times as large, with 454 full time equivalent positions—was restructured internally by BSEE personnel without relying on a consultant. Additionally, the Gulf of Mexico Region’s revised organizational structure aligns with the national program manager model implemented at BSEE headquarters (i.e., it has offices dedicated to the new national programs— investigations, environmental compliance, and enforcement). Some BSEE officials told us that they were unaware of leadership’s rationale for the differences in office structures because it was not communicated across the bureau. In turn, this lack of communication from headquarters led to confusion because regional personnel viewed it as inconsistent with the Director’s Intent for the restructuring, which contributed to trust concerns.\nBSEE headquarters did not notify the Gulf of Mexico Region when it advertised for two field-based positions located in the region to manage its SEMS program. According to BSEE regional officials, these positions would replicate functions that already existed in the Gulf of Mexico Region’s Office of Safety Management. Further, the reporting chain of these positions did not align with other actions taken during organizational restructuring, which emphasized consistency across the bureau. Specifically, these field-based positions would report to headquarters rather than regional leadership even though the Gulf of Mexico Region recently had undergone a restructuring to ensure that regional program offices report to regional leadership rather than headquarters. As a result, BSEE regional officials told us that headquarters’ actions to create new positions that would affect the region without notifying it contributed to the trust concerns of regional personnel.\nBSEE headquarters did not disseminate the final 2016 Environmental Stewardship Collaboration Core Group report to all group members, including representatives from the Office of Environmental Compliance, which is BSEE’s primary organization for conducting environmentally-focused oversight. As a result, BSEE operational personnel who could potentially benefit from the results of the working group were not advised of its final findings.\nIn February 2016, BSEE announced an initiative to assess internal communications and develop an employee engagement strategy. The data collection plan for this employee engagement initiative focused on conducting outreach across the bureau to identify the means by which BSEE personnel prefer to receive information—for example, town hall meetings, BSEE’s website, or e-mail. BSEE conducted this outreach but as of November 2016 had not developed an employee engagement strategy—although its original target completion date was April 2016— and it is unclear when it will do so. In September 2016, BSEE decided to conduct a second round of outreach across the organization by spring 2017 to review feedback from the initial outreach, discuss next steps, and provide guidance on existing communications resources. Additionally, based on its initial outreach efforts, BSEE identified numerous interim projects to undertake while it develops its employee engagement strategy: redesigning the bureau’s intranet website, updating its online employee directory, briefing employees on employee engagement project findings, training on BSEE’s e-mail system, building staff interaction, and streamlining its staff onboarding process. However, BSEE headquarters officials told us that the bureau has not identified a plan with time frames for completion of these efforts.\nBSEE employee engagement initiative documentation identifies the need to enhance communication vertically and horizontally across the bureau, but it is unclear whether its employee engagement initiative will address the lack of quality information that BSEE officials told us undermines trust across the organization or set expectations for sharing accurate and timely information as called for by BSEE’s Fiscal Year 2016-2019 Strategic Plan. Under Standards for Internal Control in the Federal Government, management should internally communicate the necessary quality information to achieve the entity’s objectives. For example, management communicates such quality information down, across, up, and around reporting lines to all levels of the entity. However, it is unclear whether BSEE’s employee engagement initiative will do so because the scope of the effort has focused on means of communication rather than quality of information. Without expanding the scope of its employee engagement initiative to incorporate the need to communicate quality information throughout the bureau, BSEE’s employee engagement initiative might not address the lack of quality information being communicated throughout the bureau that is exacerbating trust concerns.",
"The bureau’s IPRA is responsible for promptly and credibly responding to allegations or evidence of misconduct and unethical behavior by BSEE employees and coordinating its activities with other entities, such as the IG. Senior BSEE officials from across the bureau stated that the IPRA function is critical to bolstering trust within the bureau because personnel need to have a functioning mechanism to which they can report potential misconduct by other employees. However, some BSEE officials from across the bureau expressed concern regarding the IPRA’s process for adjudicating allegations of misconduct. To increase transparency and consistency in how IPRA cases are handled following the completion of an investigation report, BSEE conducted a pilot initiative in 2016 to assess the types of allegations of misconduct being reported to the IPRA as well as the frequency with which the IPRA referred such allegations to other entities. In August 2016, BSEE determined that the majority of incoming allegations are being directed to the appropriate office for action.\nHowever, BSEE’s pilot initiative did not address unclear and conflicting guidance that could undermine organizational trust in how the IPRA addresses allegations of misconduct. Specifically, the Interior Department Manual states that IPRA responsibilities include working with the IG on internal matters the IPRA investigates, pursuing certain administrative investigations with the IG’s consent and knowledge, and advising the IG of the status and results of IPRA investigations, as requested. Additionally, IPRA guidance stipulates that once an allegation is received, the IPRA Board—composed of the IPRA, the head of Human Resources, and the Deputy Director—will assess whether the allegation should be referred to the IG or other appropriate entity, investigated by the IPRA, or closed for no further action. Further, the IPRA told us that the IG has first right of refusal to investigate all allegations of misconduct within the bureau. However, the Interior Department Manual and IPRA guidance do not specify criteria for the severity thresholds for allegations that are to be referred to the IG. As a result, the boundaries of IPRA responsibility are unclear.\nAdditionally, BSEE’s pilot initiative did not address IPRA guidance that conflicts with the reporting chain established by the Interior Department Manual and BSEE’s organization chart. Specifically, the Interior Department Manual and BSEE’s organization chart indicate that the IPRA reports to the BSEE Director. However, IPRA guidance also states that, for cases that are not accepted by the IG, an IPRA Board composed of the IPRA, the head of Human Resources, and the Deputy Director will assess whether the allegation should be referred, investigated by the IPRA, or closed for no further action. BSEE officials told us that, in practice, the IPRA makes determinations as stipulated by the IPRA guidance. In turn, this reporting structure—in which the IPRA Board determines how to proceed without consultation with the Director—does not align with the Interior Department Manual and BSEE organization chart. Some BSEE regional officials told us that the uncertainty of how the IPRA reports allegations to the IG as well as its reporting structure led them to question the independence of IPRA activities and expressed concern that the IPRA could be used to retaliate against employees, which has undermined organizational trust in its activities.\nUnder the federal standards of internal control, management should design control activities to achieve objectives and respond to risks. For example, agencies are to clearly document internal controls, and the documentation may appear in management directives, administrative policies, or operating manuals. While BSEE has documented its policies, they are not clear, because (1) neither the IPRA guidance nor the Interior Department Manual specifies criteria for the severity thresholds for allegations that are to be referred to the IG and (2) the IPRA guidance does not align with the Interior Department Manual and BSEE organization chart concerning the IPRA reporting chain. Moreover, BSEE’s IPRA pilot initiative did not address the unclear and conflicting guidance regarding IPRA’s referral criteria and reporting chain, respectively. Without assessing and amending its IPRA guidance to clarify (1) the severity threshold criteria for referring allegations and (2) the IPRA reporting chain, BSEE risks further eroding organizational trust in the IPRA to carry out its mission to promptly and credibly respond to allegations or evidence of misconduct by BSEE employees.",
"Since 2012, BSEE has begun several key strategic initiatives to improve its safety and environmental oversight. However, the bureau has made limited progress in implementing them. For example, BSEE’s Environmental Stewardship Initiative encompassed two simultaneous efforts to reduce environmental risks related to U.S. offshore oil and gas operations, but the efforts were partially overlapping, had ineffective coordination and communication, and produced few results. Without establishing a mechanism for BSEE management to obtain and incorporate input from bureau personnel and any external parties, such as Argonne, that can affect the bureau’s ability to achieve its objectives, BSEE’s risk-based inspection program is likely to experience continued delays and implementation problems. Likewise, since 2013 BSEE has begun several strategic initiatives to improve its internal management but has made limited progress in implementing them. Without a higher-level organization within Interior addressing leadership commitment deficiencies within BSEE, including by implementing internal management initiatives and ongoing strategic initiatives (e.g., ERM and performance measure initiatives) in a timely manner, the bureau is unlikely to succeed in implementing internal management initiatives, including its key strategic initiatives for ERM and performance measures, in a timely manner. Additionally, BSEE documentation identifies the need to enhance communication vertically and horizontally across the bureau, but it is unclear whether the bureau’s employee engagement initiative will address the lack of quality information that BSEE officials told us undermines trust across the organization or set expectations for sharing accurate and timely information as called for by BSEE’s Fiscal Year 2016- 2019 Strategic Plan. Without expanding the scope of its employee engagement strategy to incorporate the need to communicate quality information throughout the bureau, BSEE’s employee engagement initiative might not address the lack of quality information being communicated throughout the bureau that is exacerbating trust concerns. Further, BSEE’s IPRA pilot initiative did not address unclear and conflicting guidance that could undermine organizational trust in how the IPRA addresses allegations of misconduct. Without assessing and amending IPRA guidance to clarify (1) severity threshold criteria for referring allegations of misconduct to the IG and (2) its reporting chain, BSEE risks further eroding organizational trust in the IPRA to carry out its mission to promptly and credibly respond to allegations or evidence of misconduct by BSEE employees.",
"In this report, we are making four recommendations. We recommend that the Secretary of the Interior direct the Assistant Secretary for Land and Minerals Management, who oversees BSEE, take the following two actions:\nEstablish a mechanism for BSEE management to obtain and incorporate input from bureau personnel and any external parties, such as Argonne, that can affect the bureau’s ability to achieve its objectives.\nAddress leadership commitment deficiencies within BSEE, including by implementing internal management initiatives and ongoing strategic initiatives (e.g., ERM and performance measure initiatives) in a timely manner.\nWe also recommend that the Secretary of the Interior direct the BSEE Director take the following two actions:\nTo address trust concerns that exist between headquarters and the field, BSEE should expand the scope of its employee engagement strategy to incorporate the need to communicate quality information throughout the bureau.\nTo increase organizational trust in IPRA activities, BSEE should assess and amend IPRA guidance to clarify (1) severity threshold criteria for referring allegations of misconduct to the IG and (2) its reporting chain.",
"We provided a draft of this report to the Department of the Interior for review and comment. In its written comments, reproduced in appendix I, Interior neither agreed nor disagreed with our four recommendations. Interior stated that the recommendations reflect ongoing BSEE commitments and that BSEE and Interior agree with the concepts laid out in the first three recommendations. For the fourth recommendation, Interior stated that BSEE will examine the current guidance for the Integrity and Professional Responsibility Advisor. However, Interior also stated that the draft report neither fully describes the progress made within BSEE nor fully represents the current status of the programs, initiatives, and activities highlighted therein. Interior requested that we consider information that it stated provides status updates and corrections, while also laying out in more detail BSEE's continuing commitments in these areas. Interior also enclosed additional documentation. We reviewed the additional information and documentation that Interior provided and found no evidence to support the revision of any of our findings. In turn, we disagree with Interior’s characterization of the progress that BSEE has made and believe that actions to implement our recommendations are necessary. Specifically:\nRegarding our recommendation that Interior develop a mechanism for BSEE management to obtain and incorporate input from bureau personnel and any external parties that can affect the bureau’s ability to achieve its objectives, Interior’s comments do not discuss any specific actions taken or underway to do so. Additionally, in its comments, Interior stated that regional personnel, such as regional managers and district managers, were involved throughout the development of the risk model and the pilot testing. To support this statement, Interior provided documentation of electronic communications from BSEE headquarters to senior regional leadership informing them of certain aspects of the program and meeting documents showing that certain regional officials attended meetings regarding program development. However, instead of demonstrating that regional managers were involved in the development of the model and methodology, this documentation demonstrates that regional officials raised concerns about the model and methodology but that headquarters officials said they would not make any changes in response to these concerns. Specifically, Interior provided e-mails that indicate headquarters informed regional officials of the development of the model through the Strategic Plan Implementation Team in late 2012. However, e-mails from early 2015 indicate that regional officials were not involved in the development of the risk model or risk-based inspection program methodology in the intervening more than 2 years, because they had to request information from headquarters about the underlying basis of the model and the methodology that they were being asked to comment on. After regional officials reviewed the methodology and the model, they e-mailed headquarters and raised concerns with the model. Headquarters officials replied that they validated the model and that changing the parameters of the model would decrease its effectiveness. Therefore, the e-mails that Interior provided support what regional personnel told us—that their input was not incorporated into the model and methodology prior to the first pilot. We found that regional personnel became more involved in the risk-based inspection initiative after the first pilot exposed deficiencies in headquarters’ approach. In its comments, Interior disagreed with our assessment of pilot test deficiencies and stated that BSEE expected to encounter issues while pilot testing. However, we believe that some of those issues may have been averted had BSEE included the input of regional officials earlier in the process. As described throughout the report across multiple initiatives, we have concerns about the fundamental working relationship between the region and headquarters, which are substantiated by the e-mails that Interior provided in response to our draft report. In turn, we continue to believe that Interior should develop a mechanism for BSEE management to obtain and incorporate input from bureau personnel and any external parties that can affect the bureau’s ability to achieve its objectives in the next risk-based inspection pilot test, which will be conducted by a joint headquarters-regional team in March 2017. However, as we discussed in the report, the first pilot had deficiencies in identifying high-risk offshore facilities, so the extent to which BSEE will be able to apply lessons learned is uncertain.\nRegarding our recommendation that Interior address leadership commitment deficiencies within BSEE, including implementing internal management initiatives (e.g., ERM and performance measure initiatives) in a timely manner, Interior’s comments do not discuss any specific actions taken to meet the intent of our recommendation. Interior states that BSEE's implementation of ERM is on target and that BSEE has an established ERM framework, completed its risk register, has a fully developed maturity model, has aligned enterprise and strategic risks with its strategic plan and has linked program risks with appropriate strategic risk categories, in addition to other activities. Interior also stated that BSEE is on schedule to complete its first full ERM cycle in March 2017. Additionally, Interior states that ERM is a relatively new program directed by a fall 2016 Office of Management and Budget Circular regarding ERM. However, while Circular No. A- 123 was revised in July 2016 with new ERM implementation requirements effective for fiscal year 2017, Interior’s statement is misleading because BSEE’s efforts have been ongoing since 2013. Additionally, Interior provided clarifications but does not dispute our findings on its efforts to develop performance measures. Specifically, Interior states that the November 2016 completion of a fiscal year 2016 Baseline Performance Measure Report represented the first step of implementation of BSEE’s performance measure program and that the bureau anticipates having an initial performance dashboard in fiscal year 2018. By considering November 2016 as the first step toward a performance measures program, Interior appears to disregard BSEE’s efforts over the prior 4 years. If BSEE succeeds in fiscal year 2018, this will be the culmination of 6 years of attempting to develop performance measures to inform management decision making. Therefore, we continue to believe that Interior should address leadership commitment deficiencies within BSEE, including by implementing internal management initiatives, such as ERM and performance measures, in a timely manner rather than revising initiative start dates.\nRegarding our recommendation that BSEE expand the scope of its employee engagement strategy to incorporate the need to communicate quality information throughout the bureau, Interior stated that BSEE is committed to enhancing communication and collaboration among its personnel and agrees with the importance strengthening communication between headquarters and the regions. Interior asserts that, since receiving our draft report, BSEE has completed assessment and analysis of employee feedback, and developed an engagement plan. However, Interior did not provide documentary evidence of this plan or what it entails. Moreover, in our report we identified a long history of poor communication between headquarters and regional officials, leading to a widespread lack of trust across the bureau. Without providing evidence of BSEE’s activities—and in light of the bureau’s documented struggles to effectively implement organizational change—we cannot confirm that any action has been taken and continue to believe that BSEE should expand the scope of its employee engagement strategy to incorporate the need to communicate quality information throughout the bureau.\nRegarding our recommendation that BSEE assess and amend IPRA guidance to clarify (1) severity threshold criteria for referring allegations of misconduct to the IG and (2) its reporting chain, Interior stated that the creation of the IPRA directly impacts trust concerns within BSEE and that the bureau will examine current guidance for the IPRA. However, Interior stated that contrary to our draft report, the Interior Department Manual already includes severity threshold criteria for referring allegations of misconduct to the IG. We believe that the language in the Interior Department Manual, which states that “serious allegations” and “serious complaints” should be referred to the IG, does not provide the specificity needed to adequately define the boundaries of IPRA responsibility. Additionally, Interior stated that the IPRA reports to the BSEE Director, consistent with the reporting chain established in the bureau’s organizational chart and the Interior Department Manual. However, the BSEE Director told us that, in practice, the IPRA often reports to the BSEE Deputy Director rather than the Director. Moreover, our work found that the decision making process of the IPRA Board—whereby the IPRA Board determines how to respond to an investigation without consultation with the Director—does not align with the IPRA’s prescribed reporting chain. As a result, we continue to believe that BSEE should assess and amend IPRA guidance to clarify (1) severity threshold criteria for referring allegations of misconduct to the IG and (2) its reporting chain.\nInterior’s comments on our draft report underscore our concerns regarding deficiencies in BSEE leadership commitment and support the decision to incorporate the restructuring of offshore oil and gas oversight into our High-Risk List in February 2017. Specifically: In its comments, Interior highlighted BSEE’s decision to contract with NAPA to evaluate the bureau—at a cost of approximately $450,000— as an example of the bureau’s commitment to maturing the organization. However, the timing, scope, and methodology cause us to question its value. Specifically, BSEE issued the contract five months after we began our review, and its scope—which includes identifying BSEE strategic and organizational initiatives and assessing their progress—mirrors our work already underway. Further, the contract stipulates that all work “shall be developed in a collaborative manner with BSEE leadership, but with a focus on document review rather than in-depth interviews with bureau personnel.” This calls into question the independence of the NAPA evaluation. Additionally, when we met with the NAPA team, they indicated that their instructions were to focus on BSEE headquarters and not conduct outreach to the bureau’s operational components in the regions. In our experience working with BSEE, we have found extensive outreach to the field to be essential to understanding the operations of the bureau. As a cumulative result of these factors, it is uncertain whether BSEE’s decision to engage in this evaluation will produce the organizational improvement advertised by Interior.\nInterior’s written comments contain factual errors that are contradicted by the evidence we collected in our work, further heightening our concerns regarding BSEE leadership’s commitment to taking the steps needed to improve the bureau. For example, Interior states that environmental risk was not a consideration in the Core Group objectives or final report. However, the Core Group’s final report states that the purpose of the report was “to assist in determining current and emerging environmental risks and whether BSEE has the best mitigation strategies in place.” Likewise, Interior states that BSEE’s Environmental Stewardship Collaboration Core Group and Argonne Environmental Risk Assessment were not simultaneous efforts. On the contrary, according to its final report, the Core Group convened from February 2016 to May 2016. The Statement of Work for the Argonne environmental risk assessment contract was issued in December 2015, and Argonne delivered its final report in July 2016.\nInterior also provided technical comments that we incorporated into the report, as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of the Interior, and other interested parties. In addition, the report is available at no charge on the GAO website at http://gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II.",
"",
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"In addition to the individual named above, Christine Kehr, Assistant Director; Richard Burkard; Cindy Gilbert; Alison O’Neill; Matthew D. Tabbert; Barbara Timmerman; Kiki Theodoropoulos; and Daniel R. Will made significant contributions to this report."
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"question": [
"What happened to the Deepwater Horizon drilling rig?",
"How did the incident affect the Interior's oversight?",
"How did Interior respond to this crisis?",
"How did GAO react to the crisis?",
"How did BSEE propose improving offshore safety?"
],
"summary": [
"On April 20, 2010, the Deepwater Horizon drilling rig exploded in the Gulf of Mexico.",
"The incident raised questions about Interior's oversight of offshore oil and gas activities.",
"In response, in May 2010, Interior reorganized its offshore oil and gas management activities, and in October 2011, created BSEE to among other things, develop regulations, conduct inspections, and take enforcement actions.",
"In February 2011, GAO added the management of federal oil and gas resources to its High-Risk List.",
"In December 2015, BSEE issued a strategic plan outlining initiatives to improve offshore safety and environmental oversight as well as its internal management."
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CRS_R43898
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{
"title": [
"",
"Introduction",
"Recent Legislative Action",
"The Concept of \"Tax Extenders\"",
"Evaluating Expiring Tax Provisions",
"Reasons for Temporary Tax Provisions",
"Extenders as Tax Benefits18",
"Economic Efficiency",
"Equity",
"Simplicity",
"Tax Provisions that Expired in 2014",
"Individual22",
"Business26",
"Charitable34",
"Energy37",
"The Cost of Extending Expired and Expiring Tax Provisions",
"Cost of Extensions Enacted in P.L. 114-113",
"Previous Cost Estimates for Temporary and Permanent Extensions",
"Cost of Temporary Extension",
"Cost of Permanent Extension",
"Recent \"Tax Extenders\" Legislation and Proposals",
"114th Congress",
"113th Congress",
"Tax Provisions that Expired in 2013 that Were Not Extended by P.L. 113-295"
],
"paragraphs": [
"",
"There are dozens of temporary tax provisions in the Internal Revenue Code (IRC), many of which had expired at the end of 2014. Recent legislation has extended certain expiring provisions, and, in some cases, made temporary provisions permanent. The American Taxpayer Relief Act (ATRA; P.L. 112-240 ), signed into law on January 2, 2013, reduced tax policy uncertainty by permanently extending most of the tax cuts first enacted in 2001 and 2003 and permanently indexing the alternative minimum tax (AMT) for inflation. ATRA, however, did not eliminate uncertainty in the tax code. Under ATRA, a number of provisions that had been allowed to expire at the end of 2011 or 2012 were temporarily extended through 2013. Most of the provisions that expired at the end of 2013 were retroactively extended for one year, through 2014, in the Tax Increase Prevention Act of 2014 ( P.L. 113-295 ). The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), signed into law on December 18, 2015, either made permanent or temporarily extended all tax provisions that had expired at the end of 2014.\nCollectively, temporary tax provisions that are regularly extended by Congress rather than being allowed to expire as scheduled are often referred to as \"tax extenders.\" Many of these \"tax extender\" provisions have been temporarily extended multiple times. The research tax credit, for example, was extended 16 times since being enacted in 1981, before being modified and made permanent in P.L. 114-113 . Most of the temporary tax provisions that had expired at the end of 2014 were previously extended more than once.\nIn the 114 th Congress, much of the debate on tax extenders focused on whether expired tax provisions should be made permanent, or temporarily extended. In P.L. 114-113 , all expired tax provisions were extended, either temporarily or by being made permanent. Making a number of expired provisions permanent reduced uncertainty in the tax code, by reducing the number of temporary provisions scheduled to expire. However, as not all expired provisions were made permanent, there are still a number of tax extenders set to expire at the end of 2016. Debate in the second half of the 114 th Congress may address whether the provisions set to expire at the end of 2016 should be extended.\nThis report provides a broad overview of the tax extenders. Additional information on specific extender provisions may be found in other CRS reports, including the following:\nCRS Report R43510, Selected Recently Expired Business Tax Provisions (\"Tax Extenders\") , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]; CRS Report R43688, Selected Recently Expired Individual Tax Provisions (\"Tax Extenders\"): In Brief , by [author name scrubbed] and [author name scrubbed]; CRS Report R43517, Recently Expired Charitable Tax Provisions (\"Tax Extenders\"): In Brief , by [author name scrubbed] and [author name scrubbed]; CRS Report R43541, Recently Expired Community Assistance-Related Tax Provisions (\"Tax Extenders\"): In Brief , by [author name scrubbed]; and CRS Report R43449, Recently Expired Housing Related Tax Provisions (\"Tax Extenders\"): In Brief , by [author name scrubbed].",
"The Consolidated Omnibus Appropriations Act, 2016 ( P.L. 114-113 ) contained, as Division Q, the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). The PATH Act either temporarily extended or made permanent all tax provisions that had expired at the end of 2014. Further, the PATH Act also made permanent the enhanced child tax credit, the enhanced American Opportunity Tax Credit, and the enhanced earned income tax credit, which were scheduled to expire in 2017. The PATH Act also included a two-year moratorium on the medical device excise tax. Division P of P.L. 114-113 also contained tax-related provisions, including changes to and a two-year moratorium on the high-cost employer-sponsored health coverage excise tax, a one-year moratorium on the annual fee on health insurance providers, extensions of tax credits for wind renewable power facilities and solar energy, and changes to the Section 199 deduction for independent oil refineries.\nThe Tax Increase Prevention Act of 2014, passed late in the 113 th Congress, extended expiring tax provisions for one year, retroactively through 2014. Other legislation considered in the 113 th Congress proposed a two-year extension—the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act ( S. 2260 ). Legislation was also considered that would have made certain expiring provisions permanent—see, for example, the Jobs for America Act ( H.R. 4 ) and the America Gives More Act of 2014 ( H.R. 4719 ). Tax reform legislation introduced in the 113 th Congress, the Tax Reform Act of 2014 ( H.R. 1 ), proposed to make permanent certain provisions that are currently part of the tax extenders, including the research and experimentation (R&D) tax credit and increased expensing allowances for certain businesses allowed under Internal Revenue Code (IRC) Section 179. In the 114 th Congress, the House had passed legislation that would permanently extend certain expired provisions (America's Small Business Tax Relief Act of 2015 [ H.R. 636 ], State and Local Sales Tax Deduction Fairness Act of 2015 [ H.R. 622 ], America Gives More Act of 2015 [ H.R. 644 ], and American Research and Competitiveness Act of 2015 [ H.R. 880 ]).\nThe Tax Relief Extension Act of 2015 ( S. 1946 ), as reported by the Senate Committee on Finance, would have extended the temporary provisions that expired at the end of 2014 for two years, making the provisions available for the 2015 and 2016 tax year. S. 1946 would have extended all temporary tax provisions that expired at the end of 2014, as well as one provision that expired at the end of 2013.",
"The tax code presently contains dozens of temporary tax provisions. In the past, legislation to extend some set of these expiring provisions has been referred to by some as the \"tax extender\" package. While there is no formal definition of a \"tax extender,\" the term has regularly been used to refer to the package of expiring tax provisions temporarily extended by Congress. Oftentimes, these expiring provisions are temporarily extended for a short period of time (e.g., one or two years). Over time, as new temporary provisions have been routinely extended and hence added to this package, the number of provisions that might be considered \"tax extenders\" has grown.",
"There are various reasons Congress may choose to enact temporary (as opposed to permanent) tax provisions. Enacting provisions on a temporary basis, in theory, would provide Congress with an opportunity to evaluate the effectiveness of specific provisions before providing further extension. Temporary tax provisions may also be used to provide relief during times of economic weakness or following a natural disaster. Congress may also choose to enact temporary provisions for budgetary reasons. Examining the reason why a certain provision is temporary rather than permanent may be part of evaluating whether a provision should be extended.",
"There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis may provide an opportunity to evaluate effectiveness before expiration or extension. However, this rationale for enacting temporary tax provisions is undermined if expiring provisions are regularly extended without systematic review, as is the case in practice. In 2012 testimony before the Senate Committee on Finance, Dr. Rosanne Altshuler noted that\nan expiration date can be seen as a mechanism to force policymakers to consider the costs and benefits of the special tax treatment and possible changes to increase the effectiveness of the policy. This reasoning is compelling in theory, but has been an absolute failure in practice as no real systematic review ever occurs. Instead of subjecting each provision to careful analysis of whether its benefits outweigh its costs, the extenders are traditionally considered and passed in their entirety as a package of unrelated temporary tax benefits.\nWhile most expiring tax provisions have been extended in recent years, there have been some exceptions. For example, tax incentives for alcohol fuels (e.g., ethanol), which can be traced back to policies first enacted in 1978, were not extended beyond 2011. The Government Accountability Office (GAO) had previously found that with the renewable fuel standard (RFS) mandate, tax credits for ethanol were duplicative and did not increase consumption. Congress may choose not to extend certain provisions if an evaluation determines that the benefits provided by the provision do not exceed the cost (in terms of foregone tax revenue).\nTax policy may also be used to address temporary circumstances in the form of economic stimulus or disaster relief. Economic stimulus measures might include bonus depreciation or generous expensing allowances. Disaster relief policies might include enhanced casualty loss deductions or additional net operating loss carrybacks. Other recent examples of temporary provisions that have been enacted to address special economic circumstances include the exclusion of mortgage forgiveness from taxable income during the recent housing crisis, the payroll tax cut, and the grants in lieu of tax credits to compensate for weak tax-equity markets during the economic downturn (the Section 1603 grants). It has been argued that provisions that were enacted to address a temporary situation should be allowed to expire once the situation is resolved.\nCongress may also choose to enact tax policies on a temporary basis for budgetary reasons. If policymakers decide that legislation that reduces revenues must be paid for, it is easier to find resources to offset short-term extensions rather than long-term or permanent extensions. Additionally, by definition the Congressional Budget Office (CBO) assumes under the current law baseline that temporary tax cuts expire as scheduled. Thus, the current law baseline does not assume that temporary tax provisions are regularly extended. Hence, if temporary expiring tax provisions are routinely extended in practice, the CBO current law baseline would tend to overstate projected revenues, making the long-term revenue outlook stronger. In other words, by making tax provisions temporary rather than permanent, these provisions have a smaller effect on the long-term fiscal outlook.",
"Temporary tax benefits are a form of federal subsidy that treats eligible activities favorably compared to others, and channels economic resources into qualified uses. Extenders influence how economic actors behave and how the economy's resources are employed. Like all tax benefits, extenders can be evaluated by looking at the impact on economic efficiency, equity, and simplicity. Temporary tax provisions may be efficient and effective in accomplishing their intended purpose, though not equitable. Alternatively, an extender may be equitable but not efficient. Policymakers may have to choose the economic objectives that matter most.",
"Extenders often provide subsidies to encourage more of an activity than would otherwise be undertaken. According to economic theory, in most cases an economy best satisfies the wants and needs of its participants if markets allocate resources free of distortions from taxes and other factors. Market failures, however, may occur in some instances, and economic efficiency may actually be improved by tax distortions. Thus, the ability of extenders to improve economic welfare depends in part on whether or not the extender is remedying a market failure. According to theory, a tax extender reduces economic efficiency if it is not addressing a specific market failure.\nAn extender is also considered relatively effective if it stimulates the desired activity better than a direct subsidy. Direct spending programs, however, can often be more successful at targeting resources than indirect subsidies made through the tax system such as tax extenders.",
"A tax is considered to be fair when it contributes to a socially desirable distribution of the tax burden. Tax benefits such as the extenders can result in individuals with similar incomes and expenses paying differing amounts of tax, depending on whether they engage in tax-subsidized activities. This differential treatment is a deviation from the standard of horizontal equity, which requires that people in equal positions should be treated equally.\nAnother component of fairness in taxation is vertical equity, which requires that tax burdens be distributed fairly among people with different abilities to pay. Most extenders are considered inequitable because they benefit those who have a greater ability to pay taxes. Those individuals with relatively less income and thus a reduced ability to pay taxes may not have the same opportunity to benefit from extenders as those with higher income. The disproportionate benefit of tax expenditures to individuals with higher incomes reduces the progressivity of the tax system, which is often viewed as a reduction in equity.\nAn example of the effect a tax benefit can have on vertical equity is illustrated by two teachers who have both incurred $250 in classroom-related expenses and are eligible to claim the above-the-line deduction for expenses. Yet the tax benefit to the two differs if they are in different tax brackets. A teacher with lower income, who may be in the 15% income tax bracket, receives a deduction with a value of $37.50, while another teacher, in the 33% bracket, receives a deduction value of $82.50. Thus, the higher-income taxpayer, with presumably greater ability to pay taxes, receives a greater benefit than the lower-income taxpayer.",
"Extenders contribute to the complexity of the tax code and raise the cost of administering the tax system. Those costs, which can be difficult to isolate and measure, are rarely included in the cost-benefit analysis of temporary tax provisions. In addition to making the tax code more difficult for the government to administer, complexity also increases costs imposed on individual taxpayers. With complex incentives, individuals devote more time to tax preparation and are more likely to hire paid preparers.",
"Dozens of temporary tax provisions had expired at the end of 2014, all of which were extended in P.L. 114-113 (see Table 1 ). Most of these provisions have been extended as part of previous \"tax extender\" legislation. For the purposes of this report, provisions that expired in 2014 have been classified as belonging to one of four categories: individual, business, charitable, or energy. The following sections provide additional details. Table 1 also includes information on the cost of the extension in P.L. 114-113 , as enacted.",
"All six of the individual tax extender provisions that expired at the end of 2014 had previously been extended as part of tax extenders legislation. The longest-standing individual extender provision is the above-the-line deduction for classroom expenses incurred by school teachers. This provision was first enacted on a temporary basis in 2002 and has regularly been included in tax extender packages. The above-the-line deduction for classroom expenses was made permanent in P.L. 114-113 . Other individual provisions that have been extended more than once include the deduction for state and local sales taxes, the above-the-line deduction for tuition and related expenses, the deduction for mortgage insurance premiums, and the parity for the exclusion of employer-provided mass transit and parking benefits. The deduction for state and local sales taxes and the provision providing parity for the exclusion of employer-provided mass transit and parking benefits were also made permanent in P.L. 114-113 .",
"All of the business provisions that expired at the end of 2014 had previously been extended at least once, most more than once. Long-standing provisions that expired at the end of 2014 include the research tax credit, the rum excise tax cover-over, the Work Opportunity Tax Credit, the Qualified Zone Academy Bond (QZAB) allocation limitation, and the active financing exception under Subpart F. The New Markets Tax Credit, first enacted in 2000 to promote investment in low-income communities, also expired at the end of 2014. Bonus depreciation and enhanced expensing allowances, which are often viewed as economic stimulus measures, also expired at the end of 2014.\nA number of business-related extender provisions were made permanent in P.L. 114-113 , including the research tax credit, enhanced expensing under Section 179, and the active financing exception under Subpart F. Other provisions, including the New Markets Tax Credit and bonus depreciation, were given longer-term extensions, through 2019. Table 1 provides additional information on which business tax extenders were made permanent, extended through 2019, or extended through 2016.",
"The four charitable provisions that expired at the end of 2014 have previously been extended multiple times. All four provisions were also made permanent in P.L. 114-113 . The provision providing an enhanced deduction for noncorporate businesses donating food inventory was first enacted in response to Hurricane Katrina in 2005. The remaining charitable provisions were first enacted as part of the Pension Protection Act of 2006 ( P.L. 109-280 ).",
"The longest-standing energy-related provision that expired at the end of 2014 is the renewable energy production tax credit (PTC). The PTC was extended for two years, through 2016, as part of P.L. 114-113 . P.L. 114-113 extended the PTC for wind through 2019, with a phase-down starting in 2017.\nSeveral of the temporary energy-related tax provisions that expired at the end of 2014 were first enacted as part of the Energy Policy Act of 2005 (EPACT05; P.L. 109-58 ). These include the credit for construction of energy efficient new homes, the deduction for energy efficient commercial buildings, and the credit for nonbusiness energy property (also known as the tax credit for energy efficiency improvements for existing homes). Certain tax incentives for alternative technology vehicles and alternative fuel vehicle refueling property were also first included in EPACT05. These provisions were all extended through 2016 in P.L. 114-113 .\nThe alternative motor vehicle credit for qualified fuel cell vehicles also expired at the end of 2014. This provision was introduced as part of EPACT05, and was originally set to expire December 31, 2014, when first introduced. EPACT05 incentives for other alternative motor vehicles—including hybrids, alternative fuel, and advanced lean-burn technology vehicles—expired at earlier dates. The credit for two-wheeled plug-in electric vehicles expired at the end of 2013, and was not extended as part of P.L. 113-295 , but would be extended in the Tax Relief Extension Act of 2015 (S. 1946). The credit was first enacted as part of the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) and was extended once previously by the American Taxpayer Relief Act (ATRA; P.L. 112-240 ). Both the alternative motor vehicle credit for qualified fuel cell vehicles and the credit for two-wheeled plug-in electric vehicles were extended through 2016 in P.L. 114-113 .",
"As discussed above, Congress has regularly acted to temporarily extend expired or expiring tax provisions. In addition to temporarily extending expired provisions, P.L. 114-113 also made certain provisions permanent. As a result, the cost of the tax extenders in P.L. 114-113 was higher than the cost of other tax extenders proposals considered in the 114 th Congress that would not have included permanent extensions.",
"In total, the extensions of tax extenders in P.L. 114-113 , is estimated to reduce federal revenues by $628.8 billion between 2016 and 2025. Of that cost, nearly one-third ($202.1 billion) is attributable to extensions of provisions that were scheduled to expire in 2017 (the reduced earnings threshold for the refundable portion of the child tax credit; the American Opportunity Tax Credit; and modifications to the earned income tax credit) and the two-year moratorium on the medical device excise tax. Thus, the cost of extending the \"tax extender\" provisions listed in Table 1 is an estimated $426.8 billion between 2016 and 2025.\nOf the total cost of the tax extenders in P.L. 114-113 , $559.5 billion, or 89% of the total cost, is associated with permanent extensions. The estimated cost of permanent extension of provisions listed in Table 1 (provisions that had expired in 2014 and were made permanent in P.L. 114-113 ) is $361.4 billion.\nOf the total cost of tax extenders in P.L. 114-113 , a small portion, $17.7 billion (or less than 3%) was for the two-year extension of provisions that had expired in 2014 through 2016.",
"Before P.L. 114-113 was passed, legislation was considered in the House in the 114 th Congress that would have made permanent certain temporary tax provisions. Cost of temporary as opposed to permanent extension has, in the past, been one consideration in the debate surrounding the extension of temporary tax provisions.",
"The Senate Finance Committee reported legislation in 2015, the Tax Relief Extension Act of 2015 ( S. 1946 ), that would retroactively extend expired tax provisions, for two years, through 2016. The JCT estimated that extending tax extenders, as proposed in S. 1946 , would have reduced revenue by $97.1 billion between 2016 and 2025. S. 1946 also included several revenue raising provisions, which brought the cost of the proposal to $96.9 billion. Neither of these figures include macroeconomic effects.\nWith macroeconomic effects included, the cost of extending expired provisions, as proposed in S. 1946 , was $86.6 billion over the 10-year budget window. According to the JCT, extending certain expired provisions affecting businesses, particularly the provision allowing businesses to expense 50% of investments, is expected to increase economic growth in the near term. Thus, the cost estimate when macroeconomic effects are included is less than the cost estimate that does not incorporate macroeconomic effects. Since S. 1946 is projected to increase the federal debt, part of the gain in economic growth from extending expired business-related provisions would be expected to be offset by higher interest rates, which tend to slow economic growth. The net effect of JCT's macroeconomic analysis, however, was increased economic growth within the budget window, leading to a lower cost estimate for S. 1946 .",
"The Congressional Budget Office (CBO) provides estimated costs of extending all tax provisions scheduled to expire before 2025 (see Table 2 ). The estimates below reflect information provided before the recent extensions enacted in P.L. 114-113 . CBO's estimates can be viewed as the cost of a long-term extension. According to CBO's estimates, over the 2016 to 2025 budget window,\nextending all expiring tax provisions would reduce revenues by $897.9 billion; extending bonus depreciation would cost $223.6 billion and extending Section 179 expensing would cost $60.8 billion; and extending expansions to the child tax credit, the earned income tax credit, and the American Opportunity Tax Credit currently scheduled to expire at the end of 2017 would cost $202.8 billion.\nOf the 70 tax provisions set to expire before the end of 2025 in CBO's estimates, 52 had expired at the end of 2014. Thus, most of the revenue cost associated with extending expiring provisions is for provisions that were either extended or made permanent in P.L. 114-113 .\nSince tax extender provisions are assumed to expire as scheduled by CBO, their extension—even if expected by policymakers—is not included in CBO's current law revenue baseline. As a result, CBO's revenue projections are higher than actual revenue levels that are likely to occur. Consequently, projected budget deficits under the current law baseline are smaller than actual deficits that are likely to occur.\nThe cost of providing a short-term extension, as is typical in \"tax extenders\" legislation, is less than the cost of extending expiring provisions through the budget window, as is done by CBO for the purposes of constructing the alternative fiscal scenario baseline. The CBO scores presented here, some might argue, provide a more accurate measure of the overall or long-term budget impact of temporary tax provisions. The Joint Committee on Taxation (JCT) scores accompanying extenders legislation reflect the budget impact of the temporary extension relative to current law.\nIf expiring provisions are temporarily extended, the 10-year revenue cost may be less than the cost in year 2015, as many of the expired provisions are tax deferrals, or timing provisions. Bonus depreciation is one example of a timing provision, where the short-term cost of extension is greater than the long-term or budget window cost. The one-year extension of bonus depreciation enacted as part of the Taxpayer Relief Act of 2014 ( P.L. 113-295 ) cost an estimated $1.2 billion over the 10-year budget window; however, the one-year revenue loss of the same provision in 2015 was $45.3 billion, with much of the cost recovered in the later years in the budget window. Bonus depreciation was extended through 2019 in P.L. 114-113 , at a cost of $11.3 billion over the 10-year budget window. The cost in 2016 is estimated to be $90.6 billion, with much of the estimated revenue cost in 2016, 2017, and 2018, recovered later in the budget window. As a timing provision, bonus depreciation shifts cost recovery forward, resulting in revenue losses in earlier years, with part of that revenue loss recovered in later years. In contrast to a temporary extension, making bonus depreciation permanent would cost $223.6 billion over the 10-year budget window (see Table 2 ).",
"As discussed above, the tax extenders legislation that was passed in December 2015, as part of P.L. 114-113 , made permanent a number of temporary tax provisions, while temporarily extending other expired tax provisions. Earlier in the 114 th Congress, the House had considered proposals to make permanent certain expired tax provisions. Legislation was also reported out of the Senate Committee on Finance that would temporarily extend expired tax provisions. During the 113 th Congress, the House had also considered legislation to make permanent certain expired tax provisions.",
"Before P.L. 114-113 was signed into law, there was other action on extenders in the 114 th Congress. The Senate Finance Committee reported the Tax Relief Extension Act of 2015 ( S. 1946 ), which would retroactively extend expired tax provisions for two years, through 2016.\nThe House had passed legislation to make permanent eight of the temporary tax provisions that expired at the end of 2014 (see Table 3 ). America's Small Business Tax Relief Act of 2015 ( H.R. 636 ) would have made permanent the enhanced expensing allowances under Section 179 and also included the text from bills that would extend expired S corporation provisions (the Permanent S Corporation Built-in Gains Recognition Period Act of 2015 [H.R. 629] and the Permanent S Corporation Charitable Contribution Act of 2015 [H.R. 630]). Three expired charitable provisions were part of the America Gives More Act of 2015 ( H.R. 644 ): (1) the enhanced deduction for contributions of food inventory; (2) the provision allowing for tax-free distributions from Individual Retirement Accounts (IRAs) for charitable purposes; and (3) the special rules for contributions of capital gain real property for conservation purposes. The American Research and Competitiveness Act of 2015 ( H.R. 880 ) would have modified and made permanent the research tax credit. Legislation had also passed the House that would have made permanent the option to deduct state and local sales taxes in lieu of state and local income taxes ( H.R. 622 ). Taken together, these eight measures would have cost $317.5 billion over the 10-year budget window, excluding potential macroeconomic effects.\nIn addition to the proposals to make permanent expired tax provisions that were passed in the House, the Committee on Ways and Means had reported other legislation during the 114 th Congress that would have made permanent other expired provisions (see Table 3 ).",
"During the 113 th Congress, various bills were considered to either extend or make permanent certain tax extender provisions. Ultimately, a one-year \"tax extenders\" bill was passed and enacted late in the year (the Tax Increase Prevention Act of 2014 [P.L. 113-295] was signed into law on December 19, 2014). Earlier in the year, the Senate Finance Committee had reported a two-year extenders package, the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act ( S. 2260 ). The EXPIRE Act proposed extending most expiring provisions for two years, through 2015.\nThe House also considered legislation to make certain expiring tax provisions permanent during the 113 th Congress. As noted in Table 3 , the House passed legislation that would have made permanent nine provisions that are currently part of the tax extenders. Taken together, permanently extending these nine provisions would have reduced revenues by an estimated $511.4 billion over the 10-year budget window. Six of these nine provisions were included in the Jobs for America Act ( H.R. 4 ), which also passed the House in the 113 th Congress. Three other charitable-related provisions were passed as part of the America Gives More Act of 2014 ( H.R. 4719 ). The Committee on Ways and Means reported legislation during the 113 th Congress that would have made two additional international-related extender provisions permanent, although this legislation was not considered in the full House.",
"Several provisions that had expired at the end of 2013 were not extended as part of the Tax Increase Prevention Act of 2014 ( P.L. 113-295 ). Two of these provisions would have been extended in the EXPIRE Act, but were not included in P.L. 113-295 : the health coverage tax credit and the credit for electric-drive motorcycles and three-wheeled vehicles. Both of these provisions have been extended in subsequent legislation.\nThe health coverage tax credit had not been extended as part of past \"tax extenders\" legislation. The health coverage tax credit was first enacted, without an expiration date, as part of the Trade Act of 2002 ( P.L. 107-240 ). A January 1, 2014, termination date was enacted as part of an act to extend the Generalized System of Preferences in 2011 ( P.L. 112-40 ). The health coverage tax credit was modified and retroactively extended through December 31, 2019, as part of the Trade Preferences Extension Act of 2015 ( P.L. 114-27 ), signed into law on June 29, 2015.\nThe other provision that was not extended in P.L. 113-295 , but would have been extended by the EXPIRE Act, was the credit for electric-drive motorcycles and three-wheeled vehicles. In recent years, a number of incentives have been available for various alternative technology vehicles. There are currently incentives available for plug-in electric vehicles. Incentives for most other alternative technology vehicles have expired. The credit for two-wheeled electric plug-in vehicles was extended through 2016 in P.L. 114-113 .\nTwo other energy-related provisions were not extended past their January 1, 2014, termination date: the placed-in-service date for partial expensing of certain refinery property and the credit for energy efficient appliances. The EXPIRE Act did not propose extending either of these provisions.\nTwo disaster-related provisions that expired at the end of 2013—one that provided tax-exempt bond financing authority for facilities in the New York Liberty Zone and another related to the replacement period for nonrecognition of gain for areas damaged by the 2008 Midwestern storms—were not extended in P.L. 113-295 . The EXPIRE Act also did not include an extension for these disaster-related provisions."
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{
"question": [
"How common are Congressional tax provision extensions?",
"How are these tax provisions referred to?",
"What did P.L. 114-113 do?",
"How did this differ from previous tax extenders legislation?",
"What does this report cover?",
"How has Congress addressed tax extenders?",
"What did the Tax Increase Prevention Act of 2014 do?",
"How did the Act affect provisions that expired at the end of 2013?",
"How unique were the provisions in P.L. 113-295?",
"Why does Congress typically enact tax provisions on a temporary basis?",
"How does this policy allow legislators to evaluate efficiency?",
"How can temporary tax provisions be used to aid after disasters?",
"What role do budget considerations have in determining if a provision will be temporary or permanent?",
"What were the provisions that expired at the end of 2014?",
"How will these expirations affect taxpayers?",
"What were the expired charitable provisions?",
"How do these expirations affect energy efficiency initiatives?",
"How did P.L. 114-113 affect these provisions?"
],
"summary": [
"In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions.",
"Collectively, these temporary tax provisions are often referred to as \"tax extenders.\"",
"Fifty-two temporary tax provisions expired at the end of 2014. All of these provisions were either temporarily or permanently extended as part of the Consolidated Appropriations Act, 2016 (P.L. 114-113), signed into law on December 18, 2015.",
"Unlike previous tax extenders legislation, P.L. 114-113 made a number of provisions permanent, and provided longer-term extensions for other provisions.",
"This report provides a broad overview of the tax extenders.",
"Congress had previously addressed tax extenders toward the end of the 113th Congress.",
"The Tax Increase Prevention Act of 2014 (P.L. 113-295), signed into law on December 19, 2014, made tax provisions that had expired at the end of 2013 available to taxpayers for the 2014 tax year.",
"The law extended most (but not all) provisions that had expired at the end of 2013.",
"Most of the provisions in P.L. 113-295 had been included in previous \"tax extender\" packages.",
"There are several reasons why Congress may choose to enact tax provisions on a temporary basis.",
"Enacting provisions on a temporary basis provides legislators with an opportunity to evaluate the effectiveness of tax policies prior to expiration or extension.",
"Temporary tax provisions may also be used to provide temporary economic stimulus or disaster relief.",
"Congress may also choose to enact tax provisions on a temporary rather than permanent basis due to budgetary considerations, as the foregone revenue from a temporary provision will generally be less than if it were permanent.",
"The provisions that expired at the end of 2014 are diverse in purpose, including provisions for individuals, businesses, the charitable sector, and energy-related activities. Among the individual provisions that expired are deductions for teachers' out-of-pocket expenses, state and local sales taxes, qualified tuition and related expenses, and mortgage insurance premiums.",
"On the business side, under current law, the research and development (R&D) tax credit, the work opportunity tax credit (WOTC), the active financing exceptions under Subpart F, the new markets tax credit, and increased expensing and bonus depreciation allowances will not be available for taxpayers after 2014.",
"Expired charitable provisions include the enhanced deduction for contributions of food inventory and provisions allowing for tax-free distributions from retirement accounts for charitable purposes.",
"The renewable energy production tax credit (PTC) expired at the end of 2014, along with a number of other incentives for energy efficiency and renewable and alternative fuels.",
"As discussed in this report, many of these provisions were made permanent in P.L. 114-113."
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CRS_RL33001
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{
"title": [
"",
"Aftermath of the 9/11 Attacks",
"Policy Overview",
"Options and Implications for U.S. Policy",
"Summits and \"Strategic\" Ties",
"Law-Enforcement and Intelligence Cooperation",
"Uighur People in Xinjiang and \"Terrorist\" Organizations",
"Detained Uighurs at Guantanamo",
"Olympic Security and Violent Incidents",
"Sanctions on Exports of Arms and Security Equipment",
"Weapons Nonproliferation",
"Port Security",
"Military-to-Military Contacts",
"Shanghai Cooperation Organization and U.S. Military Operations",
"PRC-Origin Weapons and Iran"
],
"paragraphs": [
"",
"China has seen itself as a victim of terrorist attacks in the 1990s, thought to be committed by some Muslim extremists (ethnic Uighur separatists) in the northwestern Xinjiang region. Some Uighur activists reportedly received training in Afghanistan. China's concerns appeared to place it in a position to support Washington and share intelligence after the attacks on September 11, 2001. In a message to President Bush on September 11, PRC ruler Jiang Zemin condemned the terrorist attacks and offered condolences. In a phone call with the President on September 12, Jiang reportedly promised to cooperate with the United States to combat terrorism. At the U.N. Security Council (UNSC) on the same day, the PRC (a permanent member) voted with the others for Resolution 1368 (to combat terrorism). On September 20, Beijing said that it offered \"unconditional support\" in fighting terrorism. On September 20-21, visiting Foreign Minister Tang Jiaxuan promised cooperation, and Secretary of State Colin Powell indicated that discussions covered intelligence-sharing but not military cooperation. PRC counterterrorism experts attended a \"productive\" initial meeting on September 25, 2001, in Washington, DC. On September 28, 2001, China voted with all others in the UNSC for Resolution 1373, reaffirming the need to combat terrorism.\nPRC promises of support for the U.S. fight against terrorism, however, were qualified by other initial statements expressing concerns about U.S. military action. China also favored exercising its decision-making authority at the UNSC, where it has veto power. Initial commentary in official PRC media faulted U.S. intelligence and U.S. defense and foreign policies (including that on missile defense) for the attacks. On September 18, 2001, in a phone call with British Prime Minister Tony Blair, China reported Jiang as saying that war against terrorism required conclusive evidence, specific targets to avoid hurting innocent people, compliance with the U.N. Charter, and a role for the Security Council. Also, observers were appalled at the reported gleeful anti-U.S. reactions in the PRC's online chat rooms after the attacks.",
"As President George W. Bush entered office in January 2001, the Director of Central Intelligence briefed him on the top three concerns for U.S. security: terrorism, weapons proliferation, and China. In April 2001, President Bush had to confront China in the EP-3/F-8 aircraft collision crisis and U.S. arms sales to Taiwan. Since the September 11 th attacks, the extent of U.S.-China counterterrorism cooperation has been limited, but the tone and context of counterterrorism helped to stabilize—even if it did not transform—the closer bilateral relationship pursued by President Bush in late 2001. In the short term, U.S. security policy toward Beijing sought counterterrorism cooperation, shifting from issues about weapons proliferation and military maritime safety. Given the mixed state of bilateral ties after the collision crisis, Beijing's support met much of initial U.S. expectations. Testifying to Congress in February 2002, Secretary of State Colin Powell praised Beijing's diplomatic support, saying that China \"helped in the war against terrorism.\"\nChina's long-standing relationship with nuclear-armed Pakistan was an important factor in considering the significance of Beijing's support, especially with concerns about the viability of Pakistani President Pervez Musharraf's government. Some said that Pakistan's cooperation with the United States must have come with PRC acquiescence, pointing to a PRC envoy's meeting with Musharraf on September 18, 2001. However, on September 13, 2001, Musharraf already had agreed to fight with the United States against bin Laden. The PRC has reportedly provided Pakistan with nuclear and missile technology. China could provide intelligence about Pakistan's nuclear weapons and any suspected technology transfers out of Pakistan to countries like North Korea, Iran, and Libya.\nIn the long term, counterterrorism was initially thought by some to hold strategic implications for the U.S.-PRC relationship. However, it has remained debatable as to whether such cooperation has fundamentally transformed the relationship, while critics have been concerned about compromises to other U.S. interests. Policymakers watched to see whether Beijing's leaders used the opportunity to improve bilateral ties, especially on weapons nonproliferation problems. In his State of the Union speech on January 29, 2002, President Bush expressed his expectation that \"in this moment of opportunity, a common danger is erasing old rivalries. America is working with Russia and China and India, in ways we have never before, to achieve peace and prosperity.\" Nonetheless, Director of Central Intelligence George Tenet testified to Congress in February 2002, that the 9/11 attacks did not change \"the fundamentals\" of China's approach to us.\nThe PRC's concerns about domestic attacks and any links to foreign terrorist groups, U.S.-PRC relations, China's international standing in a world dominated by U.S. power (particularly after the terrorist attacks), and its image as a responsible world power helped explain China's supportive stance. However, Beijing also worried about U.S. military action near China, U.S.-led alliances, Japan's active role in the war on terrorism, greater U.S. influence in Central and South Asia, and U.S. support for Taiwan—all exacerbating long-standing fears of \"encirclement.\"\nChina issued a Defense White Paper in December 2002, stating that major powers remained in competition but that since the September 2001 attacks against the United States, countries have increased cooperation. Although this policy paper contained veiled criticisms of the United States for its military buildup, stronger alliances in Asia, and increased arms sales to Taiwan, it did not criticize the United States by name as in the Defense White Paper of 2000. However, the Defense White Papers of 2004 and 2006 again criticized the United States by name.\nSince 2005, U.S. concerns about China's extent of cooperation in counterterrorism have increased. In September 2005, Deputy Secretary of State Robert Zoellick acknowledged that \"China and the United States can do more together in the global fight against terrorism\" after \"a good start,\" in his policy speech that called on China to be a \"responsible stakeholder\" in the world. The summits of the Shanghai Cooperation Organization (SCO) in 2005 and 2006 raised U.S. concerns. Since the summer of 2007, U.S. officials have expressed more concern about China-origin arms that have been found in the conflict involving U.S. forces in Afghanistan, as part of the broader threat posed by Iran and its arms transfers.",
"In addition to the specific congressional actions discussed in this report, some p olicy options for Congress include:\nvisits to Xinjiang by congressional or staff delegations; legislation to mandate appointment of a Special Envoy for Uighur affairs (in 1997, the House and Senate passed H.R. 1757 (ultimately not enacted) that included language on a Special Envoy for Tibet); legislation to mandate appointment of a Special Coordinator for Uighur affairs (Under Secretary of State for Democracy and Global Affairs also serves as the Special Coordinator for Tibetan Issues); calls for the Assistant Secretary of State for Democracy, Human Rights, and Labor to visit Xinjiang and discuss Uighurs in the Human Rights Dialogue; designation of Xinjiang as occupied territory (in 1991, Congress passed P.L. 102-138 , citing Tibet as an \"occupied country\"); review of the executive branch's designations of terrorist groups; resolution of the fates of Uighurs detained at Guantanamo.",
"The counterterrorism campaign helped to stabilize U.S.-PRC relations up to the highest level, which faced tensions early in the Bush Administration in April 2001 with the EP-3 aircraft collision crisis and U.S. approvals of arms sales to Taiwan. According to the Final Report of the 9/11 Commission issued in July 2004, President Bush chaired a National Security Council (NSC) meeting on the night of September 11, 2001, in which he contended that the attacks provided a \"great opportunity\" to engage Russia and China. President Bush traveled to Shanghai in October 2001 for his first meeting with then PRC President Jiang Zemin at the Leaders' Meeting of the Asia Pacific Economic Cooperation (APEC) forum. Bush called the PRC an important partner in the global coalition against terrorists but also warned Jiang that the \"war on terrorism must never be an excuse to persecute minorities.\" On February 21-22, 2002, the President visited Beijing (a trip postponed in October), after Tokyo and Seoul. The President then hosted Jiang at Bush's ranch in Crawford, TX, on October 25, 2002, and Bush said that the two countries were \"allies\" in fighting terrorism. By the fall of 2005, Deputy Secretary of State Robert Zoellick acknowledged that \"China and the United States can do more together in the global fight against terrorism\" after \"a good start,\" in his speech calling on China to be a \"responsible stakeholder.\"\nAfter President Barack Obama took office, he agreed with top PRC leader Hu Jintao on April 1, 2009, to elevate the \"Senior Dialogue\" launched by Deputy Secretary of State Zoellick in August 2005 to be held by the Secretary of State, to combine it into a comprehensive dialogue with the Strategic Economic Dialogue held by the Secretary of the Treasury, and to use China's preferred term of \"strategic\" (vs. \"senior\"), thus re-naming it the \"Strategic and Economic Dialogue\" (S&ED). At the first S&ED on July 27-28, 2009, in Washington, Secretary of State Hillary Clinton urged cooperation to increase stability in Afghanistan and Pakistan.",
"On December 6, 2001, Francis Taylor, the State Department's Coordinator for Counter-Terrorism, ended talks in Beijing that reciprocated the September 25 meeting in Washington, DC. He announced that the PRC agreed to give \"positive consideration\" to a long-sought U.S. request for the FBI to set up a Legal Attaché office at the U.S. Embassy, that counterterrorism consultations would occur semi-annually, and that the two sides would set up a Financial Counter-Terrorism Working Group. He reported that Beijing's cooperation entailed coordination at the U.N., intelligence-sharing, law enforcement liaison, and monitoring of financial networks. The PRC approved the FBI office in February 2002, and the first semi-annual meeting on terrorist financing was held at the Treasury Department in late May. The FBI attaché arrived at the U.S. Embassy in Beijing in September 2002. In November 2005, U.S. Attorney General Alberto Gonzales met with PRC Minister of Public Security Zhou Yongkang in Beijing. Visiting Beijing in June 2007, FBI Assistant Director for International Operations Thomas Fuentes said that he sought \"more information\" from the PRC on terrorism.\nIn December 2002, Assistant Secretary of State James Kelly confirmed and defended intelligence-sharing with the PRC, saying \"we are sharing [counterterrorism] information to an unprecedented extent but making judgments independently.\" At the S&ED in July 2009, President Obama called for \"continued\" intelligence-sharing to disrupt terrorist plots and dismantle terrorist networks, but he also urged the PRC to respect and protect ethnic and religious minorities in the country. From August 31 to September 3, 2009, the Director of the Second Department (on intelligence) of the PLA's General Staff Department, Major General Yang Hui, reportedly visited Washington and met with the Director of the Defense Intelligence Agency (DIA), Lieutenant General Ronald Burgess. Yang complained about leaks that resulted in press reports on the incident in 2006 when a PLAN submarine closely followed the aircraft carrier USS Kitty Hawk and about alleged terrorist ties of Muslim Uighurs in China's northwest.",
"Questions concern the U.S. stance on the PRC's policy toward the Uighur (\"wee-ger\") people in the northwestern Xinjiang region that links them to what the PRC calls vaguely \"East Turkistan terrorist organizations.\" Congress has concerns about the human rights of Uighurs. China has accused the United States of \"double standards\" in disputes over how to handle the Uighurs.\nXinjiang has a history of unrest dating back before September 2001, particularly since the unrest in 1990. The PRC charges Uighurs (or Uyghurs) with violent crimes and \"terrorism,\" but Uighurs say they have suffered executions, torture, detentions, harassment, religious persecution, and racial profiling. Human rights and Uighur groups have warned that, after the 9/11 attacks, the PRC shifted to use the international counterterrorism campaign to justify the PRC's long-term cultural, religious, and political repression of Uighurs both in and outside of the PRC. Since 2002, the PLA has conducted military exercises in Xinjiang with Central Asian countries and Russia to fight what the PRC calls \"East Turkistan terrorists\" and what it combines as the threat of \"three evil forces\" (separatism, extremism, and terrorism), conflating ethnic, religious, and resistant/violent activities.\nCritics say China compelled extraditions of Uighurs for execution and other punishment from countries such as Uzbekistan, Kyrgyzstan, Kazakhstan, Russia, Nepal, and Pakistan, raising questions about violations of the international legal principle of non-refoulement and the U.N. Convention Against Torture. On December 19, 2009, Cambodia joined this list when it returned 20 Uighurs who fled Xinjiang after the unrest in July 2009. The State Department, up to even the Secretary and Deputy Secretary, opposed Cambodia's return of these \"asylum seekers\" and urged China to ensure transparency, due process, and proper treatment for them. On April 1, 2010, the State Department announced that on March 19, the United States told Cambodia of a suspension in the shipment of 200 trucks and trailers that were to be provided as Excess Defense Articles. On January 18, 2010, Burma reportedly deported 17 Uighurs and 1 Han to the PRC.\nThe Uighurs are an ethnically Turkish people who speak Uyghur (close to the Turkish language) and practice a moderate form of Islam. They say that their population totals 10-15 million people. Countering China's colonial name of \"Xinjiang,\" meaning \"new frontier,\" the Uighurs call their Central Asian homeland \" East Turkistan .\" The land makes up about one-sixth of today's PRC. In 1884, the Manchurian Qing empire based in northern China incorporated the area as a province called \"Xinjiang.\" Later, it was briefly the Republic of East Turkistan in 1933 and in 1944, and a Soviet satellite power from 1934 to 1941. In October 1949, the Communist Party of China set up the PRC and deployed PLA troops to occupy and govern Xinjiang. In 1955, the PRC incorporated the area as the \"Xinjiang Uyghur Autonomous Region.\" In addition to PLA forces, the paramilitary People's Armed Police (PAP) has imposed controls. Unique to Xinjiang are the paramilitary Production and Construction Corps (PCC) guarding, producing, and settling there; the past nuclear weapon testing at Lop Nur; and routine executions for what Uighurs say are political and religious dissent. Uighurs complain of forced assimilation, instead of \"autonomy.\" Like Tibetans, Uighurs resent the Communist controls on religion, military deployments and exercises, increasing immigration of ethnic Han (Chinese) people, and forced birth control. PRC census data in 2003 report Uighurs at 8.4 million and Hans at 40% of Xinjiang's population (up from 6% in 1953). In the early 1990s, the breakup of the Soviet Union and independence of neighboring Central Asian republics encouraged the Uighurs. In response to their dissent, the PRC regime routinely has held huge public sentencing rallies and executions of Uighurs, forcing thousands to watch (one in 1998 involved more than 20,000) and intimidating Uighurs by \"killing one to frighten thousands,\" according to official PRC media.\nAs discussed above, Francis Taylor, the State Department's Coordinator for Counter-Terrorism, visited Beijing in December 2001. While he confirmed that there were \"people from western China that are involved in terrorist activities in Afghanistan,\" he rejected the view that \"all of the people of western China are indeed terrorists\" and urged Beijing to deal politically with their \"legitimate\" social and economic challenges and not with counterterrorism means. Taylor stated that the United States did not agree that \"East Turkestan\" forces were terrorists. He said that the U.S. military captured some people from western China who were involved in Afghanistan with Al Qaeda (the terrorist group led by Osama bin Laden).\nNonetheless, while in Beijing on August 26, 2002, Deputy Secretary of State Richard Armitage announced that, after months of bilateral discussions, he designated (on August 19) the East Turkistan Islamic Movement (ETIM) as a terrorist group that committed acts of violence against unarmed civilians. China had issued a new report in January 2002, publicly charging ETIM and other East Turkistan \"terrorist\" groups with attacks in the 1990s and linking them to the international terrorism of Osama bin Laden's Al Qaeda. The U.S. Embassy in Beijing suggested that ETIM planned to attack the U.S. Embassy in Kyrgyzstan, but no attack took place. The Kyrgyz Foreign Minister cited as suspicious that one Uighur was found with a map of embassies in Bishkek. Armitage called on China to respect the rights of Uighurs, but he also said that Washington was grateful for China's support at the United Nations Security Council.\nSince then, the United States has refused to designate any other PRC-targeted and \"East Turkistan\" or Uighur-related organization as a \"terrorist organization.\"\nThe State Department designated ETIM as a terrorist organization to freeze its assets under Executive Order 13224 (\"Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism\") but not as a Foreign Terrorist Organization (FTO) (under the Immigration and Nationality Act). E.O. 13224 defines \"terrorism\" as \"activity that (1) involves a violent act or an act dangerous to human life, property, or infrastructure; and (2) appears to be intended to intimidate or coerce a civilian population; to influence the policy of a government by intimidation or coercion; or to affect the conduct of a government by mass destruction, assassination, kidnapping, or hostage-taking.\" At the same time, the United States, PRC, Afghanistan, and Kyrgyzstan asked the United Nations to designate ETIM under U.N. Security Council Resolutions 1267 and 1390 (to freeze assets of this group).\nLater, in 2004, the Secretary of State also included ETIM in the \"Terrorist Exclusion List (TEL)\" (to exclude certain foreign aliens from entering the United States), under Section 411 of the USA PATRIOT Act of 2001 ( P.L. 107-56 ).\nIn April 2009, the Treasury Department designated Abdul Haq (aka Abdul Heq), a Uighur born in Xinjiang and leader of the East Turkistan Islamic Party (ETIP) , another name for ETIM, as an individual targeted under E.O. 13224. (Also see discussion of ETIM's leadership below.) As part of the justification for the designation, the Treasury Department declared that Haq had directed in January 2008 the military commander of ETIP to attack cities in China holding the Olympic Games but did not state that such attacks occurred. Also, the Treasury Department noted that as of 2005 (four years prior), Haq was a member of Al Qaeda's Shura Council (consultative group). Just preceding the U.S. designation, the U.N. Security Council acted under Resolution 1267 to identify Haq as a Uighur born in Xinjiang in 1971, the overall leader in Pakistan of ETIM, and an individual associated with Al Qaeda. A newspaper reported from Islamabad in mid-2009 that Abdul Haq was among Al Qaeda and Taliban leaders who met with the leader of the Pakistani Taliban (a group formed in 2007), Baitullah Mehsud, about ceasing attacks in Pakistan to focus on the U.S.-led coalition in Afghanistan. In March 2010, various PRC and other media reported that a drone attack killed Abdul Haq in February in North Waziristan, an anarchic border region of Pakistan. However, the PRC Foreign Ministry said it could not confirm the claim.\nThe case against ETIM—including even its name—has been complicated, in part by questions of the credibility of PRC claims that link \"terrorism\" to repressed groups like Uighurs, Tibetans, and Falungong. Moreover, there have been challenges in verifying the authenticity of Internet messages and websites ostensibly belonging to the Turkistan Islamic Party (TIP) , apparently another name for ETIM, with possibilities that the messages were created by such a terrorist group, fabricated by the PRC to justify its charges, or made as a deception by a third party.\nNo group calling itself ETIM claimed responsibility for violent incidents in the 1990s. Although many Uighur or East Turkistan advocacy groups around the world have been reported for decades, the first available mention of ETIM was found in 2000. A Russian newspaper reported that Osama bin Laden convened a meeting in Afghanistan in 1999 that included the Islamic Movement of Uzbekistan (IMU) and ETIM, and he agreed to give them funds. A Kyrgyz report in 2001 named ETIM as a militant Uighur organization with links to IMU and training in Afghanistan and Pakistan, but did not mention any links to Al Qaeda. Detailed information on \"three evil forces\" written in August 2001 by a PRC scholar at the Xinjiang Academy of Social Sciences did not name ETIM. Before the PRC government's public report of January 2002 on \"East Turkestan terrorists,\" most were not aware of ETIM, and PRC officials or official media did not mention ETIM until a Foreign Ministry news conference shortly after the September 2001 terrorist attacks in the United States. But even then, the PRC did not blame ETIM for any of alleged incidents.\nIn 2002, the leader of what China called ETIM, Hasan Mahsum, referred to his organization as the East Turkistan Islamic Party (ETIP) and said that it had no \"organizational links\" with Al Qaeda or Taliban (the extremist Islamic regime formed by former anti-Soviet Islamic fighters called Mujahedin that took over Afghanistan in 1994-1996). Moreover, he claimed that ETIM did not receive any financial aid from Osama bin Laden or Al Qaeda, although certain Uighur individuals were involved with the Taliban in Afghanistan. In November 2003, an organization calling itself the Turkistan Islamic Party (TIP) posted on the Internet its denial of the U.S. and PRC designations of ETIM as a \"terrorist organization.\"\nIn December 2003, the PRC's Ministry of Public Security issued its first list of wanted \"terrorists,\" accusing four groups as \"East Turkistan terrorist organizations\" (ETIM, East Turkistan Liberation Organization (ETLO), World Uyghur Youth Congress, and East Turkistan Information Center) and 11 Uighurs as \"terrorists,\" with Hasan Mahsum at the top of the list. China demanded foreign assistance to target them. However, the list was intentionally misleading or mistaken, because Mahsum was already dead. Confirming his operational area at the Afghan-Pakistani border, Pakistan's military killed a multinational motley that included Mahsum on October 2, 2003, in Pakistan's South Waziristan tribal district. In December 2003, the leadership of what it called TIP (having changed its name from ETIP in 1999 to be inclusive of non-Uighur Turkic peoples) posted on the Internet a eulogy of Mahsum. TIP reviewed his development of an organization in Afghanistan with the Taliban's support but not contact with Al Qaeda. The TIP announced that former Military Affairs Commander Abdul Haq took over as the leader (amir). However, the PRC Ministry of Public Security's list did not include Abdul Haq.\nThere was corroboration about their names. Hozaifa Parhat, one of the 22 Uighurs who were in Afghanistan until late 2001 then ended up at Guantanamo by 2002 and whose name was placed in the landmark court case on whether to release them, readily told his Combatant Status Review Tribunal between 2004 and 2005 that he saw Mahsum who was the leader at the Uighur camp in Afghanistan. Parhat and some other Uighur detainees also said that they heard of Abdul Haq.\nIn 2004, the deputy leader, Abudula Kariaji, said that ETIM had sent militants trained in small arms and explosives to China and had met in 1999 with Osama bin Laden, who allowed some Uighurs to train in Afghanistan but did not support their non-Arab cause of over-throwing China's rule. In January 2008, Al Qaeda in Afghanistan issued a book on 120 \"martyrs\" that included five who were Uighurs born in Xinjiang and fought with the Taliban in Afghanistan. One of them was said to have died fighting U.S. military forces that launched attacks in 2001.\nIn 2003, Mehmet Emin Hazret, the leader of the East Turkistan Liberation Organization (ETLO), another organization targeted by the PRC's 2002 report as a \"terrorist organization,\" denied that his group was responsible for violent incidents or had knowledge of an organization called ETIM, although he knew of its alleged leaders who had been in PRC prisons. Hazret also denied that ETLO had links to Al Qaeda. Nonetheless, he acknowledged that ETLO would inevitably set up a military wing to target the PRC government for its oppression of the Uighur people.\nThe PRC's own report of 2002 on \"East Turkistan terrorists\" claimed bombing incidents in Xinjiang from 1991 to 1998, with none after that year. That report did not discuss bombings outside of Xinjiang or call those other violent incidents \"terrorism.\" The report alleged that some \"terrorist\" bombings occurred in February to April 1998 and injured 11 people. However, there were no PRC or non-PRC media reports of such incidents in 1998. Moreover, Xinjiang's Party Secretary Wang Lequan and Chairman Abulahat Abdurixit said in Beijing in early 1998 and 1999 that there were no major violent incidents in 1998. In April 1998, a PRC official journal published a comprehensive report on crime, cited bombings in 1997 but none in 1998, and stated that China had no terrorist organizations and had not been penetrated by any international terrorist groups. In May 1998, Xinjiang's Vice Chairman Zhang Zhou told foreign reporters that there was an explosion near Kashgar earlier that year, but no one was killed or wounded.\nBefore August 2008, the last bombing incident in Xinjiang reported by PRC and non-PRC media occurred in 1997, when three bombs exploded in three buses in Urumqi on February 25, 1997, while two other undetonated bombs were found on two buses. Many reports speculated that the deadly attacks were timed for the mourning period of PRC paramount ruler Deng Xiaoping, who died on February 19. However, the likely critical factor was the preceding major turmoil and crackdown in Xinjiang that occurred on February 5-6 in Yining (the western town Uighurs call Gulja), involving Uighur protests against executions, security crackdown, and perhaps hundreds killed and thousands arrested. Uighurs and Amnesty International called the incident the \"Gulja Massacre.\" Shortly after the incident on February 25, further bombings were reported in Urumqi on March 1, in Yining on March 3, in Beijing on March 5 and March 7, near Guangzhou on May 12, and in Beijing on May 13; but the PRC did not label the incidents outside of Xinjiang as \"terrorist incidents.\" The incidents in 1997 occurred after the PRC government launched in 1996 the national anti-crime \"Strike Hard\" campaign that was carried out in Xinjiang and Tibet with crackdowns against those China called \"separatists.\"\nUighur and human rights groups have expressed concern that the U.S. designation of ETIM as a terrorist organization in 2002 helped China to further justify persecution and violent repression against the people in Xinjiang. They also have noted distinctions between terrorism and armed resistance against military or security forces. They have pointed out that Uighurs have no anti-U.S. sentiments but rather look to the United States as a champion of their human rights.\nIn December 2002, Assistant Secretary of State James Kelly defended the designation of ETIM as a step based on U.S. evidence that ETIM had links to Al Qaeda and committed violence against civilians, \"not as a concession to the PRC.\" Moreover, Lorne Craner, Assistant Secretary of State for Democracy, Human Rights, and Labor, specifically traveled to Urumqi to speak at Xinjiang University as part of a visit for the U.S.-PRC Human Rights Dialogue. He said that \"both President Bush and Secretary Powell have made very clear publicly and privately that the U.S. does not and will not condone governments using counterterrorism as an excuse to silence peaceful expressions of political or religious views.\" He added that the United States condemned the \"Al Qaeda-linked\" ETIM, but he was there to \"reaffirm our friendship for the peaceful people of Xinjiang.\"\nThus, one question has concerned whether ETIM has been linked to Al Qaeda . In February 2009, the U.S. Court of Appeals for the D.C. Circuit, ruling in a case on releasing Uighurs detained at Guantanamo, noted that \"the government had not presented sufficient evidence that the East Turkistan Islamic Movement was associated with al Qaida or the Taliban, or had engaged in hostilities against the United States or its coalition partners.\" If ETIM as a group or its leaders as individuals had any connection to Al Qaeda, the extent and threat of ties have been difficult to assess. Compared to ambiguous \"association\" or \"affiliation,\" specific U.S. allegations have referred to Al Qaeda's financial aid for ETIM and the inclusion of ETIM's leader in Al Qaeda's Shura Council in 2005. U.S. officials have not publicly accused ETIM of attacking U.S. interests as part of Al Qaeda's network.\nA separate question has been whether any ties evolved after 2005. In November 2006, the jihadist Al-Fajr (Dawn) Media Center apparently issued its first video described as on behalf of the cause of \"jihad in East Turkistan\" against the PRC's \"occupation of the country.\" But that video did not mention the TIP organization. On February 26, 2009, TIP's media center, the Voice of Islam, issued a statement to allow the Al-Fajr Media Center to distribute TIP's messages. In videos from 2006 to early 2009, Al Qaeda's deputy leader, Ayman al-Zawahiri, on rare occasions, mentioned the East Turkistan cause among various worldwide concerns. Beyond this awareness, he did not cite a relevant organization or action. In a video on the eve of the 7 th anniversary of the September 2001 attacks, he did not mention East Turkistan or China in a litany of grievances.\nChina has linked charges of terrorism to Uighur groups and Rebiya Kadeer . However, the Congress increasingly has expressed concerns about PRC repression of Uighurs along with concern for Tibetans, including concern about the imprisonment of the relatives of Rebiya Kadeer, a Uighur businesswoman who was detained in the PRC in 1999-2005 and was nominated for the Nobel Peace Prize in 2006 after she gained freedom in the United States. In 2006, Ms. Kadeer was elected as the President of the Uyghur American Association (UAA) and World Uyghur Congress (WUC) . (In 2004, the East Turkestan National Congress and World Uyghur Youth Congress merged to form the WUC, and it held its first two general assemblies in Munich, Germany, in 2004 and 2006.) In October 2006, a staff delegation of the House International Relations Committee reported heightened congressional concerns about the Administration's designation of ETIM as a terrorist organization and the PRC authorities' beatings and detentions of Kadeer's sons, even during the staff delegation's visit in Urumqi. In the 110 th Congress, the House passed H.Res. 497 (Ros-Lehtinen), noting that the PRC has manipulated the campaign against terrorists to increase cultural and religious oppression of the Muslim Uighur people and has detained and beaten Rebiya Kadeer's children. Passed on September 17, 2007, the resolution urged the PRC to protect the rights of the Uighurs, release Kadeer's children, and release a Canadian of Uighur descent, Huseyin Celil, who was denied access to Canadian consular officials. On May 22, 2008, Senator Sherrod Brown introduced a similar bill, S.Res. 574 . On July 11, Representatives Jim McGovern and Frank Wolf, co-chairs of the Congressional Human Rights Caucus, \"strongly condemned\" China's pre-Olympic crackdown on Uighurs, with the convictions two days earlier of 15 Uighurs (and immediate executions for two, suspended death sentences for three, and life imprisonment for the remaining 10). On July 30, 2008, the House passed H.Res. 1370 , calling on the PRC to stop repression of the Tibetan and Uighur peoples. On May 21, 2009, the WUC held its Third General Assembly in the Capitol Visitor Center, at which six Members of Congress spoke. On the same day, Senator Sherrod Brown introduced S.Res. 155 , to urge China to stop suppression of the cultural, linguistic, and religious rights of the Uighur people.\nRebiya Kadeer also received presidential support. In June 2007, President Bush met with Kadeer in Prague and criticized the PRC's imprisonment of her sons. In July 2008, before going to the Olympic Games in Beijing in August, Bush addressed religious freedom and honored Uighur Muslims, Christians, and Tibetan Buddhists seeking religious freedom in China. He also met at the White House with five advocates for freedom in China, including Kadeer. Bush told her that he would seek the release of her two imprisoned sons.\nDuring the unrest in July 2009 , the PRC blamed Rebiya Kadeer for violent Uighur-Han clashes in Urumqi and pressured foreign governments against any support for her. But in so doing, the PRC also raised her international profile and linked the PRC's tactics against Uighurs to that against Tibetans, who also experienced violent clashes in Lhasa in March 2008 that the PRC blamed on the Dalai Lama. On July 5, 2009, Uighurs in Urumqi protested a deadly fight at a factory on June 25 in southeastern Guangdong province, when Han (ethnic Chinese) workers attacked Uighur migrant workers after a Han man faked an Internet post that Uighur men raped Han women. The protests developed into confrontations with deployments of the paramilitary People's Armed Police (PAP) and attacks conducted by both Hans and Uighurs that left 192 dead and 1,721 injured. The PAP allowed Han mobs to carry poles as weapons to attack Uighurs, and the PRC's claims about casualties stressed Hans as the victims and were not independently verified. While the PRC allowed foreign reporters greater access in Urumqi (compared to Lhasa in 2008), the regime blocked international phone and Internet communication. (The regime blocked communication, such as e-mails, Internet access, text messages, and phone calls, through March 2010. Even after ostensibly re-opening channels, some suspected that the authorities restored communication with installed monitoring systems.) On July 6, the Xinjiang local government blamed Rebiya Kadeer in Washington, DC, as the \"mastermind\" behind the clashes. She denied that accusation against her and the WUC. She called for international investigations of the clashes. The next day, the PRC Foreign Ministry also blamed Kadeer, linked her to \"separatism\" and \"terrorism,\" and demanded that foreign countries, including the United States, not support her in any way.\nIn Congress , on July 7, 2009, House Speaker Nancy Pelosi issued a statement to urge China to ensure peaceful protests and dialogue instead of harsh policies. On July 9, Senator Ted Kaufman spoke on the floor against repression of the Uighurs and restrictions of press freedom in China. On July 10, Representative Bill Delahunt introduced H.Res. 624 , to condemn violent repression of Uighurs. Representative Frank Wolf wrote to President Obama and issued a floor statement on July 13, 2009, to call for officials at the White House and State Department to agree to meet with Kadeer. (Unlike President Bush, President Obama and his officials refrained from meeting with Kadeer.) Later, on December 8, Representative James McGovern introduced H.Res. 953 , to express the sense of the House that the PRC violated human rights and due process by carrying out executions and arbitrary detentions that targeted Uighurs in the aftermath of the unrest in July.\nAside from casualties, the aftermath included the PRC's crackdown that likely involved secret manhunts as well as suspected unequal law enforcement against Uighurs versus against Hans. Uighur women cried to foreign reporters about their detained husbands, sons, and brothers. Within two weeks after the unrest, the PRC reportedly arrested over 4,000 Uighurs, over-filling prisons so that some were held in PLA warehouses. Kadeer alleged in Tokyo on July 29 that almost 10,000 Uighurs disappeared in Urumqi. At least 300 Uighurs fled from China during the crackdown. Months after the unrest, ethnic tension in Xinjiang remained acute. Some Hans directed anger against Uighurs as well as even Wang Lequan (Politburo Member and Secretary of the Communist Party in Xinjiang, who was later replaced in April 2010) and the PLA (for perceived failures to protect Hans and use even tougher force against the Uighurs). In November, the police launched another one of the \"Strike Hard\" campaigns, which have involved preemptive \"first blows.\" By January 2010, a number of court decisions in Xinjiang issued 26 death sentences and other jail sentences. The courts used the charge of \"violent attacking, smashing, looting, and burning,\" (not \"terrorism\"). PRC leaders decided to expand the large presence of security forces as \"fists,\" including police, paramilitary, and military forces, trained for armed raids in homes.\nAlso, the Han-Uighur violence in Xinjiang further complicated China's demands for foreign support for its counterterrorism means. Despite China's attempt to deflect interest from local problems, the WUC denied China's charge. No foreign group, including TIP, claimed responsibility for the unrest. Moreover, China's handling of the unrest brought some foreign criticism, particularly in predominantly Muslim countries like Turkey and organizations like the Organization of the Islamic Conference (OIC). The Muslim Brotherhood issued a statement on July 7, 2009, that focused on the Uighurs as fellow Muslims (vs. nationalistic Uighur people of \"East Turkistan\") and called for unity of Islamic nations and boycotts of products made by their enemies. The Hizb ut-Tahrir (Party of Liberation) in Australia also issued a statement on July 8, on China's \"suppression\" of Muslims in Xinjiang. In Indonesia, Hizb ut Tahrir demonstrated at the PRC embassy on July 15. The Hizb ut-Tahrir in Pakistan issued its statement on July 20, criticizing China's occupation of Muslim land. In June 2010, on the eve of the first anniversary of the unrest, OIC's Secretary-General paid the first such visit to Xinjiang, including Kashgar.\nAlso, Al Qaeda's network apparently issued its first threat against China. Al Qaeda in the Islamic Maghreb (AQIM) in Algeria reportedly called for vengeance against China's interests in Africa. However, an ambush in Algeria attributed to AQIM took place in June 2009, before the July 5 incident in Urumqi, and killed 19 local police officers escorting PRC workers who were unhurt. At the end of July, Abdul Haq, TIP's leader, issued a video in Uyghur and distributed by the jihadist Al-Fajr Media Center in Arabic, that criticized the PRC for the events in Guangdong in June and Urumqi in July, called for Uighurs to engage in jihad, and appealed to other Muslims to target the PRC internationally. With a message from Abu-Yahya al-Libi on October 6, 2009, Al Qaeda apparently issued its first message focused on \"East Turkistan,\" calling for education about a \"massacre\" against Muslims in East Turkistan, a return to Islam, and use of weapons against \"invaders.\" However, he did not specify TIP or attacks, while vaguely calling for China's defeat. In January 2010, TIP produced videos in Uyghur to claim credit for alleged actions in revenge against China's \"bloody massacre\" on July 5, 2009, and to call vaguely on Muslims in Xinjiang to carry out jihad against China. In March 2010, TIP issued a statement to deny the PRC's charges that Uighur organizations linked to Rebiya Kadeer were responsible for violence in Xinjiang and were linked to TIP. TIP denied religious or organizational links to nine democratic and peaceful organizations such as the World Uyghur Congress, Uyghur American Association, and Uyghur Human Rights Project. The TIP distinguished itself with radical, armed methods.\nAs discussed above concerning foreign deportations of Uighurs to China, the PRC influenced Cambodia , despite U.S. and U.N. opposition, to hand over 20 Uighurs to China in December 2009. On June 24, 2010, just before the first anniversary of the unrest in July 2009, the PRC Ministry of Public Security (MPS) announced that it uncovered a \"terrorist cell\" that had planned attacks in 2008 and 2009, and caught and interrogated three alleged \"terrorists\" among 20 PRC citizens deported from a neighboring country, in apparent reference to Cambodia. MPS said it found that the three had sent e-mails to ETIM to seek help in their escape.\nOn July 8, 2010, Norway arrested three men whom authorities had under surveillance for over a year as suspects in a plot planned by Al Qaeda's network to commit terrorism, also in the United States and United Kingdom. One was a 39-year-old Norwegian citizen of Uighur origin who moved to Norway in 1999, named Mikael Davud, or Muhammed Rashidin. The other two were citizens of Uzbekistan (moved to Norway in 2002) and Iraq (moved to Norway in 1999). Their plot was reportedly organized by Salah al-Somali, who was a member of Al Qaeda who planned attacks around the world until a U.S. drone killed him in 2009. Under the orders of an Al Qaeda leader in Pakistan, Al-Somali allegedly acted as one of three organizers of three separate, subordinate groups that also plotted attacks in 2009 in New York City and Manchester, England. Unnamed counterterrorism officials said that the groups in Norway, the United States, and the United Kingdom likely were compartmentalized and did not know of each other's plans (allegedly to bomb subways in New York and a shopping mall in Manchester). An unnamed European official said the three in Norway were members of TIP and the ethnic Uighur had contacted Al Qaeda in 2008-2009 in Waziristan, Pakistan. However, only one suspect in three plots had an Uighur origin; he likely got to know the other two men in Norway, and the multinational network and direction from Pakistan showed the greater influence of Al Qaeda than TIP. As discussed above, Uighur and Uzbekistan radicals with common Central Asian backgrounds have had contacts for years, through TIP (ETIM) and IMU. If TIP as an organization was involved, the allegations showed that TIP attempted its first action as one of many parts of Al Qaeda's global, multinational network against Western interests, rather than an isolated Uighur-only small group with grievances localized in Xinjiang, or East Turkistan, against the PRC.\nAlso in July 2010, authorities in Dubai sentenced two Uighurs to 10 years in jail, for allegedly planning as ETIM members to explode a bomb in the DragonMart shopping center in 2008.",
"A question pertained to the fate of 22 Uighurs captured in Pakistan and Afghanistan. Soon after the U.S. military launched a war against Al Qaeda in Afghanistan in late 2001, at least 18 of the Uighurs left Afghanistan for Pakistan where Pakistanis ostensibly welcomed them but then lured them into a mosque to be handed over to the U.S. military. The United States then detained the Uighurs at Guantanamo Bay military prison, Cuba, in 2002. The PRC claimed them as its citizens for legal action as \"suspected terrorists\" and interrogated them at the prison. In May 2004, Amnesty International disclosed \"credible allegations\" that the United States in September 2002 allowed PRC officials access at Guantanamo to interrogate the Uighur detainees and that they also intimidated and threatened the Uighurs. Amnesty alleged that the Uighurs were subjected to stress and duress treatments, such as environmental manipulation, forced sitting for many hours, and sleep deprivation, some at the direction of the PRC official delegation. The Defense Department did not publicly comment on or deny the report. According to the Uighurs, the United States handed over to the PRC officials personal files on them and their families.\nThen, in July 2004, Amnesty International urged the United States not to turn the 22 detained Uighurs over to China, where they would face torture and execution in China's campaign to repress the Uighur people in the name of \"counterterrorism.\" Other options have included sending them to a third country and resettling them in the United States.\nEven while arguing that the United States had reason to detain the Uighurs at Guantanamo, the executive branch nonetheless contended that they should be released. The Departments of Defense and State sought a third country to accept them, rather than send them to China.\nStarting in late 2003, the Defense Department reportedly determined that 15 Uighurs at Guantanamo could be released, including five who were picked up because they were in the wrong place at the wrong time and 10 who were considered low-risk detainees whose enemy was the PRC government. Seven others were determined to be \"enemy combatants.\" By 2004, U.S. officials told reporters that Uighurs detained at Guantanamo Bay had no more intelligence value, but the United States could not find a third country to accept them, while ruling out their return to China. In August 2004, Secretary of State Colin Powell confirmed the dilemma and assured that \"the Uighurs are not going back to China, but finding places for them is not a simple matter, but we are trying to find places for them.\" Meanwhile, the Department of Homeland Security ruled out the Uighurs' settlement in the United States. The United States approached over 100 countries to accept the Uighurs, and the State Department reportedly had considered sending the Uighurs back to China instead of allowing them be resettled in the United States.\nOn April 20, 2006, the Defense Department released a list of 558 people detained at Guantanamo, in response to a Freedom of Information Act lawsuit brought by the Associated Press . The list confirmed that there were 22 Uighurs with PRC citizenship being held.\nOn May 5, 2006, the Pentagon announced the transfer from the Guantanamo Bay prison to Albania of five Uighurs, all of whom had been determined to be \"no longer enemy combatants\" during reviews in 2004-2005. The PRC then demanded that Albania extradite to China those Uighurs as \"terrorists,\" but Albania refused. Their plight raised a question of whether they should be resettled in the United States or another country, rather than be confined in a camp in Albania. Later, they reportedly found work in a snack bar making pizzas. In February 2009, Sweden awarded asylum to one of them, Adil Hakimjan, who became the first former detainee at Guantanamo to find asylum in the European Union.\nBy mid-2008, facing major court rulings, the executive branch began to grapple more urgently with the issue of whether and how to release the remaining Uighurs. Meanwhile, defense lawyers for the remaining 17 Uighurs held at Guantanamo Bay complained and testified to Congress that the Uighurs suffered in captivity of nearly total isolation at Camp Six.\nAlso in Congress , on June 4, 2008, at a hearing of the House Foreign Affairs Subcommittee on International Organizations, Human Rights, and Oversight, the Department of Justice's Inspector General, Glenn Fine, testified that U.S. military interrogators not only collaborated with PRC government agents to interrogate Uighurs at the prison, but that they also deprived them of sleep the night before by waking them up every 15 minutes in a treatment called the \"frequent flyer program.\" (This testimony confirmed Amnesty International's 2004 disclosure that the Bush Administration awarded access to PRC officials to interrogate the Uighurs at Guantanamo in 2002.) The chairman and ranking member, Representatives Bill Delahunt and Dana Rohrabacher, then wrote a letter to Defense Secretary Robert Gates to request that the detained Uighurs promptly be transferred and paroled into the United States. The Members noted that the transfer would not automatically grant asylum, another option for policymakers.\nOn July 30, 2008, Under Secretary of Defense for Policy Eric Edelman responded to the letter of June 19, 2008, to Secretary of Defense Robert Gates from Representatives Delahunt and Rohrabacher. Edelman wrote in his letter that \"many\" of the Uighurs detained at Guantanamo received \"terrorist training\" at a camp run by ETIM, but he nonetheless stressed that the Departments of State and Defense \"aggressively\" asked many other countries to accept those same detainees. He wrote that:\nAll of the Uighurs currently detained at Guantanamo were captured in the course of hostilities. Many of the Uighur detainees at Guantanamo received terrorist training at a camp run at the time by the Eastern Turkistan Islamic Movement (ETIM), a terrorist organization that received funding from Al Qaeda, or have stated that they are members of the organization itself. ETIM is on the State Department's Terrorist Exclusion List and was designated a terrorist organization under Executive Order 13224, \"Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism.\" There is therefore no current plan to parole Uighur detainees from Guantanamo into the United States. However, the Departments of State and Defense have aggressively approached more than 100 countries to accept the Uighur detainees at Guantanamo, and continue to seek a country that would accept transfer of the Uighurs. To date, only Albania has agreed to accept any and five were transferred there in 2006.\nIn contrast, in October 2008, Senator Lindsey Graham, sponsor of S. 3401 , the Enemy Combatant Detention Review Act, argued that while the Uighurs' case was \"exceptional,\" their release in the United States would be a \"dangerous precedent\" and that detainees waiting release should be transferred to another country.\nAt the start of the Obama Administration, Representative Delahunt wrote another letter to urge that the Uighurs be allowed to resettle in the United States. He also wrote that he was troubled that the Defense Department allowed PRC intelligence agents to interrogate the Uighurs at Guantanamo even while denying the same access to him and Representative Rohrabacher.\nOn February 2, 2009, Defense Secretary Robert Gates signed a memorandum, on the review of the Defense Department's compliance with President Obama's \"Executive Order on Review and Disposition of Individuals Detained at Guantanamo Bay Naval Base and Closure of Detention Facilities,\" dated January 22, 2009. Adm. Patrick Walsh, Vice Chief of Naval Operations, led the Defense Department team that conducted the review. Concerning the Uighurs still detained at Guantanamo, the review concluded that:\nNot knowing when they might depart Guantanamo (for home or elsewhere) has almost certainly increased tension and anxiety within the detainee population. This tension is further exacerbated in one particular population—the Chinese [sic] Uighurs. For several years, the [Department of Defense] and the State Department have been struggling to transfer 17 Chinese [sic] Uighur detainees from Guantanamo to a suitable third country. Due to U.S. obligations, the U.S. cannot send them back to China. Recent court rulings increased the pressure to move these detainees out of Guantanamo as soon as a suitable third country has been selected. In addition to the Chinese [sic] Uighurs, there are now two additional detainees (Algerian, but captured in Bosnia) that the court has ordered to be released from U.S. custody. All these detainees are now housed in Camp Iguana, a holding camp that provides the greatest amount of freedom for the detainees while ensuring continued camp and U.S. naval base security. Despite increased freedoms at Camp Iguana, the detainees there continue to vocally and physically express their extreme frustration with their continued detention at Guantanamo. Therefore, the Review Team requests that emphasis be placed on providing immediate assistance within the interagency process on where to transfer these detainees (especially those currently housed in Camp Iguana).\nLater, at a hearing of the Senate Appropriations Committee in late April 2009, Defense Secretary Robert Gates confirmed to Congress that the Administration has considered taking in some but probably not all of the 17 Uighur detainees because of worry that they would be \"persecuted\" if they go to China and because it is \"difficult for the State Department to make the argument to other countries they should take these people that we have deemed, in this case, not to be dangerous, if we won't take any of them ourselves.\"\nMeanwhile, concerning the possible resettlement of the detained Uighurs in the United States, Senator Mitch McConnell stated that \"the question remains, as it does with all detainees held at Guantanamo: does their release make America safer? Surely, the Administration will not release these terrorist-trained detainees onto the streets of a U.S. community before providing to Congress the legal rationale for doing so, and a guarantee of safety for American citizens.\" In the House, on May 1, Representative Frank Wolf wrote a letter to President Obama expressing concern that release of the Uighur detainees to the United States \"could directly threaten the security of the American people.\" Wolf asked the President to declassify all intelligence regarding their capture, detention, and assessment of the threat that they might pose to Americans, before any decision to release them. Three days later, Wolf stated that it is \"unacceptable\" for the President to release the Uighur detainees to the United States without first briefing Congress.\nOn May 7, 2009, Representative John Boehner introduced H.R. 2294 , the \"Keep Terrorists Out of America Act.\" It would seek to oppose transfers of any detainees from Guantanamo to the United States and require approval from the recipient state's governor and legislature as well as presidential certification to Congress concerning the destinations of transfers, continued prosecution and detention of detainees, and authority of federal courts to release them into the United States. A week later, the Senate Appropriations Committee reported S. 1054 , Supplemental Appropriations Act, 2009, with $50 million to support relocation and disposition of detainees to locations outside of the United States after the Defense Secretary submits a plan and with a ban on use of the funds to transfer, relocate, or incarcerate detainees in the United States. The House and Senate passed, respectively on May 14 and 21, the Supplemental Appropriations Act, 2009, P.L. 111-32 , inter alia , to ban use of funds to release any detainees to the United States.\nEven without custody or proceedings for the Uighurs at Guantanamo, the PRC Foreign Ministry, in a press conference on June 2, 2009, branded them as \"East Turkistan Islamic Movement\" (or ETIM) \"terrorist suspects\" and expressed opposition to any country accepting the Uighurs. Then, on June 10, Palau (which has a diplomatic relationship with Taiwan, not the PRC, and close ties with the United States under the Free Compact of Association) announced its willingness to accept the remaining 17 Uighurs detained at Guantanamo. Then, suddenly, Bermuda accepted four of them on the next day. Later, in June, Palau's officials interviewed some of the 13 Uighurs left at Guantanamo, who worried about Palau's ability to protect them from China. On November 1, 2009, the Defense Department transferred six Uighurs to Palau. Then, on February 3, 2010, Switzerland announced that it would accept on humanitarian grounds two Uighurs who were in a special case (Arkin Mahmud, who developed mental health problems, and his brother and fellow detainee, Bahtiyar Mahnut, who refused to leave his brother behind), leaving five in detention. The five Uighurs remaining at Guantanamo had been taken into custody in Pakistan, after they fled the bombings in Afghanistan in late 2001.\nIn Congress, Representative Madeleine Bordallo of Guam wrote a letter to President Obama on June 9, to express her concern about security risks due to the possibility that the Uighurs who go to Palau could travel to Guam under the Compact of Free Association. On June 11, Representatives Delahunt and Rohrabacher wrote to Attorney General Eric Holder to urge him to oppose the PRC's demand to take the Uighur detainees. Moreover, Representative Delahunt and Rohrabacher held a series of hearings on the Uighurs, including those at Guantanamo, on June 10, June 16, and July 16, 2009. On June 26, 2009, the House Intelligence Committee reported H.R. 2701 (Reyes), the Intelligence Authorization Act for FY2010, with Section 351 to require an unclassified summary of intelligence on any threats posed by the Uighurs who were detained at Guantanamo. On February 26, 2010, the House passed H.R. 2701 with Section 351. On September 24, Representative Alcee Hastings introduced H.Res. 774 to express appreciation to Bermuda for accepting four of the Uighurs.\nIn the c ourts , on June 12, 2008, the Supreme Court granted habeas corpus rights to detainees at Guantanamo and ruled that challenges to their detentions be moved to a civilian federal court. Then, undermining the evidence accusing Uighurs, on June 20, 2008, the U.S. Court of Appeals for the District of Columbia Circuit decided that in the case of Huzaifa Parhat, the Combatant Status Review Tribunal's determination of him as an \"enemy combatant\" was not valid. The U.S. Court of Appeals ordered the United States Government to release Parhat, to transfer him, or to expeditiously convene a new Tribunal to consider evidence submitted in a manner consistent with the court's opinion. In reviewing the evidence, the Court of Appeals found that:\nParhat is an ethnic Uighur, who fled his home in the People's Republic of China in opposition to the policies of the Chinese government. It is undisputed that he is not a member of al Qaida or the Taliban, and that he has never participated in any hostile action against the United States or its allies. The Tribunal's determination that Parhat is an enemy combatant is based on its finding that he is \"affiliated\" with a Uighur independence group, and the further finding that the group was \"associated\" with al Qaida and the Taliban. The Tribunal's findings regarding the Uighur group rest, in key respects, on statements in classified State and Defense Department documents that provide no information regarding the sources of the reporting upon which the statements are based, and otherwise lack sufficient indicia of the statements' reliability. Parhat contends, with support of his own, that the Chinese government is the source of several of the key statements.\nThen, on September 30, 2008, the Justice Department conceded in a filing at the U.S. District Court for the District of Columbia that all of the 17 remaining Uighur detainees were \"no longer enemy combatants.\" The Justice Department notified that the status of the remaining 12 Uighur detainees will be \"put into the same category\" as the five original petitioners, including Parhat, who challenged their status as \"enemy combatants.\" In response, on October 1, the Uighurs' counsels submitted a memorandum to the District Court, contending that the concession ended any question about each Uighur's \"non-combatant status\" (in contrast to the Justice Department's use of \"no longer enemy combatants\"). The counsels argued that the Justice Department conceded that it would not contest what the Uighurs asserted since 2005: that none of them was an enemy combatant. (As the U.S. Court of Appeals for the D.C. Circuit later noted on February 18, 2009, \"the government saw no material differences in its evidence against the other Uighurs, and therefore decided that none of the petitioners should be detained as enemy combatants.\")\nThen, at a hearing on October 7, Judge Ricardo Urbina ordered the release of the Uighurs into the United States, saying that \"because the Constitution prohibits indefinite detention without cause, the Government's continued detention of Petitioners is unlawful.\" The Uighurs' attorneys sought their release, particularly with assistance in resettlement offered by a Uighur community in the Washington, DC, area and by a Christian, Muslim, and Jewish religious community in Tallahassee, FL. One of their lawyers said that they should not be detained \"just because it's politically expedient,\" while the Bush White House argued against setting a \"precedent\" for other detainees suspected of planning the 9/11 attacks. On the day of the release order, the PRC branded the detainees as suspected \"terrorists\" and demanded that they be handed over to Beijing.\nThe next day, on October 8, the U.S. Court of Appeals for the District of Columbia Circuit temporarily blocked the order to release the Uighurs, as requested by the Justice Department which argued that they had received \"military training.\" However, this claim about a danger undermined the State Department's efforts to find a country to accept the Uighurs as not dangerous, and Ambassador-At-Large Clint Williamson had to cancel an imminent diplomatic trip. On October 20, the Court of Appeals granted the Justice Department's request for a stay of the order to release the Uighurs, in a 2-1 decision. In her dissent, Judge Judith Rogers wrote that \"the fact that petitioners received firearms training cannot alone show they are dangerous, unless millions of United States resident citizens who have received firearms training are to be deemed dangerous as well.\"\nMeanwhile, according to a review of their statements at the prison, the Uighurs expressed support for the United States as their ally but also anger at their long detention. After the change in their status in early October 2008, authorities at Guantanamo moved the 17 Uighurs to the low-security Camp Iguana. In its brief for the Court of Appeals on October 24, 2008, the Justice Department reported that the Uighurs were housed in \"relatively unrestrictive conditions,\" in special communal housing with access to all areas of the camp, including outdoor recreational and picnic areas. They slept in an air-conditioned bunk house and enjoyed access to a television, VCR and DVD players, special food, showers, and reading materials. At the end of March 2009, the Uighurs were among 20 detainees (out of 240) at Camp Iguana, during a visit by an inter-agency team that included lawyers from the Departments of Justice, State, and Homeland Security.\nThe Court of Appeals heard arguments on November 24, 2008. Then, on February 18, 2009, the three-judge U.S. Court of Appeals for the D.C. Circuit reversed Judge Urbina's order to release the Uighurs to the United States. As part of the summary of the legal situation of the Uighur detainees, the Court wrote:\nIn the Parhat case, the court ruled that the government had not presented sufficient evidence that the Eastern Turkistan Islamic Movement was associated with al Qaida or the Taliban, or had engaged in hostilities against the United States or its coalition partners. Parhat therefore could not be held as an enemy combatant. The government saw no material differences in its evidence against the other Uighurs, and therefore decided that none of the petitioners should be detained as enemy combatants. Releasing petitioners to their country of origin poses a problem. Petitioners fear that if they are returned to China they will face arrest, torture or execution. United States policy is not to transfer individuals to countries where they will be subject to mistreatment. Petitioners have not sought to comply with the immigration laws governing an alien's entry into the United States. Diplomatic efforts to locate an appropriate third country in which to resettle them are continuing. In the meantime, petitioners are held under the least restrictive conditions possible in the Guantanamo military base. As relief in their habeas cases, petitioners moved for an order compelling their release into the United States.\nTwo of the judges, Karen Henderson and Raymond Randolph ruled that Urbina overstepped his authority. The judges argued that the courts do not have the authority to review the determination of the executive branch to prevent the 17 Uighurs from entering the country. Judge Randolph wrote that \"the question here is not whether petitioners should be released, but where.\" While concurring, Judge Judith Rogers declared that the District Court erred in granting release prematurely without first ascertaining whether immigration laws provided a valid basis for detention of the Uighurs. Then, on April 6, 2009, the Uighurs appealed to the Supreme Court. On March 1, 2010, the Supreme Court dismissed the case ( Kiyemba v. Obama ), in part because the Uighur detainees had offers of resettlement in another country by the time of the court's ruling.",
"The Olympic Games took place in Beijing on August 8-24, 2008, with no attacks against them. Before the event, there was congressional concern about whether China's tight security at the Olympic Games would result in internal repression (including human rights dissidents, Uighurs, Tibetans) or harm to safety of American citizens (including those targeted by China for expressing concerns about Tibet, Darfur, Falungong, Taiwan, Burma, North Korean refugees, Xinjiang, etc.). U.S. officials and private firms (even major U.S. Olympic sponsors) faced difficulty in getting the PRC's plans for Olympic security. One policy implication concerns whether to support or oppose holding future international events in China.\nIn 2007, the PRC government reportedly intensified intelligence gathering of foreigners whom it suspected as protesting its policies in a range of areas, including targeting various non-governmental organizations (NGOs). Issues concerned the U.S. role, including how the State Department should warn and protect U.S. citizens who travel to Beijing. On April 30, 2008, the State Department issued a general \"travel alert\" to advise U.S. citizens that \"any large-scale public event such as the upcoming Olympic Games may present an attractive target for terrorists. There is a heightened risk that extremist groups will conduct terrorist acts within China in the near future.\" However, while U.S. intelligence was concerned about PRC compromise of electronic equipment, like computers and cellphones, that Americans would bring to the Games (or other times), the State and Commerce Departments reportedly declined to issue a strong warning. On July 30, 2008, Senator Sam Brownback introduced S.Res. 633 on China's pre-Olympic clampdown, to express the sense of the Senate on the deterioration of respect for privacy and human rights.\nAnother question concerned the U.S. stance on the PRC's clampdown on security with greater repression before and during major events. Some were concerned about President Bush's attendance at the Olympic Games, involving the message it sent and any pretext for China's claimed need to tighten internal security for Bush's presence. U.S. policymakers knew about the PRC's record of rounding up dissidents, peaceful protestors, and other \"undesirables\" ahead of and during major international events, including presidential summits. When President Bush visited Beijing on November 20, 2005, accompanying Secretary of State Condoleezza Rice acknowledged reports about crackdowns by the PRC's security forces on religious figures (with house arrests and detentions) in the days ahead of Bush's visit. Rice said that the U.S. side would raise those concerns \"vociferously\" with the PRC government. On February 28, 2008, President Bush said he would raise concerns about human rights and religious freedom in China with its ruler Hu Jintao and at the same time \"enjoy a great sporting event\" as a \"sports fan.\"\nAs preparations intensified for the summer Olympics in Beijing, another issue concerned the extent to which the United States, including the military, should cooperate with the PLA or the paramilitary PAP, given concerns about China's internal repression surrounding international events. In March 2007, the PRC Minister of Public Security called for \"striking hard\" at \"hostile forces\" of \"ethnic separatism, religious extremism, and violent terrorism\" and \"evil cults\" like the Falungong to have \"stability\" for the Olympic Games. A precedent was set in 2004, when various U.S. departments, including the Department of Defense, provided security assistance for the Olympic Games in Athens, Greece, in 2004. On June 22, 2006, at a hearing of the House Armed Services Committee, Brigadier General John Allen, Principal Director for Asian and Pacific Affairs, told Congress that the Defense Department might work with China on security cooperation for the Olympics. However, a year later, Deputy Under Secretary of Defense Richard Lawless testified to the House Armed Services Committee on June 13, 2007, that China did not accept assistance from the Defense Department for Olympic security.\nIn the lead-up to the Olympic Games, there was no clarity or confirmation about the PRC's claims of terrorist threats in China. The PRC regime has tended to selectively target violent incidents involving Uighurs and Tibetans as \"terrorism\" but not other violent attacks committed by Hans (ethnic Chinese people). After a Tibetan riot and security crackdown in Lhasa in March 2008, the PRC called the Tibetan Youth Congress \"terrorist.\"\nIn 2007, just as PRC preparations and propaganda for Olympic security intensified, the PRC claimed that on January 5, police destroyed a \"terrorist training camp\" run by ETIM in Xinjiang near the border with Pakistan, killed 18 \"terrorists,\" and captured 17 others (who were later sentenced to death, suspended death sentences, or life imprisonment). However, the civilian Public Security police reportedly carried out the action, not the paramilitary People's Armed Police (PAP). As a specialist wrote, the question was \"whether China really confronts a serious threat of terrorism in Xinjiang.\" Visiting Beijing in June 2007, FBI Assistant Director for International Operations Thomas Fuentes said that the FBI was still assessing the validity of the PRC's claims about the terrorist threat. The State Department reported that there were no acts of international terrorism in China in 2002, 2003, 2004, 2005, 2006, or 2007. The National Counterterrorism Center under the Director of National Intelligence did not report any terrorist attacks in the PRC in 2007. \"Terrorism\" was defined as \"premeditated, politically motivated violence perpetrated against noncombatant targets by subnational groups or clandestine agents.\"\nThe next year, the PRC claimed that police in January 2008 raided a house in Urumqi in Xinjiang, killing two people and capturing 15 others who were Uighur separatists carrying out \"terrorist acts.\" Despite calling them \"terrorists,\" the Xinjiang police found only axes, books, and knives (which are common traditional items in Uighur culture). Again, the PAP was not involved in this reported raid by the civilian police. The U.S.-based Uyghur American Association called for an independent investigation of those claims and defended efforts of the Uighur people as peaceful. A reporter who visited the site of the raid in April found residents of the apartment building who reported that nothing dramatically dangerous had happened. Then, in March 2008, the PRC claimed that a Uighur woman was an \"East Turkestan element\" who tried to blow up a plane flying from Urumqi to Beijing. A news article in New Delhi reported that the incident had a connection to terrorists in Pakistan, but the sophistication of that attempt remained disputable. Also in March, soon after riots in Tibet, hundreds protested in the southern Xinjiang city of Khotan after police returned the body of a Uighur man who died in custody.\nHowever, just the next month in April, the city of Urumqi (including the airport and railroad station) and flights between Urumqi and Beijing were generally calm without stringent security. A few civilian policemen carried sub-machine guns, and the airport banned small bottles of shampoo and other liquids in carry-on bags.\nIn June 2008, the Olympic torch relay went though Xinjiang with no major incident, while there were crackdowns that prompted an attack on at least one police station. In July, PRC and Hong Kong media reported tightened security checks for roads, railways, and airports throughout Xinjiang, amid a claimed need to protect the Olympics. Uighurs complained of racial profiling that targeted them at airports or train stations and that confiscated their passports to ban travel.\nJust before the Olympic Games and in the Han areas of China, up to 30,000 people protested and burned police cars in southern Guizhou province on June 28, and a man from Beijing attacked a police station in Shanghai, killing six policemen on July 1, 2008. He reportedly was armed with a knife, a hammer, and homemade explosive devices. PRC media reported that he sought revenge for harsh police interrogation of him in 2007. The PRC did not call these attacks \"terrorism.\"\nBut in Xinjiang, on July 9, 2008, official PRC media asserted in an English-language report that the police killed and arrested criminals who were in a \"holy war\" training group. However, the original Chinese-language news article in Urumqi called them criminals and did not refer to any terrorist connections. On the same day, Uighur sources reported that the PRC regime forced about 10,000 Uighurs in Kashgar (Kashi) to watch a mass sentencing and execution rally. On July 10, Urumqi's local Public Security officials claimed that they had cracked five \"terrorist groups\" and detained 82 \"terrorists\" in the first six months of 2008. On July 14, the local police in Kashgar in Xinjiang claimed that they had eliminated 12 \"terrorist\" gangs.\nNevertheless, the PRC regime downplayed ostensible terrorist threats in videos posted on the Internet in 2008 that cited Uighur grievances in China and targeted the Olympic Games. On June 26, 2008, a video was posted on YouTube with a message in Uighur threatening violence at the Olympic Games in Beijing issued under the name of the Turkistan Islamic Party (TIP), which could be ETIM, by a masked and armed man calling himself Seyfullah. However, instead of citing this to bolster its claims about the Uighurs, the PRC did not play up the development. Only a PRC official media report on July 3 cited a Vice Minister of Public Security as mentioning an \"East Turkistan\" threat on the Internet. Uighur leader Rebiya Kadeer reacted by supporting peaceful and successful Olympic Games in Beijing.\nAgain on July 25, a self-described TIP leader, Seyfullah, posted another video in Uyghur on YouTube, trying to stop the Olympic Games and claiming credit for four incidents in various cities in China (that were not Beijing) supposedly on May 5, May 17, July 17, and July 21. Contrary to its usual hyping of an \"East Turkestan\" terrorist threat, the PRC government and its experts promptly denied the TIP leader's claims. In another YouTube video dated August 1, a man identified as the head of TIP's Religious Education Department, Abdullah Mensur, warned Muslims against going to the Olympic Games in Beijing.\nHowever, in those incidents outside of Xinjiang and in eastern and southern cities not hosting the Olympic Games, except for Shanghai, the PRC did not call them \"terrorist\" acts. Moreover, the video incorrectly named an explosion in Guangzhou on July 17. There was an explosion reported in Guangzhou, but it was on March 13 and involved migrant workers unloading trucks when cargo exploded and killed seven people. On May 5, a bus reportedly exploded in Shanghai, killing three people. On May 17, a gambler who lost money reportedly drove a tractor with explosives to target a gambling site in Wenzhou and killed 17 people. In another incident that the video did not mention, on July 2, a man reportedly seeking revenge caused an explosion at a government office in Hunan province that injured 12 people. On July 21, bombs exploded in two buses in Kunming, Yunnan province, killing two people. The PRC Public Security Ministry called the incident \"sabotage,\" not terrorism.\nThen, on August 4, four days before the start of the Olympics in Beijing, in the western-most city of Kashgar (Kashi) in Xinjiang, two men drove a truck into a group of PAP Border Security Guards and threw two bombs, killing 16 of them. Immediately, PRC official media reported the violent incident as \"suspected terrorism\" and raised an alleged connection to \"East Turkistan\" terrorists. The police said they caught two Uighur men from Kashgar, a vegetable vendor and taxi driver, who were found with \"home-made\" bombs, a hand-gun, and knives, and were waging a \"holy war.\" Kashgar's Communist Party Secretary said on August 5 that the incident was a premeditated \"terrorist attack.\" However, the director of Xinjiang's Public Security Department said that the police did not have proof that a terrorist organization like ETIM was responsible for the incident. He also had to apologize to two Japanese journalists trying to cover the incident whom PAP guards detained and beat in a hotel, prompting Japan's diplomatic protest. Foreign eye-witnesses reported that the attackers wore the same PAP uniforms as the security personnel.\n(In its report on terrorism in 2008, the National Counterterrorism Center under the Director of National Intelligence reported that China was one of the countries that experienced their first \"high-fatality attack\" perpetrated by Sunni extremists, based on data since 2004. Also, the report included the incident on August 4, 2008, in Kashgar, Xinjiang, as one of the worldwide \"high-fatality terror attacks.\" The report noted that \"no group claimed responsibility, although it was widely reported that the East Turkistan Islamic Movement (ETIM) was responsible.\" )\nOn August 10, 2008 in the town of Kuqa in Xinjiang, according to PRC state-owned media, 15 male and female assailants threw out of vehicles some home-made bombs that targeted the Public Security Bureau, government offices, and businesses. The bombs killed one security guard and one Uighur bystander. The police again prevented foreign news about what occurred by detaining Japanese reporters and deleting their photographs. Then, two days later, on August 12, attackers stabbed to death three guards at a security checkpoint at Yamanya town near Kashgar, where an attack occurred on August 4. The authorities responded with police and paramilitary manhunts.\nOn August 13, the PRC Foreign Ministry quickly blamed \"East Turkistan\" forces even while noting that the incidents were still under investigation. A PRC government intelligence-related analyst claimed that threats increased in Xinjiang with coordinated multiple bombings, crude home-made bombs, female attackers, and \"suicide bombers.\" However, PRC media had reported such alleged attacks in the 1990s. Further, initial reports noted that the alleged attackers threw the bombs on August 10. Also, PRC officials accused the two (of 15) alleged attackers who died in an explosion to be \"terrorists\" and \"suicide bombers,\" but it was not known whether they intended to blow themselves up. Moreover, the three attacks in Xinjiang in August 2008 killed 21 people and targeted primarily security forces and not civilians, contrary to the bombings in 1997 in Urumqi and earlier in 2008 in Shanghai and Kunming.\nFurthermore, there was a bombing incident on a bus in Guangzhou on August 21, 2008, during the Olympic Games, reported by a newspaper in Hong Kong, but the PRC media did not report on it until August 24 (the last day of the Olympic Games) and PRC authorities deleted postings about it on the Internet. On May 26, 2009, a court sentenced to six years in prison a man from the southern province of Guangxi who allegedly planted the bomb on a bus. Conflicting reports said that the police detonated the bomb before it was set off but also that it exploded a hole in the bus with no injury. The incident did not involve a Uighur, and the PRC did not call it \"terrorism.\"\nIn the violent incidents in 2008, the first reported bombings in Xinjiang since 1997, a critical factor could be the Taliban's resurgence in Pakistan and Afghanistan since mid-2006 that radicalized some disaffected Uighurs in that border area. Many multinational militants have been known to operate in the area that also borders Xinjiang. Since 1997, if not earlier, Pakistani militants crossing into China have raised concerns in Beijing. Before the Olympic Games in 2008, the PRC ambassador in Islamabad said that ETIM was active in Pakistan, warning of harm to the PRC-Pakistan relationship. During the Olympic Games, the PRC arrested 35 Pakistanis accused of planning to attack the Games, which the Foreign Ministry did not deny. After the Olympics, in the spring of 2009, the PRC government, including Minister of Public Security Meng Jianzhu, asserted to Pakistan's President Asif Ali Zardari that ETIM put its \"military headquarters\" in Pakistan's tribal areas and was \"planning to attack China on the 60 th anniversary celebration of the communist revolution in October,\" according to Pakistani politician Mushahid Hussain. Moreover, Pakistan reportedly extradited to China nine alleged \"militants\" from Xinjiang who were arrested in Pakistan's Federally Administered Tribal Areas (FATA).\nAlternatively, it was also possible that PRC security precipitated unrest in Xinjiang ahead of August 2008 for a pre-Olympic crackdown, similar to a suspected strategy employed in Tibet surrounding the March 2008 riots, so as not to upset its determined \"successful\" Olympics. PRC officials have cited the use of \"preemptive strikes\" in \"stability maintenance\" in Xinjiang. The violence also could have been reactions to the pre-Olympic security crackdowns that raised resentment. Some Uighurs might have taken advantage of the Games to publicize their plight.\nDespite the Internet videos and incidents in Xinjiang, the Olympics took place on August 8-24, 2008, with no violence against the Games in Beijing. In the lead-up to the Games with increasing voices opposing PRC policies, some were concerned that the PRC would not be able to effectively maintain control and security at the Olympic Games. Nevertheless, as the PRC authorities severely tightened security around China, the regime showed a greater likelihood in over-reacting to any disturbances, even peaceful protests, by foreigners or PRC citizens. The PRC deployed immense security forces comprised of the military (PLA), paramilitary People's Armed Police (PAP), and civilian police and totaling 110,000 to tighten control. Those PLA forces included ground, air, and naval units. Indeed, while the PRC authorities exercised initial restraint against domestic and foreign protesters (who advocated for a free Tibet), agents violently beat up and detained some foreign reporters. In addition to the above-mentioned beatings and detentions by security forces of Japanese reporters in Xinjiang, PRC police beat up or forcefully detained Hong Kong reporters covering a sale of Olympic tickets in late July plus British and U.S. journalists covering pro-Tibet protests during the Games.\nOn October 21, 2008, the PRC's Ministry of Public Security (MPS) issued its second list of alleged terrorists belonging to ETIM (after the first in December 2003), seeking to capture in China or abroad eight Uighurs wanted for having plotted \"terrorist attacks\" against the Olympic Games. Three days later, a video was posted to YouTube that identified itself as a message from TIP with a still picture of \"Military Commander Seyfullah.\" The message in Uyghur rebutted the MPS's charges, questioning the accuracy of the identification of suspects and defending the East Turkistan Muslim's \"jihad\" against \"Chinese Communist invaders.\"\nIn February 2009, PRC authorities launched a campaign to demolish the Uighurs' old town in Kashgar and force families from their homes and cultural center, relocating 42% of Kashgar to new buildings. On April 9, PRC authorities in Kashgar executed two local Uighur men for the alleged attack on August 4, 2008, with their death sentence publicly announced to about 4,000 people assembled in a stadium followed by their execution out of public view. The official news media's report did not mention the ETIM organization in declaring their execution. In September 2009, PRC authorities stepped up the assimilation policy by closing schools in townships and villages to merge students into larger, county-level schools and to force Uighur students to learn the Mandarin (Chinese) language at a younger age instead of their Uighur language. While learning Mandarin could help Uighurs economically, Uighurs have said that their Turkic-based language historically promoted trade and other ties with neighboring Central Asia and with Europe. Also, critics said that rather than Uighur nationalism, the Han's extreme nationalism imposed superiority and assimilation that continued to exacerbate resentment.\nOutside of Xinjiang, there have been numerous violent incidents reported in China that the PRC authorities did not label as \"terrorism\" or \"suicide bombings.\" From January 2006 to July 2009, PRC law-enforcement authorities carried out a nationwide campaign to target organized crime. The campaign reportedly involved the convictions of 12,796 people in gangs connected with 1,171 cases of organized crime, detentions of over 89,000 people, and over 108,000 other cases. Moreover, China's provinces have reported widespread seizures of firearms and explosives, attacks on police, and fires or explosions in buses. For example, on June 5, 2009, a fire in one bus in Chengdu, Sichuan province, resulted in the deaths of 28 people. PRC media reported that an unemployed man (with a Han name) was the \"arsonist\" who started the blaze and killed himself, not a \"terrorist\" or \"suicide-bomber.\" In Chongqing, another city in Sichuan, a bus reportedly caught on fire or exploded on September 3, 2009, injuring seven riders.",
"There has been congressional oversight of sanctions banning arms sales and export of crime control equipment to China. The President has the options of strictly maintaining the sanctions, permanently waiving sanctions, or selectively waiving sanctions imposed after the 1989 Tiananmen Crackdown (Section 902 of the Foreign Relations Authorization Act for FYs 1990 and 1991, P.L. 101-246 ), which deny exports of defense articles/services (including helicopters or related parts), crime control equipment, and satellites. President Bush issued a waiver of those sanctions on January 9, 2002 (to export a bomb containment and disposal unit for the Shanghai fire department to prevent terrorist bombings) and again on January 25, 2002 (to consider export licenses for equipment to clean up chemical weapons in China left by Japan in World War II).\nMore presidential waivers were considered for exports of equipment for the Olympic Games in Beijing in August 2008, but there were concerns about contributing to China's internal repression. In May 2005, China held its first exhibition on counterterrorism equipment, and over 200 U.S. and other foreign companies displayed their arms and equipment. At a hearing of the Congressional-Executive Commission on China (CECC) on February 27, 2008, its chairman, Representative Sander Levin, expressed concerns that \"any high-technology surveillance equipment will be left in the hands of China's public security and state security organ, who may use them to monitor political activists, religious practitioners, and members of certain ethnic minority groups.\" The Bush Administration reportedly approved the export of sensitive equipment and expertise to PRC security and PLA forces (for which no presidential waiver was needed, according to the State Department). The equipment included that used to detect explosives and radiation. Also, the Energy Department's National Nuclear Security Administration sent a Nuclear Emergency Support Team (NEST) to China to help in detection of a radiological bomb. On June 30, 2008, President Bush notified Congress that he waived temporarily the sanction on munitions exports to allow athletes in shooting competitions to bring firearms and U.S. film crews to bring mobile high definition television camera systems with military gyroscopes to the Olympic Games, after which the equipment would be returned to the United States.\nFurther, another law could affect U.S. policy on whether to allow military transfers to the PRC. Section 6 of the Arms Export Control Act ( P.L. 90-629 ) prohibits arms sales governed by the Act to any country that is determined by the President to be engaged in a pattern of intimidation or harassment directed against individuals in the United States. There are congressional and other concerns about suspected PRC-directed intimidation or harassment on U.S. soil. For example, Representative Frank Wolf raised concern about a collision between a car connected to the PRC government and Uighur leader Rebiya Kadeer's car, injuring her in 2006 in northern Virginia. Representative Wolf also noted that the PRC government verbally harassed his staff on multiple occasions because of his invitations to Rebiya Kadeer to speak on Capitol Hill. Reportedly, PRC diplomats use informants in Uighur communities in Germany, Sweden, the United States, and elsewhere. In January 2010, the PRC withdrew two films in retaliation after a private film festival in Palm Springs, CA, refused the PRC's demand to cancel a movie about Tibet. In 2010, Defense Secretary Robert Gates voiced U.S. objection to any effort to intimidate U.S. corporations engaged in legitimate economic activity, particularly in the South China Sea.",
"In his 2002 State of the Union speech, President Bush stressed the twin threats of terrorism and weapons proliferation, indicating a strong stance on proliferation problems with the PRC and others. PRC entities have reportedly transferred missile and/or chemical weapons technology to countries that the State Department says support terrorism, like Iran and North Korea. On numerous occasions, the Administration has imposed sanctions for weapons proliferation by PRC entities. However, the Administration has stressed China's cooperation at the Six-Party Talks on North Korea's nuclear weapons and at the U.N. Security Council on sanctions against Iran, rather than China's transfers. China has not joined the Proliferation Security Initiative (PSI) announced by President Bush on May 31, 2003. In its Final Report issued on July 22, 2004, the 9/11 Commission urged that the United States encourage China (and Russia) to join the PSI, among many recommendations. The 110 th Congress considered H.R. 1 , the Implementing Recommendations of the 9/11 Commission Act of 2007. The House-passed bill of January 9, 2007, noted that the Commission called on China to participate in PSI. The Senate passed its bill on July 9 without such language. The Conference Report of July 25 adopted the House provisions on the commission's recommendations and on the sense of Congress that the President should expand and strengthen the PSI. The bill became P.L. 110-53 on August 3, 2007.",
"The Bush Administration also sought China's cooperation in the Container Security Initiative (CSI) of U.S. Customs and Border Protection. Launched in January 2002, CSI looked at PRC ports (Shanghai and Shenzhen) among the top 20 foreign ports proposed for U.S. screening of manifests and inspections of containers before U.S.-bound shipping. On July 29, 2003, China agreed to join CSI. However, only after this U.S.-PRC agreement did the Bush Administration discuss an agreement with Taiwan to cover the last of the 20 ports: Kaohsiung. The U.S. CSI team became operational in Shanghai in April 2005, and that CSI program underwent its first six-month review by late summer. That CSI program has been compared to the CSI experience with more cooperative and efficient customs authorities in Hong Kong, cooperation that became operational in 2002. In November 2005, the United States and the PRC signed an agreement, as part of the Megaports Initiative of the Energy Department's National Nuclear Security Administration, to install equipment at China's ports to detect nuclear and other radioactive material that could be used for nuclear weapons and \"dirty bombs.\"",
"While there have been no counterterrorism operations conducted with the PLA, the Pentagon has cautiously resumed a military-to-military relationship with China. In 2001, the Bush Administration limited contacts with the PLA after a Pentagon review started and the EP-3 aircraft collision crisis occurred. Then, for the first time under the Bush Administration, the Pentagon and the PLA again held Defense Consultative Talks (DCT) on December 9, 2002. There were visits by China's Defense Minister, General Cao Gangchuan, in October 2003 and the Chairman of the Joint Chiefs of Staff, General Richard Myers, in January 2004. Secretary of Defense Rumsfeld visited China in October 2005, the first visit by a defense secretary since William Cohen's visit in 2000 and long sought by the PLA for the resumption of a military relationship. Relevant legislation for congressional oversight includes the Foreign Relations Authorization Act for FYs 1990-1991 ( P.L. 101-246 ); National Defense Authorization Act for FY2000 ( P.L. 106-65 ); and National Defense Authorization Act for FY2006 ( P.L. 109-163 ).\nHowever, there is a debate about the extent to which U.S. forces should help the PLA's modernization, including through combined exercises. Some have urged caution in military cooperation with China on this front of counterterrorism, while others see benefits for the relationship with China. Senator Bob Smith and Representative Dana Rohrabacher wrote Secretary of Defense Rumsfeld in late 2001, to express concerns about renewed military contacts with China. They argued that \"China is not a good prospect for counter-terrorism cooperation,\" because of concerns that China has practiced internal repression in the name of counterterrorism and has supplied technology to rogue regimes and state sponsors of terrorism. In contrast, a 2004 report by Rand urged a program of security management with China that includes counterterrorism as one of three components.",
"China increased its influence in international counterterrorism cooperation through a Central Asian group. After the breakup of the Soviet Union in 1991, China in April 1996 sponsored a \"Shanghai Five\" meeting in Shanghai with Russia, Kazakhstan, Kyrgyzstan, and Tajikistan to sign an agreement on military confidence building measures. By 1998, at their meeting in Almaty, Kazakhstan, the countries added a ban on allowing the use of one's territory for activities that undermine the sovereignty, security, and social order of another. By 2000, when PLA General Chi Haotian, a Vice Chairman of the Central Military Commission, attended the first defense ministers' meeting and PRC ruler Jiang Zemin attended a summit in Dushanbe, Tajikistan, China shifted the five nations' counterterrorism approach to target what it combined as the threat of the \"three evil forces\" of religious extremism, national separatism, and international terrorism. In Shanghai in June 2001, the group added Uzbekistan and became the Shanghai Cooperation Organization (SCO) .\nAfter the terrorist attacks on September 11, 2001, China's influence expanded in the SCO along with increased international attention to terrorism. China has granted military assistance to Central Asian countries. The PRC also has operationalized the fight with its military as it sought lessons for modernization. Since 2002, the PLA has conducted combined military exercises in Xinjiang with Central Asian countries and with Russia under the guise of combating terrorists.\nHowever, the SCO summits in 2005 and 2006 raised U.S. concerns, despite the SCO's claim to be a counterterrorism group. In addition to Mongolia, the countries of India, Pakistan, and Iran were invited as observers in 2005. The SCO summit issued a declaration on July 5, 2005, that called for a \" deadline \" for the counterterrorism coalition's \"temporary\" use of facilities and military presence in SCO countries, because major military operations against terrorists ended in Afghanistan, they claimed. U.S. armed forces were deployed at bases in Uzbekistan until 2005 and have maintained an airbase in Kyrgyzstan, raising China's suspicions about U.S. military deployments in Central Asia and a perceived U.S. encirclement campaign. PRC ruler Hu Jintao also argued that Central Asian countries could handle their own internal and regional affairs. General Richard Myers, Chairman of the Joint Chiefs of Staff, responded on July 14, 2005, that China and Russia were \"trying to bully\" the Central Asian countries. A week later, China's official People's Daily accused General Myers of showing \"arrogance\" and U.S. intentions to \"permanently meddle\" and be \"strategically dominant\" in Central Asia.\nDuring the 109 th Congress, on July 19, 2005, the House passed (by voice vote) Representative Tom Lantos's amendment to the Foreign Relations Authorization Act for FYs 2006 and 2007 ( H.R. 2601 ). The language expressed the congressional concern that the SCO's declaration called for a deadline for deployments in Central Asia and called on the President and Secretaries of Defense and State to open a dialogue with SCO countries about the use of bases there. The House passed H.R. 2601 (by 351-78) on July 20, 2005, whereas the Senate did not vote on it.\nThe PRC hosted a summit of SCO members in Shanghai on June 15, 2006, that included Iran as an observer in an ostensibly counterterrorism group. The State Department criticized that inclusion of Iran, a state sponsor of terrorism, as running \"counter\" to the international fight against terrorism. Ahead of the SCO summit in Bishkek in August 2007, the PRC's official newspaper published an article calling for the U.S. military to withdraw from the base in Kyrgyzstan. Also, the Deputy Speaker of the Kyrgyz parliament said he expected pressure from Russia and China on his government concerning the use of the Manas air base by the U.S. military. In August 2007, the PLA and Russian forces held a combined counterterrorism exercise called \"Peace Mission 2007\" under the SCO's sponsorship in Chelyabinsk in Russia's Ural Mountains and in Urumqi in Xinjiang. The exercise targeted what China called the \"three evil forces.\" In 2008, Iran applied to be a SCO member.\nThe U.S. military and NATO have been concerned about alternative logistical supply routes to support the war in Afghanistan , given increasing instability in Pakistan, south of Afghanistan. Also, a question arose about possible cooperation from China after Kyrgyzstan notified the United States in February 2009 of the planned closure of Manas Air Base. The United States proposed to the PRC to open a route for non-combat supplies to northern Afghanistan, but there has been no progress. China has a short, 57-mile-long border with Afghanistan's Wakhan Corridor that is narrow and features difficult mountainous terrain. Consideration of this option became less urgent after Kyrgyzstan in June 2009 backed off from its threat to evict U.S. forces from Manas. Moreover, at their summit in Moscow in July, Presidents Barack Obama and Dmitry Medvedev agreed to provide for transits of lethal supplies through Russia.\nThen also in July 2009, there were violent ethnic clashes between the Uighur people and Han (Chinese) people in China's northwestern region of Xinjiang, which has a short border with Afghanistan's northeastern Wakhan Corridor. The unrest highlighted the risks of possible military cooperation with China where there have been concerns about its repression against the minority Muslim Uighurs and where tensions reportedly stayed high for at least months following the riots and subsequent crackdown. As discussed above, some Hans in Urumqi reportedly directed anger even at the PLA (for perceived failures to protect Hans and take even tougher actions against the Uighurs). China has demanded foreign actions against Uighurs and extradition of Uighurs in U.S. custody, as discussed above. Unique in Xinjiang, the PRC's armed forces involve three types: the People's Liberation Army (PLA), People's Armed Police (PAP), and Production and Construction Corps (PCC). In May 2010, the PCC alone reportedly totaled 2.5 million in personnel.\nFurthermore, the PRC-Russian \"Peace Mission 2009\" military exercise in July 2009 began just after the unrest in Xinjiang that involved the use of the paramilitary PAP, primarily, and also the PLA, including its facilities to detain people after the crackdown filled Urumqi's prisons, as discussed above. During the combined exercise, the PLA's Chief of General Staff Chen Bingde said in an interview with a pro-PRC TV program based in Hong Kong that the PLA had the capability and would consider deploying troops, under U.N. authority, to Central Asian countries to fight \"East Turkistan elements\" outside of China. Also, the newspaper of Russia's defense ministry reported that an exercise in the PLA's Shenyang Military Region involved forces from China and Russia, under U.N. authority, deploying to a third nation in an \"anti-terrorism\" operation to fight \"separatist\" forces. Moreover, an official and popular newspaper in China published an article on December 14, 2009, calling for China to \"control\" Afghanistan's Wakhan Corridor. A researcher at the PLA's Academy of Military Science (AMS) wrote in 2010 about foreign deployments of PLA forces in part to combat vague \"East Turkistan\" organizations.\nThe Obama Administration also has proposed to China that it contribute counter-narcotics and humanitarian assistance to stabilize Afghanistan, in addition to PRC economic investments which benefit from the security provided by the United States and other countries. At a conference in Tokyo on January 21, 2002, on reconstruction aid to Afghanistan, China pledged only $1 million, in addition to humanitarian goods worth $3.6 million. But three days later, PRC leader Jiang Zemin promised to visiting Afghan interim leader Hamid Karzai additional reconstruction aid of $150 million spread over four to five years. Of this $150 million, China reportedly offered $47 million by 2003 and offered $15 million in 2004. However, at an international meeting on reconstruction in Afghanistan that was held in Istanbul in January 2010, PRC Foreign Minister Yang Jiechi said that PRC aid since 2002 consisted of cancelling debts owed by Afghanistan, providing a total of $132 million in grants, and converting $75 million from concessional loans into grants from 2009 to 2014. Also, China started major projects (including building a hospital and an irrigation project) and training for over 500 Afghan officials. It was unclear whether these programs contributed to the gross values of total assistance, with aid offered in kind or payments. The PRC also has sent workers, partly to build roads and schools in Afghanistan.\nAs agreed in December 2007, the China Metallurgical Group Corporation (MCC) and Jiangxi Copper Company invested in Afghanistan's largest development project (worth $3-4 billion) centered on the Aynak copper mine . In a speech on September 24, 2009, Deputy Secretary of State James Steinberg mentioned China's investment in the Aynak copper mine as a case of cooperation. However, the PRC's MCC allegedly paid $808 million in a \"signing bonus\" and a $30 million bribe to the Afghan minister of mines for the 30-year lease. While economic development would help stability, this reported practice exacerbated corruption in Kabul and countered U.S. goals of better governance in Afghanistan.\nIn addition to concerns about PRC contributions and suspected corruption, at the S&ED in July 2009, the United States pressed for increased PRC coordination to promote stability and development in Afghanistan and Pakistan. In May 2010, Assistant Secretary of State for South and Central Asian Affairs Robert Blake visited Beijing for a U.S.-China Sub-dialogue on South Asia. On the goal of defeating Al Qaeda in Afghanistan and Pakistan, Blake sought the PRC's greater openness about its aid and coordination with U.S. efforts, in part to avoid duplication. He did not discuss any military assistance from the PRC, but he gave assurances that U.S. forces would not withdraw \"precipitously\" from Afghanistan. Days later, Deputy Secretary of State James Steinberg said that the United States welcomed the PRC's investments in Afghanistan, as long as the investments were transparent and conformed to international standards.\nConcerning any military cooperation by the People's Liberation Army (PLA) , the commanders of the Central and Pacific Commands, General Tommy Franks and Admiral Dennis Blair, separately confirmed in April 2002 that China did not provide military cooperation (nor was it requested) in Operation Enduring Freedom in Afghanistan (e.g., basing, staging, or overflight) and that its shared intelligence was not specific enough, particularly as compared to cooperation from the Philippines, Singapore, and Malaysia. The Pentagon's June 2002 report on foreign contributions in the counterterrorism war did not include China among the 50 countries in the coalition. After President Obama announced on December 1, 2009, that he would deploy 30,000 additional U.S. troops to Afghanistan, China did not pledge troops. Separately, the PLA started in September 2009 to provide military training in China on clearing mines to the Afghan National Army (ANA), including through the offer of \"scholarships\" and equipment.\nThe United States has discussed with China parallel pressure on Pakistan with which China is considered to have close military and intelligence ties. A risk could be that the PRC could fuel anti-Americanism. The pressure on Pakistan to counter terrorists and the Taliban increased after the attack in Mumbai, India, in November 2008. Pakistan's Interior Minister confirmed in February 2009 that some of plotters were in Pakistan. The CIA reportedly brokered intelligence-sharing between India and Pakistan. Also in February, Pakistan's President visited Shanghai and briefed PRC President Hu Jintao on the phone about Pakistan's willingness to improve its relationship with India. Deputy Secretary of State Steinberg claimed in a speech on September 24 that the PRC helped to encourage Pakistan to take stronger measures against extremists. The Obama Administration also looked to China to expand humanitarian aid and build up governance in Pakistan. In May 2010, the PRC Defense Minister, General Liang Guanglie, visited Pakistan, and signed three Memorandums of Understanding that provided for military exercises, four PRC trainer aircraft, and PRC aid (valued at US$8.8 million). On July 3, 2010, in the middle of China, air and ground forces of the two militaries started their third combined exercise that focused on fighting terrorists and that coincided with the first anniversary of the unrest in Urumqi in July 2009. The PLA could deploy forces to Pakistan in the future. During the exercise, Pakistan's President visited the PRC to seek more economic investments beyond about 120 PRC companies. However, since he noted there were already 10,000 PRC workers in Pakistan, the PRC's investments have meant lost job opportunities for local Pakistanis. Moreover, PRC leader Hu asked Pakistan to protect the security of PRC people, which could divert forces from fighting militants.\nFurther, by 2010, there has been increased concern about cyber threats originating from the PRC that stole sensitive information on the movements and operational security of U.S. and NATO forces in Afghanistan, including compromising the computers of India's government. Meanwhile, India's concerns heightened about China's increased influence in Central and South Asia. The PRC could encourage or frustrate reconciliation between India and Pakistan. In any case, by April 2010, Pakistan's military redeployed 100,000 troops from its eastern border facing India to fight the Taliban near the western border with Afghanistan. Nonetheless, Under Secretary of Defense for Policy Michele Flournoy cautioned that \"Pakistan's strategic concerns about India remain preeminent,\" in her testimony to the House Armed Services Committee.",
"Since 2006, U.S. concern has increased about China-origin weapons that have been found in the conflicts in the Middle East or in Afghanistan (and Iraq) involving U.S. and allied forces, as part of the broader threat posed by Iran and its arms transfers to terrorist forces.\nOn July 14, 2006, Hezbollah used C-802 anti-ship cruise missiles to hit an Israeli naval ship off Lebanon, an attack that killed four crewmembers, according to surprised U.S. and Israeli officials. (Hezbollah is a U.S.-designated Foreign Terrorist Organization (FTO) and a major political faction in Lebanon with an armed wing that, in the past, committed acts of terrorism.) A second missile sank a Cambodian merchant ship. Iran allegedly armed Hezbollah with C-802 missiles first acquired from China in the 1990s and/or clones of them with the Noor name.\nPRC-made weapons found in Afghanistan, mainly small arms and ammunition, have included man-portable anti-aircraft missiles (such as the HN-5 missiles); armor-piercing ammunition; rocket propelled grenades; artillery rockets; sniper rifles; and components for weapons. In late 2001, PRC-origin (produced by the state-owned defense-industrial company, NORINCO) multiple rocket launchers (using 107 mm rockets) were found in Afghanistan. Also, in late 2001 to spring 2002, caches of PRC-origin HN-5 missiles, ammunition, and rocket propelled grenades were discovered. In June 2007, the Taliban used PRC-made HN-5 surface-to-air missiles in Afghanistan. In some cases, tracing to the producer of the arms is challenged by the intentional removal of serial numbers from the weapons or parts. Also adding to the challenge of identifying the source of weapons is the fact that Iran has manufactured an anti-aircraft missile, called the Misagh-1, that is similar to the QW-1 anti-air missile made by the PRC's state-owned, defense industrial company, the China Precision Machinery Import and Export Corporation (CPMIEC).\nEven while U.S. officials pointed to China as the origin of some of the weaponry found in Afghanistan, another question concerned whether the supplies were new (since Operation Enduring Freedom began in 2001) or left over from the years when various countries transferred weapons to Mujahedin fighters in Afghanistan during its Soviet occupation in the 1980s or later in the 1990s. China's CPMIEC exported the HN-5 anti-aircraft missiles for years, and China previously supplied them to the Mujahedin in Afghanistan, Iran, and other countries. Defense Secretary Donald Rumsfeld told reporters in August 2002 that Afghanistan was \"filled with weapons\" and that \"you do find things from China, but you find them from country after country after country.\" He added, \"a lot of it is quite old and probably not stable.\" In September 2007, an Afghan Interior Ministry spokesman said that his government seized various types of arms, including PRC weapons, but did not have evidence of new PRC arms being transferred to the Taliban. Aside from the explanation of left-over caches, PRC-made weapons were not the only type uncovered. In the same month, another Afghan official announced that arms made in China, Iran, and Russia were discovered in the city of Herat, near the western border with Iran.\nIn its approach, the Bush Administration focused concerns and questions on Iran, rather than China, and how the weapons ended up in Afghanistan (some through Iran), rather than where they were made (in China, Iran, or other countries). Focusing on Iran, Under Secretary of State for Political Affairs Nicholas Burns specifically said on June 13, 2007: \"There's irrefutable evidence the Iranians are now [transferring arms to the Taliban in Afghanistan], and it's a pattern of activity.... It's coming from the Iranian Revolutionary Guard Corps command, which is a basic unit of the Iranian government.\" After just retiring as Deputy Under Secretary of Defense, Richard Lawless told reporters on July 6 that \"Identifying how [the weapons] came through Iran [into Afghanistan] and who is facilitating that transit through Iran is the key issue for us right now. It is really not the issue of where they ultimately were manufactured.\" Nonetheless, despite the primary focus on Iran, the Administration sent demarches to Beijing. Lawless confirmed that the United States expressed concerns to China about exercising greater care in its arms sales to Iran. The Deputy Assistant Secretary of Defense for East Asia also said on July 12, that the United States \"repeatedly asked China to stop its transfers to Iran of conventional weapons and technologies,\" but Beijing's response was \"irresponsible.\" He also warned, \"partners do not provide weapons to people who support those who kill our troops and those of our allies.\" While in Kabul on September 11, Deputy Secretary of State John Negroponte acknowledged that he raised concerns with China about its arms sales to Iran and requested that China refrain from signing any new arms sales contracts with Iran. The United Kingdom also asked Beijing about the Taliban's use of PRC weapons against U.K. troops in Afghanistan.\nIt was uncertain as to whether China stopped arms transfers to Iran or prevented any new arms sales contracts with Iran, as the United States urged. The PRC did not deny its arms sales to Iran and indeed conveyed a sense of \"business as usual.\" In 2007, when questioned by reporters about PRC arms sales to Iran that were found in Afghanistan (and Iraq), the PRC Foreign Ministry characterized its arms sales as \"normal\" military trade and cooperation with other countries. The ministry stated China's position that its arms sales were beyond reproach and responsible because China follows these \"principles\" for arms exports: they are for legitimate self-defense; they do not undermine international peace and stability; they do not interfere in the internal affairs of the recipients; and they are exported only to sovereign countries. In addition, the Foreign Ministry claimed that China stipulated another condition: no re-transfer to a third party without PRC permission. The ministry also argued that China complied with international laws and United Nations Security Council (UNSC) resolutions.\nHowever, China could contend compliance with the letter of UNSC resolutions because China (along with Russia) objected to UNSC sanctions targeting Iran's arms imports. Thus, only after diplomatic negotiations on additional sanctions against Iran for its nuclear enrichment program (during which China and Russia objected to banning Iran's arms imports and export credit guarantees for doing business in Iran), China voted with all other UNSC members on March 24, 2007, for Resolution 1747, which included a ban on Iran's arms exports (not imports).\nAside from the issue of whether the PRC was responsive to U.S. and other nations' concerns, the complicity of China's government in allowing or acquiescing in the arms flow to Iran was another question. Part of that question concerned whether the PLA was involved. The arms manufacturers were PRC state-owned defense-industrial plants, rather than the PLA itself, although the PLA might have a role in any vetting of the arms exports. Regardless of whether the PRC government did or did not know about these arms sales to Iran or PRC weapons found in Afghanistan and Iraq, U.S. demarches raised the problem with Beijing.\nContinuing through 2008, the Director of National Intelligence (DNI) testified to Congress that the PRC's arms sales in the Middle East were \"destabilizing\" and \"a threat\" to U.S. forces, while missile sales to Iran posed a \"threat to U.S. forces in the Persian Gulf.\" At a hearing in June 2008, Defense Department officials testified to Congress that although the United States demanded that the PRC stop transfers that violated U.N. sanctions, nonproliferation norms, and PRC law, U.S. efforts met with \"mixed results.\" China's cooperation was \"uneven\" and it needed to act \"responsibly.\" The officials testified that there were particular concerns about PRC sales of conventional weapons to Iran, a \"country that supports terrorism and groups in Iraq, Lebanon, and Afghanistan that target and kill Americans and our allies.\"\nMoreover, the Secretary of Defense reported to Congress in March 2009 that China's weapons supplied to Iran were then transferred to terrorist organizations in Iraq and Afghanistan, where U.S. troops fought. The serious situation required continued U.S. monitoring. In July 2009, the United Arab Emirates (UAE) seized a cargo ship (ANL Australia) that was bound for Iran with weapons from North Korea suspected as intended for Hezbollah, Hamas, or Quds Force. The weapons, including components for rockets, were hidden in ten containers that left North Korea and were transferred to a PRC ship that sailed from China's port city of Dalian to Shanghai, where they were transferred to the ANL Australia. This or other cargo included PRC-made parts for the 122mm Grad rockets fired by Hamas and Hezbollah into Israel. Possibly related, a U.S. destroyer followed an Iranian ship from Dalian to Iran's port of Bandar Abbas in October 2009."
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{
"question": [
"What challenge faced the United States after 9/11 regarding China?",
"What were short-term concerns about this process?",
"What longer-term issues have emerged?",
"To what extent have the U.S. and China cooperated on counterterrorism efforts?",
"What role did the PLA play in the U.S.-led counterterrorism coalition?",
"How did the change in the designation of the ETIM affect U.S.-China counterterrorism efforts?",
"How does Congress have oversight over ties with China?",
"How is China's harassment of Uighurs a cause for concern?",
"How did the U.S. directly get involved with Uighur people?",
"How were the Uighurs accepted by other countries?",
"How does H.R. 2701 address some of these concerns?",
"What other bills seek to address these issues?"
],
"summary": [
"After the terrorist attacks on September 11, 2001, the United States faced a challenge in enlisting the full support of the People's Republic of China (PRC) in the counterterrorism fight against Al Qaeda.",
"This effort raised short-term policy issues about how to elicit cooperation and how to address PRC concerns about the U.S.-led war (Operation Enduring Freedom).",
"Longer-term issues have concerned whether counterterrorism has strategically transformed bilateral ties and whether China's support was valuable and not obtained at the expense of other U.S. interests.",
"The extent of U.S.-China counterterrorism cooperation has been limited, but the tone and context of counterterrorism helped to stabilize—even if it did not transform—the closer bilateral relationship pursued by President George Bush in late 2001.",
"China's military, the People's Liberation Army (PLA), has not fought in the U.S.-led counterterrorism coalition.",
"The Bush Administration designated the PRC-targeted \"East Turkistan Islamic Movement\" (ETIM) as a terrorist organization in August 2002, reportedly allowed PRC interrogators access to Uighur detainees at Guantanamo in September 2002, and held a summit in Texas in October 2002.",
"Congress has oversight over the closer ties with China and a number of policy options. U.S. policy has addressed law-enforcement and intelligence ties; oppressed Uighur (Uyghur) people in western Xinjiang whom China claims to be linked to \"terrorists\"; detained Uighurs at Guantanamo Bay prison; Olympic security in August 2008; sanctions that ban exports of arms and security equipment; weapons nonproliferation; port security; military-to-military contacts; China's influence and support in Central Asia through the SCO; and China's arms transfers to Iran.",
"Also, Congress has concerns about suspected PRC harassment of Uighurs and others in the United States, the President's efforts to transfer the Uighurs detained at Guantanamo, and efforts to seek China's counterterrorism cooperation (with U.S. assessments of mixed implications).",
"The United States detained 22 Uighurs and rejected China's demand to take them while seeking a third country to accept them.",
"In 2006, Albania accepted five of them. In June 2009, Bermuda accepted four. In November 2009, Palau accepted six. In February 2010, Switzerland accepted two Uighurs. The five Uighurs remaining in detention had been taken into custody in Pakistan.",
"On February 26, 2010, the House passed H.R. 2701 (Reyes), with Section 351 which would require an unclassified summary of intelligence on any threats posed by the Uighurs who were detained at Guantanamo.",
"Other relevant bills in the 111th Congress include: H.R. 2346 (P.L. 111-32); H.Res. 417 (Baldwin); H.Res. 624 (Delahunt); H.Res. 774 (Hastings); H.Res. 953 (McGovern); H.R. 2294 (Boehner); S.Res. 155 (Brown); and S. 1054 (Inouye)."
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GAO_GAO-14-274
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{
"title": [
"Background",
"Use and Hazards of Ammonium Nitrate",
"Federal Agencies’ Responsibilities for Promoting Chemical Safety and Security",
"State and Local Government Responsibilities for Promoting Chemical Safety",
"Executive Order on Improving Chemical Facility Safety and Security",
"OECD’s Guidance on Chemical Safety",
"Over 1,300 Facilities in 47 States Reported Having Ammonium Nitrate, but Data Limitations Prevent Obtaining a Complete Count of Facilities",
"DHS Data List Over 1,300 Facilities in 47 States with Ammonium Nitrate",
"State Data and Federal Trade Data Suggest That the Total Number of Facilities with Ammonium Nitrate is Greater Than Those That Report to DHS",
"Differences in Reporting Criteria, Including Exemptions, and Facilities’ Failure to File Required Reports Also Prevent Full Identification of Facilities with Ammonium Nitrate",
"OSHA Lacks Access to Data on Facilities That Have Ammonium Nitrate",
"Ongoing Efforts to Improve Data Sharing on Chemical Facilities",
"OSHA Has Not Focused Its Enforcement Efforts on Ammonium Nitrate and EPA Has Not Regulated It as a Hazardous Material",
"OSHA’s Regulations for Explosives and Blasting Agents List Substantive Requirements for the Storage of Ammonium Nitrate",
"OSHA Has Conducted Little Outreach to the Fertilizer Industry to Increase Awareness of Its Ammonium Nitrate Storage Regulations",
"OSHA Has No Program for Targeted Inspections of Facilities with Ammonium Nitrate",
"OSHA Is Prohibited from Inspecting Some Facilities with Ammonium Nitrate That Have 10 or Fewer Employees",
"Other OSHA and EPA Chemical Safety Regulations Do Not Apply to Facilities with Ammonium Nitrate",
"Under the Executive Order, OSHA and EPA Are Seeking Information on Expanding Regulation and Oversight of Ammonium Nitrate, but Have Not Yet Proposed Any Regulatory Changes",
"Some Countries Regulate and Oversee Ammonium Nitrate By Imposing Requirements on Facilities, Conducting Inspections, and Supporting Industry Initiatives to Promote Compliance",
"Other Countries’ Approaches Include Risk Assessments and Restrictions on Where and How Ammonium Nitrate Can Be Stored",
"Foreign Oversight Approaches and Industry Initiatives Include Guidance on Safe Practices, Requirements for Routine Inspections, and Voluntary Third Party Audit Programs",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Comments from the Environmental Protection Agency",
"Appendix II: Comments from the Department of Homeland Security",
"Appendix III: Comments from the Department of Labor",
"Appendix IV: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"",
"Ammonium nitrate products are manufactured and sold in various forms, depending upon their use. For example, ammonium nitrate fertilizer may be produced and sold in liquid form or as solid granules. According to The Fertilizer Institute, solid ammonium nitrate fertilizer is used heavily by farmers in Alabama, Missouri, Tennessee, and Texas primarily on pastureland, hay, fruit, and vegetable crops. In addition to its agricultural benefits, ammonium nitrate can be mixed with fuel oil or other additives and used by the mining and construction industries as an explosive for blasting.\nWhile ammonium nitrate can increase agricultural productivity, use of this chemical poses a safety and health risk because it can intensify a fire and, under certain circumstances, explode. Ammonium nitrate by itself does not burn, but it increases the risk of fire if it comes in contact with combustible materials. Ammonium nitrate that is stored in a confined space and reaches high temperatures can explode. An explosion is more likely to occur if ammonium nitrate is contaminated by certain materials, such as fuel oil, or if it is stored in large stacks.\nBecause of ammonium nitrate’s potential to facilitate an explosion, facilities storing ammonium nitrate may pose a security threat in part because it can be used to make weapons. Ammonium nitrate fertilizer has been used by domestic and international terrorists to make explosive devices. For example, on April 19, 1995, ammonium nitrate fertilizer— mixed with fuel oil—was used by a domestic terrorist to blow up a federal building in Oklahoma City, Oklahoma. The explosion killed 168 people and injured hundreds more.\nAmmonium nitrate has been involved in several major chemical accidents over the past century, including explosions in the United States and Europe. In addition to killing at least 14 people and injuring more than 200 others, the explosion in West, Texas severely damaged or destroyed nearly 200 homes; an apartment complex; and three schools that were, at the time, unoccupied (see fig. 1). Prior to that incident, an explosion in 1994 involving ammonium nitrate at a factory in Port Neal, Iowa killed four workers and injured 18 people. In 1947, explosions aboard two ships holding thousands of tons of ammonium nitrate fertilizer killed more than 500 people, injured approximately 3,500, and devastated large areas of industrial and residential buildings in Texas City, Texas. In Europe, accidents involving ammonium nitrate have occurred in Germany, Belgium, and France. A 1921 accident in Germany and one in Belgium in 1942 caused hundreds of deaths after explosives were used to break up piles of hundreds of tons of ammonium nitrate, resulting in large scale detonations. In France, a ship carrying more than 3,000 tons of ammonium nitrate exploded in 1947, a few months after the Texas City disaster, after pressurized steam was injected into the storage area in an attempt to put out a fire. In 2001, an explosion at a fertilizer plant in Toulouse, France involving between 22 and132 tons of ammonium nitrate resulted in 30 deaths, thousands of injuries requiring hospitalization, and widespread property damage. Past accidents also indicate that smaller quantities of ammonium nitrate can cause substantial damage. For example, in 2003, an explosion of less than 6 tons of ammonium nitrate in a barn in rural France injured 23 people and caused significant property damage.",
"OSHA and EPA play key roles in protecting the public from the effects of chemical accidents, with EPA focusing on the environment and public health and OSHA focusing on worker safety and health. Under the Occupational Safety and Health Act of 1970 (OSH Act), OSHA is the federal agency responsible for setting and enforcing regulations to protect workers from hazards in the workplace, including exposure to hazardous chemicals. In addition, the Clean Air Act Amendments of 1990 designated roles for both OSHA and EPA with respect to preventing chemical accidents and preparing for the consequences of chemical accidents. In response to requirements in this act, OSHA issued Process Safety Management (PSM) regulations in 1992 to protect workers engaged in processes that involve certain highly hazardous chemicals, and EPA issued Risk Management Program (RMP) regulations in 1996 to require facilities handling particular chemicals to plan how to prevent and address chemical accidents. The PSM and RMP regulations each apply to processes involving a specified list of chemicals above threshold quantities, and require covered facilities to take certain steps to prevent and prepare for chemical accidents. However, neither OSHA’s PSM regulations nor EPA’s RMP regulations cover ammonium nitrate.\nThe Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA) establishes authorities for emergency planning and preparedness and emergency release notification reporting, among other things. Under section 312 of EPCRA and EPA regulations, facilities with certain hazardous chemicals in amounts at or above threshold levels— including ammonium nitrate in some circumstances—are required to annually submit chemical inventory forms to state and local authorities to help emergency response officials prepare for and respond to chemical incidents.\nFor purposes of enhancing chemical facility security, the Department of Homeland Security (DHS) Chemical Facility Anti-Terrorism Standards (CFATS) program requires facilities possessing certain chemicals at or above threshold quantities–including some types of ammonium nitrate–to submit reports to DHS with information about the facility and the regulated chemicals present on site. Among other things, DHS collects information on the quantities of certain hazardous chemicals held at facilities, the location of the facilities, and their industry codes. DHS set different threshold quantities for reporting based on the type of ammonium nitrate and the type of security risk presented (see table 1).\nNot all facilities with ammonium nitrate, however, are required to file CFATS reports with DHS. First, facilities are only required to report if they are holding amounts equal to or greater than threshold quantities of specific types of ammonium nitrate. Also, DHS does not require certain agricultural producers to report their chemical holdings to DHS. In addition, DHS’s reporting threshold for ammonium nitrate fertilizer only applies to quantities held in transportable containers such as cylinders, bulk bags, bottles (inside or outside of boxes), cargo tanks, and tank cars. Finally, there are several statutory exemptions to CFATS requirements. Specifically, CFATS does not apply to public water systems or treatment works, any facility that is owned or operated by the Department of Defense or the Department of Energy, facilities regulated by the Nuclear Regulatory Commission, or facilities covered by the Maritime Transportation Security Act of 2002 administered by the Coast Guard.\nOther federal agencies regulate different aspects of the use of hazardous chemicals. For example, the Department of Transportation regulates the transport of hazardous materials, the Coast Guard inspects containers of hazardous materials at ports and waterways, and the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) in the Department of Justice regulates the manufacture, distribution, and storage of explosive materials, including blasting agents and other explosive materials containing ammonium nitrate.",
"State and local government agencies are also involved in regulating hazardous chemical facilities under federal laws and their own state or local laws. Federal laws may authorize or assign state and local governments certain roles and responsibilities for overseeing chemical facilities. For example, as permitted by the OSH Act, OSHA has approved state plans that authorize about half the states to operate their own occupational safety and health programs. As a result, private sector workplaces in 21 states and Puerto Rico are regulated and inspected by state occupational safety and health agencies rather than OSHA. Similarly, EPA has delegated its authority to implement and enforce the Risk Management Program to nine states and five counties. As previously mentioned, both state and local governments play a role in implementing EPCRA, which requires covered facilities to report basic information about their hazardous chemical inventories to certain state and local authorities, including estimates of the amounts of chemicals present at facilities.\nIn addition, state and local governments may establish and enforce their own laws, regulations, or ordinances to protect the public from chemical accidents. For example, state and local governments may adopt and enforce fire codes or zoning laws that specify how far chemical facilities must be located from residential areas.",
"The Executive Order issued on August 1, 2013 established a Chemical Facility Safety and Security Working Group co-chaired by the Secretary of Homeland Security, the Administrator of EPA, and the Secretary of Labor. The Executive Order includes directives for the working group to: improve operational coordination with state and local partners; enhance federal agency coordination and information sharing; modernize policies, regulations, and standards; and work with stakeholders to identify best practices. The order includes tasks focused specifically on ammonium nitrate. Specifically, it directs the Secretaries of Homeland Security, Labor, and Agriculture to develop a list of potential regulatory and legislative proposals to improve the safe and secure storage, handling, and sale of ammonium nitrate. In addition, the Department of Labor and EPA are directed to review the chemical hazards covered by the RMP and PSM regulations and determine whether they should be expanded to address additional hazards.",
"The Organisation for Economic Co-operation and Development (OECD), an intergovernmental organization with 34 member countries, issued guidance in 2003 on the prevention of, preparedness for, and response to chemical accidents. This publication was developed with other international organizations active in the area of chemical accident safety, such as the World Health Organization. The document—OECD Guiding Principles for Chemical Accident Prevention, Preparedness and Response—includes detailed guidance for industry, public authorities, and the public on how they can help prevent chemical accidents and better respond when accidents occur.",
"The total number of facilities in the United States with ammonium nitrate is not known because of the different reporting criteria used by different government agencies, reporting exemptions, and other data limitations. While the total number is unknown, over 1,300 facilities reported having ammonium nitrate to DHS. DHS’s data, however, do not include all facilities that work with ammonium nitrate, in part because some facilities, such as farms, currently do not have to report to DHS and, according to DHS officials, other facilities that are required to report may fail to do so.",
"As of August 2013, 1,345 facilities located in 47 states reported to DHS under CFATS that they had ammonium nitrate. The facilities that reported to DHS as having reportable quantities of ammonium nitrate were most often engaged in supplying and supporting the agriculture and mining industries. Many of these facilities were concentrated in the South. About half of these facilities were located in six states: Alabama, Georgia, Kentucky, Missouri, Tennessee, and Texas. Table 2 shows the number of facilities that reported to DHS that they had ammonium nitrate and the number of states in which they were located.",
"Our review of additional state data, including EPRCA data, from Texas and Alabama, which have different reporting criteria than CFATS, indicated that there are more facilities with ammonium nitrate than those that report to DHS. We compared the data they provided to the data on facilities that reported to DHS under CFATS. In these two states, we found that the data from each of the sources provided to us differed and that no single count of such facilities, whether from the state or DHS, represented a comprehensive picture of facilities with ammonium nitrate.\nFor Texas, we reviewed three sources of data on facilities that have ammonium nitrate: (1) EPCRA data from the Texas Department of State Health Services; (2) a list of facilities that registered with the Office of the Texas State Chemist as having plans to produce, store, or sell ammonium nitrate; and (3) DHS’s CFATS data. We compared data from all three of these sources and found 189 facilities that reported having ammonium nitrate (see fig. 2). Of these 189 facilities, 52 filed CFATS reports with DHS. Data were not readily available to determine whether the remaining facilities were required to file CFATS reports. DHS officials told us the agency has begun an effort to obtain lists of chemical facilities the states have compiled and compare them with its CFATS data to identify facilities that should have filed CFATS reports but did not. This effort is still under way. As shown in figure 2, 17 of the 189 facilities in Texas were listed in all three data sources.\nFor Alabama, we reviewed data from two sources on facilities that reported having ammonium nitrate: (1) EPCRA data from Alabama’s Department of Environmental Management, and (2) DHS’s CFATS data. From these two sources, we found 91 facilities that reported having ammonium nitrate— 57 that filed EPCRA reports with the state Department of Environmental Management and 71 that filed CFATS reports with DHS. Thirty-seven of the facilities filed reports with both the state and DHS. (See fig. 3.)\nOur analysis of federal trade data collected by DHS’s Customs and Border Protection agency also suggests that a greater number of facilities have ammonium nitrate than those that reported to DHS under the CFATS program. Using the data from the Customs and Border Protection agency, we identified 205 facilities that imported ammonium nitrate products and 81 facilities that exported ammonium nitrate products in fiscal year 2013. The majority of these facilities reported importing or exporting mixtures of ammonium nitrate and calcium carbonate or mixtures of urea and ammonium nitrate. Eight of these facilities filed CFATS reports with DHS. Moreover, we found about 100 facilities that imported or exported a form of ammonium nitrate that may be subject to DHS’s CFATS requirements for reporting quantities over 2,000 pounds but did not file a report. These facilities, however, may not be required to file CFATS reports. For example, they may meet one of the statutory exemptions, or the composition of their ammonium nitrate (or their ammonium nitrate mixture) may not trigger the reporting requirements. Data were not readily available to determine whether they met all of DHS’s reporting requirements for the CFATS program. In addition, according to DHS officials, other data limitations could explain some of the differences between the CFATS data and the federal trade data. For example, facilities may submit reports to the different agencies using different names and addresses. According to DHS, different people in the facility may prepare the different reports; the facility may define the perimeters of each site differently; or the corporate structure or nomenclature may have changed from the time one report was submitted to the next reporting period.",
"The total number of facilities with ammonium nitrate is also difficult to determine because of the variation in reporting criteria, including exemptions for some facilities from reporting to either their state or to DHS. For example, farmers could be exempt from reporting under both EPCRA and CFATS because EPCRA’s reporting requirements do not apply to substances used in routine agricultural operations and DHS does not currently require certain agricultural producers to report their chemical holdings to DHS. In addition, DHS’s reporting threshold for ammonium nitrate fertilizer only applies to quantities held in transportable containers such as cylinders, bulk bags, bottles (inside or outside of boxes), cargo tanks, and tank cars. Also, EPCRA does not require retailers to report fertilizer held for sale to the ultimate customer. However, an August 2013 chemical advisory on ammonium nitrate issued jointly by EPA, OSHA, and ATF clarified that EPCRA requires fertilizer distributors to report ammonium nitrate that is blended or mixed with other chemicals on site. In addition, some facilities may not report to DHS or their state because they have amounts of ammonium nitrate that are below the applicable reporting thresholds.\nSome facilities may not be included in either DHS’s or states’ data because they fail to submit their required reports, but the magnitude of underreporting is not known. DHS officials acknowledged that some facilities fail to file the required forms. The facility in West, Texas had not filed a CFATS report to DHS but, in 2012, this facility filed an EPRCA form with the state, reporting that it had 270 tons of ammonium nitrate. According to DHS officials, the agency does not know with certainty whether the West, Texas facility should have reported its ammonium nitrate to DHS because the agency did not visit the facility after the explosion and it does not know the manner in which the facility held its ammonium nitrate prior to the explosion. Following the explosion at the facility in West, Texas, DHS obtained data from the state of Texas and compared the state data to the facilities that reported to DHS. As a result of this data matching effort, DHS sent out 106 letters to other potentially noncompliant facilities in Texas. According to DHS, many of the Texas facilities that received the letter said they do not actually possess ammonium nitrate or do not meet the criteria to require reporting under CFATS. DHS has used EPA’s Risk Management Program (RMP) database to try and identify such facilities holding other chemicals, but it cannot use the RMP database to identify all facilities with ammonium nitrate because ammonium nitrate is not covered by EPA’s RMP regulations. In addition, DHS officials told us the agency is in the process of comparing its list of facilities that reported to DHS under the CFATS program to ATF’s list of facilities that have federal explosives licenses and permits to identify potentially noncompliant facilities, but this effort had not been completed at the time of our review.",
"OSHA has limited access to data collected by other agencies to use in identifying facilities with ammonium nitrate. DHS does not currently share its CFATS data with OSHA, although DHS officials told us they were not aware of anything prohibiting DHS from doing so. While EPA shares data from its RMP with OSHA on a quarterly basis, the data do not include information on ammonium nitrate because ammonium nitrate is not covered by EPA’s RMP regulations. As previously discussed, under section 312 of EPCRA, facilities are required to annually report information to state and local authorities on the types and quantities of certain hazardous chemicals present at their facilities, which may include ammonium nitrate. Facilities that possess reportable quantities of ammonium nitrate submit this information electronically or on paper forms, and the state and local entities maintain copies of these forms. However, according to agency officials, the EPCRA data are not shared directly with federal agencies, including OSHA, EPA, or DHS (see fig. 4). EPA officials, however, noted that EPCRA is primarily intended to provide information to state and local officials, not to other federal agencies. Any person may submit written requests to the designated state or local authority for information on individual facilities that may have ammonium nitrate, but lists of all facilities in a state that have submitted these data, including those that reported having ammonium nitrate, are not publicly available. In certain states we contacted, officials indicated that data on individual facilities could be requested from the state, but the requester would have to request data on specific facilities to obtain information on the chemicals they hold. OSHA officials cited the lack of access to data on facilities with ammonium nitrate as a reason they would have difficulty designing an inspection program to target such facilities.\nThe University of Texas at Dallas has a database (called E-Plan) that contains EPCRA data from over half of the states for the 2012 reporting year, but federal agencies have made limited use of it. University staff originally developed the E-Plan database in 2000 with funding from EPA to facilitate EPCRA reporting and provide first responders rapid access to information on chemical facilities in emergency situations. In many local areas, first responders and emergency services personnel can use the E- Plan data when they prepare for and respond to emergencies such as fires. According to E-Plan administrators, OSHA staff helped develop the database, but currently OSHA does not use E-Plan. EPA staff told us that some EPA regional offices have used the E-Plan database to assess compliance with the agency’s RMP reporting requirements. DHS officials told us the agency does not use E-Plan data to assess compliance with CFATS requirements. DHS officials also explained that, while the database could contain useful information, it is incomplete. Some states do not submit data to E-Plan at all, and other states’ data are incomplete. In addition, participation in E-Plan is voluntary and, even among those states that participate, some states do not choose to allow their E-Plan data to be shared with federal agencies.",
"The Chemical Facility Safety and Security Working Group established by the August 2013 Executive Order has begun its efforts to develop proposals for improving information sharing, but this work has not been completed. The working group has held listening sessions throughout the country seeking input from interested parties on options for making improvements in chemical safety and security. It also has launched a pilot program in New York and New Jersey aimed at improving access to data on chemical facilities for federal, state, local, and tribal governments. In addition, the working group is evaluating how federal agencies can work with states to enhance the states’ roles as information sharing organizations, including options for sharing RMP, CFATS, and EPCRA data. Finally, it is exploring ways for federal and state agencies to share information and exchange data to, among other things, identify chemical facilities that are not in compliance with safety and security requirements. For example, DHS and EPA are comparing their CFATS and RMP data to determine if the CFATS data include facilities that should also have reported under the RMP. As a result, EPA has begun sending notification letters to facilities requesting information to help determine if the facility is subject to RMP requirements. Because the RMP regulations do not currently cover ammonium nitrate, however, this strategy would not be useful for identifying facilities that have ammonium nitrate. The federal working group is also sharing information to, among other things, identify whether additional facilities have failed to report under CFATS and is exploring whether EPA software offered to states to facilitate EPCRA reporting could also provide a vehicle to enhance access to the reports while meeting security objectives.",
"OSHA has regulations for the storage of ammonium nitrate, but the agency has not focused its enforcement resources on the use of ammonium nitrate by the fertilizer industry, which is a primary user. EPA, on the other hand, has regulations requiring risk management planning by facilities that have certain hazardous chemicals, but these regulations do not apply to ammonium nitrate.",
"OSHA’s Explosives and Blasting Agents regulations—issued in 1971— include provisions for the storage of both explosives grade and fertilizer grade ammonium nitrate in quantities of 1,000 pounds or more. OSHA based these regulations on two 1970 consensus standards developed by the National Fire Protection Association (NFPA). Few significant changes have been made to these regulations since they were issued, although the National Fire Protection Association periodically reviews and updates its standards. OSHA’s regulations include requirements that could reduce the fire and explosion hazards associated with ammonium nitrate, such as required fire protection measures, limits on stack size, and requirements related to separating ammonium nitrate from combustible and other contaminating materials. However, the regulations do not categorically prohibit employers from storing ammonium nitrate in wooden bins and buildings. In addition, if the facilities were in existence at the time the regulations were issued in 1971, OSHA’s regulations allow the use of storage buildings not in strict conformity with the regulations if such use does not constitute a hazard to life. Some of the provisions of OSHA’s ammonium nitrate storage regulations are described in table 3.\nRecently, OSHA, EPA, and ATF jointly issued a chemical advisory that recommends that facilities store ammonium nitrate in non-combustible buildings. Similarly, following the explosion in West, Texas, the National Fire Protection Association is considering changes to its ammonium nitrate storage provisions, which are part of its hazardous materials consensus standard, including restricting the use of wood to store ammonium nitrate.\nIn addition to storage requirements, OSHA’s Hazard Communication regulations require that employers whose workers are exposed to hazardous chemicals, including ammonium nitrate, inform their workers of the dangers and train them to handle the materials appropriately. Employers are required to use labels, training, and safety data sheets to inform workers of chemical hazards in the workplace. Safety data sheets are written documents with details on the hazards associated with each chemical, measures workers can take to protect themselves, actions workers should take in case of an emergency, and safety precautions for handling and storing the chemical.",
"Until the explosion in West, Texas, OSHA had not reached out to the fertilizer industry to inform its members of OSHA’s requirements for the storage of ammonium nitrate fertilizer. An OSHA official told us the agency has not traditionally informed the fertilizer industry about these regulations. However, another OSHA official said agency officials met with industry representatives after the explosion at the facility in West, Texas and, based on that meeting, concluded that the fertilizer industry is “well aware” of the agency’s storage regulations. OECD’s Guiding Principles for Chemical Accident Prevention, Preparedness, and Response recommend that public authorities provide clear, easy-to- understand guidance to facilities on how regulatory objectives and requirements can be met.\nOSHA recently published information about how the agency’s Explosives and Blasting Agents regulations apply to ammonium nitrate fertilizer. The agency provides employers with training, technical assistance, and information through its website on a variety of safety and health topics. Recently, OSHA updated its website to refer to its storage regulations for ammonium nitrate fertilizer. The August 2013 chemical advisory contains information on OSHA’s ammonium nitrate storage regulations, stating that OSHA’s Explosives and Blasting Agents regulations contain requirements for the storage of all grades of ammonium nitrate, including fertilizer grade ammonium nitrate. In addition, in February 2014, OSHA announced that the agency is working with the fertilizer industry to remind employers of the importance of safely storing and handling ammonium nitrate. OSHA published a letter on its website that provides employers with legal requirements and best practice recommendations for safely storing and handling ammonium nitrate. In the letter, OSHA states that the agency will enforce the requirements of 29 C.F.R. § 1910.109(i) for storage of ammonium nitrate, including at facilities in non-explosives industries. According to the announcement, fertilizer industry associations will share the letter with facilities across the country.\nFertilizer industry representatives we interviewed said that, prior to the explosion in West, Texas, they did not know that OSHA’s ammonium nitrate storage regulations applied to the fertilizer industry, and they suggested that OSHA reach out to the fertilizer industry to help prevent another incident. Industry representatives explained that their understanding was based on a proposed rule published by OSHA in the Federal Register on April 13, 2007, which proposed revisions to the Explosives and Blasting Agents regulation. In that notice, OSHA proposed a change to the ammonium nitrate storage requirements “to clarify that OSHA intends the requirements to apply to ammonium nitrate that will be used in the manufacture of explosives.” Although this proposed rule was never finalized, the industry representatives told us they relied on this statement to mean OSHA did not intend the storage requirements to apply to ammonium nitrate fertilizer.\nIn addition, we reviewed the safety data sheets developed by four U.S. producers of solid ammonium nitrate fertilizer and found that only one company’s sheet listed OSHA’s Explosives and Blasting Agents regulations as applicable to the storage and handling of ammonium nitrate fertilizer. An industry representative who assists agricultural retailers with regulatory compliance said he reviewed the regulatory information sections in his clients’ safety data sheets for ammonium nitrate fertilizer and none of them referred to OSHA’s Explosives and Blasting Agents regulations. A representative from one national fertilizer industry association said it would be helpful if OSHA took additional steps to explain its interpretation of the applicable requirements and reach out to the fertilizer industry so that affected companies are better informed. A representative from another national agricultural industry group suggested that OSHA develop and disseminate a compliance assistance tool or checklist to ensure that facilities are aware of and in compliance with the applicable regulations.\nThe fertilizer industry is developing a voluntary program called Responsible Ag to promote compliance with federal regulations among fertilizer facilities. Officials from the Fertilizer Institute and the Agricultural Retailers Association told us they plan to consolidate federal regulatory requirements for fertilizer retail facilities into one comprehensive checklist and provide third party audits to retailers based on a checklist they have developed. In addition, officials with the Asmark Institute, a nonprofit resource center for agricultural retailers in the United States, said they developed their own compliance assessment tool for agricultural retailers. The Fertilizer Institute and the Agricultural Retailers Association selected the Asmark Institute to develop a database that will include information on audit reports and scores from the third party audits. This initiative will be modeled after a voluntary audit program in Minnesota for agricultural retailers to help them improve compliance with federal and state regulations. According to OSHA officials, OSHA has not been involved in the development of this industry initiative.",
"Although OSHA has a national enforcement program that targets certain chemical facilities for inspection, this program does not systematically cover facilities with ammonium nitrate. OECD chemical safety guidance suggests public authorities periodically inspect the safety performance of hazardous facilities. OSHA conducts inspections of worksites, as authorized under the OSH Act. As part of its enforcement efforts, OSHA randomly selects facilities for inspection as part of a national emphasis program for chemical facilities it initiated in 2011. However, these inspections are for facilities and chemicals covered under its Process Safety Management (PSM) regulations, which do not include ammonium nitrate. According to OSHA officials, facilities that blend and store ammonium nitrate fertilizer fall outside the scope of this national emphasis program. When we asked whether OSHA might expand its national emphasis program to focus on ammonium nitrate fertilizer facilities, officials said that the agency is not planning on targeting these facilities, in part because OSHA has no means of identifying them.\nIn addition, OSHA is not likely to target facilities with ammonium nitrate for inspection because of its limited resources, and because these facilities often do not meet OSHA’s current inspection priorities. OSHA conducts inspections with its own personnel and the number of inspections OSHA and the states can perform each year is limited by the size of their inspection workforce. According to OSHA officials, OSHA and the states have about 2,200 inspectors who inspected about 1 percent of the 8 million covered employers in fiscal year 2012. Among OSHA’s highest priorities for inspecting worksites are responding to major accidents and employee complaints. In fiscal year 2012, OSHA reported that 44 percent of the agency’s inspections were unplanned inspections, which include inspections initiated in response to an accident or complaint. OSHA also targets certain industries for planned inspections that have high rates of workplace injury and illness. For example, OSHA reported that 55 percent of OSHA’s planned inspections in fiscal year 2012 were inspections of worksites in the construction industry.\nOSHA has rarely issued citations for violations of its ammonium nitrate storage regulations at fertilizer facilities. OSHA officials told us a citation for a violation of the agency’s ammonium nitrate storage regulations was issued as the result of an inspection of a fertilizer facility only once before the explosion in West, Texas. In that case, OSHA inspected a Florida- based fertilizer manufacturer in 1997 in response to a complaint, and cited the company for 30 violations, one of which was a violation of its ammonium nitrate storage requirements. In addition, according to OSHA officials, within the last 5 years, none of the 21 states that operate their own safety and health programs have cited any employers for improper storage or handling of ammonium nitrate.",
"Under a provision regularly included in the annual appropriations act, OSHA is prohibited from conducting planned safety inspections of small employers—those with 10 or fewer employees—in certain low hazard industries, as determined by their injury and illness rates. Although the number of facilities exempted from OSHA inspections under this provision is unclear, we found that, of the facilities that reported having ammonium nitrate to DHS as of August 2013, 60 facilities—about 4 percent of the 1,345 facilities that reported to DHS— reported having 10 or fewer employees and had an industry code with a lower than the average workplace injury and illness rate (see table 4). As a result, according to OSHA officials, this provision could have hindered the agency’s enforcement of its ammonium nitrate storage regulations at these facilities.\nOSHA’s fiscal year 2015 budget request asks Congress to consider amending OSHA’s appropriation language to allow the agency to perform targeted inspections of small establishments that have the potential for catastrophic incidents, such as those with processes covered by OSHA’s PSM or EPA’s RMP regulations. In the budget request, OSHA states that the current appropriations language limits the agency’s ability to conduct inspections, and neither the number of workers in a company nor low injury and illness rates is predictive of the potential for catastrophic accidents that can damage whole communities.",
"OSHA’s PSM regulations for chemical safety do not cover ammonium nitrate. In response to a requirement in the Clean Air Act Amendments of 1990, OSHA issued its PSM regulations in 1992 to help prevent accidents involving highly hazardous chemicals, including toxic, flammable, highly reactive, and explosive substances. These regulations apply to processes involving listed chemicals in amounts at or above threshold quantities. Employers subject to the PSM regulations are required to take specified steps, which include evaluating the hazards associated with the process, as well as developing and implementing operating procedures, employee training, emergency action plans, and compliance audits at least every 3 years, among other requirements. Despite the hazards of ammonium nitrate, this chemical is not listed as one of the chemicals subject to these regulations. OSHA officials told us they did not know why ammonium nitrate was not included when the regulation was first issued. According to the August 2013 chemical advisory, although ammonium nitrate is not covered by the PSM regulations, the production or use of ammonium nitrate may involve PSM- listed chemicals, and the manufacture of explosives, which may involve ammonium nitrate, is covered by the regulations. In the late 1990s, OSHA staff drafted a proposal for expanding PSM regulations to cover ammonium nitrate and other reactive chemicals, but it was not reviewed by agency policy officials and was never published in the Federal Register for public comment.\nIn addition, retail facilities, which may include facilities that store and blend fertilizer for direct sale to end users, are exempt from OSHA’s PSM regulations. In the preamble to the final rule for the PSM regulations, OSHA stated that retailers are not likely to store large quantities of hazardous chemicals, and that a large chemical release would be unlikely. While the facility in West, Texas stored large quantities of anhydrous ammonia, a chemical covered by the PSM regulations, OSHA officials told us that the PSM regulations would not apply to the facility because it was a retail outlet.\nIn addition, other chemical safety regulations issued by EPA do not apply to facilities with ammonium nitrate. EPA’s RMP regulations, issued in 1996 in response to a provision of the Clean Air Act Amendments of 1990, require covered chemical facilities to develop and implement a risk management program, but ammonium nitrate is not included on the list of chemicals that would trigger the requirements. EPA’s RMP regulations require facilities that handle more than threshold amounts of certain chemicals to implement a risk management program to guard against the release of chemicals into the air and surrounding environment. Covered facilities must develop their own risk management plans, and some facilities must also develop an emergency response program and conduct compliance audits, among other requirements. Covered facilities must also submit their risk management plans to EPA, including data on the regulated substances handled, and prepare a plan for a worst-case chemical release scenario.\nAlthough EPA initially included high explosives in its list of regulated substances, which would include explosives grade ammonium nitrate, these explosives were subsequently removed from the list as a result of a legal settlement. EPA officials also told us that fertilizer grade ammonium nitrate was not considered for its list for RMP because the agency had determined that it did not meet the criteria EPA established to implement the statute. Specifically, EPA officials told us that ammonium nitrate could have been included in the RMP regulations, but ammonium nitrate was not included because it was not considered a toxic or flammable chemical, which were among the criteria EPA used when the agency first developed the regulations. Accordingly, ammonium nitrate is not a covered chemical and EPA inspectors do not review facilities’ risk management plans for this chemical during their RMP inspections. In 2006, EPA conducted an on-site inspection of the West, Texas facility, but the inspection focused on anhydrous ammonia, not ammonium nitrate.",
"In response to the August 2013 Executive Order on Improving Chemical Facility Safety and Security, OSHA and EPA, as part of the federal working group, have invited public comment on a wide range of policy options for overseeing the housing and handling of hazardous chemicals in the United States. Because they are still evaluating these options, the agencies have not issued any notices of proposed rulemaking. As directed by the Executive Order, in December 2013, OSHA issued a Request for Information on potential revisions to its PSM and related regulations, including its ammonium nitrate storage regulations. OSHA’s Request for Information also seeks public input on changing the agency’s enforcement policy concerning the retailer exemption in the PSM regulations. In the Request for Information, OSHA states that “The West Fertilizer facility is not currently covered by PSM, however it is a stark example of how potential modernization of the PSM standard may include such facilities and prevent future catastrophe.” In addition, as chair of one of the workgroups established to implement the Executive Order, OSHA solicited public input in January 2014 on federal policy options for improved chemical safety and security, including whether to expand OSHA’s PSM regulations and EPA’s RMP regulations to cover ammonium nitrate, among other options. This solicitation also sought public input on whether federal agencies should examine the use of third party audits to promote safe storage and handling of ammonium nitrate. The solicitation defined third party audits as inspections conducted by independent auditors, retained by a chemical facility, who make process safety and regulatory compliance recommendations. In an ongoing pilot project in selected states implemented in response to the Executive Order, federal agencies report improved coordination of inspections, such as sharing inspection schedules, cross‐training inspectors, and inter‐agency referrals of possible regulatory non‐compliance.",
"",
"According to foreign officials and government documents, Canada and the three EU countries we contacted—France, Germany, and the United Kingdom—require facilities with specified quantities of ammonium nitrate, including fertilizer grade ammonium nitrate, to assess its risk and develop plans or policies to control the risks and mitigate the consequences of accidents. Like the United States, these countries are members of the OECD, which has published best practices for managing the risks of chemical accidents. The OECD publication includes guidance on preventing and mitigating the consequences of chemical accidents, preparedness planning, and land use planning, among other things. For example, OECD’s guidance recommends that regulatory authorities ensure that facilities with hazardous substances assess the range of possible accidents and require hazardous facilities to submit reports describing the hazards and the steps taken to prevent accidents.\nWith respect to assessing the risks of ammonium nitrate, according to Canadian officials and Canadian government documents, ammonium nitrate is regulated under the country’s Environmental Emergency Regulations, which include risk management provisions. According to guidance published by Environment Canada, a federal-level regulatory agency, facilities that store 22 tons or more of ammonium nitrate must develop and implement an environmental emergency plan. In developing an emergency plan, facilities are directed to analyze the risks posed during the storage and handling processes for certain chemicals and adopt practices to reduce the risks, taking into consideration the impact a chemical accident would have on the surrounding community.\nAccording to information provided by EU officials, facilities in the 28 member countries of the EU with specific quantities of ammonium nitrate fertilizer are subject to the Seveso Directive, the EU legislation for facilities that use or store large quantities of certain toxic, explosive, and flammable substances, among other types of chemicals. At a minimum, EU officials told us that EU member countries must comply with the Seveso Directive, although they have the option to adopt more stringent requirements. The legislation was adopted after a chemical accident in Seveso, Italy in 1976 that exposed thousands of people to the toxic chemical known as dioxin. Under the Seveso Directive, last updated in 2012, member countries are to require facilities with large amounts of ammonium nitrate fertilizer to notify the appropriate authority in their respective country, adopt a major accident prevention policy, and in some cases, develop a detailed safety report (see table 5).\nSome countries, such as France and the United Kingdom, have other requirements for notifying authorities about the types and quantities of chemicals at facilities, including certain types of ammonium nitrate. In the United Kingdom, officials told us that facilities with 28 tons or more of certain types of ammonium nitrate must notify the Health and Safety Executive or local authority and the fire authorities. French officials said that facilities with more than 276 tons of ammonium nitrate fertilizer must notify local authorities about their holdings.\nThe selected countries we reviewed generally reported having more centralized land use policies that specify where facilities with large quantities of ammonium nitrate should be located. For example, EU officials explained that the Seveso Directive requires member countries to develop and implement land use policies. Through controls on the siting of new Seveso facilities and new developments in the vicinity of such facilities, such as transportation routes and residential areas, they told us, member countries’ policies aim to limit the consequences of chemical accidents for human health and the environment. In the United Kingdom, officials told us that facilities intending to store more than 1,102 tons of ammonium nitrate must first receive permission from their local planning authority to do so for relevant ammonium nitrate materials. They explained that these local planning authorities consider the hazards and risks to people in surrounding areas and consult with the Health and Safety Executive prior to granting permission to such facilities.\nThree of the countries we reviewed—France, Germany, and the United Kingdom—restrict the use of wood for storage purposes in certain instances, according to information and documents provided by relevant officials. EU officials told us that the Seveso Directive does not prescribe how chemicals, including ammonium nitrate, should be stored. EU countries have developed their own technical standards or rely on industry standards for storing and handling ammonium nitrate. For example, according to information provided by French officials, after several accidents involving ammonium nitrate fertilizer, the government in France launched a working group to update existing ammonium nitrate regulations, including storage and handling requirements. They described the most recent regulations in France, issued in 2010, which include updated fire resistance provisions for new and existing facilities banning or restricting the use of materials such as wood and asphalt flooring for storing ammonium nitrate. Specifically, according to documents provided by French officials, the regulations direct facilities not to store ammonium nitrate fertilizer in structures with wood walls or sides. According to an official in Germany, strict storage requirements for using certain types of ammonium nitrate fertilizer have led many farmers to voluntarily use an alternative type of fertilizer, known as calcium ammonium nitrate., For example, she explained that, in Germany, certain kinds of ammonium nitrate must be divided into quantities of 28 tons prior to storage, and quantities are separated by concrete walls. In addition, certain ammonium nitrate and ammonium nitrate-based preparations must be separated from combustible materials, for example by brick or concrete walls. Guidance in the United Kingdom also recommends that buildings for storing ammonium nitrate should be constructed of material that does not burn, such as concrete, bricks, or steel, as does the recent advisory in the United States published by OSHA, EPA, and ATF.",
"Guidance on Safe Practices. In the countries we reviewed, government entities developed materials to help facilities with ammonium nitrate fertilizer comply with safety regulations. For example, in the United Kingdom, the government published guidance on storing and handling ammonium nitrate that illustrates proper storage practices and is written in plain language. The United Kingdom also developed a checklist that facilities can use as a compliance tool to determine whether they are meeting safe storage requirements. In Canada, Environment Canada issued a guidance document in 2011 so that facilities covered by its Environmental Emergency Regulations, including facilities with certain types and amounts of ammonium nitrate, can better understand and comply with regulatory requirements.\nThe EU compiles information about chemical accidents and disseminates publications that include guidance on how facilities can prevent future incidents. Specifically, the EU has a system for reporting major accidents, including accidents involving ammonium nitrate, and tracks the information in a central database. For example, as of January 2014, this database contained information on several incidents involving ammonium nitrate dating back to 1986. EU researchers use this information to develop semi-annual publications in order to facilitate the exchange of lessons learned from accidents for both industry and government regulators. Each publication focuses on a particular theme such as a specific substance, industry, or practice, and summarizes the causes of related accidents and lessons learned to help prevent future accidents. EU officials told us that the next publication will be issued in the summer of 2014 and will focus on the hazards of ammonium nitrate in part as a result of the explosion that occurred in West, Texas.\nRoutine Inspections. In the EU, member countries are required to inspect facilities with large quantities of chemicals covered by the Seveso Directive, which includes facilities with ammonium nitrate. According to EU officials and documents, the EU’s Seveso Directive requires covered facilities to be inspected either annually or once every 3 years, depending on the amount of hazardous chemicals a facility has—the greater the amount, the more frequent the inspection. EU officials also explained that member countries are required to report information to the European Commission every 3 years on how they are implementing the Seveso Directive requirements, including the number of facilities that have been inspected in their country. According to a report published by the European Commission in June 2013, member countries reported in December 2011 that they had 10,314 covered facilities. According to the report, of those facilities to be inspected annually, 66 percent were inspected, on average, in 2011, and of those facilities to be inspected once every 3 years, 43 percent were inspected, on average, in 2011.\nVoluntary Initiatives and Third Party Audits. In the countries we reviewed, the fertilizer industry has actively promoted voluntary compliance with national safety requirements among facilities with ammonium nitrate fertilizer. For example, Fertilizers Europe, which represents the major fertilizer manufacturers in Europe, published guidance in 2007 for the storage and handling of ammonium nitrate-based fertilizers. This guidance recommends that buildings used to store ammonium nitrate- based fertilizers be constructed of non-readily combustible materials such as brick, concrete, or steel and that wood or other combustible materials be avoided, among other things. Fertilizers Europe has also developed a compliance program that is a key requirement for membership, which consists of independent third party audits. As part of the program, it developed a self assessment tool for fertilizer manufacturers to use to identify gaps and possible improvements.\nIn the United Kingdom, the government and the fertilizer industry worked together in 2006 to develop a voluntary compliance program for facilities that manufacture and store fertilizers, among other activities, including ammonium nitrate-based fertilizers. According to a United Kingdom official, the government provided some of the initial funding for this initiative, and the voluntary compliance program is now self financed. Although the program was initially focused on fertilizer security, it has evolved over the years to also address fertilizer safety in the United Kingdom. As part of the voluntary compliance program, participating facilities carry out risk assessments. These facilities are audited annually by an independent audit team comprised of specialists to determine whether they comply with industry and government standards, including standards for safely storing and handling ammonium nitrate fertilizer.\nOfficials we interviewed in the United Kingdom told us that the government encourages and supports this industry initiative and that about 90 percent of facilities with ammonium nitrate in the United Kingdom, including those that have small quantities, are members of the voluntary program. A United Kingdom official said, in his opinion, one would expect facilities participating in this industry initiative to be more likely to be found in compliance by the government when it conducts its own inspections. Furthermore, government officials, industry representatives, and program administrators meet twice a year to discuss how the program is being implemented and monitored.",
"Large quantities of ammonium nitrate are present in the United States, although the precise number of facilities with ammonium nitrate is not known. While incidents involving ammonium nitrate are rare, this chemical can react in ways that harm significant numbers of people and devastate communities. Facilities may be required, in certain circumstances, to report their chemical holdings to federal, state, and local authorities for security and emergency planning purposes. However, given the various reporting requirements and numerous reporting exemptions, some facilities may be uncertain about what to report to whom. Through the new Executive Order, federal agencies including DHS, EPA, and OSHA have the opportunity to work together on data sharing initiatives to help identify facilities with ammonium nitrate fertilizer. Such data sharing could help federal agencies identify facilities that are not complying with their regulations and enable OSHA to target high risk facilities with ammonium nitrate for inspection. Without improved coordination among the various federal and state agencies that collect data on facilities that store potentially hazardous chemicals, identifying facilities with ammonium nitrate for purposes of increasing awareness of the hazards and improving regulatory compliance will remain a challenge.\nAlthough OSHA has requirements for storing ammonium nitrate fertilizer in its Explosives and Blasting Agents regulations that could reduce the likelihood of an explosion, OSHA has done little to ensure that the fertilizer industry, which is one of the primary users of ammonium nitrate, understands how to comply with its existing regulations. The August 2013 chemical advisory and OSHA’s February 2014 letter to facilities help clarify how OSHA’s Explosives and Blasting Agents regulations apply to fertilizer facilities. However, without additional action by OSHA to promote awareness of how to comply with its regulations, fertilizer facilities may not know whether their practices are in compliance with OSHA’s existing ammonium nitrate storage regulations or if changes need to be made. Moreover, unless OSHA takes steps to leverage additional resources to support its enforcement efforts, whether through enhanced targeting or coordination with other agencies or outside parties, beginning with encouraging voluntary compliance with ammonium nitrate regulations through various industry initiatives, it will not know the extent to which dangerous conditions at some facilities may continue to exist.\nWhile much can be achieved under current regulations, OSHA and EPA’s regulations contain gaps with respect to ammonium nitrate that may allow unsafe facilities to operate and poor planning to persist. OSHA has not significantly changed its ammonium nitrate storage regulations since they were issued in 1971, which means that fertilizer facilities may be adhering to outdated practices. For example, other countries we reviewed have revisited and updated their ammonium nitrate regulations and the National Fire Protection Association is considering making changes to its ammonium nitrate storage standards as a result of the explosion in West, Texas. In addition, as a result of incidents involving ammonium nitrate abroad, countries in the European Union and Canada require facilities to assess the risks of working with ammonium nitrate fertilizer, and the European Union requires member countries to routinely inspect facilities that have very large quantities of it. These approaches offer examples of how the risks of ammonium nitrate can be managed. Although increased regulation may be more burdensome to industry, without some means of ensuring that high risk facilities plan for and manage the risks associated with ammonium nitrate, such facilities may not be prompted to adequately address the risks the chemical creates for workers and neighboring communities.",
"1. To improve federal oversight of facilities with ammonium nitrate, we recommend that the Secretary of Labor, the Administrator of EPA, and the Secretary of Homeland Security, as part of their efforts as members of the Chemical Facility Safety and Security Working Group established by the Executive Order issued in August 2013, develop and implement methods of improving data sharing among federal agencies and with states. 2. We also recommend that the Secretary of Labor direct the Assistant Secretary for Occupational Safety and Health to take the following three actions:\nExtend OSHA’s outreach to the fertilizer industry. For example, OSHA could work with the fertilizer industry to develop and disseminate informational materials related to storage of ammonium nitrate.\nTake steps to identify high risk facilities working with ammonium nitrate and develop options to target them for inspection.\nConsider updating regulations for the storage of ammonium nitrate taking into consideration, as appropriate, other related standards and current practices. 3. To strengthen federal oversight of facilities with ammonium nitrate, we recommend that the Secretary of Labor and the Administrator of EPA direct OSHA and EPA, respectively, to consider revising their related regulations to cover ammonium nitrate and jointly develop a plan to require high risk facilities with ammonium nitrate to assess the risks and implement safeguards to prevent accidents involving this chemical.",
"We provided a draft of this report to the Administrator of EPA, the Secretary of Homeland Security, and the Secretary of Labor for review and comment. We received written comments from EPA, DHS, and OSHA, which are reproduced in appendices I, II, and III. EPA, DHS, and OSHA agreed with our recommendation that the agencies improve data sharing and described their current efforts to address this issue as part of their implementation of the Executive Order on Improving Chemical Facility Safety and Security. The agencies stated that a status report by the Executive Order Working Group, which will be submitted to the President by the end of May, 2014, will include proposals for enhancing data sharing among federal agencies and with states.\nOSHA agreed with our recommendation that the agency conduct additional outreach to the fertilizer industry, stating that additional outreach efforts will be identified in the Executive Order status report and that these efforts should help the fertilizer industry understand OSHA’s safety requirements and industry best practices. OSHA also agreed with our recommendation that the agency target high risk facilities for inspection, stating that the agency is evaluating options for targeting high risk fertilizer facilities for inspection.\nOSHA and EPA agreed with our recommendation that the agencies consider revising their regulations to cover ammonium nitrate. OSHA is currently reviewing public comments submitted in response to a Request for Information on a proposed revision to the agency’s Process Safety Management and Prevention of Major Chemical Accidents regulations and the a request for public input on issues associated with Section 6 of the Executive Order, which addresses Policy, Regulation, and Standards Modernization. EPA stated that the agency will be publishing a Request for Information seeking public input on its proposed revision to process safety and risk management issues relevant to its Risk Management Program regulations, including coverage of ammonium nitrate. In addition, EPA, DHS, and OSHA provided technical comments, which we have incorporated as appropriate. We also provided portions of the draft report related to each of the four countries we reviewed to relevant officials from each country, and incorporated their technical comments, as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Administrator of EPA, the Secretary of Homeland Security, the Secretary of Labor, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staffs have any questions concerning this report, please contact me at (202) 512-7215 or moranr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV.",
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"In addition to the contact named above, Betty Ward-Zukerman, Assistant Director; Catherine Roark, Analyst in Charge, Theodore Alexander, Nancy Cosentino, Joel Marus, and Meredith Moore, made significant contributions to all phases of the work. Also contributing to this report were Hiwotte Amare, Jason Bair, James Bennett, Susan Bernstein, Stephen Caldwell, Sarah Cornetto, Charles Johnson, Jr., Kathy Leslie, Ashley McCall, Sheila McCoy, Jean McSween, John Mortin, Vincent Price, Stephen Sanford, Sushil Sharma, Linda Siegel, Maria Stattel, and Kathleen van Gelder."
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"question": [
"How comprehensive are data about facilities containing ammonium nitrate?",
"How are ammonium nitrate holdings reported?",
"How widespread are facilities with ammonium nitrate in the United States?",
"Why might this data be limited?",
"How are data-sharing attempts being explored?",
"How does OSHA regulate facilities with ammonium nitrate?",
"How modern are OSHA's regulations?",
"How do these regulations compare to other OSHA chemical regulations?",
"What does international chemical safety guidance suggest authorities should do regarding facilities with ammonium nitrate?",
"How did GAO review approaches for reviewing ammonium nitrate facilities?",
"How do these countries regulate facilities with ammonium nitrate?",
"How do these countries restrict the storage of ammonium nitrate?",
"How dangerous can ammonium nitrate be?",
"How did this incident affect oversight concerns?",
"What federal agencies are best-suited to approach this oversight?",
"What does this report address?",
"How did GAO source their data for this report?"
],
"summary": [
"Federal data provide insight into the number of facilities in the United States with ammonium nitrate but do not provide a complete picture because of reporting exemptions and other data limitations.",
"The Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA) do not require facilities to report their ammonium nitrate holdings. The Department of Homeland Security (DHS) requires facilities with certain quantities of ammonium nitrate to report their holdings for security purposes.",
"While the total number of facilities in the United States with ammonium nitrate is unknown, as of August 2013, at least 1,300 facilities in 47 states reported to DHS that they had reportable quantities of ammonium nitrate.",
"Federal law also requires certain facilities to report their ammonium nitrate holdings to state and local authorities for emergency planning purposes, but these data are not routinely shared with federal agencies. According to EPA, states are not required to report these data to federal agencies, and each state determines how to share its data.",
"As part of an Executive Order on Improving Chemical Facility Safety and Security issued in August 2013, federal agencies are exploring options for improving data sharing, but this work is not yet complete.",
"OSHA's regulations include provisions for the storage of ammonium nitrate, but the agency has done little outreach to increase awareness of these regulations within the fertilizer industry, a primary user.",
"In addition, the regulations have not been significantly revised since 1971 and allow storage of ammonium nitrate in wooden buildings, which could increase the risk of fire and explosion.",
"Other OSHA and EPA chemical safety regulations—which require facilities to complete hazard assessments, use procedures to prevent and respond to accidents, and conduct routine compliance audits—do not apply to ammonium nitrate.",
"International chemical safety guidance suggests authorities should provide facilities information on how regulatory requirements can be met and periodically inspect them.",
"GAO reviewed approaches to overseeing facilities with ammonium nitrate in Canada, France, Germany, and the United Kingdom, selected in part based on recommendations from chemical safety experts.",
"According to foreign officials and government documents, these countries require facilities with specified quantities of ammonium nitrate to assess its risk and develop plans or policies to prevent chemical accidents. For example, Canadian officials said facilities with 22 tons or more of ammonium nitrate are required to complete a risk assessment and an emergency plan.",
"Some countries' storage requirements also restrict the use of wood to store ammonium nitrate. For example, officials told GAO that France restricted the use of wood for storing ammonium nitrate fertilizer after several incidents involving ammonium nitrate fertilizer, and German officials told GAO that certain ammonium nitrate and ammonium nitrate-based preparations must be separated from combustible materials by brick or concrete walls.",
"In April 2013, about 30 tons of ammonium nitrate fertilizer detonated during a fire at a facility in West, Texas, killing at least 14 people and damaging nearby schools, homes, and a nursing home.",
"This incident raised concerns about the risks posed by similar facilities across the country.",
"OSHA and EPA play a central role in protecting workers and communities from chemical accidents, and DHS administers a chemical facility security program.",
"This report addresses (1) how many facilities have ammonium nitrate in the United States, (2) how OSHA and EPA regulate and oversee facilities that have ammonium nitrate, and (3) what approaches selected other countries have adopted for regulating and overseeing facilities with ammonium nitrate.",
"GAO analyzed available federal data and data from selected states with high use of ammonium nitrate; reviewed federal laws and regulations; and interviewed government officials, chemical safety experts, and industry representatives in the United States and selected countries."
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{
"title": [
"",
"Background",
"The Campaign",
"Results and Assessments",
"Implications for Georgia",
"Implications for U.S. Interests"
],
"paragraphs": [
"",
"Since President Mikheil Saakashvili came to power in late 2003, Georgia has made notable progress in increasing economic and political freedoms and reducing police corruption and crime, according to many observers. However, these observers—including international organizations such as the Organization for Security and Cooperation in Europe (OSCE) and the European Union (EU), and governments such as the United States—also have viewed this progress as uneven, and have judged Georgia's legislative and presidential elections in 2008 as promising but falling somewhat short as free and fair contests. These observers strongly impressed upon the Georgian government that the conduct of the October 1, 2012, election to the Parliament (also called the Supreme Council) would affect future relations and the country's hopes for eventually joining the European Union and NATO.\nThe seminal event in the run-up to the October 2012 legislative race was multi-billionaire businessman Bidzina Ivanishvili's announcement in late 2011 that he would enter politics in opposition to Saakashvili (See Box). A few days after this announcement, Saakashvili signed an order revoking Ivanishvili's Georgian citizenship on the grounds that he also held Russian and French citizenship (Ivanishvili subsequently relinquished his Russian citizenship, but France deferred action on his request to relinquish his French citizenship). With his citizenship revoked, Ivanishvili was barred from running for office. Following domestic and international criticism, several constitutional changes were enacted by Saakashvili's United National Movement (UNM)-led Parliament and went into force in May 2012. One such change permitted a citizen of an EU country who has lived for five years in Georgia to be elected to high political office. This provision was designed to permit Ivanishvili's participation in the October 2012 legislative election. However, Ivanishvili proclaimed that he would not run in the election except as a citizen of Georgia.\nThe UNM-controlled legislature passed other provisions in late 2011 barring corporate contributions and limiting corporate employee contributions to political parties. Critics viewed these provisions as attempts to hinder Ivanishvili from financing prospective or existing parties. Instead, state financing of campaigns by existing parties that had won past elections was stepped up, also viewed by critics as a means to constrict any new party created through Ivanishvili's interests. The State Audit Chamber was given responsibility to monitor campaign spending.\nAlso in late 2011, a new electoral code provided for 77 members of the 150-seat legislature to be elected through proportional voting and the remaining 73 through constituency voting in single member districts, replacing the previous election of 50% of the members by each method. Another provision guaranteed that a party that gained a minimum of 5% of the vote would get at least six seats in the legislature.\nIvanishvili launched his new political party, Georgia Dream-Democratic Georgia (GD), in April 2012, and formed a coalition with several parties headed by individuals who once supported or were a part of the Saakashvili government, and other groups and individuals left behind by political developments in the country. These include two parties that broke with Saakashvili in 2004: the Republican Party of Georgia, headed by Davit Usupashvili, and the Conservative Party, headed by Zviad Dzidziguri. Another party, the Free Democrats Party, headed by Irakli Alasania, broke with Saakashvili at the end of 2008. Two other parties moved into opposition during or soon after Saakashvili's rise to power: the National Forum Party, headed by Gubaz Sanikidze, and the Industry Will Save Georgia Party, headed by Gogi Topadze. Besides these party leaders who ran as candidates under the GD umbrella, other past and present politicians and celebrities joined the GD as candidates. Although these parties and individuals represented a broad range of views from xenophobic and socially conservative to pro-Western and reformist, in launching GD, Ivanishvili affirmed support for Georgia's integration into NATO and the EU; vowed to reduce poverty, unemployment, and emigration and to increase health, education and other social services; and generally pledged to bolster Georgia's democratic and free market orientation.\nIn June-July 2012, the State Audit Chamber obtained court rulings levying substantial fines on GD and its campaign donors, and authorities seized tens of thousands of satellite dishes belonging to two Ivanishvili-related television stations, alleging that the provision of dishes to customers represented illicit vote-buying. Domestic and international criticism of these moves may have contributed to the reduction or deferral of some of the fines and the enactment of a \"must carry\" law that allowed programs from Ivanishvili-related stations to be carried by cable providers until election day.",
"By early September 2012, the Central Electoral Commission (CEC) of Georgia had registered 14 parties and two electoral blocs (GD and the Christian Democratic Union)—comprising 2,313 candidates—for the proportional part of the legislative election. In the constituency races, the CEC had registered 429 candidates, including four nominated by independent initiative groups. There were no uncontested constituency races.\nThe most significant events occurring late in the campaign were the release of videos by GD purporting to show shocking prison abuse by guards, and allegations by UNM that GD was consorting with organized crime. The airing of the videos on September 18 led to large protests throughout Georgia. On September 20, Saakashvili emphasized that the videos showed \"disgusting\" human rights abuses that were \"failures of the system,\" but he urged that voters \"should not throw the baby out with the bathwater,\" by punishing UNM at the polls. In his address to the U.N. General Assembly on September 25, he emphasized that \"we did what democracies must do,\" by replacing the Minister of Prisons with a human rights official, ousting the Minister of the Interior, and arresting other prison officials.\nThe release of the videos late in the campaign undermined Saakashvili's image as a anti-corruption fighter and champion of democracy in the eyes of many voters, according to many observers. Opinion polls taken by the U.S. National Democratic Institute in June and August 2012—before the release of the videos—seemed to indicate that more Georgians preferred UNM to GD and that support for GD may have weakened (perhaps a caveat to these findings, a large percentage of individuals declined to indicate who they would vote for). After the videos were released, the views of the electorate may have shifted. Perhaps indicative of this shift late in the campaign, over 100,000 individuals reportedly turned out at a final campaign rally held by Ivanishvili in Tbilisi on September 29, among the largest turnout at a rally in recent years.",
"The CEC reported that almost 2.16 million of 3.6 million registered voters turned out for the election (about 59.8%) on October 1. Only UNM and GD won enough party list votes to pass the 5% hurdle and win seats in the legislature (see Table 1 ). Citing irregularities in the voting in several precincts, the CEC ordered repeat elections to be held on October 14 in three constituency races, which resulted in reversals in two with wins by GD candidates and the re-confirmation of a tentative win by a GD candidate in the third. Looking at the results for both the party list and constituency races, UNM lost 54 of the 119 seats it held after the 2008 election. The polarization between the two major political forces—GD and UNM—appeared to attract the attention of the bulk of the electorate, so that all the other parties were sidelined, including the Christian Democratic Union and the Labor Party, which had won legislative seats in 2008 but failed to win any during this election.\nOn October 2, after 29% of the votes had been counted and GD appeared to have a wide lead over UNM, President Saakashvili made a concession speech, repeating past statements that he thought GD's views were \"extremely mistaken,\" but that he respected the decision of the people. He voiced the hope that the UNM could work with GD to govern, but stressed that UNM would oppose any rollback of the party's achievements, including \"fighting against corruption, fighting against crime, modernizing Georgia, and building new institutions.\"\nOn October 3-4, the CEC reported that groups of GD supporters were threatening the work of electoral officials at nearly a dozen district headquarters, demanding that the election officials reverse \"fraudulent\" vote counts resulting in wins for UNM candidates in constituency races. The European Union's mission chief in Georgia, Philip Dimitrov, warned that such threats against election officials reflected badly on party leaders. On October 4, U.S. Ambassador to Georgia Richard Norland traveled to Zugdidi to urge GD supporters protesting against a local electoral win by a UNM candidate to respect democratic processes. That same day, Ivanishvili issued an appeal for these protests to stop. Georgian National Security Council Secretary Giga Bokeria warned that \"violence and the threat of violence\" at electoral commissions was the main impediment to the orderly transfer of power, and urged the protesters to heed Ivanishvili's appeal.\nThe head of the OSCE election observation mission stated on October 2 that \"the Georgian people have freely expressed their will at the ballot box ... despite a very polarizing campaign.\" The nearly 400 observers reported that the legislative elections \"marked an important step in consolidating the conduct of democratic elections,\" although some problems remained. The observers reported that voting appeared to be administered in a competent manner in almost all of 1,260 polling stations visited. However, they evaluated vote counting somewhat less positively, reporting that in nearly two dozen of 135 counts observed, there were procedural errors in completing voting protocols. The monitors mostly focused their concerns on the campaign environment, which they typified as \"polarized and tense,\" with the use of harsh rhetoric and occasional violence, and as emphasizing incumbency and private financial assets over political programs. The observers raised concerns that a majority of fines levied and activists detained during the campaign involved supporters of GD. The monitors praised the efforts of the Inter-Agency Commission to address uses of resources or other actions by government officials that violated campaign laws, but raised concerns that the State Audit Office appeared to target the opposition for violations of campaign financing laws.",
"The October 1, 2012, legislative election is the first in the South Caucasus resulting in a competitive and peaceful transfer of power. As such, the election meets Saakashvili's pledge in his state of the nation address in early 2012 that it would be the \"freest, most transparent and most democratic ... ever held in Georgia.\" Also for the first time during Saakashvili's tenure as president, he will face a legislative majority from an opposing party.\nIn a briefing the day after the election, Ivanishvili stated that he expected to become the new prime minister (but see below). He emphasized that the election results meant that Saakashvili should resign and that new presidential elections should be held. Barring Saakashvili's resignation, Ivanishvili indicated that GD legislators would move to constrain Saakashvili's ability to govern. He stated that he had informed Members of Congress and other U.S. visitors that Saakashvili was unlikely to respond to cooperative overtures by GD. Ivanishvili claimed that GD would not seek to prosecute members of the former government and would work with them, except for those guilty of \"crimes.\"\nThe next day, however, Ivanishvili softened his tone toward Saakashvili, claiming that he had not demanded but only suggested that the president resign. Belying Ivanishvili's expectations that Saakashvili would not cooperate, on October 5 a working group of government officials met with a similar group of GD officials to work out future cooperation. Ivanishvili reported that the first meeting between the two sides was constructive, with Saakashvili's representatives understanding that GD planned all new appointments to the cabinet. Bokeria, a member of the UNM working group, underscored that the President would nominate a candidate for prime minister suggested by GD.\nUnder the Georgian constitution, after the new legislature convenes in late October or early November, the president will nominate a candidate for prime minister after consulting with GD. The candidate then will form a cabinet, and within ten days will present the choices to the legislature for a vote of confidence. Georgian constitutional expert Avtandil Demetrashvili has suggested that Saakashvili may well be reluctant to totally replace the cabinet, as called for by Ivanishvili, but that both also have stated that they will cooperate to form a new government.\nOn October 8, Ivanishvili announced the names of prospective cabinet members. Maia Panjikidze, the former spokeswoman for GD, was nominated to be foreign minister. She pledged to uphold the strategic partnership with the United States and Georgia's European and Euro-Atlantic orientation. She averred that efforts would be taken to improve relations with Russia, but that Georgia would not move to re-establish diplomatic relations with Russia as long as it denies that Abkhazia and South Ossetia are part of Georgia. She also termed \"absurd,\" a call by the Russia-led Commonwealth of Independent States for Georgia to re-join. Alasania, the nominee for defense minister, likewise promised to continue efforts to join NATO. Pro-Western Davit Usupashvili was nominated to be the legislative speaker. Bokeria stated that outgoing ministers would meet with and brief these nominees in coming days so that the political transition would move smoothly.\nSince the GD coalition contains 6 political parties (including the GD Movement), the new legislature will not be predominantly a two-party body, as in the United States. Ivanishvili anticipates that the coalition parties will form separate factions in the Parliament but that they will cooperate on major issues. However, many observers predict that cooperation may prove difficult, since the parties long have endeavored to maintain their distinct identities.\nSince GD has a majority in the legislature and influence over the new cabinet government, it may well seek to revamp and replace Saakashvili's policies and priorities. A more contentious and oppositionist legislature would be somewhat similar to the one faced by former President Eduard Shevardnadze after the October 1992 legislative election (until it granted him greater powers in mid-1993 due to a deepening economic crisis and conflict in Abkhazia).\nSome observers raise concerns that GD might not safeguard democracy but could move to constrain it, as has occurred in Ukraine and Russia. Georgian analyst Gia Nodia argues that Ivanishvili is closely tied to Russia and organized crime, and warns that Ivanishvili has displayed authoritarian tendencies, as indicated by his threats against reporters and opponents. For these reasons, he argues, UNM must continue to function as an effective opposition party. He and other political analysts argue that because the GD coalition did not win an overwhelming majority of seats in the legislature, the UNM may have ample room to maneuver, particularly if the parties in the GD coalition bicker among themselves and even ally with UNM on some votes, so that some of Saakashvili's preferred policies are continued.\nA few analysts discount President Saakashvili's broad commitment to democracy and assert that he not only will use his substantial presidential powers to constrain GD initiatives but will use myriad illicit means (such assertions by Ivanishvili and others were more prevalent during the election campaign). They point out that he came to power during the 2003 \"rose revolution,\" and warn that he could carry out another coup. They also point to several instances where the Saakashvili government exercised force against opposition demonstrators that was deemed excessive by international observers.\nA third group of analysts argue that wrangling and even policy gridlock within the legislature and between government ministers and Saakashvili may not be inevitable. GD and UNM both emphasized boosting support for social policies during the campaign, so that there are grounds for cooperation on these issues. According to this view, Saakashvili's policies of combating corruption and supporting democratization are popular, so also may be endorsed by a GD government that wishes to maintain public support. Some observers have argued that GD may try to entice UNM legislators to join them in passing legislation, although these observers generally view it as unlikely that GD would be able to garner the constitutional majority (100 votes) needed to impeach and remove the president, although it may be possible for GD to attract votes to reach the 90 necessary to override a presidential veto.\nPerhaps removing one concern of the new legislators and cabinet, outgoing Prime Minister Vano Merabishvili stated on October 8 that the state's fiscal balance was healthy, so that existing and planned government spending would not face a crisis. Some observers have raised concerns, however, that investment and foreign assistance might decrease if political turmoil increases.\nSaakashvili and Ivanishvili met briefly on October 9. Ivanishvili stated that the peaceful and democratic transfer of power was \"dignified\" and historic, and pledged that GD would not launch prosecutions against the opposition. He also reported that he agreed with the main course of Saakashvili's foreign policy and would bolster its European and Euro-Atlantic orientation. President Saakashvili in turn pledged that he would work to ensure a peaceful transfer of power.\nThe win by GD sets the stage for the prospective 2013 presidential election, after which constitutional changes will come into force granting the legislature and prime minister more power vis-à-vis the presidency. This election may be called by the president at any time during 2013. Under the changes, the party that has the largest number of seats in the legislature after the presidential election (and after the resignation of the previous cabinet) will nominate the candidate for prime minister. This nominee will select ministers and draft a program, and upon approval by the legislature, the president will confirm the prime minister. The changes also call for regional governors to be appointed by the prime minister rather than the president, as is currently the case. The Venice Commission, an advisory body of the Council of Europe, has raised concerns that presidential powers will still be substantial relative to those of the prime minister and legislature, and that clashes between the president and prime minister might emerge on foreign policy and other matters.\nRussia appeared to largely follow a policy of noninterference in the election, although a military exercise in southern Russia before the election was troubling to many in Georgia. The day after the election, Russian President Vladimir Putin hailed the appearance of \"more responsible forces\" in the Georgian legislature and stated that the ruling United Russia Party—which had \"always stayed in touch\" with some political forces in Georgia—was ready for further dialogue on Georgia-Russia ties. Russian state television hailed the election as marking the \"end of color revolutions\" (democratization progress in several Soviet successor states in the early to mid-2000s that President Putin and others asserted was orchestrated by the United States) and the ebbing of U.S. influence in the South Caucasus region. In line with this Russian conception of U.S.-directed \"color revolutions,\" Russian state television also rejected the argument that the Georgian election was a democratic showpiece in the region—in contrast to Russia's elections—asserting that the United States had grown \"tired\" of Saakashvili and cut back his power.\nSaakashvili has stated that he will abide by a constitutional limit to two terms as president, so will not run in the planned 2013 presidential election, but that he hopes to remain in politics. He has denied an intention to become the prime minister after this election, and even so, GD's legislative victory may make this less possible. While some observers have proclaimed that the \"Saakashvili era\" may be winding down in Georgia, others point to Saakashvili's political crisis of late 2007—when a crackdown on protesters led him to resign and seek re-election and affirmation as president—and his political resiliency after the 2008 Georgia-Russia conflict in suggesting that he may continue to play a role in Georgian politics.",
"To demonstrate U.S. interest in the election, the Obama Administration dispatched an inter-agency delegation to Georgia in mid-September 2012, led by Deputy Assistant Secretary of State Thomas Melia. He testified to Congress that the delegation emphasized that the United States supported a democratic election that would advance Euro-Atlantic aspirations and that would set the tone for a peaceful presidential succession and alteration in the power of the prime minister in 2013.\nThe White House on October 2, 2012, congratulated the people of Georgia for achieving \"another milestone\" in the country's development by holding a competitive and peaceful democratic election. The White House called for Ivanishvili and Saakashvili to work together to ensure the continued advancement of democracy and economic development, and stated that it looked forward to strengthening the U.S.-Georgia partnership.\nSeveral Members of Congress, including Senator Jeanne Shaheen, Representative Gregory Meeks, and Representative David Dreier, observed the election and reportedly urged the two sides to cooperate in governing the country. Senator Shaheen stressed that the outcome of the election demonstrated that President Saakashvili had followed democratic procedures and that warnings by Ivanishvili that the election would not be democratic were false.\nOn October 3, 2012, Senator John McCain, Senator Joe Lieberman, and Senator Lindsey Graham issued a statement commending President Saakashvili for his efforts to transform Georgia into a prosperous democracy, and pointed to the competitive and peaceful election as evidence of the transformation. At the same time, they raised concerns about Ivanishvili's call for Saakashvili to resign and about protests by GD supporters, and cautioned that the future of U.S.-Georgia relations depends on Georgia's continued commitment to democratization.\nLieutenant General John Paxton, Commander of Marine Corps Forces Command, was among the first post-election U.S. visitors to Georgia. He met with Ivanishvili on October 5, 2012, and congratulated him on his electoral victory and emphasized that the United States remained an ally and looked forward to further cooperation with Georgia. Ivanishvili praised U.S. assistance in modernizing Georgia's military and pledged to continue \"our partnership in Afghanistan\" and other military cooperation.\nIvanishvili announced on October 3 that his first foreign visit would be to the United States, after the U.S. presidential election, since the country is Georgia's \"principal partner.\" Secretary Clinton reportedly telephoned both Saakashvili and Ivanishvili on the evening of October 4 to urge a peaceful transition of power in Georgia. She raised concerns about protests at district electoral commissions and thanked Ivanishvili for his commitment to deepen ties with the United States. Ivanishvili in turn reportedly praised the role of the United States in Georgia's development.\nSome observers have raised concerns that two parties in the GD coalition—the National Forum and Industry Will Save Georgia—do not support NATO membership for Georgia. Two other parties in the coalition—the Free Democrats and the Republican Party—are supportive of NATO membership. Observers point to the nomination of leaders of these latter two parties—Alasania as defense minister and Usupashvili as speaker—as boding well for the continuation of this pro-NATO orientation. Meeting with NATO Liaison Officer William Lahue on October 5, Ivanishvili argued that his policies would accelerate Georgia's democratization, so that it soon would meet NATO's standards for membership.\nDespite his statements in support of closer relations with NATO and the United States, Saakashvili and others have raised concerns about Ivanishvili's links to Russia and his intentions to improve Georgia-Russia ties. These observers have argued that although Ivanishvili sold his business interests in Russia, this could not have been accomplished without the Kremlin's active involvement. They worry that as a condition for improved bilateral ties, Russia will insist that Georgia loosen its ties to NATO and the United States. Perhaps militating against a substantial thaw in Georgia-Russia relations, Ivanishvili has stated that he rejects Moscow's assertion that South Ossetia and Abkhazia are independent countries rather than parts of Georgia.\nWhile the initial period of the political transition in Georgia has appeared mostly peaceful, political in-fighting within GD and between GD and Saakashvili could increase in coming months, as both sides maneuver before the planned 2013 presidential election. The UNM plans to retain the presidency. Under the constitutional changes, the legislature is slated to gain greater powers vis-à-vis the presidency, so a divided political situation could endure for some time. In such a case, statesmanship and a commitment to compromise and good governance are essential for Georgia's continued democratization, observers stress.\nPolitical instability in Georgia could jeopardize its role as an east-west trade corridor, including for oil and gas bound for the West and for U.S. and NATO goods and equipment transiting the region to and from Afghanistan as part of the Northern Distribution Network (NDN). Russia could gain leverage from this instability. In the case of oil and gas, Azerbaijan may be forced to rely more on export routes transiting Russia, and it may become somewhat more difficult for the European Union to reduce Russia's control over European energy supplies. In the case of the NDN, Russia's significance as a transit route could increase. Rising instability in Georgia might provide other entre to Russian influence, which could impact the regional security situation, including by placing more pressure on Azerbaijan to pursue a less pro-Western foreign policy, according to some observers.\nMany in Congress have indicated that they continue to support Georgia's independence and peaceful political and economic development. As Congress considers ongoing foreign and security assistance to Georgia, it will be particularly concerned about the unfolding political transition in the country."
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"question": [
"To what extent is the continued sovereignty of Georgia an area of interest for Congress?",
"How has the United States been supporting Georgia?",
"How fair are Georgia's elections?",
"How does the U.S. plan to continue its support?",
"What did Georgia's Central Electoral Commission do in the run-up to the 2012 election?",
"What was the main opposition coalition?",
"What factors led to the electoral victory of Georgia Dream?",
"To what extent was the election free?",
"How important is the election in Georgia's development as a democracy?",
"How were Members of Congress involved in the election?",
"What were points of concern in the election?"
],
"summary": [
"Georgia's continued sovereignty and independence and its development as a free market democracy have been significant concerns to successive Congresses and Administrations.",
"The United States and Georgia signed a Charter on Strategic Partnership in early 2009 pledging U.S. support for these objectives, and the United States has been Georgia's largest provider of foreign and security assistance.",
"Most recently, elections for the 150-member Parliament of Georgia on October 1, 2012, have been viewed as substantially free and fair by most observers.",
"Several Members of Congress and the Administration have called for a peaceful transition of political power in Georgia and have vowed continued support for Georgia's development and independence.",
"In the run-up to the October 2012 election, Georgia's Central Electoral Commission registered 16 parties and blocs and several thousand candidates to run in mixed party list and single-member constituency races.",
"A new electoral coalition, Georgia Dream—set up by billionaire Bidzina Ivanishvili—posed the main opposition to President Mikheil Saakashvili's United National Movement, which held the majority of legislative seats.",
"A video tape of abuse in a prison released by Georgia Dream late in the campaign seemed to be a factor in the loss of voter support for the United National Movement and in the electoral victory of Georgia Dream.",
"According to observers from the Organization for Security and Cooperation in Europe, the election freely reflected the will of the people, although a few procedural and other problems were reported.",
"The White House has described the election as \"another milestone\" in Georgia's development as a democracy, and has called for Ivanishvili and Saakashvili to work together to ensure the country's continued peaceful transition of power.",
"Several Members of Congress observed the election, and several Members of the Senate issued a post-election statement commending President Saakashvili for his efforts to transform Georgia into a prosperous democracy, and pointing to the competitive and peaceful election as evidence of his success.",
"At the same time, they raised concerns about some bickering and unrest in the wake of the election, and cautioned that the future of U.S.-Georgia relations depends on the country's continued commitment to democratization."
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{
"title": [
"",
"Introduction",
"Reauthorization Activity in the 109th Congress",
"Senate action",
"Hearings",
"House action",
"Hearing",
"Provisions of the Child and Family Services Improvement Act of 2006 (P.L. 109-288)",
"Funding Reauthorization and Other Changes to PSSF",
"Broader limitation on administrative spending",
"Reporting on use of funds",
"Targeting the Use of New PSSF Funds",
"Support for monthly caseworker visits",
"Grants to Increase the Well-Being of and Improve the Permanency for Children Affected by Methamphetamine or Other Substance Abuse",
"Use of grant funds",
"What is a regional partnership?",
"Considerations in awarding grants",
"Size and duration of grant awards and reports on activities",
"Evaluation of targeted spending",
"Tribal PSSF Program Funding and Access",
"Amendments to the Child Welfare Services Program",
"Purposes",
"Limitation on Administrative Spending",
"Revised Limitation on Use of Federal Funds",
"Limit on use of non-federal (matching) funds",
"State Plan Requirements",
"Monthly Caseworker Visit Standards",
"Publication of state visitation rate",
"Mentoring Children of Prisoners Reauthorization",
"Extension of the Court Improvement Program",
"Court Consultation with Child/Youth in Permanency Review Proceedings",
"PSSF Funding Authorizations and Distribution of Funds",
"Mandatory and Discretionary Funding Authorizations",
"Distribution of Funds",
"Program Funding History",
"Allotment of PSSF Funds to States"
],
"paragraphs": [
"This report discusses reauthorization of the Promoting Safe and Stable Families (PSSF) program (and amendments to related programs) in the 109 th Congress, as enacted by P.L. 109-288 . It also provides information on PSSF funding. It concludes with a number of appendices. The first of these shows (in table form) selected provisions in prior law compared with provisions in reauthorization legislation considered in the 109 th Congress, as well as the final provisions enacted in P.L. 109-288 . Other appendices provide a legislative history of the PSSF program, discuss certain policy issues related to the program, and offer an overview of federal programs providing funding for purposes related to those of the PSSF program.",
"The Child and Family Services Improvement Act of 2006 ( P.L. 109-288 ) extended funding authorization for the Promoting Safe and Stable Families (PSSF) program (Title IV-B, Subpart 2 of the Social Security Act) for five years (FY2007-FY2011). The program primarily provides formula grants to states, territories, and tribes for provision of four broad categories of services to children and families: community-based family support, family preservation, time-limited reunification, and adoption promotion and support. P.L. 109-288 increased the amount of funds that will be made available to tribes for these purposes and also provides that no less than $40 million of funds provided for the program annually (through FY2011) are to be set-aside for competitive grants to eligible regional partnerships to address child welfare issues raised by parent/caretaker abuse of methamphetamine (or other substances) and for formula grants to states to support monthly caseworker visits to children in foster care.\nIn addition, as under prior law, a part of the total funding provided for the PSSF program is reserved for certain grants under the Court Improvement Program (CIP, Section 438 of the Social Security Act). These CIP grants are distributed by formula to each eligible highest state court and are for those courts to assess and make improvements to their handling of child welfare cases. Finally, funds are also set aside for evaluation, research, and technical assistance related to the PSSF program. P.L. 109-288 provides that a portion of those set-aside funds must be used to provide evaluations, research and technical assistance related to monthly caseworker visits and grants to improve the outcomes of children affected by parent/caretaker abuse of methamphetamine or other substances.\nThe Promoting Safe and Stable Families program was initially created as a program of \"Family Preservation and Support Services\" by the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ). That program was reauthorized, expanded, and given its current name by the Adoption and Safe Families Act of 1997 ( P.L. 105-89 ). Subsequently, Congress passed the Promoting Safe and Stable Families Amendments of 2001 ( P.L. 107-133 ), which reauthorized the program through FY2006. More recently, the Deficit Reduction Act of 2005 ( P.L. 109-171 ) increased the authorization for mandatory PSSF appropriations by $40 million for FY2006 and, separately, appropriated funding ($20 million for each of FY2006-FY2010) for two new kinds of grants under the Court Improvement Program. The Senate Finance and House Ways and Means committees have exercised jurisdiction over the program and both committees held hearings related to reauthorization of this program during 2006.\nIn addition to reauthorizing the Promoting Safe and Stable Families program and extending certain Court Improvement Program grants, P.L. 109-288 made significant amendments to the Child Welfare Services program (Title IV-B, Subpart 1 of the Social Security Act). That program provides formula grants to states for a wide range of services to children and families and was first authorized in 1935 by the original Social Security Act. Under prior law, that program had an \"indefinite\" or \"no-year\" funding authorization. P.L. 109-288 set the program's funding authorization to expire with FY2011 (placing it on the same reauthorization calendar as the PSSF program) and made other changes related to the program's purposes, how funds may be used under the program and what states are required to do in order to receive these funds.\nFinally, P.L. 109-288 extended funding authorization for the Mentoring Children of Prisoners program (Section 439 of the Social Security Act), which provides funds to eligible entities to support mentoring services for children of prisoners. In addition to extending the program's funding authorization for these site-based, competitive grants, P.L. 109-288 authorized a demonstration project to test the effectiveness of using vouchers to deliver these services more broadly.",
"On September 28, 2006, the President signed the Child and Family Services Improvement Act of 2006, which was enacted as P.L. 109-288 . By unanimous consent, the Senate on September 20, 2006 amended (S. Amdt 5024 and S. Amdt 5025) and passed the Child and Family Services Improvement Act of 2006 ( S. 3525 ). On September 26, 2006 the House passed identical legislation under suspension of the rules. The final legislation included significant portions of separate bills previously passed in the House and in the Senate.",
"On June 8, 2006, a unanimous Senate Finance Committee ordered favorably reported a bill to reauthorize the PSSF program and make other changes. On June 15, that bill, the Improving Outcomes for Children Affected by Meth Act of 2006 ( S. 3525 ) was introduced by Senator Grassley and a written report from the Finance Committee was submitted on June 23 ( S.Rept. 109-269 ). On July 13, 2006, the Senate passed the legislation by unanimous consent and then sent the bill to the House for further action.",
"Before approving this legislation, the Senate Finance Committee held two related hearings. On April 25, 2006, witnesses, including child welfare program administrators, advocates, and researchers, as well as individuals in recovery from methamphetamine, testified at a hearing titled \"The Social and Economic Effects of the Methamphetamine Epidemic on America's Child Welfare System.\" A number of witnesses emphasized that treatment for methamphetamine abuse, especially family-based, longer-term and comprehensive residential treatment, can be effective, and that increasing access to these services could improve the lives of children and their families affected by methamphetamine abuse. On May 10, 2006, in a hearing titled \"Fostering Permanence: Progress Achieved and Challenges Ahead for America's Child Welfare Systems,\" the Senate Finance Committee heard testimony from child welfare advocates and policy experts, federal and tribal program administrators, and a former foster care youth. These witnesses stressed the need for continued federal support of child welfare programs; the tribal administrator emphasized the limited funds available to her tribe and the many challenges it faced, including methamphetamine abuse.",
"On June 20, 2006, Representatives Wally Herger and Jim McDermott, introduced the Child and Family Services Improvement Act of 2006 ( H.R. 5640 ). After amending the bill, the House Ways and Means Committee gave it unanimous approval on June 29, 2006 and the bill was reported to the House on July 12 ( H.Rept. 109-555 ). Under suspension of the rules, the House passed this legislation (renumbered as S. 3525 ) on July 25, 2006.",
"On May 23, 2006, the House Ways and Means Subcommittee on Human Resources held a hearing to review proposals to improve child protective services. The subcommittee heard from representatives of the court, social workers, state child welfare agencies, and the Government Accountability Office (GAO) and many advocates—representing a range of viewpoints—who spoke on behalf of children served in the child welfare system.",
"As enacted, the Child and Family Services Improvement Act of 2006 ( S. 3525 , P.L. 109-288 ) incorporates language approved in two earlier versions of S. 3525 . The following discussion describes provisions of the enacted legislation. (For a table comparing selected provisions from each of the predecessor bills along with prior law and current law, see Appendix A .)",
"Under prior law, the Promoting Safe and Stable Families (PSSF) program was authorized to receive mandatory appropriations of $345 million in FY2006 and discretionary appropriations of $200 million. P.L. 109-288 extended these same funding authorization levels to each of FY2007-FY2011.",
"The costs of the PSSF program are shared by the federal government (75%) and the states (at least 25%). Under prior law, a state was not permitted to spend more than 10% of its federal PSSF funds for administrative purposes, but there was no limit on use of the state PSSF funds (often described as \"matching\" funds) that could be spent for administrative purposes. Beginning with FY2008, P.L. 109-288 extends the 10% limit on spending for administrative purposes to include all funds spent under the program, both federal and non-federal (or matching).",
"Federal law and policy emphasize planning the use of PSSF funds (along with the Child Welfare Services and other child welfare or related programs) to ensure that a comprehensive range of child and family services is developed in each state. (See Appendix C \"Planning and Reporting.\") In keeping with this emphasis, states are required to annually send information to HHS on their planned use of funds under the PSSF, Child Welfare Services, and other child welfare and related programs. Beginning on June 30, 2007, P.L. 109-288 requires states to annually submit actual (in addition to planned) expenditure data on their use of funds under the PSSF and Child Welfare Services programs. (States, at their own option, may also provide data on actual use of funds for child welfare purposes in other programs.) Data on the use of funds are to be submitted on standard forms (which were previously used to report planned expenditures only) and include, for each program, spending by service, activity, or assistance provided, and the number of people served, the populations targeted for services, and the geographic areas served. The new law also requires the U.S. Department of Health and Human Services (HHS) to compile the forms showing this planned and actual use of funds and to submit them to the Senate Finance and House Ways and Means committees by September 30 of each year.",
"The FY2006 mandatory funding authorization for the PSSF was raised from $305 million to $345 million by the Deficit Reduction Act of 2005 ( P.L. 109-171 ), but this additional $40 million was not appropriated in that law. P.L. 109-288 appropriated the newly authorized FY2006 funds and extended the $40 million annual increase in the mandatory funding authorization level through FY2011. Further, as shown in Table 1 , the law targets the use of the new funding to support monthly caseworker visits of children in foster care and to provide grants to increase the well-being of children affected by a parent or caretaker's abuse of methamphetamine (or other substances).",
"Between FY2006 and FY2011, P.L. 109-288 provides a total of $95 million in funds for support of monthly caseworker visits of children in foster care \"with a primary emphasis on activities designed to improve caseworker retention, recruitment, training and ability to access the benefits of technology.\" This total figure includes all of the $40 million in new FY2006 PSSF funds (which were appropriated by the law and will remain available for states to spend through FY2009), as well as $5 million in FY2008; $10 million in FY2009; and $20 million in each of FY2010 and FY2011.\nStates are to receive these funds on essentially the same formula basis as is the case for the current PSSF program (distribution is based on a state's relative share of children receiving food stamps in the nation). States may not use these funds to supplant other federal foster care funds available (under Title IV-E of the Social Security Act) for the same purposes. Also, for FY2008-FY2011, a state's access to the full allotment of funds reserved for support of monthly caseworker visits will be contingent upon its spending no less than $1 on support of caseworker visits for every $3 in federal funds it received for that purpose. (For additional provisions in P.L. 109-288 that are related to caseworker visits of children in foster care, see the discussion under \"Monthly Caseworker Visit Standards,\" below.)",
"Between FY2007 and FY2011, P.L. 109-288 reserves $145 million in mandatory PSSF funds to support competitive grants to regional partnerships for services and activities designed to improve the safety, permanency, and well-being of children who are in an out-of-home placement or are at-risk of such placement because of a parent or caretaker's abuse of methamphetamine or another substance. (The annual set-aside amounts are $40 million for FY2007, $35 million for FY2008, $30 million for FY2009 and $20 million in each of FY2010 and FY2011.)",
"The services and activities that may be funded under such a grant include family-based comprehensive long-term substance abuse treatment and replication of successful models for such treatment; early intervention and preventative services; counseling for children and families; mental health services; and parenting skills training.",
"Regional partnerships must be established by a collaborative agreement between two or more entities (for example, providers of child welfare services, including the state child welfare agency; the state agency administering federal substance abuse prevention and treatment funding; local law enforcement agencies; juvenile justice officials, judges and school or court personnel; providers of community health and mental health services and tribes, including tribal child welfare agencies). The state child welfare agency doesn't need to be the lead agency in the partnership applying for these funds, but with one exception it must be a member of each partnership. (The agency does not need to be a part of the partnership if a tribe/tribal child welfare agency is a member of the partnership.)",
"HHS must first give consideration to the level of need demonstrated in the grant application of a regional partnership. Once that initial consideration is made added weight must be given to those applications from regional partnerships showing the effect of methamphetamine abuse and addiction on the child welfare system in the partnership region.",
"Grants must extend for a minimum of two years but can not be made for more than five years; the annual funding to the grantee must be at least $500,000 but may not be more than $1 million. Finally, grantees will be required to submit annual reports on their activities and to incorporate information related to their performance on certain indicators (to be developed by HHS in consultation with representatives of states and tribes receiving funds). Further, HHS must annually send information regarding the use of this grant funding to the Senate Finance and House Ways and Means committees.",
"Prior law required HHS to annually reserve $6 million in PSSF funds to support research, technical assistance, and training related to the program and for evaluation of the program (or other programs designed to achieve the same purposes). P.L. 109-288 further stipulates that HHS must annually spend no less than $1 million of those reserved funds for research, evaluation and technical assistance related to supporting monthly caseworker visits of children in foster care and, separately, no less than $1 million annually for research, evaluation, and technical assistance related to the competitive grants to increase the well-being and improve the permanency of children affected by methamphetamine or other substance abuse.",
"Under prior law tribal PSSF programs were funded with a 1% set-aside of the program's mandatory funding, plus a 2% set-aside of any discretionary funds provided for the program and in recent years tribes have received annual PSSF funding of roughly $5 million. Beginning with FY2007, P.L. 109-288 raises the tribal set-aside to 3% of the program's mandatory funding plus 3% of any discretionary funding provided for PSSF. (However, it would apply the 3% set-aside of mandatory funds only after the $40 million in targeted funds are reserved for the purposes described above.) Thus, the maximum funding authorized to be made available to tribes out of the PSSF would be $15.2 million (and the minimum funding would be $9.2 million). Based on these set-aside rules and the expected funding provided in the Revised Continuing Appropriations Resolution, 2007 ( P.L. 110-5 ), tribal PSSF funding in FY2007 is expected to be $11.8 million.\nTribal allotment of PSSF funds are based on a tribe's relative share of individuals under the age of 21 (among all eligible tribes) and no allotment may be less than $10,000. For FY2006, about 90 tribes received PSSF funds (or less than a third of the tribes that received funds under the Child Welfare Services program). P.L. 109-288 permits a group of tribes to form a consortium and to have their PSSF allotment determined based on their combined share of children under the age of 21. The effect of this provision should be to expand access to PSSF funds by permitting tribes with smaller populations to band together (or to band with a larger tribe) to ensure their allotment amount is equal to or greater than the $10,000 threshold.\nFinally, P.L. 109-288 limits the prior law authority of HHS to exempt tribes from any PSSF state plan requirement that the Department determines would be inappropriate for that tribe based on the tribe's size and resources. The law now provides that HHS may continue to exempt tribes from requirements that limit the use of the federal PSSF funds for administrative purposes to no more than 10% and the requirement that provides that \"significant portions\" of PSSF federal funds must be spent on each of the four service categories: community-based family support, family preservation, time-limited reunification, and adoption promotion and support. However, tribes are required to comply with all other plan requirements (including assurances that the funds received will not supplant other federal or non-federal funds available for those purposes as well as other planning and reporting requirements).",
"Under prior law, the Child Welfare Services program (Title IV-B, Subpart 1 of the Social Security Act) was authorized to receive funding of $325 million annually on an indefinite basis. P.L. 109-288 continues this same funding authorization level but limits it to five years (FY2007-FY2011)—thus placing this program on the same reauthorization calendar as the Promoting Safe and Stable Families program. For FY2006 the Child Welfare Services Program received an appropriation of $287 million; (under P.L. 110-5 , FY2007 funding for the program was expected to again be $287 million).",
"P.L. 109-288 deleted a lengthy prior law definition of \"child welfare services\" along with a brief program purpose statement. However, it largely incorporated the intent of those prior provisions in a new purpose section. The law now describes the purpose of the Child Welfare Services program as \"to promote State flexibility in the development and expansion of a coordinated child and family services program that utilizes community-based agencies and ensures all children are raised in safe, loving families, by—(1) protecting and promoting the welfare of all children; (2) preventing the neglect, abuse, or exploitation of children; (3) supporting at-risk families through services which allow children, where appropriate, to remain safely with their families or return to their families in a timely manner; (4) promoting the safety, permanence, and well-being of children in foster care and adoptive families; and (5) providing training, professional development and support to ensure a well-qualified child welfare workforce.\" New aspects of this language include both the assertion that the program is intended to promote \"state flexibility in the development and expansion of a coordinated child and family services program\" and the inclusion of an explicit program purpose related to providing training development and support to ensure a well-qualified child welfare workforce.",
"The total cost of the Child Welfare Services program is shared by the federal government (75%) and the state (25%). Prior law placed no limit on the amount of program funds states could spend for administrative purposes. Beginning with FY2008, P.L. 109-288 limits the use of program funds for those purposes to no more than 10%, (which applies to both federal and non-federal program funds). The law also defines administrative costs to include CWS program-related procurement, payroll management, personnel functions (except supervision of caseworker services), management, maintenance and operation of space and property, data processing and computer services, accounting, budgeting, auditing, and certain travel expenses. (Under this definition, spending on caseworker services is not considered an administrative cost.)",
"Under prior law the state could not spend more of its federal program funds on those foster care maintenance payments, adoption assistance payments, or to provide child day care (that was necessary solely for the employment or employment related training of a parent/relative of a child) than the amount of federal funds it had received under this program in FY1979. (In FY1979, funding for the program was $56.5 million or roughly 20% of the FY2006 funding level.) By contract, P.L. 109-288 provides that beginning with FY2008, no state may spend any federal CWS funds for foster care maintenance payments, adoption assistance payments, or child day care unless it can demonstrate to HHS that it used federal CWS funds for at least one of these purposes in FY2005. If a state can show this, then its new annual limit on spending of federal CWS funds for these three purposes, combined, is the amount of the federal CWS funds it spent on them in FY2005.",
"For purposes of providing their required 25% of the Child Welfare Services program cost (i.e. their matching dollars), states have been permitted to count their own spending for foster care maintenance payments without any limits. Beginning with FY2008, P.L. 109-288 prohibits states from using any foster care maintenance payment expenditures for the purpose of providing their non-federal matching dollars under the CWS program unless the state can show that it used foster care maintenance payment spending to meet the matching requirement for CWS funds in FY2005. If a state can show this, then the amount of the foster care maintenance payment spending that it counted under the program for matching purposes in FY2005 is the maximum amount of foster care maintenance payment spending it may count in the program in FY2008 and every following year.",
"Under the Child Welfare Services program, states are required to develop a plan that assures the state will meet federal requirements. P.L. 109-288 adds several new requirements. It requires states to describe how they consult with and involve physicians or other appropriate medical professionals in assessing the health and well-being of children in foster care and in determining appropriate medical treatment for them. Further, no later than one year after the enactment of P.L. 109-288 (that is by late September 2007), states must have procedures in place to ensure continued availability of child and family services in the wake of a disaster. In addition, P.L. 109-288 requires states to describe (by the first day of FY2008), their standards for the content and frequency of caseworker visits to children in foster care, which at a minimum, must include a monthly visit by the caseworker that is \"well-planned and focused on issues pertinent to case planning and service delivery to ensure the safety, permanency and well-being of the children.\" (Related requirements are described below, under \" Monthly Caseworker Visit Standards . \" )\nP.L. 109-288 includes a separate requirement to clarify that for children in foster care who have a permanency goal of \"another planned permanent living arrangement\" such an arrangement may include placement in a residential education program. It also eliminated certain requirements that have little or no meaning today. These eliminated provisions required a state to assure that—the child care standards used in the Social Services Block Grant (SSBG) applied to any child day care services funded under CWS; it would train and use paraprofessional staff and volunteers to help with the program; and it had (as of June 1980) conducted an inventory of children in foster care. Finally, the law re-organizes much of the CWS program language and makes numerous, related conforming amendments and some technical amendments. (See Appendix A for more specific information.)",
"Beyond requiring specific caseworker visitation standards in state Child Welfare Services plans (described above), P.L. 109-288 requires each state—before it can receive any FY2008 CWS funding—to provide data to HHS that show (for FY2007) the percentage of children in its foster care caseload who were visited on a monthly basis (by their caseworkers) and the percentage of those visits that occurred in the place where the child lived. Based on these data, HHS, in consultation with the state, must outline (as of June 30, 2008) state-specific steps (including target percentages to be reached) to ensure that no later than October 1, 2011 (first day of FY2012), at least 90% of the children in foster care receive a monthly visit (and that most of these visits occur where the child lives).\nFurther, P.L. 109-288 provides that, beginning with FY2009, if HHS determines that a state has not made the requisite progress toward meeting the monthly caseworker visitation standard, then the state must spend more of its own funds under the program in order to receive its full federal allotment. The minimum penalty is 1 percentage point (meaning the state would need to provide 26% of program funding to receive its full federal allotment) and the maximum penalty is 5 percentage points (meaning a state would need to provide 30% of the program funding to receive its full federal allotment). The amount of penalty for a state is to be determined by its degree of noncompliance with the state-specific monthly caseworker visit targets established in consultation with HHS (described above). P.L. 109-288 also requires HHS to prepare a progress report, including recommendations, on state caseworker visitation standards and to submit this report to the House Ways and Means and Senate Finance committees no later than March 31, 2010.",
"Finally, P.L. 109-288 requires that beginning with the report for FY2007, the annual Child Welfare Outcomes report, which HHS is required to prepare (under Section 479A of the Social Security Act), must include state-by-state data on the percentage of children in foster care who received monthly caseworker visits and the percentage of the visits that occurred where the child lives.",
"Since it received its initial funding in FY2003, the Mentoring Children of Prisoners program (Section 439 of the Social Security Act) has provided grants to local public or private entities to establish, expand, or operate programs that provide mentoring services to children of prisoners. P.L. 109-288 expands the purpose of the program by requiring HHS to enter into a cooperative agreement with a qualified entity to demonstrate the effectiveness of using vouchers to deliver mentoring services to children of prisoners nationwide. In addition, P.L. 109-288 extended program authority for the Mentoring Children of Prisoners program, which had been scheduled to expire with FY2006, through FY2007-FY2011. It also provides that funds may be appropriated for the program in each of those years at \"such sums as may be necessary.\" For FY2006, the program received $49.5 million in funding. Under P.L. 110-5 , the program is expected to receive this amount in FY2007 as well.\nP.L. 109-288 stipulates that HHS must use a competitive process to select the entity that will conduct the voucher demonstration (under a cooperative agreement with the agency). And it requires that the entity selected must 1) identify children in need of mentoring services (with priority given to Indian children, and children in areas that are rural, are not now served by the program, or that have substantial numbers of children of prisoners); 2) provide families of these identified children with vouchers (as well as a list of qualified mentoring programs in their area); 3) develop (with HHS) quality program standards for mentoring services, including criminal background checks of prospective mentors; and 4) monitor and oversee the delivery of the vouchers. Contingent on sufficient appropriated funding, the entity must agree to provide 3,000 vouchers in the first year of the cooperative agreement, 8,000 in the second year and 13,000 in the third year. The vouchers are to be valued at one-year of services and a qualified provider may receive periodic payments for a voucher by providing mentoring services to the child for whom it was issued and by demonstrating that it will be able to continue these services (with non-federal resources) after the 12-month value of the voucher is exhausted.\nP.L. 109-288 increased to 4% (from 2.5%) the amount of funds that are to be reserved by HHS out of the total appropriation for the Mentoring Children of Prisoners program for evaluation, research, and technical assistance (related now to both the site-based and voucher-based delivery of mentoring services). In addition to completing an evaluation of the total program, P.L. 109-288 requires HHS to fund an independent evaluation of the voucher demonstration project, and to provide a report of this evaluation to the House Ways and Means and Senate Finance committees no later than 90 days after the end of the second year of the demonstration. The new law also provides that the cooperative agreement may be extended two years beyond the initial three-year demonstration phase—but only if the entity administering the project performs satisfactorily and if an independent evaluation shows that vouchers are an effective way to deliver these services.\nFinally, P.L. 109-288 provides that if at least $25 million in program appropriations are made available for site-based grants (i.e. the prior law program), HHS must reserve not more than $5 million for the entity selected to demonstrate voucher service delivery in the first year of the cooperative agreement, $10 million for the second year of the agreement, and $15 million for the third year.",
"P.L. 109-288 extended through FY2011, the entitlement of eligible state highest courts to certain funds reserved from the PSSF program. Those funds are to be used to assess and improve court handling of child welfare proceedings. It also extends through FY2011 the requirement that a highest state court receiving these funds must provide no less than 25% of the funding for the activities supported by the Court Improvement Program (Section 438 of the Social Security Act). For more information about this program, including changes made to it by the Deficit Reduction Act of 2005 ( P.L. 109-171 ), see CRS Report RL33350, Child Welfare: The Court Improvement Program , by [author name scrubbed].",
"P.L. 109-288 also amended the definition of the case review system provided in Section 475 of the Social Security Act, to assert that as part of the required annual permanency review for each child in foster care, the court or administrative body conducting the review must consult (in an age-appropriate manner) with the child whose permanency plan is the subject of the review. This includes permanency hearings that review plans for a foster youth's transition to independent living.",
"As noted above, P.L. 109-288 appropriated $40 million in additional FY2006 funding for the Promoting Safe and Stable Families, which brought the total FY2006 program funding to $434 million. Under the Revised Continuing Appropriation Act, 2006, ( P.L. 110-5 ), the PSSF program is expected to receive this same level of funding in FY2007. This section discusses mandatory and discretionary funding authorizations under the program, outlines statutory distribution requirements as amended by P.L. 109-288 (see Table 2 ), shows total program funding by purpose since the program's inception (see Table 3 ), and provides funding levels by state for recent years (see Table 4 ).",
"The PSSF program is authorized to receive total funding of $545 million annually through a combination of mandatory and discretionary authorization levels. The Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) raised the mandatory funding authorized for the PSSF program from $305 million to $345 million and the five-year cost of this increased mandatory funding was \"scored\" or \"paid for\" in that law. P.L. 109-288 extended the mandatory funding authorization of $345 million for the PSSF through each of FY2007-FY2011.\nP.L. 109-288 also continues the prior law discretionary funding authorization in the PSSF program of $200 million. The authorization of discretionary funds, at this level, was first made for FY2002 but Congress has never provided more than $99 million in any one year under this discretionary authorization. In FY2006 and FY2007, Congress provided $89 million in discretionary funding.",
"The statute entitles eligible states to receive a portion of the fixed mandatory funding amount, as well as a portion of any discretionary funds that may be appropriated to provide certain child and family services. Before the funds are allocated to states, however, the statute provides that certain PSSF funds are to be reserved for specific purposes.\nP.L. 109-288 amended those set-aside provisions by requiring that $40 million of the program's mandatory funds must be reserved in each of FY2006-FY2011 to support increased frequency and better quality of caseworker visits to children in foster care and to improve the outcomes of children affected by parents or caretakers' abuse of methamphetamine or another substance. ( Table 1 above shows the split of these funds by year.) It also increased PSSF funding to tribes by (as discussed earlier) establishing a 3% set-aside of both mandatory and any discretionary funds appropriated. Finally, the law also stipulates that HHS must use a portion of the funds reserved to it for research, evaluation and technical assistance to study or support improved quality and quantity of caseworker visits to foster children ($1 million annually) and to study or support grants to improve outcomes for children affected by methamphetamine abuse or other substance abuse ($1 million annually).\nTable 2 outlines the PSSF funding distribution requirements by purpose, as amended by P.L. 109-288 .",
"Table 3 , below, shows annual funding for the PSSF program, by purpose and since its inception. All of the court funding shown in this table is derived from a set-aside of PSSF appropriations. As noted earlier, increased funding for courts was provided in the Deficit Reduction Act, P.L. 109-171 . However, this money was separately appropriated and is not shown here as a part of PSSF funding. (The CIP as revised by P.L. 109-171 is discussed in more detail in a separate report. See CRS Report RL33350, Child Welfare: The Court Improvement Program , by [author name scrubbed]. )",
"Table 4 shows actual awards of PSSF funds by state for FY2005 and FY2006, and allotment of these funds by state for FY2007. Funds for the four authorized categories of child and family services are allotted to states based on their relative share of children (individuals under age 18) receiving food stamps. Data used to make this determination are derived from the most current three years of available food stamps data.\nAs described earlier, beginning with FY2006, P.L. 109-288 annually targets $40 million in PSSF funding for specified purposes. For FY2006 all of this money was distributed to state or territories by formula and may only be used to support monthly caseworker visits of children in foster care. (Because these funds were not made available until the very end of the fiscal year, P.L. 109-288 provides that states may have through FY2009 to expend these funds.) For FY2007 all of the targeted funds must be distributed via competitive grants for services or activities to improve the outcomes of children affected by parent/caretaker abuse of methamphetamine or another substance.\nAppendix A. Selected Provisions of the Child and Family Services Act of 2006 as Compared to Prior Law and to Earlier Versions of the Bill\n(Section references in prior law column are to the Social Security Act, as amended prior to enactment of P.L. 109-288 )\nAppendix B. Legislative History of the Promoting Safe and Stable Families Program\nAt least since the creation of the current federal child welfare program structure by the Adoption Assistance and Child Welfare Act of 1980 ( P.L. 96-272 ), Congress has remained consistently concerned about the number of children in foster care and the lack of stability and permanence in their lives. During the 1990s, Congress created a new program ( P.L. 103-66 ), now called the Promoting Safe and Stable Families Program, which responded to some of those concerns.\nBy the end of the 1980s, there were widespread concerns about a rapidly growing foster care caseload (believed to be spurred by the spread of crack cocaine use) and a belief that too few preventive services were resulting in too many children being unnecessarily placed in foster care. At the same time, a number of states, often with the support of private foundations, had begun to offer a model of family preservation services that provided families with short-term, intensive services; early research suggested these services would significantly reduce the number of children unnecessarily placed in foster care.\nIn this climate, Congress began discussions about increasing federal support for preventive services, including intensive family preservation. Several years of legislative efforts lead initially to a 1992 agreement between the House and Senate on new capped entitlement funding for 1) \"innovative services\" to children and families (e.g., family preservation services); 2) substance abuse prevention and treatment; and 3) respite care. The agreement would have entitled states to their share of $165 million for these purposes in FY1993 rising to $575 million in FY1998, and for every succeeding year, the FY1998 amount adjusted by an inflation factor. The legislation provided specific allotment of the total funds for each purpose—with the largest share reserved for innovative services (conference agreement to accompany H.R. 11 , 102 nd Cong., H.Rept. 102-1034). Although this legislation was approved by both the Senate and the House, as part of an omnibus package, the Revenue Act of 1992, it was vetoed by President George H. W. Bush (for reasons unrelated to the child welfare provisions) and so did not become law.\nOriginal Enactment\nOne year later, however, child welfare advocates succeeded in including new entitlement funding for family preservation and support services in the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ) which created Subpart 2 of Title IV-B of the Social Security Act. Proposed by the Clinton Administration, the 1993 legislation drew much of its inspiration from the earlier legislative work but made several notable changes. Among those, it included less entitlement funding and deleted specific allotment of funds for substance abuse prevention and treatment and respite care (both of which could nonetheless be funded out of the program that was approved).\nAs enacted, the Family Preservation and Support Services provisions of P.L. 103-66 entitled states to receive a certain portion of federal funds (rising from $60 million in FY1994 to no less than $255 million by FY1998) to enable states and territories \"to develop and establish, or expand, and to operate a program of family preservation services and community-based family support services.\" One percent of the funds was to be reserved for support of tribal child and family services, and each state was to be allotted these new funds based on its relative share of children in the nation who receive food stamps. To receive their full formula allocation states were required to maintain at least their FY1992 level of funding for these services and to support no less than 25% of the state's total family preservation and family support services program with non-federal funding. Finally, the new law also provided that funds were to be set aside annually to allow state highest courts to assess their need for improvements to their handling of child welfare cases ($5 million for such grants in FY1995 and $10 million for each of FY1996-FY1998) and, separately, to allow HHS to evaluate programs carried out under the new subpart or others designed to achieve the same purposes and to support research, training and technical assistance related to the program ($2 million in FY1994 and $6 million in each of FY1995-FY1998).\nASFA Amendments\nCongress returned to child welfare issues when it passed the 1997 Adoption and Safe Families Act (ASFA, P.L. 105-89 ). That legislation sought to make a child's safety the primary concern in all child welfare decisions and also to move foster children to a permanent family more quickly. With an eye toward children's development and their concept of time, Members of Congress were concerned that states maintained a goal of family reunification long after it was apparent that such a goal was inappropriate (or in cases where reunification might in fact jeopardize the child's safety). They were also troubled by reports that the number of adoptions out of foster care had remained virtually unchanged for years while the number of children in care had risen dramatically.\nASFA renamed Title IV-B, Subpart 2 of the Social Security Act, the Promoting Safe and Stable Families program. In addition, as one part of ASFA's multiple amendments related to the safety of children, Congress added a requirement that the safety of children be the \"paramount concern\" in administering and conducting service programs under the PSSF program. As a part of its focus on expediting decisions around finding a permanent home for children in foster care (and encouraging adoption as one method of doing this), Congress defined two additional service categories for which states were required to use \"significant portions\" of their PSSF funding—time-limited family reunification services and adoption promotion and support. Finally, Congress set annual increases in the mandatory funding authorized for the program, raising it from $275 million in FY1999 to $305 million in FY2001. (Congress also continued the annual set-asides from these funds for tribal child and family services, court improvements, and program evaluation, research, training, and technical assistance.)\nThe time limit for the new category of reunification services was set at within 15 months of a child's removal from his/her home. This is consistent with a separate ASFA-added requirement, which provides that states must initiate termination of parental rights (TPR) proceedings for any child who has been in foster care for 15 of the past 22 months (unless the state can show good cause why it should not do this). A child's adoption cannot be completed without termination of parental rights and courts are generally reluctant to grant TPR in cases where the family has not first been offered needed reunification services. Thus the new \"time-limited reunification\" funding category sought to ensure that ASFA's efforts to expedite permanency were not defeated by a lack of available or provided services. Likewise, the addition of the adoption promotion and support services category was consistent with other ASFA amendments that encouraged adoption as a way of attaining permanent family for children.\n2001 Amendments\nProgram reauthorization language introduced in 2001 largely mirrored language suggested by the Bush Administration and initially sought to raise the annual mandatory funding level of the program to $505 million. However, Congress subsequently changed this provision (and the Administration also changed its budget request) to instead authorize discretionary funds above the prior mandatory funding level. As enacted, the Promoting Safe and Stable Families Amendments of 2001 ( P.L. 107-133 ) authorized $200 million in discretionary funding for the program in each of FY2002-FY2006 and maintained the prior authorized mandatory funding level ($305 million) through FY2006. P.L. 107-133 further provided that a state was entitled to its share of any discretionary funds appropriated in the same manner (i.e., based on its relative share of children receiving food stamps) as was the case with mandatory funding. Additionally, it provided that, out of any discretionary funds appropriated (and in addition to the pre-existing set-asides of mandatory funds for these same purposes), 2% must be set aside for tribal child and family services, 3.3% for Court Improvement and 3.3% for research, evaluation, training and technical assistance.\nP.L. 107-133 added four findings to the statute and provided four program objectives (each linked to one of the four service categories funded by the program). It amended the definition of family preservation services (to include funding of infant \"safe haven\" programs) and the definition of family support services (to explicitly include funding of services that \"strengthen parental relationships and promote healthy marriages\"); provided for re-allotment of any unused program funds; moved the statutory authorization language for the Court Improvement Program (previously freestanding) into the Social Security Act; and provided that in implementing changes identified by an assessment, courts could use CIP funds to ensure children's safety, well-being and permanence (in accordance with standards established in ASFA) and to implement a corrective action plan identified as needed via a federal conformity review of the child welfare agency. Finally, it established research priorities and specified the kinds of technical assistance HHS may offer to tribes, territories and states regarding implementing the Promoting Safe and Stable Families program and required the Department to report to Congress biennially (beginning not later than April 2003) on the evaluations, research and technical assistance funded with money set-aside for this purpose from the PSSF.\nThe Deficit Reduction Act of 2005\nAs enacted in February 2006, the Deficit Reduction Act ( P.L. 109-171 ) increased the FY2006 mandatory funding authorization for the PSSF program, for FY2006 only, to $345 million. Separately P.L. 109-171 also amended the Court Improvement Program, which had been entirely funded as a set-aside from the PSSF funding. These amendments provide for two new kinds of Court Improvement Program grants, which are related to improved training and, separately, timely achievement of safety, permanence and well-being for children; the law appropriated $20 million for each of FY2006-FY2010 (total of $100 million) to make these grants. These funds are independent of PSSF funding, and are in addition to the funds already set-aside from the PSSF for assessing and improving court performance in child welfare proceedings.\nThe Promoting Safe and Stable Families and Court Improvement provisions of the Deficit Reduction Act were incorporated into the legislation during the conference negotiations and had not been previously acted on by the Senate or the House. However, changes to the Court Improvement Program are consistent with recommendations made in a May 2004 report by the Pew Commission on Children in Foster Care and legislation introduced in the Senate ( S. 1679 ) and House ( H.R. 3758 ) sought to make similar or related court improvement changes.\nThe Child and Family Services Improvement Act\nAs enacted in September 2006, the Child and Family Services Improvement Act of 2006 ( P.L. 109-288 ) extends the funding authorization of the PSSF program for five years (FY2007-FY2011) and annually targets the use of $40 million in new funds for the program for two purposes: to support monthly caseworker visits and to improve outcomes for children affected by their parent/caretaker's abuse of methamphetamine or another substance. HHS is required to use some of the research, evaluation and technical assistance funds it is provided under PSSF to evaluate or otherwise support those newly authorized PSSF activities. In addition, the law requires states to report on their actual —as opposed to simply planned —use of PSSF (and Child Welfare Services) funds and both increases the PSSF set aside for tribal child and family services, and allows access to these funds for more tribes.\nAppendix C. Selected Policy Issues\nThe following section was developed prior to the reauthorization of the PSSF in 2006 to discuss the definition of service categories under the PSSF program, findings related to the effectiveness of these services, as well as requirements related to planning and reporting child and family services. The Child and Family Services Improvement Act of 2006 ( P.L. 109-288 ) did not amend the definition of services under the PSSF program, although it does require states to report information on the actual as opposed to planned spending of PSSF funds. Further it requires HHS to use some of its research set-aside to support research, evaluation, and technical assistance related to two new purposes for which some PSSF funds are targeted: improving the quality and quantity of caseworker visits of children in foster care and providing services and activities to improve the outcomes of children affected by parent/caretaker's abuse of methamphetamine (or another) substance.\nService Categories Defined\nStates are required to spend significant portions of their PSSF funding on each of four service categories: family support, family preservation, time-limited family reunification, and adoption promotion and support services. The statute (Section 431 of the Social Security Act) defines these service categories at some length.\nFamily support —community-based services to promote the safety and well-being of children and families designed to increase the strength and stability of families (including adoptive, foster, and extended families), to increase parents' confidence and competence in their parenting abilities, to afford children a safe, stable and supportive family environment, to strengthen parental relationships and promote healthy marriages, and otherwise to enhance child development.\nFamily preservation —services for children and families designed to help families (including adoptive and extended families) at risk or in crisis, including\nservice programs designed to help children safely return to families from which they have been removed; or be placed for adoption or with a legal guardian (or, if adoption or legal guardianship is determined not to be safe and appropriate for the child, in some other planned, permanent living arrangement); pre-placement preventive services programs, such as intensive family preservation programs, designed to help children at risk of foster care placement remain safely with their families; service programs designed to provide follow-up care for families to whom a child has been returned after a foster care placement; respite care of children to provide temporary relief of parents and other caregivers (including foster parents); services designed to improve parenting skills (by reinforcing parents' confidence in their strengths, and helping them to identify where improvement is needed and to obtain assistance in improving those skills) with respect to matters such as child development, family budgeting coping with stress, health, and nutrition; and infant safe haven programs to provide a way for a parent to safely relinquish a newborn infant at a safe haven designated pursuant to a state law.\nTime-limited family reunification —services and activities provided to a child that is removed from his/her home and placed in foster care, and to the parents or primary caregiver of such a child, in order to facilitate the reunification of the child safely, appropriately and within a timely fashion, but only during the 15-month period that begins on the date that the child is considered to have entered foster care:\nindividual, group, and family counseling; inpatient, residential, or outpatient substance abuse services; mental health services; assistance to address domestic violence; services designed to provide temporary child care and therapeutic services for families, including crisis nurseries; transportation to or from any of the services and activities described.\nAdoption promotion and support —services and activities designed to encourage more adoptions out of the foster care system, when adoptions promote the best interests of children, including such activities as pre- and post-adoptive services and activities designed to expedite the adoption process and support adoptive families.\nService Category Overlap\nEven a relatively quick reading of these definitions reveals that in many cases they define a mission rather than provide a list of specific activities that are expected to achieve this mission. Further, the PSSF service categories have similar and, in some cases, even identical missions. At the same time, while the service categories can be understood as having overlapping missions or even, in certain cases as subsets of each other, each of the PSSF services categories have different target populations and, as the legislative history shows, they were created by Congress to meet separate if related goals.\nFamily support services have the broadest target population and, in philosophy, aim to bolster the functioning of any family in a given community. Family preservation services are generally understood to serve a far narrower group of families—those where children are at imminent risk of removal to foster care, meaning in most cases that a child has already experienced abuse or neglect (and including some families where a child has been removed to foster care and reunification efforts are underway). Federal child welfare funding for family support and family preservation services was instituted at a time when Congress was particularly concerned about the burgeoning foster care caseload. The services were intended to prevent the need for foster care placement, whenever possible and the new funding for these services was the centerpiece of the child welfare legislation in which they were enacted ( P.L. 103-66 ).\nTime-limited reunification services may be understood as a subset of family preservation services and are explicitly meant to serve the needs of children and families who have been separated for 15 months or less (because the child is placed in foster care). Adoption promotion and support services aim to encourage families seeking to adopt from foster care and to support those who have done so. Such services might also be understood as a subset of family support services, or in the case of adoptive families in crisis, as a family preservation service.\nFederal funding for these services was not the central creation of the Adoption and Safe Families Act (ASFA, P.L. 105-89 ). Rather, Congress increased PSSF funding to some extent and required states to spend money on time-limited reunification and adoption promotion and support to augment ASFA's central goals of promoting safety and permanency for children. At the time, Congress remained deeply concerned about the size of the foster care caseload, but ASFA helped shift the focus of this concern from policies primarily intended to prevent entries into foster care to policies that sought to safely expedite exits from care.\nState Planned Spending by Category\nFederal statute, as interpreted in HHS policy, requires states to spend at least 20% of their PSSF funds on each of the four service categories. Collectively states reported that they intended to spend their FY2002 PSSF funds as follows—29% for family support, 30% for family preservation, 21% for time-limited reunification, and 20% for adoption promotion and support. Given that family support and family preservation have received dedicated funding the longest and that their service goals (and target populations) are more expansive, program evaluators note that the two newest services categories—time-limited family reunification and adoption promotion and support—have become \"well-established in the continuum of PSSF-funded services.\"\nAt the same time, because states may choose to include the same given activity in more than one service category, this spreading of resources across categories could ideally mean that states have a full range of child and family services available to those who are not yet in need of extensive child welfare services, those who need such services to ensure that children and their parents can safely live together (rather than be separated via foster care placement), those for whom the services are needed to ensure a short foster care stay and permit early reunification, and those for whom the services support successful creation and functioning of permanent adoptive families.\nEffectiveness of Services\nCongress required HHS to evaluate the effectiveness of programs funded under Title IV-B, Subpart 2 as part of its initial approval of funding for family preservation and family support services in the early 1990s. HHS used those funds to support three large-scale evaluations. One looked at overall implementation issues for the program, a second looked at the effectiveness of two particular models of family preservation services (both providing relatively intensive casework), and the third looked at the effectiveness of a very wide range of family support services. (Findings from these evaluations are discussed below.)\nNo similar large-scale evaluations of time-limited reunification services or of adoption promotion and support services have been made. However, these services may in part be subsets of some kinds of family preservation and family support programs. Further, Congress amended the statutory language on evaluations in 2001 ( P.L. 107-133 ) to include specific research priorities. Among these are \"promising program models in the [PSSF] service categories ... particularly time-limited reunification services and post-adoption services.\"\nAs noted earlier, the 2006 amendments ( P.L. 109-288 ) require HHS to use some of its set-aside funds to fund research, evaluation and technical assistance related to supporting improved quality and quantity of caseworker visits of foster children ($1 million annually) and to providing services or activities to improve the outcome of children affected by their parents' (or other caretakers') abuse of methamphetamine or other substance.\nIntensive Family Preservation Services\nWhen Congress began discussion of funding these services in the early 1990s, a great deal of optimism existed about the ability of intensive family preservation services to cost-effectively reduce the number of placements in foster care. Since that time, multiple program evaluations have not shown that intensive family preservation services lower placement risk for the children and families they serve (when compared to children and families receiving standard in-home casework services).\nIn addition, both children and families who received standard in-home casework services and those receiving intensive family preservation services were found to have similar (relatively low) levels of maltreatment recurrence (after initiation of the services) and to exhibit similar levels of family functioning. In other words, receipt of intensive family preservation services did not reduce out-of-home placement or maltreatment recurrence, and did not improve family functioning beyond what normal casework services achieved.\nThese evaluations did not compare—nor were they designed to compare—the placement outcomes for families receiving no services versus outcomes for those who received services; and they should not be understood as proof that the families served did not benefit from or need the services. Instead the evaluations were designed to test whether a particular manner of delivering the same kinds of caseworker activities (e.g., anything from help paying a utility bill to counseling about effective and appropriate child discipline) could produce better outcomes for children and families.\nThe most-scrutinized intensive family preservation services delivery model (Homebuilders) provides that services must be initiated quickly (within 72 hours of a \"crisis\" that precipitated imminent child removal), that they must be intensive (caseworkers are to be assigned no more than two families to work with, must be available to those families 24 hours a day, seven days a week, and are expected to swiftly offer any or all of a full range of material and clinical aids needed), and they are to be of short duration (4-6 weeks). As these characteristics suggest, the target population for the delivery of services via the Homebuilders model is families where children are at imminent risk of removal . This is especially critical to the model's theory of effectiveness, which rests on an aspect of \"crisis theory\" and posits that a family in crisis is at a juncture where it is particularly amenable to change.\nIn practice, and for a variety of reasons, providing intensive family preservation services to families and children who are \"imminent risk of foster care removal\" has proven difficult. In the four-site study contracted by HHS and jointly conducted by Westat, the Chapin Hall Center for Children and James Bell Associates, the evaluators found that even though special precautions were taken to ensure only families at imminent risk were studied, very small percentages of the \"control group children\"—those are children who were randomly assigned to receive regular caseworker services rather than intensive family preservation services—were actually placed in foster care within 30 days of their assignment to the study. The share of control group children who were not placed in foster care during this time period ranged from 89% to 95%. This was very similar to the share of experimental group children not placed in foster care during the first 30 days after their assignment to the study (89% to 99%).\nGiven that targeting intensive family preservation services on children at imminent risk for removal has been a problem for most or all of the evaluations of this service delivery model, and that for the multi-site HHS study the evaluators developed special tools meant to ensure only families most at risk were included in the study, researchers suggest that optimal targeting may never be achieved. These evaluators also questioned whether many families coming into contact with child welfare services—and referred to family preservation services—understand themselves to be at a crisis point. Noting that the lives of families served \"are often full of difficulties—externally imposed and internally generated\" they suggest that the imminent removal of a child might simply be understood as part of a set of ongoing problems rather than as a crisis. For families with chronic problems, they suggest, a short term dose of services—no matter how intense—would be unlikely to resolve all or many of the chronic concerns. Noting that the intensive family preservation services provided did not harm families, the evaluators also made it clear that services for many families whose children are not in foster care are still needed. However, given the heterogeneity of the child welfare needs of these families (child behavioral problems, child abuse, child neglect, suspected child abuse or neglect, etc.), they suggest that a single service delivery model providing access to relatively general services is unlikely to work for everyone.\nWhat Next for Family Preservation Services?\nThe federal statute does not provide that a specific family preservation services delivery model must be used by states and HHS explicitly declined to do this when it issued program regulations. In addition, the discouraging evaluation data on intensive family preservation services is not new (some suggestions of the current findings were available even as the program was being federally implemented in the middle 1990s). States then have had ample time to adjust or otherwise change their models of service delivery, although much remains to be learned about what the most effective services and delivery of those services might be. Researchers have suggested more study of the effectiveness of specific caseworker activities, more effective and more selectively delivered parent training classes (which are a staple service in both preservation and reunification cases) and different service delivery models, or activities on behalf of specific subgroups of child welfare clients (e.g., young mothers or families with substance abuse concerns) are needed.\nNeed for In-Home Services\nApart from the specific way in-home services are delivered to families, there remains an apparent need for services to families in which children have not been removed from their homes but have been maltreated in those homes. Of the estimated 872,000 children found to be victims of child maltreatment in FY2004, a little more than 40% received in-home services (following the investigation that confirmed their maltreatment), an additional 19% were removed to foster care while the remaining 41% of these child victims continued to live at home and received no post-investigation services of any kind. While some of the children may not have been served because their parents refused assistance offered (unlike removal to foster care, parents generally must voluntarily participate in services offered to intact families), researchers also note that there may not be enough of the kind of services needed or there may be long waiting lists for the services.\nBeyond the substantial number of children and families arguably in need of services who do not receive them, a case-level analysis of findings in the initial Child and Family Services Review (CFSR) shows that states were less successful in meeting the needs of children and families served in their own homes, than those with children in foster care. This analysis found that in the on-site review of cases, in-home cases were significantly more likely than foster care cases to receive an \"area needing improvement\" rating for a number of key indicators related to ensuring the well-being of children and families. These items in which in-home cases were significantly more likely to receive this rating than foster care cases include those related to\nassessing child and family needs and providing needed services; involving children/families in case planning; adequate face-to-face worker visits with children; and ensuring that children receive services to meet their educational, mental health and physical health needs.\nIn-home cases were also significantly more likely to be rated lower on the safety item related to reducing risk of harm to children served than were foster care cases.\nThis same study also reported on \"common challenges\" to better state performance and while these may apply to either foster care or in-home cases, a number are directly related to the indicators listed above and for which the on-site case reviews revealed specific weakness for in-home cases. Common challenges associated with those indicators and identified for many states, include\nthe agency doesn't consistently provide sufficient services to address risk of harm to children, particularly in the in-home services cases; the agency doesn't consistently monitor families to assess service participation and change in risk factors to protect children in their homes and prevent removal; the agency doesn't consistently provide appropriate services to meet the identified needs of children and parents; fathers, mothers, and children (age appropriate) are not sufficiently involved in case planning; the frequency of face-to-face contacts between workers and children isn't consistently sufficient to ensure children's safety and well being; the agency is not consistent in providing services to meet children's identified education-related needs; the number of dentists/doctors in the state willing to accept Medicaid is not sufficient to meet the need; there is a lack of mental health services for children; and the agency doesn't consistently conduct mental health assessments.\nIn sum, while children in foster care are much discussed as the barometer of states' child welfare performance, states' in-home case loads are generally more sizeable than their foster care caseloads and the data suggest that not all families are receiving needed services, nor are those receiving services having their needs fully met.\nFamily Support Services\nWhere family preservation services may be requested once a family has come to the attention of the child welfare agency (e.g., child maltreatment allegation and/or finding made), family support services seek to reach families that have not reached that threshold. The central object of these services is to ensure a child never experiences abuse or neglect and to improve the functioning of parents on behalf of their children. Typically these services have been provided by community agencies or groups—rather than by the state or local public child welfare agency—and the \"target family group\" is much broader than those typically served by the child welfare agency. Although family support services may be described (and implemented) as intended for families \"at-risk\" of child abuse or neglect, in theory they are designed to benefit any family in a particular community or neighborhood. Overall, families that receive family support services (such as parent training or child development classes) would seem much more likely to seek out (or volunteer) for the service as opposed to families that may be offered these same services (or may be ordered by the court to participate in them) for family preservation.\nStudy Design\nCiting the vast range of programs that might fall under the \"family support\" rubric, the Abt Associates researchers who conducted the HHS-funded study opted to conduct a \"meta-analysis\" of program success. This evaluation technique required the researchers to identify previously conducted studies of a range of family support programs and to organize the data collected in these studies in such a way that they could generate findings across these studies. For the family support studies, the researchers coded information from 665 studies (representing 260 different family support programs) that were conducted after 1965 in Canada, the United States or Great Britain.\nKinds of Programs Evaluated\nTo be included in the meta-analysis, a study needed to evaluate a program that provided services intended to improve child outcomes by strengthening the capacity of parents to support their children's development. Accordingly, nearly all the programs included in the meta-analysis had goals of improved parenting (98%) and child development (91%). Most services were delivered in the family home (62%) but other settings (in descending order of frequency) included hospital or clinic, school, community center, university -college, and public or private agency. Home visits were a primary service delivery mode, followed, in descending order of frequency, by parent meetings/classes/ groups, parent-child classes/groups and group early education for children. Most programs (87%) used at least some staff with a degree and formal training. Finally, although the original family support programs were neighborhood-based and available to all in the community, many programs targeted specific populations. About 88% of the family support programs included in the meta-analysis targeted families believed to be at certain environmental risk (e.g., poverty, risk of abuse or neglect, teen parenthood), those with certain biological risks (e.g., low-birth weight baby, developmental delay, behavior problems) or a combination of these populations. Most services were available to families for less than one year and families received relatively small amounts of service (measured in number of hours per month).\nFindings\nOverall, the meta-analysis showed that family support programs have small but consistent and (statistically) significant positive effects in children's cognitive development and their social and emotional development. Programs that had larger positive effects on children's cognitive outcomes were those that focused on children with special needs (either biological or developmental), or provided early childhood education directly to children, or provided parents with opportunities for peer support. Programs that used home visiting as a primary service had less effect on children's cognitive outcomes. Although on an overall basis, child safety was not otherwise shown to be meaningfully affected, programs that targeted teen parents with young children and combined case management with parent-child activities were more effective in protecting children from accidental injury, abuse or neglect. Finally, family support programs were not shown to have a meaningful effect on children's health and physical development.\nWith regard to parent/family outcomes, the study showed that overall family support programs have small but consistent and statistically significant positive effects in parenting attitudes and knowledge, parenting behavior, and family functioning. Programs that used professional staff to help parents to be effective adults, and that provide opportunities for parents to meet in support groups, were more effective in producing positive outcomes for parents. The programs that had greatest effect on parents' attitudes towards and knowledge of child-rearing and child development were those that work with special needs children and provided opportunities for peer support. The meta-analysis found no or little meaningful effect of family support programs on parent mental health, nor on family economic self-sufficiency.\nOther Services\nIn contrast to the large scale family preservation and family support studies, HHS has recently directed the PSSF evaluation funds towards generally smaller scale projects that look at one kind of service or program design (often at a single site). In recent years projects funded include those related to strengthening and promoting healthy marriage, the meaning of termination of parental rights for older foster children, fathers involvement in permanency planning and child welfare casework, Early Head Start services provided to child welfare families, interventions for substance abusing parents, post-adoption services, and adoption promotion efforts, intensive family reunification efforts, and provision of crisis nursery/respite care service. Research and/or evaluation is ongoing for most of these projects.\nPlanning and Reporting\nThe 1993 law ( P.L. 103-66 ) establishing funding for child and family services under Title IV-B, Subpart 2, both encouraged and required states to engage in planning how these services would be delivered. The law requires states to consult with \"appropriate public and nonprofit private agencies\" with experience in administering services to children and families and to (jointly with HHS) prepare a five-year plan, which establishes the goals the state intends to accomplish and describes the methods that will be used to measure progress toward accomplishing those goals. It further requires states to annually review and report on progress toward achieving these goals and to make any necessary adjustments to the plan that reflect changed circumstances. States must continually be engaged in this planning and review process. That is, every five years the state must establish a new five-year plan and begin annual progress reviews and reports of that plan. Beyond these requirements, the 1993 legislation encouraged states to take planning seriously by permitting each state to use up to $1 million of its first year grant (FY1994) for planning purposes and providing that this spending on planning did not need to be matched with state spending.\nThe policy guidance and subsequent regulations from HHS further encouraged and required this extensive planning. As ultimately implemented by HHS, the regulation consolidated a number of child welfare program planning requirements into a single Child and Family Services Plan. States submit this single five-year plan (the most recent was due in June 2004 for the period FY2005-FY2009), and annual progress reports. In addition to the requirements related to the PSSF programs, this plan must include the assurances required for receipt of funds for Child Welfare Services (Title IV-B, Subpart 1 of the Social Security Act), Basic State Grants (Section 106 of the Child Abuse Prevention and Treatment Act), and the Chafee Foster Care Independence Program and related Education and Training Vouchers (both in Section 477 of the Social Security Act). Also, as part of the annual progress report, states must estimate their total child welfare spending for the upcoming fiscal year, across the full continuum of services and noting amounts used from all federal funding streams (as well as state and local funding). Finally, HHS permits states to use their PSSF funds for these planning purposes without having those funds count towards the limit on use of PSSF funds which is set at 10%.\nBoth the notice of proposed rulemaking (NPRM) and the final rule for implementing Title IV-B, Subpart 2 emphasized the importance of collaborating broadly when creating this plan to ensure the full continuum of child and family services was considered and planned for and to leverage as many resources as possible for the program's purposes. Studying the implementation of the program, James Bell Associates found that most states engaged in extensive planning and that the focus on collaboration meant increased community and consumer involvement. Initially, over the 14 states where implementation case studies were conducted, most (8) developed a state-level collaborative body that made the decisions about how PSSF funds would be used; that is to say the locus of decision making was outside the state child welfare agency. In part, this no doubt stems from the inclusion of family support on an equal basis with family preservation in the statute. Where family preservation has a long history of child welfare agency implementation, family support was (and remains) outside the traditional child welfare agency purview. Following passage of ASFA (P.L., 105-89) and the addition of two new service categories (time-limited family reunification and adoption promotion and support)—both of which were much more closely aligned with traditional child welfare programs—the locus of decision-making shifted back toward the state child welfare agency in the majority of the case study sites.\nLimited Information on Current Program\nSince the Bell study, which as one part of its implementation study made an analysis of the annual progress reports submitted by states for FY1999-FY2002, there has been no comparable study of state spending plans. That analysis showed that most states were spreading their PSSF funding across all four categories. At the same time, that report noted that the overlap in service categories—because family support and family preservation might fund the same service (but presumably for a different population) and because the newest service categories (time-limited reunification and adoption promotion and support) could be understood as subsets of the initial service categories of family support and family preservation—it was not easy to accurately report spending in the statutorily defined categories. In addition, the consolidated planning and lack of a single plan format made it hard to consistently track how funds were being spent across the states.\nThe researchers suggested that how funds were used (or planned to be used) might better be understood based on where the service was delivered (in the home, child welfare office, school, community center, clinic, etc.) and/or who the service was targeted on (families in process of reunification, families with recently reported abuse or neglect, teenage parents, parents of children with problem behavior, etc.). The report did track the planned use of PSSF funds for 17 specific kinds of activities between FY1999-FY2002. These included home visiting and family centers, information and referral, recreation, basic needs, employment services, health services, child care, prevention services, parent support, parent skills training, mentoring, respite care, domestic violence, drug/alcohol assessment/treatment, counseling/mental health services, \"family preservation\" (more narrowly defined than the statute), time-limited family reunification and adoption promotion and support. Although the researchers had increasing difficulty in linking PSSF funding to specific activities (due to consolidation of program planning and reporting), they noted especially large drops in the number of states reporting that they planned to use these funds for child care (decreased from 21 states in FY1999 to 5 for FY2002), parent support and skills training (decreased from 27 states to 11 states and from 33 states to 12 respectively) and \"family preservation\"(decreased from 34 states to 19 states).\nReporting Requirements\nThe PSSF reporting requirements are, for the most part, a subset of the planning requirements. States must send their five-year plans to HHS and as a part of their Annual Progress Review and Report, are required to provide separate descriptions of the family preservation, family support, time-limited family reunification and adoption promotion and support services they intend to provide under the plan in the upcoming year; the populations to be served; and the geographic areas where the services will be available.\nJust prior to the 2006 amendments (P.L 109-288), these plans were sent to HHS regional offices of the Administration for Children and Families (ACF), rather than to the central Washington, D.C. office), and while they are required to be made available to the public, they were for the most part, not produced in any standard format and were not necessarily easy to compare or collect. Further all of the reporting requirements were prospective—providing information on what a state plans to do with its money rather than what it has actually done with the money.\nP.L. 109-288 amended the reporting requirements so that certain parts of the report must now include information on how the state actually spent PSSF (and Child Welfare Services) funds as well as continuing to provide information on planned spending. In addition, the law requires HHS to annually compile this information in a report for Congress.\nAppendix D. Selected Federal Programs with Related Purposes\nSome other federal programs share purposes similar to those of the Promoting Safe and Stable Families Program.\nCommunity-Based Child Abuse Prevention (CBCAP)\nAuthorized by Title II of the Child Abuse Prevention and Treatment Act (CAPTA) the Community-Based Child Abuse Prevention (CBCAP) program provides funds to each state (including the District of Columbia), territories, and tribes to support community-based services to prevent child maltreatment. The program purposes most closely match the category of PSSF services described as \"family support.\" However, funds under this program are not available for direct use by the state child welfare agency but must be sent to community-based groups that provide family support and family resource services.\nFunds are distributed by formula to a lead state agency (which may or may not be the state child welfare agency); the lead agency is responsible for ensuring coordination of services and for distributing funds to community-based groups that provide (or can refer families to) core family resource and support services. The statute describes these core services to, among other things, include—parent education, mutual support and self help; voluntary home visiting; and respite care. Other services, which CBCAP local grantees may provide access to include referrals to counseling for adoption (for those seeking to adopt or to relinquish a child for adoption); child care, early childhood development and intervention services; referrals to services and supports to meet special needs of families with children with disabilities; referrals to job readiness services; referrals to educational services; life management skills training; and others.\nLike Title I of CAPTA, the Senate Health, Education, Labor and Pensions (HELP) and the House Education and Labor committees have generally exercised jurisdiction over this program. It was most recently amended and re-authorized in 2003 ( P.L. 108-36 ). That legislation raised the program's authorization level to $80 million for FY2004, and such sums as necessary for each of FY2005-FY2008. However, the program has never received more than the $43 million that was appropriated for it in FY2005. For FY2006 the program received $42 million and (under P.L. 110-5 ) it is expected to receive the same sum in FY2007.\nChild Welfare Services\nAuthorized by Title IV-B, Subpart 1, Child Welfare Services is the oldest federal program supporting state child welfare activities and was first authorized as part of the original 1935 Social Security Act. P.L. 109-288 made a number of changes to this program and by changing its funding authorization from indefinite (no year limit) to the same schedule as the PSSF program (funding authorization will expire with FY2011), appears to promote somewhat closer alignment of the programs. Child Welfare Services funds are distributed to states (including the District of Columbia), territories, and tribes. The funds may be used to support a broad range of services to children and families, which are intended to protect children who have been abused or neglected or are at risk of maltreatment and may take various forms, ranging from counseling and other supports for parents (intended to improve child well-being, prevent child abuse and neglect and preserve a family), to removal of the children from their homes and provision of services to parents to enable safe and appropriate return of children to their own homes. When efforts to reunite are not appropriate or do not succeed, child welfare services may include termination of parental rights, placement of the children for adoption, and provision of post adoption services.\nStates may use Child Welfare Services, generally, for a wider range of activities than are permitted under PSSF and a 2003 General Accounting Office (GAO) study found that despite considerable overlap in the purposes, states used the bulk of their Child Welfare Services and PSSF grants to fund significantly different activities. For instance, while states reported spending both Child Welfare Services and PSSF funds to support family support/prevention, family preservation, family reunification, and adoption support and preservation services, they reported using just 11% of their Child Welfare Services funds for these purposes compared to 82% of their PSSF funds. States expended the largest share of Child Welfare Funds (71%) for child welfare worker salaries, administration and management, child protective services, and foster care maintenance payments. (PSSF expenditures for those purposes equaled just 8% of state PSSF spending. )\nThe House Ways and Means Committee and the Senate Finance Committee have exercised jurisdiction over Child Welfare Services. Since 1990, the program has had a discretionary funding authorization level of $325 million, but it has never received more than $295 million in a given year. For FY2006 the program is funded at $287 million and under P.L. 110-5 it is expected to receive the same level of funding in FY2007.\nOther Child Welfare and Related Programs\nSeveral additional child welfare programs primarily support research or demonstration projects related to adoption, as well as to services to help certain families at special risk of child abuse or neglect. Each of these programs is funded by discretionary appropriations and any appropriated funds are distributed on a competitive basis to eligible entities. These programs include Adoption Opportunities, Abandoned Infants Assistance and Adoption Awareness. Funding authorization for the Adoption Opportunities (FY2007 funding—$27 million) and Abandoned Infants Assistance Act (FY2007 funding—$12 million) was extended through FY2008 by P.L. 108-36 (handled in the Senate HELP and House Education and Workforce Committee). Funding authorization for the Adoption Awareness programs (which were included in the Public Health Services Act) expired with FY2005 but the programs nonetheless received FY2007 funding of $13 million. The House Energy and Commerce and Senate HELP committees handled the 2000 legislation that created Adoption Awareness program authority.\nAdditional programs that support primarily the family support goals of PSSF include Early Head Start, Head Start, and the Healthy Start Initiative. Like family support programs in general, the populations served by these programs are much broader than those generally served by the child welfare population and these programs are not further described here.\nSome Non-dedicated Federal Funding Used for PSSF Purposes\nMany states also make use of federal funding streams that are not specifically or exclusively provided for child welfare purposes but for which federal law includes certain child welfare activities as purposes or permissible uses of funds. Measured by state use of the funds for child welfare purposes, the largest of these are the Temporary Assistance for Needy Families (TANF) block grant, the Social Services Block Grant (SSBG) and Medicaid. An Urban Institute survey of state FY2002 spending on child welfare found that in that year state child welfare agencies spent about $4.7 billion from these federal funding streams of which some 28% ($1.3. billion) $1.3 billion was used to support prevention activities (e.g., prevent teen-age pregnancy, prevent drug use, prevent child abuse), family reunification efforts, and in-home support, as well as child protective, services (screening and investigating reported child maltreatment).\nWhile state child welfare agencies have in recent years had access to considerable TANF, SSBG and Medicaid funds, because these funds are not appropriated solely for child welfare agencies they cannot necessarily count on their continued availability. Instead, their access to these federal funds is generally conditioned on the funding decisions made by others in the state (e.g., discretion about how funds are used may rest with the state legislature or in a different state executive agency) and may further be limited by federal legislative and administrative changes to these programs.\nFor instance, the current Administration continues to seek new limits on state use of certain Medicaid services for a range of purposes, including child welfare. The Deficit Reduction Act of 2005 ( P.L. 109-171 ) enacted certain language intended to clarify how states may use Medicaid funds for targeted case management (TCM) on behalf of children in foster care. Further, the ability of state child welfare agencies to use TANF funds may be affected by increased work requirements included in the Deficit Reduction Act (which are expected to necessitate greater state spending of TANF on job related costs such as training and child care).\nFinally, Congress has greatly reduced the amount of funding for SSBG, which includes among its five primary purposes: \"preventing or remedying neglect, abuse, or exploitation of children and adults unable to protect their own interests, or preserving, rehabilitating or reuniting families.\" Annual funding for SSBG stood at $2.8 billion when the Congress enacted new child welfare services funding (now called the Promoting Safe and Stable Families program) in 1993. In 1996, however, P.L. 104-193 reduced the SSBG entitlement cap and funding has since declined to $1.7 billion annually."
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{
"question": [
"What act, targeting millions of dollars, was enacted in 2006?",
"What is the purpose of this act?",
"How must the majority of PSSF funds be used?",
"How does the act affect PSSF funds reporting?",
"How does the Act affect tribal services?",
"How did the Act affect the Child Welfare Services program?",
"How does the new law limit the use of CWS funds?",
"How does it enact new standards for CWS?",
"How will the act affect states with low foster visitation rates?",
"How does the act extend authorizations for other projects?",
"What does this report track?",
"How does it report on PSSF funding?",
"How does the report analyze provisions of the law and a legislative history?",
"To what extent will the report be updated?"
],
"summary": [
"The Child and Family Services Improvement Act of 2006 was enacted on September 25, 2006 (P.L. 109-288).",
"As enacted it extends the funding authorization of the Promoting Safe and Stable Families (PSSF) program for five years (FY2007-FY2011) and annually targets the use of $40 million in new funds for the program for two purposes: to support monthly caseworker visits and to improve outcomes for children affected by their parent/caretaker's abuse of methamphetamine or another substance.",
"As under prior law, states must spend the majority of PSSF funds on four broad categories of child and family services: community-based family support, family preservation, time-limited reunification and adoption promotion and support.",
"P.L. 109-288 requires states to report on their actual—as opposed to simply planned—use of PSSF (and Child Welfare Services) funds.",
"It also increases the PSSF set-aside for tribal child and family services, and allows access to these funds for more tribes.",
"Separately, P.L. 109-288 amended the Child Welfare Services program (Title IV-B, Subpart 1 of the Social Security Act), re-organizing its provisions and limiting its funding authorization to FY2007-FY2011.",
"Beginning with FY2008, the new law limits the use of Child Welfare Service funds for administrative purposes to no more than 10%, and prohibits their use for foster care maintenance payments, adoption assistance payments, and child care above a state's use of the program's funds for those purposes in FY2005.",
"Further, it requires states to—1) develop procedures to respond to and maintain services in the wake of a disaster; 2) describe in their state plans how they consult with medical professionals to assess the health of and provide appropriate medical treatment to children in foster care; and 3) establish a standard of no less than monthly caseworker visits of children in foster care along with standards for the content of the visit.",
"The new law provides that in any state where less than 90% of children in foster care are visited on a monthly basis—or where the U.S. Department of Health and Human Services (HHS) determines that the state is not making enough progress to meet that standard by October 1, 2011—the state will need to supply a greater amount of non-federal funds in order to access its full federal Child Welfare Services allotment.",
"P.L. 109-288 also extends authorization for five years (FY2007-FY2011) of Mentoring Children of Prisoners, and includes authority for a project to demonstrate the effectiveness of vouchers as a method of delivering these services. Further, it extends for five years (FY2007-FY2011) certain grants under the Court Improvement Program.",
"This report tracked successful legislative efforts to reauthorize these programs in the 109th Congress.",
"It describes provisions enacted by P.L. 109-288 and provides information on PSSF funding.",
"Further it contains an appendix showing (in table form) selected provisions in prior law compared to those proposed and enacted, and additional appendices that provide a legislative history of the PSSF program, discuss selected program policy issues and offer an overview of federal programs providing funding for purposes related to the PSSF program.",
"It will not be updated."
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GAO_GAO-12-717
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{
"title": [
"Background",
"State Concealed Carry Laws",
"Federal Role",
"State Eligibility Restrictions",
"States Allowing Concealed Carry Permits Have Increased, but Eligibility Requirements and Extent of Reciprocity Differ",
"Since 2002, More States Required to Issue Permits to Eligible Applicants, though Some States Have Discretion in Who Receives a Permit",
"More States Are Granting Permits",
"Interactive graphic Figure 2: State Concealed Carry Permits Profile 2011",
"States’ Eligibility Requirements Differ; Thus Some States Would Issue a Permit to an Applicant and Others Would Not",
"Majority of States Recognize Permits of at Least 20 Other States; May- Issue States Generally Do Not Grant Reciprocity",
"Interactive graphic Figure 3: State Reciprocity as of March 2012",
"Select States Reported Monitoring if Certain Permits Should Be Revoked and Having Processes to Revoke Them when Needed",
"Select States Reported Having Mechanisms to Monitor Continued Eligibility",
"Most States Track Revocations, and Select States Use Similar Mechanisms to Revoke Permits and Provide for an Appeals Process",
"Select States Use Different Mechanisms to Retrieve Revoked Permits",
"Law Enforcement in Select States Visually Check Permits to Verify Validity, among Other Actions",
"Appendix I: Case Study State Summaries",
"Arizona Summary: Shall- Issue State (Residents and Nonresidents)",
"California Summary: May- Issue State (Residents)",
"Florida Summary: Shall- Issue State (Residents and Nonresidents)",
"Georgia Summary: Shall- Issue State (Residents)",
"Louisiana Summary: Shall- Issue State (Residents)",
"Maryland Summary: May- Issue State (Residents and Nonresidents)",
"Tennessee Summary: Shall- Issue State (Residents and Nonresidents)",
"Texas Summary: Shall- Issue State (Residents and Nonresidents)",
"Virginia Summary: Shall- Issue State (Residents and Nonresidents)",
"Appendix II: Objectives, Scope and Methodology",
"Appendix III: State Issuing Authority, as of March 2012",
"Type of authority Decentralized",
"Appendix IV: State Concealed Carry Permit Designation, as of March 28, 2012",
"Appendix V: Number of Valid Permits",
"Approximate number of active permits (as of December 31, 2011 or unless otherwise noted) 13,000",
"Appendix VI: Approximate Total Number of Active Permits by Residency",
"Appendix VII: State Reciprocity, as of March 2012",
"Permits from other states that are recognized by this state NY does not honor permits issued in other states",
"Appendix VIII: GAO Contacts and Staff Acknowledgments",
"GAO Contacts",
"Staff Acknowledgments"
],
"paragraphs": [
"",
"States’ concealed carry laws can allow handgun owners, under certain conditions, to carry a loaded handgun either concealed on a person, in a vehicle, or in public. “Concealed carry” means a person may carry a handgun in a manner so that others cannot see the handgun. Generally, these laws apply to handguns—i.e. pistols and revolvers; therefore, for the purposes of this report, we use this category to define firearms. States can allow civilians to carry a concealed handgun with or without a permit. Generally, states regulate whether individuals can carry handguns in public places such as schools, government buildings, and state and national parks, among other restricted places.\nStates can be classified into one of the following four categories based on their concealed carry laws:\nNo-issue: The state does not permit residents or nonresidents to carry concealed handguns.\nMay-issue: The state applies discretion in granting permits to carry concealed handguns.\nShall-issue: Issuing authorities are required to issue a permit to an applicant that fulfills the objective statutory criteria if no statutory reason for denial exists.\nPermit not required: States do not require a permit to carry a concealed handgun.\nState laws also define which entities issue permits in their state. For example, some states have delegated the authority to issue permits to a single issuing authority (sometimes referred to as a centralized system), such as departments of public safety, while other states have multiple issuing authorities (referred to as a decentralized system), such as local law enforcement and local courts. There are also states with a mixture of both centralized and decentralized systems. Of the 48 states that issue concealed carry permits (2 states do not issue permits—Illinois and Vermont), 20 states have centralized issuing authorities that process all applications and issue all permits for their state. Another 23 states have decentralized issuing authorities that process applications and issue permits at the jurisdictional level. The remaining 5 states use a combination of centralized and decentralized issuing authorities. These states generally utilize decentralized authorities for residents and a centralized authority for nonresidents (see app. III for a list of states’ issuing authorities).",
"There is no federal law specifically addressing the issuance of concealed carry permits at the state level. While the FBI does not have a direct role in the issuance of concealed carry permits, the FBI serves as a source for criminal history background information. States may contact the FBI to obtain national criminal history records, if any, on applicants who apply for a concealed carry permit, but checking with the FBI prior to issuing a state permit is not required by federal law. Generally, states request name-based background checks from the FBI CJIS Division’s National Instant Criminal Background Check System (NICS) to help them make a determination about who is prohibited from receiving or possessing a handgun and thus prohibited from obtaining a concealed carry permit. During the course of a NICS background check, the applicant’s descriptive information is checked against three computerized systems to determine if the person is eligible to obtain the handgun. Those systems include the National Crime Information Center (NCIC), the Interstate Identification Index (III), and the NICS Index. If the applicant indicates that he or she is not a U.S. citizen, a query is generated against the immigration and naturalization databases maintained by the Department of Homeland Security, U.S. Immigration and Customs Enforcement. ATF is the primary agency that enforces federal firearms laws regulating the commerce of firearms in the United States.\nAlthough the federal government does not have a direct role in the issuance of concealed carry, there is federal law making it unlawful for individuals to receive or possess a handgun if they (1) have been convicted in any court of, a crime punishable by imprisonment for a term exceeding 1 year; (2) are fugitives from justice; (3) are unlawful drug users or are addicted to any controlled substance; (4) have been adjudicated as mental defective or have been committed to a mental institution; (5) are aliens illegally or unlawfully in the United States, or certain other aliens admitted under a nonimmigrant visa; (6) have been discharged from the Armed Forces under dishonorable conditions; (7) have renounced their U.S. citizenship; (8) are the subject of certain types of a qualifying restraining order of a court; or (9) have been convicted in any court of a misdemeanor crime of domestic violence.",
"In practice, state determinations about eligibility to obtain concealed carry permits depend largely upon a person’s criminal history. When determining who should receive a concealed carry permit, generally states use eligibility prohibitors that are similar to the federal eligibility restrictions that apply for possessing or receiving a handgun. For example, persons convicted of a felony, the subject of certain types of orders of protection, or who have been committed to a mental institution are disqualified from receiving a concealed carry permit in many states.",
"Since 2002, more states are required by law to issue permits and more permits have been issued to eligible applicants, although some states still maintain discretion in determining who receives permits. States can issue to either residents of the state only or to both residents and nonresidents, depending on state law. Because eligibility requirements differ, an individual could obtain a permit in one state but not another. In addition, the number of states that recognize other states’ permits has grown since 2002, but some states do not recognize any other states’ permits.",
"",
"Over time, more states have changed their concealed carry laws either from no-issue or may-issue to shall-issue, as shown in table 1 below.\nFigure 1 below shows changes in issue designation, by state, for 2002 and 2012. See app. IV for a list of issue designation by state).\nShall-issue states generally issue more permits than may-issue states relative to the state population. (See app. V for information on the approximate number of active permits by state as of December 31, 2011.) Of the 48 states that issue permits, 45 provided us with permit information. The top 5 states by ratio of active permits issued to the adult population (20 years or older) are shall-issue states—Utah, Iowa, South Dakota, Georgia, and Indiana. The ratio of active permits relative to adult population in Georgia and South Dakota (shall-issue states) is approximately 9 percent and 11 percent respectively, while the same ratio in California and Maryland (may-issue states) is approximately 0.1 percent and 0.3 percent respectively.profiles (see apps. III, IV, and V for detailed information on each state).",
"Move mouse over the name of each state for its concealed carry information.\nMont.\nVt.\nWisc.\nS.Dak.\nWyo.\nMich.\nNebr.\nIll.\nDel.\nColo.\nW.VA.\nKans.\nMo.\nKy.\nD.C.\nN.C.\nOkla.\nN.Mex.\nArk.\nMiss.\nAla.\nGa.\nLa.\nIf applicants do not meet states’ eligibility requirements, issuing authorities may deny the applicant a permit. Of the 45 states that reported permit information, 36 stated that they track denials and 29 provided some common reasons for the denials. For example, in 2011, Louisiana reported that the state denied approximately 400 permits and issued 12,000 concealed handgun permits (this includes original and renewal) citing failure to provide information within the specified time frames as required by the state as a common cause of denial. Likewise, Florida reported that from July 1, 2010, to June 30, 2011, the state issued approximately 124,000 concealed carry permits (this includes original), and denied approximately 2,000 permits. Like Louisiana officials, Florida officials identified failure to provide required information, such as proof of citizenship and legible fingerprint cards, as common reasons for denial.\nAuthorities in 26 states (10 may-issue and 16 shall-issue) that grant permits have discretion in making permit decisions. While 10 may-issue states have broad discretion in making permit decisions, authorities in 16 shall-issue states have limited discretion in making permit decisions, if no statutory reason for denial exists. In Virginia (a shall-issue state), for example, issuing authorities stated that they can deny individuals whom the court finds are likely to use a weapon unlawfully or negligently to endanger others, based on a preponderance of the evidence. Similarly, in Georgia (a shall-issue state), issuing authorities noted that applicants are subject to denial if the issuing authority determines, among other things, that the applicant is not of good moral character. However, both Virginia and Georgia officials told us that although they have the discretion to deny a permit based on the factors mentioned above, it is rarely utilized.\nIn the 10 may-issue states, issuing authorities may issue a permit to eligible individuals after considering additional requirements, such as the applicant’s history and personal character. For example, Maryland issues permits to residents who, on the basis of an investigation, can demonstrate a good and substantial reason for needing a permit, and Maryland’s issuing authority is responsible for making the determination of what constitutes a good and substantial reason. For example, in one instance, Maryland’s issuing authority denied a permit to a community activist working in anti-drug and anti-crime programs because, although the activist claimed that people had told him that others had made threats of bodily harm against him, the activist could not provide the names of the persons who had made the threats and had not reported any assaults. In upholding the denial on appeal, the issuing authority explained that a good and substantial reason should include additional evidence, rather than be based solely on personal anxiety or concern about unsubstantiated threats. Similarly, issuing authorities in California use discretion to determine if the applicant is of good moral character, and good cause exists for the issuance of the permit.authorities in California (local law enforcement) told us that an example of a good cause is a business owner who may regularly retain cash on-hand used to pay employees. The issuing authorities of the 2 may-issue states in our case study also conduct additional detailed investigations (e.g., physical verification of residency, reviews of applicants’ financial history, and in-person interviews, etc.) of permit applicants. For example, Maryland’s issuing authority sends local law enforcement to an applicant’s neighborhood or place of business to verify the applicant’s address and help decide whether to issue a permit, according to the Maryland State Police. Likewise, several of the issuing authorities in California that we interviewed noted that they hold face-to-face interviews with applicants when determining permit eligibility.\nOf the 48 states that issue permits, 22 states’ laws allow for authorities to issue only to residents of their state, while 26 allow for issuance to both residents and nonresidents. State laws allow issuing authorities to issue permits to nonresidents in 10 of these 26 states on a limited basis. For example, the issuing authorities in California may issue permits to nonresidents whose principal place of employment or business is within the state. The remaining 16 states do not have such limitations. See appendix VI for a listing of states that issue nonresident permits and the number of permits issued as of December 31, 2011.",
"While the majority of states share some common eligibility requirements for qualifying an individual for a concealed carry permit, such as firearms safety training and being at least 21 years of age, the 9 states included in our case study that issue permits define certain eligibility requirements very differently, which can affect who is granted a permit (see app. I for individual state summaries in our case study). States disqualify individuals convicted of a felony, but these 9 states differed in defining what crimes constitute a felony (i.e., a particular crime could be a felony in a particular state, but a misdemeanor in another). For example, in Virginia, certain types of larceny are considered Class 6 felonies and would disqualify an individual convicted of these crimes from being If an individual either takes money eligible for a concealed carry permit.or an item worth at least $5 directly from a person, or takes goods valued at $200 or more not directly from a person, he or she could be convicted of a Class 6 felony in Virginia. Alternatively, in Tennessee, if an individual commits a crime of theft of property or services that is valued at $500 or less, it would be classified as a Class A misdemeanor and the individual would remain eligible for a concealed carry permit. Thus, permit applicants who have committed a particular crime could be eligible to receive a permit in some states, but not in others.\nLa. Rev. Stat. Ann. § 40:1379.3(C)(8). specifically disqualify applicants who suffer from a mental or physical infirmity, while the other 6 states in our case study that issue permits do not. Similarly, Texas and Tennessee disqualify applicants for delinquency on child support. The other 7 states in our case study that issue permits did not cite this as a factor for denial or revocation. See table 2 below for a listing of state disqualifiers for the 9 states included in our case study.\nThe laws of 8 of the 9 states we examined that issue permits also require applicants to complete training related to firearms safety to qualify for a permit; however, the training requirements differ considerably. These requirements range from a list of approved training courses with no specified curriculum to a prescriptive state curriculum that can include a combination of classroom and live fire proficiency testing, which table 3 illustrates (also see app. I for state summaries): Further, differences in the information required by issuing authorities for eligibility determination exist not only between states but within states. Issuing authorities in some decentralized states augment their application process with additional requirements, which means the steps an individual must take to get a permit will vary by jurisdiction. For example, the issuing authority in one of the California counties we interviewed reported that it requires applicants to have three letters of reference before considering applicants for a permit. Other California counties in our review do not have this requirement. In another example, in Virginia, a shall-issue state, the decision of requiring applicants to submit fingerprints was left to the discretion of each issuing authority, however this discretion has been removed by the Virginia legislature effective July 1, 2012.",
"As of March 2012, 39 of the 48 states that issue permits and Vermont allow concealed carry, and recognize permits from other states. Of these, the number of other states whose permits they recognize varies, as follows:\n7 states recognize permits issued in 1 to 19 states,\n17 states recognize permits issued in 20 to 39 states, and\n15 states recognize permits issued in 40 or more states—of these, 13 states recognize permits issued in all 47 other states that issue permits.\nVermont does not require a permit to carry concealed handguns and does not issue permits (residents and nonresidents can carry concealed handguns).\nThe other 9 states that issue permits do not recognize permits issued from other states; 8 of these states are may-issue states. In addition, Illinois and the District of Columbia do not allow concealed carrying of handguns or issue permits, nor do they recognize other states’ permits.\nOver the last 10 years, shall-issue states have increasingly honored more states’ permits. For example, Georgia honored 12 states’ permits in 2002, but increased that number to 26 by 2012. Similarly, Louisiana honored 5 states’ permits in 2002, but honored 38 states’ permits as of March 2012. Figure 3 shows which states’ permits each state will recognize (see app. VII for a listing by state).",
"Move mouse over the black and teal circle in each state to see carry permit information for states.\nMont.\nN.Dak.\nMinn.\nVt.\nN.H.\nWisc.\nS.Dak.\nN.Y.\nMass.\nWyo.\nMich.\nPa.\nR.I. Conn.\nNebr.\nN.J.\nIll.\nInd.\nW.VA.\nColo.\nDel. Md.\nKans.\nMo.\nVa.\nKy.\nD.C.\nN.C.\nTenn.\nOkla.\nN.Mex.\nArk.\nS.C.\nMiss.\nAla.\nGa.\nLa.\nTex.\nFla.\nIn general, shall-issue states recognize permits from more states than may-issue states. For example, Texas honors the permits of 40 states, while 32 states honor Texas permits; and Arizona and Tennessee honor the permits of 47 states, while 35 states honor Arizona permits, and 37 honor Tennessee permits. Alternatively, may-issue states do not generally grant reciprocity. Of the 10 may-issue states, Alabama and Delaware are the only states whose laws allow for recognition of permits States may not grant reciprocity for a number of issued by other states.reasons. For example, states may require that eligibility requirements are similar to those of their own state, or that similar background checks are conducted on permit applicants; if this is not the case, they are unlikely to enter into a reciprocity agreement. For the 9 states included in our case study, state laws prescribe the criteria for recognizing other states’ permits, as discussed below.\nTennessee and Arizona (shall-issue states), as required by law, will recognize permits issued in any other state.\nTenn. Code Ann. § 39-17-1351(r), (recognizing that a facially valid handgun permit, firearms permit, weapons permit or license issued by another state is valid in Tennessee according to its terms and is treated as if it is a handgun permit issued by Tennessee; provided, however, this is not construed to authorize the holder of any out-of-state permit or license to carry any firearm or weapon other than a handgun within the state). Ariz. Rev. Stat. § 13-3112(Q) (recognizing concealed weapon permits issued by other states if the permit is recognized as valid in the issuing state, and the permit holder is legally present in Arizona and not legally prohibited from possessing a firearm in Arizona). However, even when these requirements are met, a person with a permit from another state may not carry a concealed weapon in Arizona if the person is under 21 years of age, or is under indictment for, or has been convicted of, a felony in any jurisdiction, unless the conviction has been expunged, set aside or vacated, or the person’s rights have been restored pursuant to Ariz. Rev. Stat. § 13-3112(S).\nFla. Stat. Ann. § 790.015. criminal history databases that make up NICS when screening applicants for a concealed carry permit.\nVirginia (a shall-issue state) law allows for recognition of permits issued only in states that provide the means for validation of a permit 24 hours a day, among other things.\nCalifornia and Maryland (may-issue states) alternatively, by law, do not recognize permits issued in any other state.\nStates also have the ability to rescind reciprocity agreements, particularly if reciprocal states make changes to their concealed carry laws or requirements. For example, according to a Florida issuing authority official, Nevada no longer recognizes Florida permits because the time between renewals, and subsequent background checks, was changed from 5 to 7 years in 2009, and thus deemed too long for Nevada’s standards.\nCurrently, permit holders who want to carry concealed during their travel to or through other states must know which states will recognize their permits or else they must obtain a nonresident permit in the state they are traveling to or through. This can be challenging since state laws change regularly and permit holders may not always be aware of the most recent changes, though state websites post information on whose permits they honor. For example, because of a recent change in Louisiana’s reciprocity laws, while Louisiana recognizes nonresident permits issued in other states, Louisiana residents can no longer use a nonresident permit from another state to carry a concealed weapon in Louisiana.",
"All 9 states in our case study reported reconfirming permit holders’ eligibility at renewal, and 8 reported having mechanisms to monitor eligibility between issuance and renewal. These 9 states utilize similar methods to revoke permits, provide for an appeal process, and use varying processes to retrieve revoked permits.",
"Issuing authorities from all 9 states included in our case study reported that they take action to confirm an individual’s continued eligibility to hold a permit as part of the permit renewal process, and 8 of these 9 states also use mechanisms to monitor resident permit holders’ continued eligibility between issuance and renewal. As part of this process, issuing authorities consider the length of time permits are valid. During this period, they look for any violations committed by the permit holders since issuance of the permit. The length of time that issuing authorities have to monitor permits holders generally ranges from 1 to 7 years, as shown in figure 4, with the majority (38 of 48) of the states that issue permits having a 4 to 5-year period of validity (see app. V for specific state information on length of time a permit is valid).\nIn 8 of the 9 states that issue permits in our case study, issuing authorities are to be notified if a resident or nonresident permit holder commits a disqualifying act within their state through law enforcement or state databases. For example, according to officials from the Virginia State Police, they monitor their state criminal databases on a daily basis and receive information from the courts that they use to identify resident permit holders who commit offenses that would make them ineligible to hold permits. In such cases, the Virginia State Police is to inform the state’s local permit issuing authorities via fax when permit holders are convicted of a criminal offense or commit an act that would make them ineligible. However, authorities may not be made aware if permit holders commit disqualifying acts outside of their state until conducting background checks during the renewal period or if an out-of-state law enforcement official contacts the state issuing authority. In Florida and Tennessee, issuing authority officials said that they receive arrest reports and review the reports for matches against their permit databases, and when necessary, take appropriate action, such as revoking the permit. In Arizona, California, Louisiana, Maryland, Texas, and Virginia, issuing authority officials reported that they receive an automatic alert if permit holders are arrested within their state, which they refer to as “rap back.”The issuing authorities in these states then review the charges and take appropriate action, to include revoking of a permit if warranted.\nAccording to FBI officials, in response to user needs including those of law enforcement for notification of nationwide, subsequent criminal activity, the FBI is developing a national Rap Back service. Specifically, through the Next Generation Identification’s (NGI) Rap Back Service of the FBI CJIS Division, states may have the opportunity to subscribe to this service and automatically be notified of subsequent arrests across the United States for crimes committed by permit holders and other individuals who have had a federal background check. In order for states to use FBI’s NGI Rap Back, technical and legislative updates may be required. states by the summer of 2014.\nThe FBI’s NGI Rap Back Service is expected to be available to In Georgia, the remaining case study state, the state’s 159 county probate courts that issue permits in the state could become aware of disqualifying acts committed by permit holders through other means. For example, according to Georgia permit issuing authority officials, law enforcement entities within the issuing county may call the issuing probate courts of permit holders who have committed disqualifying acts, which may result in the court revoking the permit. Additionally, probate court officials could become aware of disqualifying acts committed by permit holders through other means, such as reading or scanning the local newspaper and watching local news television broadcasts, which may result in a revocation.\nWith respect to legislation, states that wish to use the FBI’s NGI Rap Back services need legislation requiring concealed carry permit applicants to be fingerprinted and a background check conducted at the federal level. Further, state legislation would also have to allow for retention of those fingerprints at the federal level for use in the FBI’s NGI Rap Back Services.",
"Of the 45 states that reported permitting information, 35 reported that they track revocation information, such as the number of permits revoked and the general reasons for the revocations. For the 9 states in our case study, in 2011, the number of revocations per state ranged from approximately 30 to 900. All except 1 select state (Georgia) provided data As shown in table 4, the number on the number of revocations for 2011.of revocations and issuances vary across the case study states.\nGenerally, issuing authorities in the 9 states in our case study that issue permits revoke permits when a permit holder commits a criminal offense, such as a felony, that would make the individual no longer eligible to hold a permit. In Virginia, an issuing authority reported that a common reason for a revocation is if a permit holder is found to be driving under the influence. In Louisiana, the issuing authority reported that a common reason for a revocation is if a permit holder failed to notify the department of public safety of an arrest within 15 days. In Virginia, for example, a revocation could also be warranted if the permit holder has a noncriminal prohibition against carrying a concealed firearm, such as being diagnosed with a mental illness or subject to a domestic violence restraining order. For example, in Arizona, if a judge orders a permit holder to receive mental health treatment or a permit holder is involuntarily committed to a mental health facility, the holder’s permit is revoked.\nAfter detecting a disqualifying criminal offense or other disqualifying factors, officials from each of the 9 states in our case study that issues permits reported that they begin the revocation process by notifying the permit holder through a letter or court order, or in some cases, issuing authorities send law enforcement to deliver the letter and retrieve the permit. The letter is to outline the procedures for either appealing the revocation (if applicable) or physically surrendering the permit. Further, all 9 states in our case study have an appeals process. Some states, such as Louisiana and Texas, have a suspension process until the appeal process is completed, final disposition is determined by a court, or the individual surrenders the permit. For example, when a permit holder is arrested, the issuing authority is to suspend the permit until the final disposition has been determined by the court. If the court convicts the permit holder, the issuing authority is to revoke the permit. For example, Louisiana offers permit holders the option of providing additional evidence for the issuing authority to consider as part of its appeals process before final revocation. Texas offers its permit holders the option of requesting a hearing to review the denial, suspension, or revocation of their permit.",
"As mentioned above, the 9 states in our case study that issue permits have mechanisms for indicating in their respective systems that a permit has been revoked. In addition, these states have varying retrieval processes. For example: In Arizona, the permit holder is required to surrender a revoked permit. If the holder does not surrender the permit and is caught by law enforcement with the revoked permit, the law enforcement officer is directed to seize the permit and return it to the issuing authority. In California, although doing so is not a requirement in state law, local law enforcement officials said that permit holders are asked to physically return their revoked permit to the issuing authority (a city police department or sheriff’s department).\nSome Georgia issuing authorities send a letter communicating the court order via certified mail notifying permit holders that their permits have been revoked and to surrender the permits. If the issuing authorities do not receive a response, they can send local law enforcement to retrieve the revoked permit.\nVirginia’s issuing authorities use different processes to retrieve revoked permits. For example, one issuing authority in Virginia sends local law enforcement to the permit holder’s residence to retrieve the revoked permit. Another jurisdiction requires the permit holder to come to the circuit court for a hearing. The judge may charge the permit holder with contempt if the person does not show up for the hearing.\nOf the 9 states in our case study that issue permits, 3 (Georgia, Maryland, and Tennessee) reported that they can impose a penalty for failure to surrender a revoked permit or continuing to possess one. Permit issuing authority officials in 5 out of the remaining 6 states (Arizona, California, Florida, Louisiana, Texas, and Virginia) said that they were not aware of any instances where individuals have presented revoked permits to law enforcement and noted that because revocations are annotated in their state-wide systems available to law enforcement, law enforcement could know if someone presented a revoked permit.",
"When encountering an individual with a concealed carry permit, such as during a routine traffic stop, law enforcement officials in our 9 case study states that issue permits told us that they visually inspect a permit to verify its status to ensure it is valid and active. They also have mechanisms available to further validate the permit, as needed, such as checking a permit against state databases or contacting state dispatchers. Law enforcement in these states may take steps to confirm a permit is valid and active if law enforcement knows a person has a permit and determines a need to take this action. In Texas, permit holders are required by law to present their permit when encountering law enforcement and identification is requested. In addition, in 5 of our case study states (Arizona, Florida, Louisiana, Tennessee, and Virginia), permit holders are required to produce a permit if law enforcement demands it. For example, in 4 of these states (Louisiana, Tennessee, Texas, and Virginia), law enforcement could become aware if an individual had an active permit when running his or her driver’s license, as permits in these states are linked to the driver’s license system. During these checks, law enforcement in these states would also receive information on whether the individual had a permit revoked. Permit holders may also voluntarily present permits to law enforcement officials immediately when being pulled over for a traffic stop regardless of state requirements. While Tennessee law does not require permit holders to present permits unless requested by law enforcement officers, according to Tennessee issuing authority officials, firearms safety training required for all Tennessee permit holders teaches them to do so when encountering law enforcement.\nGenerally, law enforcement officials in all 9 case study states said that when presented with a permit, they would visually inspect the permit to verify that the permit was current and belonged to the individual. All of these states have a standardized permit prescribed by state law, which can make it easier for law enforcement to verify. Further, all of these states’ permits contain the permit holders’ name, permit expiration date, and unique permit number—this information assists law enforcement in verifying whether a permit is current. As shown in table 5, the permits have other physical features such as a photograph, the date of birth, or a state seal or hologram, among others.\nLaw enforcement officials in all 9 case study states said they would not routinely take additional steps to verify a permit beyond visual inspection and verifying permit information in the driver’s license system in states where permits are linked to such systems. These officials explained that their top priorities during a traffic stop would be officer safety and the reason for the stop (e.g., traffic violation). However, law enforcement in all of these states has other means to further validate a permit as needed, although some methods are easier to use than others. According to issuing authority officials in Arizona, California, Florida, Louisiana, Maryland, Tennessee, Texas, and Virginia, law enforcement within their state can instantly access state databases, which have permit holders’ information, to validate the status of a permit as needed. In Florida, for example, issuing authority officials said that they update all information related to permit holders in the state’s criminal database nightly. The Florida Department of Law Enforcement —which manages the database—makes the information available to all law enforcement agencies. Thus, a law enforcement officer in the field can obtain current information on the status of a permit usually by contacting the officer’s dispatcher, or in some Florida jurisdictions, law enforcement can obtain current permit information from their vehicles’ on-board computer systems. In Georgia and Maryland, law enforcement officers can call the issuing authority to verify the status of resident permits. However, law enforcement may not be able to instantly validate a permit because permit issuing authorities generally operate during normal business hours (Monday through Friday, between the hours of 8 a.m. to 5 p.m.).\nIn addition, law enforcement may have mechanisms to validate permits issued by other states. As noted above, Louisiana, Tennessee, Texas, and Virginia provide access to permit information when officers check these driver’s licenses; consequently, this check can be used to validate permits within their state or outside of their state. Further, an out-of-state law enforcement agency can obtain current information on Florida-issued permits by submitting an information request to the Florida Department of Law Enforcement Customer Support Center. Additionally, Arizona, Florida, Louisiana, Tennessee, Texas, and Virginia input permit information into the International Justice and Public Safety Network (Nlets), an information- sharing system available to all states’ law enforcement agencies. Nlets provides users instant access to permit holder information, such as permit status (i.e., whether the permit is valid, active, or revoked, etc.), and a description of the permit holder. Submission of permit holder information into Nlets is strictly voluntary for states that have a centralized state database. Currently, approximately 20 states input permit information into Nlets. States that do not have a centralized state database of permit holders (e.g., Georgia) cannot make information available in Nlets. Law enforcement in other states can also call select states’ dispatchers in Florida and Maryland to validate permits issued by these states. To validate a permit issued in California, officers from other states could call the California Department of Justice, which collects permit information from the issuing authorities throughout the state.\nWe provided portions of a draft of this report to state and local officials in Arizona, California, Florida, Georgia, Louisiana, Maryland, Tennessee, Texas, and Virginia. We did not obtain official comments from the Department of Justice because we were not directly auditing its programs. However to ensure the accuracy of the information in the report that relates to the department provided, the department provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Attorney General of the United States; and other interested parties. In addition, this report is available at no charge on the GAO web site at: http://www.gao.gov.\nIf you or your staff members have any questions about this report please contact Carol Cha at (202) 512-4456 or chac@gao.gov or Eileen Larence at (202) 512-6510 or larencee@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VIII.",
"",
"Approximate Number of Active Concealed Carry Permit Holders as of December 31, 2011: 163,000 (rounded to the nearest thousand)\nState Adult Population (age 20 or over) per U.S. 2010 Census: 4,572,376 Unlicensed Open Carry Permitted: Yes Permit to Carry Concealed: Arizona significantly revised its weapons permit laws in 2010. Arizona had allowed the open carrying of a weapon without a permit prior to that time, but since 2010, Arizona has allowed residents to carry a firearm open or concealed without a permit. However, Arizona does issue concealed carry permits, which may be used for purposes of reciprocity, and to carry in certain locations.\nLength of Permit Validity: 5 years Eligibility Requirements: The Arizona Department of Public Safety is required to issue a permit to carry a concealed weapon to a person who meets all of the following eligibility requirements: 1. is a resident of Arizona or a United States citizen (i.e., in-state and 2. is 21 years of age or older; 3. is not under indictment for and has not been convicted in any jurisdiction of a felony;4. does not suffer from mental illness and has not been adjudicated mentally incompetent or committed to a mental institution; 5. is not unlawfully present in the United States; 6. has ever demonstrated competence with a firearm (as described in the training requirement section below) and provides adequate documentation that the person has satisfactorily completed a training program a. adequate documentation means: a) a current or expired Arizona permit; b) a certificate or affidavit of completion from the conductor of the course; c) evidence of current military service or proof of honorable discharge or general discharge under honorable conditions from the United States armed forces; d) a concealed weapon permit as described in the training requirement section below.\nFirearms Training Requirements: An applicant shall demonstrate competence with a firearm through any of the following: 1. Completion of any firearms safety or training course or class that is available to the general public; that is offered by a law enforcement agency, a junior college, a college or a private or public institution, academy, organization or firearms training school; and that is approved by the Department of Public Safety or that uses instructors who are certified by the National Rifle Association. 2. Completion of any hunter education or hunter safety course approved by the Arizona game and fish department or a similar agency of another state. 3. Completion of any National Rifle Association firearms safety or training course. 4. Completion of any law enforcement firearms safety or training course or class that is offered for security guards, investigators, special deputies, or other divisions or subdivisions of law enforcement or security enforcement and that is approved by the Department of Public Safety. 5. Evidence of current military service or proof of honorable discharge or general discharge under honorable conditions from the United States armed forces. 6. A valid current or expired concealed weapon, firearm, or handgun permit or license that is issued by another state or a political subdivision of another state and that has a training or testing requirement for initial issuance. 7. Completion of any governmental police agency firearms training course and qualification to carry a firearm in the course of normal police duties. 8. Completion of any other firearms safety or training course or class that is conducted by a Department of Public Safety-approved or National Rifle Association-certified firearms instructor.\nFactors State Considers in Granting Reciprocity: Arizona law requires that the concealed weapon, firearm, or handgun permit or license issued by another state or its political subdivision be recognized if the following conditions are met: 1. the permit or license is recognized as valid in the issuing state; 2. the permit holder is legally present in Arizona; 3. the permit holder is not legally prohibited from possessing a firearm in Arizona.4. the permit holder is 21 years of age or older; and 5. the permit holder is not under indictment for, or been convicted of, a felony offense in any jurisdiction (unless the conviction has been set aside in some way, or the applicant’s rights have been restored, and the permit holder is not a prohibited possessor under state or federal law).\nRevocation Process: The permit must be suspended or revoked if the person no longer meets the eligibility requirements listed above. The department must notify the permit holder in writing within 15 working days of the revocation or suspension and state the reasons for the action.Arizona law also provides that if a person is arrested or indicted for an offense that would disqualify him or her from obtaining a permit, or prohibited from possessing a weapon under state law, the permit is required to be immediately suspended and seized. The permit is to be restored if the permittee is found not guilty or the charges are dismissed. Permits may also be suspended when permittees do not present their permit at the request of law enforcement.\nMechanism Available for Law Enforcement Officers within and outside the State to Verify the Validity of Permits Issued in This State: Law enforcement officials in Arizona, and in states that participate in the International Justice and Public Safety Network (Nlets), can run a Concealed Weapons Query through the system. Law enforcement officials in states that do not participate in Nlets can call dispatch at the Arizona Department of Public Safety.",
"Approximate Number of Active Concealed Carry Permit Holders as of September 1, 2011: 35,000 (rounded to the nearest thousand)\nState Adult Population (age 20 or over) per U.S. 2010 Census: 26,801,914 Unlicensed Open Carry Permitted: No Permit to Carry Concealed: California law provides license-issuing authority to various officials: a sheriff of a county; or the chief or other head of a municipal police department of any city, or city and county.\nThe issuing authority may issue one or two forms of concealed carry license: a license to carry a firearm capable of being concealed on the person; or in a county of less than 200,000, a license to carry, only in that county, a loaded and exposed firearm capable of being concealed upon the person.\nThe issuing authority may include any reasonable restrictions or conditions that the issuing authority deems warranted, including restrictions as to the time, place, manner, and circumstances under which the person may carry the concealed firearm. These restrictions are to be indicated on the permit.\nLength of Permit Validity: The license is generally valid for a period not to exceed 2 years. For peace officers, it is 4 years. For judges, it is 3 years.\nEligibility Requirements: The license may be issued if the following conditions are met: 1. the person applying is of good moral character; 2. good cause exists for the issuance; 3. the applicant is a resident of the county or city within the county; 4. the applicant has completed a course of training; and 5. The California Department of Justice (CA DOJ) has determined that the person is not prohibited by state or federal law from possessing, receiving, owning, or purchasing a firearm.\nFirearms Training Requirements: Applicant must complete a firearms safety training course: a. For new applicants, the course must be acceptable to the licensing authority, not be longer than 16 hours, and must include instruction on at least firearm safety and the law regarding the permissible use of a firearm. b. For renewal applicants, the course must be acceptable to the licensing authority, be at least 4 hours, and must include instruction on at least firearm safety and the law regarding the permissible use of a firearm.\nFactors State Considers in Granting Reciprocity: California does not recognize concealed carry permits from other states.\nRevocation Process: The license must be revoked by the local licensing authority if it has either been notified by the CA DOJ or determines that the person is prohibited by California or federal law from possessing, receiving, owning, or purchasing a firearm. Correspondingly, if the CA DOJ determines that the licensee is subject to any of these prohibitions, it must notify the local licensing authority. If the licensing authority revokes the license, the CA DOJ must be notified of the revocation immediately. The licensee must also be immediately notified of the revocation in writing.\nIf a person moves from his or her original county of residence, the license will expire 90 days after the move. If the license was to carry a loaded and exposed firearm, the license will be revoked immediately when the licensee changes his or her place of residence.\nMechanism Available for Law Enforcement Officers within and outside the State to Verify the Validity of Permits Issued in This State: California law enforcement uses local law enforcement and the CA DOJ databases to verify the validity of permits; for example:\nA California police department enters all concealed carry permit information into the Police Department Records Management System which is linked to COPLINK (a computer system that accepts information from all law enforcement agencies that are linked into COPLINK). Other law enforcement entities that are linked into COPLINK can get concealed carry permit information.\nAnother police department stated that it can check its database or CA DOJ databases to verify the status of a concealed carry holder’s permit.",
"Approximate Number of Active Concealed Carry Permit Holders as of December 31, 2011: 887,000 (rounded to the nearest thousand)\nState Adult Population (age 20 or over) per U.S. 2010 Census: 14,288,320 Unlicensed Open Carry Permitted: No Permit to Carry Concealed: Yes. Under Florida law, it is a crime to carry a concealed firearm without having a license to carry.\nLength of Permit Validity: Licenses are valid for 7 years from the date of issuance.\nEligibility Requirements: The Department of Agriculture and Consumer Services is required to issue a license when the applicant meets the following requirements:a. Is a resident of the United States or permanent resident alien, in certain circumstances, a foreign government official; b. Is 21 years of age or older; c. Does not suffer from a physical infirmity that prevents the safe handling of a firearm; d. Desires a legal means to carry a concealed firearm for lawful self- 2. Criminal History Information: a. Is not ineligible to possess a firearm by virtue of a felony b. Is not prohibited from purchasing or possessing a firearm by any other provision of Florida or federal laws. c. Has not had adjudication of guilt withheld or imposition of sentence suspended on any felony or misdemeanor crime of domestic violence unless 3 years have elapsed since probation or any other conditions set by the court have been fulfilled, or the record has been sealed or expunged; d. Has not been issued an injunction that is currently in force and effect and that restrains the applicant from committing acts of domestic violence or acts of repeat violence; e. Licenses must be denied if the applicant has been found guilty of, had adjudication of guilt withheld for, or had imposition of sentence suspended for one or more crimes of violence constituting a misdemeanor, unless 3 years have elapsed since probation or any other conditions set by the court have been fulfilled or the record has been sealed or expunged. If the applicant is charged with a disqualifying crime or injunction related to domestic violence during the processing, the processing must be suspended pending final disposition.1. Substance Abuse and Mental Health Information a. Has not been committed for the abuse of a controlled substance or been found guilty under Florida’s drug laws or similar laws of another state within 3 years prior to the application submission; b. Does not chronically and habitually use alcoholic beverages or other substances to the extent that his or her normal faculties are impaired; c. Has not been adjudicated an incapacitated person under Florida law or similar laws or another state unless 5 years have elapsed since the applicant’s restoration to capacity by court order; d. Has not been committed to a mental institution under Florida law or similar laws of another state, unless the applicant produces a certificate from a licensed psychiatrist that the applicant has not suffered from the disability for at least 5 years prior to the date of submission.\nFirearms Training Requirements: The Department of Agriculture and Consumer Services is required to issue a license when the applicant:\nDemonstrates competence with a firearm by completion of an approved class, such as one offered by the National Rifle Association, a certified instructor, or law enforcement, or through evidence of experience through the military service, among other things.\nFactors State Considers in Granting Reciprocity: Florida will grant reciprocity to only those states that honor its concealed weapons permit.\nRevocation or Suspension Process: Licenses must be revoked if the licensee has been found guilty of a crime of violence within the preceding 3 years. Once the department has been notified by a law enforcement agency, court, or the Florida Department of Law Enforcement that an applicant or licensee has been arrested or formally charged for a disqualifying crime, or an injunction related to domestic violence, the department must obtain written verification and then must suspend the license. Florida also provides suspension and revocation authority to the department if a licensee becomes ineligible due to the previously outlined physical, mental health or criminal disqualifications.\nMechanism Available for Law Enforcement Officer’s within and outside the State to Verify the Validity of Permits Issued in this State: Law enforcement (in-state and out-of-state) can check the validity of a Florida permit through the Florida Department of Law Enforcement’s database.",
"Approximate Number of Active Concealed Carry Permit Holders as of December 31, 2011: 600,000 (rounded to the nearest thousand)\nState Adult Population (age 20 or over) per US 2010 Census: 6,906,024 Unlicensed Open Carry Permitted: No Permit to Carry Concealed: Georgia law allows an individual to carry a weapon in a concealed or open manner—in the person’s home, car, or place of business.\nAn applicant is eligible for a license to carry a concealed 1. is domiciled in that county.\nThis also includes non-citizens, who provide certain identifying information. 2. is at least 21 years of age. 3. has not been convicted of a felony by any court (unless pardoned); 4. does not have felony proceedings pending against the person; 5. is not a fugitive from justice; 6. is not federally prohibited from possessing or shipping a firearm; 7. has not been convicted of the offense of unlawful manufacture or distribution of a controlled substance or other dangerous drug;8. has not had his or her weapons carry license revoked; 9. has not been convicted of specified weapons-related offenses, such as carrying a weapon without a license, unless it has been 5 years since any related restraint or supervision or other conviction; and10. has not been convicted of a drug-related offense and is not subject to related restraint and supervision, a second drug related conviction, or a conviction related to (6)–(8) above, in the 5 years prior to the date of application.\nMay also provide licenses to military personnel. Ga. Code Ann. §16-11-129(a).\nGa. Code Ann. § 16-11-129(b)(2)(A).\nMental Health and Substance Abuse 11. Has not been hospitalized as an inpatient in any mental hospital or alcohol or drug treatment center within the 5 years immediately preceding the application; however, the judge has discretion to issue the weapons carry license or renewal license, considering the circumstances surrounding the hospitalization and the recommendation of the superintendent of the hospital or treatment center where the individual was a patient.\nFirearms Training Requirements: Not Required Factors State Considers in Granting Reciprocity: Georgia law provides that an out-of-state resident who is licensed to carry a weapon in a state whose laws recognize Georgia licenses can carry a weapon in Georgia. The license holder must follow Georgia law in carrying the weapon. Other states’ permits are not valid for Georgia residents.\nRevocation Process: If the judge learns or has brought to his or her attention any reasonable ground to believe that the licensee is not eligible to have the license, after notice and hearing, the judge may revoke the license. The judge must find that the person does not meet the weapons carry license eligibility requirements, has falsified the application, is mentally incompetent, or chronically uses alcohol or narcotics.\nPossession of a revoked license is a misdemeanor offense.\nGa. Code Ann. § 16-11-129(e).\nLaw enforcement officers within and outside of the state can call the issuing probate court during normal business hours to verify the validity of permits. Some probate courts require documentation or other proof that the person requesting is a member of law enforcement (a faxed request on letterhead, or an in-person request by a uniformed officer with a proper identification such as a badge).",
"Approximate Number of Active Concealed Carry Permit Holders as of December 31, 2011: 40,000 (rounded to the nearest thousand)\nState Adult Population (age 20 or over) per U.S. 2010 Census: 3,279,135 Unlicensed Open Carry Permitted: Yes Permit to Carry Concealed: The Deputy Secretary of Public Safety Services of the Department of Public Safety and Corrections is required to issue a concealed handgun permit to any Louisiana resident who qualifies for a permit under the Louisiana permit eligibility provisions.\nLength of Permit Validity: 5 years.\nLa. Rev. Stat. Ann. § 40:1379.3(H)(2).\nThere is a rebuttable presumption that an applicant has a history of engaging in violent behavior upon proof that, within a 10-year period immediately preceding the date of the application, the applicant has been arrested or charged on three or more occasions for any crime of violence, or has been arrested or charged on two or more occasions for any crime of violence that may be punished by death.\n6. not have been discharged from the U.S. armed forces under certain circumstances (e.g., dishonorable discharge). 7. Prior permit applications: a. not have had a permit denied within 1-year prior to the most b. not have a permit revoked within 4 years prior to the most recent application.8. demonstrate competence with a handgun.\nFirearms Training Requirements: Upon application to the department for a permit, all applicants shall demonstrate competence with a handgun by any one of the following: a. completion of any Department of Public Safety and Corrections- approved firearms safety or training course that shall include at least a minimum of 9 hours of instruction as detailed below: i. ii. iii. iv. v. vi. one hour of instruction on handgun nomenclature and safe handling procedures of a revolver and semi-automatic pistol; one hour of instruction on ammunition knowledge and fundamentals of pistol shooting; one hour of instruction on handgun shooting positions; three hours of instruction on the use of deadly force and conflict resolution that will include a review of La. Rev. Stat. Ann. §§14:18 through 14:22 and which may include a review of any other laws relating to the use of deadly force; one hour of instruction on child access prevention; and two hours of actual live range fire and proper handgun cleaning procedures: 1. live range fire shall include 12 rounds each at 6 feet, 10 feet, and 15 feet for a total of 36 rounds; 2. each applicant or permittee must perform at least one safe reload of the handgun at each distance; 3. each applicant or permittee must score 100 percent hits within the silhouette portion of a National Rifle Association (NRA) B-27-type silhouette target with at least 36 rounds; b. completion of the NRA personal protection course including instruction in child access prevention conducted by a NRA certified instructor; c. completion of the NRA basic pistol shooting course including instruction in child access prevention conducted by a NRA certified instructor; d. completion of a firearms training course approved by the Louisiana State Board of Private Security Examiners, in accordance with La. Rev. Stat. Ann. § 37:3284 et seq., including instruction in child access prevention; e. possession of a current valid license or permit to carry a concealed handgun issued by a parish law enforcement officer; f. completion of a law enforcement training academy program certified by the Council on Peace Officer Standards and Training; or g. proof of completion of small arms training while serving with the armed forces of The United States of America as described in La. Rev. Stat. Ann. § 40:1379.3(D)(1).\nFactors State Considers in Granting Reciprocity: While Louisiana law recognizes the validity of out-of-state permits when carried by out-of-state residents, it does not allow Louisiana residents to obtain permits from other states for the purpose of carrying a concealed weapon in Louisiana.\nThe permits of out-of-state residents are valid in Louisiana in the following circumstances: 1. The permit is current and valid; 2. the permit holder is at least 21 years of age; and 3. the state in which the permit was issued recognizes permits issued by Louisiana.\nLouisiana residents may not use permits issued by another state for the purpose of authorizing the carrying of a concealed weapon in Louisiana.\nThe Deputy Secretary for Public Safety Services is authorized to enter into reciprocity agreements with other states so that full-time active peace officers commissioned in another state have the same authority as a person issued a concealed handgun permit to carry a concealed handgun while in Louisiana, regardless of whether or not they are in the official discharge of their duties.\nRevocation Process: A permit is to be revoked if the permittee fails to satisfy any of the qualification requirements.\nPermit holders are prohibited from carrying a weapon while under the influence of alcohol or a controlled dangerous substance; the permit is considered automatically suspended and is not valid. The department is required to revoke the permit where the holder has carried the weapon in these circumstances, refuses to submit to a chemical test, or where the holder commits negligent carrying of a concealed handgun.\nPermit holders are required to make law enforcement officers aware that the holder has a weapon and the permit is to be revoked for violation of this requirement.\nWhenever a peace officer determines that grounds under exist for the revocation of a concealed handgun permit, the officer is to prepare an affidavit indicating the reasons for the revocation and all other available information regarding the revocation. A copy of the peace officer’s report relating to the incident must be attached to the affidavit when submitted to the department.\nMechanism Available for Law Enforcement Officers within and outside the State to Verify the Validity of Permits Issued in This State: Law enforcement officers can access concealed carry permit status when checking a Louisiana resident’s driver’s license.",
"Approximate Number of Active Concealed Carry Permit Holders as of October 1, 2011: 12,000 (rounded to the nearest thousand)\nState Adult Population (age 20 or over) per U.S. 2010 Census: 4,256,926 Unlicensed Open Carry Permitted: Maryland state law requires a person to have a permit issued “before the person carries, wears, or transports a handgun.” The person must have the permit in his or her possession whenever carrying, wearing, or transporting a handgun.\nPermit to Carry Concealed: A permit is to be issued to a person when the Secretary of the Maryland State Police finds that the applicant meets specific eligibility requirements.\nLength of Permit Validity: Permits expire on the last day of the holder’s birth month following 2 years after the date the permit is issued and may be renewed for successive 3-year periods.\nEligibility Requirements: A permit is to be issued to a person when the Secretary of the Maryland State Police finds that the applicant: 1. is an adult; 2. has not been convicted of a felony or of a misdemeanor for which a sentence of imprisonment of more than 1 year has been imposed;3. has not been convicted or a crime involving the possession, use, or distribution of a controlled dangerous substance; 4. is not presently an alcoholic, addict, or habitual user of a controlled dangerous substance, unless under legitimate medical direction; 5. based on an investigation, has not exhibited a propensity for violence or instability that may reasonably render the person’s possession of a handgun a danger to the person or to another; and 6. based on an investigation, has good and substantial reason to wear, carry, or transport a handgun, such as a finding that the permit is necessary as a reasonable precaution against apprehended danger.\nWhen an applicant is under 30 years of age, the Secretary must additionally find that the applicant has not been: 1. committed to a juvenile facility for longer than 1 year after an adjudication of delinquency by a juvenile court; or 2. adjudicated delinquent by a juvenile court for an act that if committed by an adult would be a crime of violence, a felony under Maryland law, or a misdemeanor under Maryland law that carries a statutory penalty of more than 2 years.\nThese requirements are in addition to those enumerated in Maryland law to legally possess a firearm.\nFirearms Training Requirements: Maryland does not require handgun safety training for residents wishing to obtain a concealed handgun permit for specific purposes of personal protection.\nFactors State Considers in Granting Reciprocity: Maryland does not recognize other states’ concealed carry handgun permits with the exception of other states’ armored car personnel who possess a valid permit who are on duty in Maryland.\nRevocation Process: The Secretary may revoke the permit after finding that the holder does not meet the permit application requirements listed above, or did not have the permit in the person’s possession when carrying, wearing, or transporting a handgun. The failure to return a revoked permit is a misdemeanor offense, subject to the imprisonment of up to 1 year, and/or a fine between $100 and $1,000. A permit holder is prohibited from wearing, carrying, or transporting a handgun while under the influence of alcohol or drugs, and doing so may result in a misdemeanor violation subject to 1 year of imprisonment and/or a fine of up to $1,000.\nMechanism Available for Law Enforcement Officers within and outside the State to Verify the Validity of Permits Issued in This State: Law enforcement officers within Maryland can check the Maryland Automated Firearms Services System to verify the validity of concealed carry weapons permits. Law enforcement officers from other states can call the Licensing Division of the Maryland State Police during normal business hours to verify the validity of permits.",
"Approximate Number of Active Concealed Carry Permit Holders as of January 3, 2012: 341,000 (rounded to the nearest thousand)\nState Adult Population (age 20 or over) per U.S. 2010 Census: 4,669,984 Unlicensed Open Carry Permitted: No Permit to Carry Concealed: Permit holders do not have to carry handguns in a concealed manner.\nLength of Permit Validity: Permits are generally valid for 4 years.\nTenn. Code Ann. § 39-17-1351(n).\nA resident is someone who has lived in Tennessee for more than 30 days, is employed in the state, would qualify as registered voter, or has taken action to establish the state as his or her principal place of domicile. Tenn. Code Ann. § 55-50-102(47). b. that the applicant is not currently subject to any order of protection and, if so, the applicant must provide a copy of the order; and that the applicant is not a fugitive from justice; c. 3. Substance Abuse and Mental Health Information: a. that the applicant is not an unlawful user of or addicted to alcohol or any controlled substance, and the applicant has not been a patient in a rehabilitation program or hospitalized for alcohol or controlled substance abuse or addiction within 10 years from the date of application; b. that the applicant has not been adjudicated as a mental c. defective; has not been judicially committed to or hospitalized in a mental institution; has not had a court appoint a conservator for the applicant by reason of a mental defect; has not been judicially determined to be disabled by reason of mental illness, developmental disability, or other mental incapacity; and has not, within 7 years from the date of application, been found by a court to pose an immediate substantial likelihood of serious harm because of mental illness; and that the applicant is not receiving Social Security disability benefits by reason of alcohol dependence, drug dependence, or mental disability; 1. that the applicant is not an alien and is not illegally or unlawfully in the United States; 2. that the applicant has not renounced the applicant’s United 3. that the applicant has not been discharged from the armed forces under dishonorable conditions.\nThe applicant must also provide two sets of classifiable fingerprints and must be photographed for the permit. The applicant must present photo identification to the department when filing the application; the name and photo must match those of the application.\nFirearms Training Requirements: The department must require applicants to provide proof of successful completion of an approved handgun safety course. The course must include both classroom hours and firing range hours, as well as instruction on alcohol and drugs; the effects of those substances on a person’s reflexes, judgment, and ability to handle a firearm; and laws related to possession of a firearm while intoxicated.\nAn applicant may be exempt from the firing range and classroom hours requirements if, within the past 5 years, the applicant completed training or had been certified related to being a law enforcement officer, security guard, or in the military.\nOnce a permit has been obtained, permit holders cannot be required to complete a handgun safety course to maintain or renew a permit.\nFactors State Considers in Granting Reciprocity: An out-of-state permit is valid in Tennessee to carry a handgun, and the holder must carry the permit at all times the person carries a handgun in Tennessee.\nTennessee law requires the Commissioner of Safety to enter into reciprocity agreements with other states that require the execution of such agreements. The Commissioner is to publish a list of the states that honor the permits of Tennessee, as well as a list of the states that refuse to enter into reciprocity agreements with the state, or honor Tennessee handgun carry permits. If another state imposes conditions on Tennessee permit holder in a reciprocity agreement, the conditions will apply to the other state’s permit holder when they carry a handgun in Tennessee.\nTenn. Code Ann. § 39-17-1351(r)(1)-(2). already has a permit. If the permit application is denied in Tennessee, that person cannot carry a handgun based on the former state’s permit.\nPersons who work in Tennessee: If a person is a resident and a permit holder of another state, but is employed in Tennessee and wants to carry a handgun in Tennessee, once the person has been working in Tennessee for 6 months, the person has 6 months to obtain a Tennessee handgun permit. If the state the person has a permit from has substantially similar permit eligibility requirements, the permit may be issued based on the fact that the person already has a permit. If the application for a permit is denied in Tennessee, that person cannot carry a handgun based on the former state’s permit. These provisions do not apply if the state of residence of the person employed has a reciprocity agreement with Tennessee.\nRevocation Process: The department is required to suspend or revoke a handgun permit when its records or other evidence show that the holder: 1. is prohibited from purchasing a handgun under applicable state or 2. has not accurately disclosed material information required for 3. poses a material likelihood of risk of harm to the public; 4. has been arrested for a felony that involves the use or attempted use of force, violence, or a deadly weapon, or for a felony drug offense; 5. has been convicted of a felony; 6. has violated any provision of the Tennessee code related to 7. has engaged in conduct that would make the holder ineligible to apply for or obtain a permit under the permit eligibility requirements; 8. has been convicted of domestic assault or other misdemeanor crime of domestic violence and is still subject to the disabilities of such a conviction; 9. is subject to a current order of protection; or 10. has been judicially committed to a mental institution or adjudicated as a mental defective.\nOnce the department suspends or revokes a permit, the department is required to send notice to the holder and appropriate law enforcement officers. In addition to stating that the permit has been suspended or revoked, the notice must tell the holder to surrender the permit within 10 days and that it is a crime not to do so, and that the permit holder has 30 days to request a hearing, among other things.\nThe permit holder has 10 days to surrender the permit once the holder has notice it has been surrendered or revoked. Failure to do so is a Class A misdemeanor.\nThe permit holder has a right to have the suspension or revocation reviewed in court. If the holder has been arrested and charged with certain felony offenses, including a felony offense involving violence or the use of a firearm, the court with jurisdiction over the criminal charge is required to find out if the defendant has a permit and order the surrender of the permit. On other felony charges, the permit holder can petition for a hearing to keep the permit and may retain the permit if the court determines that the permit holder will not present a material risk of physical harm to the public if released and allowed to retain the permit. If the holder is acquitted of charges, the permit is restored; if the holder is convicted, the permit is revoked. Permits are suspended during pre-trial diversion or judicial diversion. Permit holders must also surrender their permits if convicted of a Class A misdemeanor for the term of the sentence imposed. Permit holders who have received a notice of suspension or revocation may make a written request for review of the determination at a hearing. The hearing must be scheduled within 30 days. After this determination, there is a right of review in court.\nMechanism Available for Law Enforcement Officers within and outside the State to Verify the Validity of Permits Issued in This State: Information about the status of a Tennessee handgun permit (whether it is valid, or revoked, or there is no permit) is in the Tennessee driver’s license system and the status is shown on the driver’s license. However, there is no way to check all states’ databases to determine the status of a permit unless the states’ permits are linked to their driver’s license systems.",
"Approximate Number of Active Concealed Carry Permit Holders as of December 31, 2011: 519,000 (rounded to the nearest thousand)\nState Adult Population (age 20 or over) per U.S. 2010 Census: 17,523,847 Unlicensed Open Carry Permitted: No Permit to Carry Concealed: If specific eligibility and application requirements are met, the Texas Department of Public Safety is required to issue a license to the applicant.\nLength of Permit Validity: Texas licenses to carry concealed weapons expire on the first birthday of the license holder occurring after the fourth anniversary of the date of issuance, and renewed licenses expire on the license holder’s birth date, 5 years after the date of the expiration of the previous license.\nTexas’s eligibility statute gives further content to these requirements. Specifically, there is a definition for what constitutes a felony. Tex. Gov’t Code Ann. § 411.172(b).\nA person is incapable of exercising sound judgment with respect to the proper use and storage of a handgun if the person has been diagnosed with or suffers from certain psychiatric disorders or conditions; has been declared incompetent to manage the person’s own affairs; or has entered a plea of not guilty by reason of insanity, among other things. Tex. Gov’t Code Ann. § 411.172(d). Evidence that a person has a psychiatric disorder, or condition may include, for example, involuntary psychiatric hospitalization; inpatient or residential substance abuse treatment in the preceding 5-year period; or diagnoses by a physician that the person is dependent on alcohol or drugs, or has certain mental disorders including bipolar disorder, antisocial personality disorder, or chronic dementia, among others. Tex. Gov’t Code Ann. § 411.172(e). The person may, however, provide a certificate from a physician stating that the disorder or condition is in remission and not likely to develop at a future time. Tex. Gov’t Code Ann. § 411.172(f).\n9. is not subject to a restraining order or court protective order; and 10. has not made any material misrepresentation, or failed to disclose any material fact in the permit application.\nFirearms Training Requirements: The Department of Public Safety is required to establish minimum standards for handgun proficiency, develop a course to teach proficiency, and administer examinations to measure proficiency. One part of the course is to be classroom, and the other part range instruction, where the applicant must demonstrate the applicant’s ability to safely and proficiently use the applicable category of handgun.\nThe course must be administered by a qualified instructor. The course must include between 10 and 15 hours of instruction on 1) laws related to deadly force; 2) handgun use, proficiency, and safety; 3) nonviolent dispute resolution; and 4) proper storage practices.\nThe department must also develop a continuing education course for holders who want to renew a license. The course must be administrated by a qualified instructor and must include at least 4 hours of the subjects from the initial course.\nThe proficiency exam includes a written exam on the subjects taught in the course and a physical demonstration of proficiency and handgun safety procedures. The qualified handgun instructor may submit to the department a recommendation concerning an applicant’s proficiency.\nCertain applicants and license holders do not have to complete the range instruction portion of the course. These include persons who are currently serving or were honorably discharged from the U.S. or Texas state military forces; and who within the last 5 years have completed a course in handgun proficiency with the military forces. Applicants and license holders that work in the criminal justice system may also avail themselves of alternative proficiency procedures.\nUnique State Disqualifiers/Prohibitions: Delinquent taxes or child support payment.\nFactors State Considers in Granting Reciprocity: Texas law requires the Governor to negotiate reciprocity agreements with any other states that provide conceal carry licenses, if the Texas Attorney General determines that the authorities of the other state initiate background checks of its applicants. The background check must include a search of the FBI’s National Crime Information Center database and the Interstate Identification Index.\nEvery year, the Texas Attorney General must submit a report listing the states that the Attorney General has determined qualify for reciprocity and review the statutes of states that do not to determine whether changes to their statues are necessary to qualify.\nRevocation Process: Licenses are to be revoked if the holder: 1. was not entitled to the license when it was issued; 2. made a material misrepresentation or failed to disclose a material fact 3. becomes ineligible, unless the only basis of ineligibility is being charged with the commission of a crime (in which case the license is suspended); 4. is convicted of an offense related to the unlawful carrying of a handgun by a license holder; 5. is determined to have engaged in conduct constituting a reason to suspend a license (listed above) after the person’s license has been previously suspended twice for the same reason; or 6. the holder’s fee is returned and the holder does not repay it plus $25, within 30 days of being notified.\nThe holder can reapply for a license after 2 years and the reason for revocation does not exist and has not existed for 2 years. A holder whose fee was returned can reapply at any time.\nAfter receiving written notice of a denial, revocation, or suspension of a license, the holder has 30 days to request a hearing before a justice of the peace acting as an administrative hearing officer. The hearing must be scheduled within 30 days of the request and held within no more than 60 days. The ruling may be appealed within 30 days to a county court.\nMechanism Available for Law Enforcement Officers within and outside the State to Verify the Validity of Permits Issued in This State: Law enforcement officials in Texas, and other states, have access to concealed carry permit information when they run a wanted person check on permit holders. Texas law enforcement officers can also access concealed carry permit information from the computers of squad cars.",
"Approximate Number of Active Concealed Carry Permit Holders as of December 31, 2011: 279,000 (rounded to the nearest thousand)\nState Adult Population (age 20 or over) per U.S. 2010 Census: 5,917,339 Unlicensed Open Carry Permitted: Virginia allows residents to carry firearms openly without a permit.\nPermit to Carry Concealed: Persons wishing to apply for a concealed carry permit can apply to the clerk of the circuit court of their county or city.\nLength of Permit Validity: 5 yearsEligibility Requirements: The applicant must be 21 years of age or older and the following persons are ineligible to be issued a permit: Criminal History: 1. Persons who have been convicted of a felony; 2. individuals subject to a restraining or protective order and prohibited from purchasing or transporting a firearm; 3. persons who have been adjudicated delinquent for certain crimes, unless they file a petition to the circuit court that is granted; 4. individuals who have been convicted of two or more misdemeanors within the 5 years prior to the application, if one of the misdemeanors was Class 1; if two or more of the misdemeanors are not Class 1, then the judge has discretion; 5. individuals who have been convicted of driving while under the influence or public drunkenness within the 3-year period preceding the application, or have been determined to be a habitual drunkard under Virginia law. 6. fugitives from justice; 7. individuals who have been convicted within 3 years of the application, or have a charge pending for, specified crimes, including assault, assault and battery, sexual battery, discharging a firearm, and brandishing a firearm; 8. individuals who have been convicted of or have a charge pending for 9. Individuals who have previous convictions or adjudications of delinquency that would have been a felony if committed by an adult; Mental Health and Substance Abuse: 10. persons who were admitted to outpatient treatment; adjudicated mentally incapacitated or legally incompetent; or were acquitted by reason of insanity under Virginia or similar state law, unless the person was discharged or released from custody, or competency was restored, as applicable, more than 5 years prior to the date of application; 11. individuals addicted to, using, or distributing any controlled substance; 12. individuals who have received mental health treatment or substance abuse treatment in a residential setting within 5 years prior to the date of their application; and 13. individuals who within the 3 years prior to the date of application were found guilty of any criminal offense set forth in Virginia’s controlled substances laws, or of illegal possession or distribution of any controlled substance; this prohibitor also applies where the court find the facts sufficient for a finding of guilty but ordered probation or other conditions; Other: 14. aliens not lawfully admitted for permanent residence; 15. persons who have been discharged from the U.S. Armed Forces under dishonorable conditions; and 16. individuals who the court finds, by a preponderance of the evidence, based on specific acts by the applicant, are likely to use a weapon unlawfully or negligently to endanger others.\nThis final condition provides for limited discretion to deny a permit. To support this finding, the sheriff, chief of police, or attorney for the Commonwealth may submit to the court a sworn written statement indicating the applicant is likely to use a weapon unlawfully or negligently to endanger others. This statement is to be based on personal knowledge or that of a sheriff, police officer, or assistant attorney for the Commonwealth, or a sworn statement of a competent person having personal knowledge of specific acts.\nFirearms Training Requirements: Each applicant is required to submit proof that the applicant has demonstrated competence with a handgun. This can be satisfied in one of the following ways: 1. Completing any hunter education or hunter safety course approved by the Department of Game and Inland Fisheries or a similar agency of another state; 2. completing any National Rifle Association (NRA) firearms safety or 3. completing any firearms safety or training course or class that is available to the general public that is approved by the Department of Public Safety or that uses NRA-certified instructors. The course may be offered by a law enforcement agency, a junior college, a college or a private or public institution, academy, organization, or firearms training school; 4. completing any law enforcement firearms safety or training course or class approved by the department of public safety offered for security guards, investigators, etc; 5. presenting evidence of equivalent experience with a firearm through participation in organized shooting competition or current military service or proof of an honorable discharge from any branch of the armed services; 6. obtaining or previously having held a license to carry a firearm in Virginia or a locality, unless such license has been revoked for cause; 7. completing any firearms training or safety course or class, including an electronic, video, or on-line course, conducted by a state-certified or NRA-certified firearms instructor; 8. completing any governmental police agency firearms training course and qualifying to carry a firearm in the course of normal police duties; or 9. completing any other firearms training that the court deems adequate.\nThe documentation must include one of the following: a photocopy of a certificate of completion of any of the courses or classes, an affidavit from the instructor or organization that conducted the course or class attesting to the completion by the applicant, or a copy of any document that shows completion of the course or evidences participation in a firearms competition.\nFactor(s) State Considers in Granting Reciprocity: Virginia law provides for an out-of-state permit to be valid if the following requirements are met: 1. the holder is at least 21 years of age; 2. the issuing state authority provides the means for instantaneous verification of the validity permits issued within that state, accessible 24 hours a day; and 3. the requirements and qualifications of that state’s law are adequate to prevent possession of a permit by persons who would be denied a permit in Virginia (other than the age requirements and the type of weapon authorized to be carried).\nThe Superintendent of State Police, in consultation with the Office of the Attorney General, is required to determine whether states meet these requirements, maintain a registry of the qualifying states on the Virginia Criminal Information Network, and enter into agreements for reciprocal recognition with qualifying states. The registry is to be available to law enforcement officers for investigative purposes Revocation Process: Virginia law provides for revocation of a permit for generally any offense that would disqualify a person from obtaining a permit and also provides for some specific grounds for revocation. Any person who is convicted of an offense that would disqualify that person from obtaining a permit, or who made materially false statements on the person’s application, is required to forfeit his or her permit and surrender it to the court. When the Central Criminal Records Exchange obtains a record of arrest, conviction or occurrence of any other event that would disqualify a person from obtaining a concealed handgun permit, the Central Criminal Records Exchange must notify the court that issued the permit. The court will then revoke the permit of the disqualified person, and notify the State Police and the person whose permit was revoked.\nThe permit is also required to be revoked if the permit holder is under the influence of alcohol or illegal drugs while carrying the handgun in a public place, which is guilty of a Class 1 misdemeanor. The convicting court is required to revoke the permit and notify the issuing circuit court. The permit holder is ineligible to apply for a permit for 5 years.\nThe court must revoke the permit of a person who is admitted to outpatient treatment or adjudicated mentally incapacitated or legally incompetent under Virginia or similar state law, and must notify the State Police and the permit holder of the revocation.\nVirginia law provides for suspension only in limited circumstances, where a person has a felony charge pending for stalking or assault, assault and battery, sexual battery, discharging a firearm, or brandishing a firearm. In these instances, the court hearing the charge or the court that issued the permit may have the permit suspended while the charge is pending.\nMechanism Available for Law Enforcement Officers within and outside the State to Verify the Validity of Permits Issued in This State: Law enforcement officials in Virginia can check the Virginia Crime Information Network to obtain information related to the status of permits issued in Virginia. Law enforcement officials from other states can run a Concealed Weapons Query in the International Justice and Public Safety Network to verify the status of permits issued in Virginia. Law enforcement officials from other states can also query the Federal Bureau of Investigation’s Interstate Identification Index, or call the Duty Sergeant at the Virginia State Police to verify the validity of a Virginia permit.",
"This report describes (1) the extent to which states allow concealed carry permits, and how select states’ eligibility requirements and laws regarding and recognition of other states’ permits differ, (2) what processes select states use to help ensure they revoke permits when holders no longer meet eligibility requirements, and (3) how law enforcement officials in select states determine whether permits they encounter are current and valid.\nTo address all three objectives, we conducted a case study on 9 states— Arizona, California, Florida, Georgia, Louisiana, Maryland, Tennessee, Texas, and Virginia—which we selected to illustrate a variety of applicable state laws and procedures. However the results cannot be generalized across all states. The information obtained from these case studies provides a broad understanding of the different requirements and processes states utilize in issuing permits. Our selection covers states representing each of the factors outlined below:\nStates from each of the permit issue designations-states classify themselves based on their issuing laws: (1) no-issue: where concealed carry is prohibited; (2) may-issue: the issuing authority has discretion to grant concealed carry permits to eligible individuals; (3) shall-issue: a concealed carry permit must be issued if no statutory reason for denial exists; and (4) permit not required to carry concealed handguns. We selected states that issue to residents only, and states that issue to both residents and nonresidents.\nIssuing authority—states with a centralized (singular) issuing authority and decentralized—multiple issuing authorities within a state.\nReciprocity—the number of states that have reciprocity with each other and the number of agreements in place.\nThe selection includes states that represent a range of the length of time concealed carry permits are valid, as well as differing eligibility requirements such as mandatory training on a gun safety program or demonstrating proficiency of firing a handgun, and reason(s) for requesting the permit.\nTo determine states’ concealed carry permit practices and whose permits they honor, we gathered information on permit issuing laws, issuing authorities, and reciprocity agreements for the 50 states and the District of Columbia. This report presents the states’ laws as they were as of March 2012. To obtain data on the current number of active concealed carry permits, and the length of time a permit is valid, we contacted 48 states. We also contacted the 48 states to obtain information on their permit tracking systems, reasons for denials, and revocations. Of the 48 states, we received data from 45 states. We requested data for the period 2007 through 2011 to illustrate any trends; however some states could not provide complete data for this period. Most states were able to provide 2011 data. To assess the reliability of these data, we asked the states questions about the systems they use to track the data, any steps taken to verity accuracy, and any limitations to the data. Our analysis was largely dependent on the availability of state data on the number of concealed carry permits. In some cases, statewide data were not available, and in other cases only data from certain time periods were available. As a result of these limitations, we determined that the data were sufficiently reliable solely to illustrate a minimum number of total active permits and approximate number of state specific permits.\nIn addition, we obtained information from and interviewed federal agencies with firearms-related experience and law enforcement responsibilities—the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) and the Federal Bureau of Investigations (FBI). We obtained information from and interviewed FBI headquarters officials on their audits of select states that utilize federal databases that states query when screening concealed carry permit applicants. We obtained information and interviewed ATF headquarters officials and field special agents on their experience and perspective on state permits. In addition, we interviewed non-governmental groups representing a cross section of different views on concealed carry permit issues to obtain information regarding a historical perspective of carry conceal issues.\nTo obtain more detailed information about specific state laws and procedures for carry concealed permits, we met with officials at various state and local agencies in the 9 states in our case study. We obtained and analyzed information about state laws, eligibility requirements, and procedures including, (1) how states screen, approve, and deny permit applicants and (2) factors considered by states when entering into reciprocity agreements with other states and the number of current reciprocity agreements in place. We also obtained and analyzed state data on state-maintained statistics on the number of active and denied permits, and other firearms-related information such as specific requirements and training guidance.\nTo determine how the 9 states we selected for our case study monitor active holders to ensure they remain eligible to possess firearms and what actions the states take to revoke permits when permit holders become ineligible, we obtained information from the 9 states that issue permits: Arizona, California, Florida, Georgia, Louisiana, Maryland, Tennessee, Texas, and Virginia. Of these 9, 3 states (California, Georgia, and Virginia) have a decentralized process for issuing permits. We obtained information and interviewed the issuing officials (county sheriffs, probate court staff, and circuit court staff) from three to five jurisdictions per state. From the 9 states, we selected for our case study that issue permits, we obtained and analyzed available data on the number of permits revoked, and the extent to which states recovered revoked permits from permit holders. We also interviewed state and local officials responsible for issuing permits to obtain information on applicable laws and procedures for monitoring, and revoking permits.\nTo identify how law enforcement officials in the 9 select states that issue permits determine whether permits they encounter are current and valid, we obtained information on the physical features embedded in each state’s permit, and the state and federal systems utilized to check the status of permits, and we interviewed state and local law enforcement officials across the 9 states to obtain information on processes they use to validate permits. These law enforcement officials included those representing state department of law enforcement, state departments of public safety, state police or state highway patrol, county sheriffs, and city police.\nWe conducted our work from August 2011 through July 2012 in accordance with all sections of GAO’s Quality Assurance Framework that are relevant to our objectives. The framework requires that we plan and perform the engagement to obtain sufficient and appropriate evidence to meet our stated objectives and to discuss any limitations in our work. We believe that the information and data obtained, and the analysis conducted, provide a reasonable basis for any findings in this product.",
"",
"Local police or Colonel of the State Police Counties Concealed Weapon Licensing Boards 17 Approximate number of authorities (if decentralized)\nClerk of Circuit Courts for residents, Department of State Police for nonresidents Chiefs of police of municipalities, county sheriffs Not applicable (N/A)\nAttorney General’s Office through the Division of Criminal Investigation For states that have a + symbol beside the number of authorities, the approximate number of authorities may be significantly higher.",
"While there is no federal law specifically addressing the issuance of concealed carry permits, 48 states have passed laws allowing the state to issue citizens concealed carry permits. A few states do not require a permit to carry certain firearms in public within that particular state, but issue permits for reciprocity purposes in other states. See table 6 below.",
"",
"Length of time permit/license valid (years) for initial applicants 5 years 1.5 4 years (5 years for retired law enforcement) 3 years in New York City; 5 years for Nassau, Suffolk, and Westchester; Until Revoked for all other counties 3.2 5 years on/after 3/14/07; 4 years prior to 3/14/07 4.5 5 or 10 years (optional if no prohibitions) 4 years; 5 years after renewal 5 years States that have missing data either do not track, could not provide, or declined to provide the information requested. Of the four counties that issue permits in Hawaii, only two provided information. New York has no mechanism to purge inactive files. The New York State Police became the repository for concealed carry permit data in 1936. As of December 31, 2011, New York had 1,281,662 applications on file since 1936. However, this number is not an accurate count of people who possess a valid carry concealed weapons permit from the state of New York. Some permit holders may have died and some permit holders may have had their permits revoked or cancelled since 1936.",
"Of the 48 states that issue concealed carry permits, 26 issue to residents and nonresidents of their state, and of these 26 states that issue to nonresidents, 10 provided data on the number of valid nonresident permits, as shown in the table.",
"Permits from other states that are recognized by this state AK, AZ, AR, CO, FL, GA, ID, IN, IA, KY, LA, MI, MS, MO, NH, NC, ND, OK, SD, TN, TX, UT, WY (23)\nStates that recognize permits issued in this state AK, AZ, AR, CO, FL, GA, ID, IN, IA, KY, LA, MI, MS, MO, NH, NC, ND, OK, SD, TN, TX, UT, WY (23)\nAL, AZ, AR, CA, CO ,CT, DE, FL, GA, HI, ID, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, WA, WV, WI, WY (47)\nAL, AZ, AR, CO, DE, FL, GA, ID, IN, IA, KS, KY, LA, MI, MN, MS, MO, MT, NE, NV, NH, NM, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, VA, WV, WY (35)\nAL, AK, AR, CA, CO ,CT, DE, FL, GA, HI, ID, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, WA, WV, WI, WY (47)\nAL, AK, AR, CO, DE, FL, GA, ID, IN, IA, KS, KY, LA, MI, MS, MO, MT, NE, NV, NH, NM, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, VA, WI, WV, WY (35)\nAL, AK, AZ, CO, DE, FL, GA, ID, IN, IA, KS, KY, LA, ME, MI, MN, MS, MO, MT, NE, NV, NH, NM, ND, NC, OH, OK, PA, SC, SD, TN, TX, UT, VA, WA, WI, WV, WY (38)\nAL, AK, AZ, CO, DE, FL, GA, ID, IN, IA, KS, KY, LA, ME, MI, MN, MS, MO, MT, NE, NV, NH, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, VA, WA, WV, WI, WY (37)\nCA does not honor permits issued in other states.\nAK, AZ, ID, IN, IA, KY, MI, MO, MT, NE, NC, OK, SD, TN, TX, UT, WI (17)\nAL, AK, AZ, AR, DE, FL, GA, ID, IN, IA, KS, KY, LA, MI, MS, MO, MT, NE, NH, NM, NC, ND, OK, PA, SD, TN, TX, UT, WI, WY (30)\nAL, AK, AZ, AR, DE, FL, GA, ID, IN, IA, KS, KY, LA, MI, MS, MO, MT, NE, NH, NM, NC, ND, OK, PA, SD, TN, TX, UT, WI, WY (30)\nCT does not honor permits issued in other states.\nAK, AZ, ID, IN, IA, KY, MI, MO, MT, NE, NC, OK, SD, TN, TX, UT, WI (17)\nAK, AZ, AR, CO, FL, KY, ME, MI, MO, NM, NC, ND, OH, OK, TN, TX, UT, VA, WV (19)\nAK, AZ, AR, CO, FL, ID, IN, IA, KY, ME, MI, MO, NM, NC, ND, OH, OK, SD, TN, TX, UT, VA, WV (23)\nAL, AK, AZ, AR, CO, DE, GA, ID, IN, IA, KS, KY, LA, MI, MS, MO, MT, NE, NH, NM, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, VT, VA, WA, WV, WY (35)\nAL, AK, AZ, AR, CO, DE, GA, ID, IN, IA, KS, KY, LA, MI, MS, MO, MT, NE, NH, NM, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, VA, WA, WV, WY (33)\nAL, AK, AR, AZ, CO, FL, IA, ID, IN, KY, LA, MI, MS, MO, MT, ND, NH, NC, OK, PA, SD, TN, TX, UT, WI, WY (26)\nAL, AK, AZ, AR, CO, FL, ID, IN, IA, KY, LA, MI, MS, MO, MT, NH, NC, ND, OK, PA, SD, TN, TX, UT, WI, WY (26)\nHI does not honor permits issued in other states.\nAK, AZ, ID, IN, IA, KS, KY, MI, MO, NE, NC, OK, SD, TN, TX, UT, WI (17)\nAL, AK, AZ, AR, CA, CO ,CT, DE, FL, GA, HI, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, WA, WV, WI, WY (47)\nAL, AK, AZ, AR, CO, FL, GA, IN, IA, KY, LA, MI, MO, MT, NE, NH, NC, ND, OH, OK, PA, SD, TN, TX, UT, WI, WY (27)\nIL does not honor permits issued in other states.\nAL, AK, AZ, AR, CA, CO ,CT, DE, FL, GA, HI, ID, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, WA, WV, WI, WY (47)\nAL, AK, AZ, AR, CO, FL, GA, ID, IA, KY, LA, MI, MS, MO, MT, NH, NC, ND, OK, PA, SD, TN, TX, UT, WI, WY (26)\nAL, AK, AZ, AR, CA, CO ,CT, DE, FL, GA, HI, ID, IN, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, WA, WV, WI, WY (47)\nAL, AK, AZ, AR, CO, FL, GA, ID, IN, KY, LA, MI, MO, MT, NE, NH, NC, ND, OK, PA, SD, TN, TX, UT, WI, WY (26)\nPermits from other states that are recognized by this state AK, AZ, AR, CO, FL, HI, KY, LA, MI, MN, MO, NE, NV, NJ, NM, NC, ND, OH, OK, SC, TN, TX, WV (23)\nStates that recognize permits issued in this state AK, AZ, AR, CO, FL, ID, IN, IA, KY, LA, MI, MN, MO, MT, NE, NV, NC, ND, OH, OK, SC, SD, TN, TX, UT, WI, WV (27)\nAL, AK, AZ, AR, CA, CO ,CT, DE, FL, GA, HI, ID, IA, IN, KS, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, WA, WV, WI, WY (47)\nAL, AK, AZ, AR, CO, DE, FL, GA, ID, IN, IA, KS, LA, MI, MN, MS, MO, MT, NE, NV, NH, NM, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, VA, WI, WV, WY (36)\nAL, AK, AZ, AR, CO, FL, GA, ID, IN, IA, KS, KY, ME, MI, MN, MS, MO, MT, NE, NM, NV, NH, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, VT, VA, WA, WI, WV, WY (38)\nAL, AK, AZ, AR, CO, FL, GA, ID, IN, IA, KS, KY, ME, MI, MN, MS, MO, MT, NE, NV, NH, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, VA, WA, WI, WV, WY (36)\nAR, DE, LA, MI, ND, PA, SD, WY (8)\nAK, AZ, AR, DE, ID, IN, IA, KY, LA, MI, MO, NE, NC, ND, OK, PA, SD, TN, UT, WY (20)\nMD does not honor permits issued in other states.\nAK, AZ, ID, IN, IA, KY, MI, MO, MT, NC OK, SD, TN, TX, UT, WI (16)\nMA does not honor permits issued in other states.\nAK, AZ, ID, IN, IA, KY, MI, MO, MT, NC, OK, SD, TN, TX, UT (15)\nAL, AK, AZ, AR, CA, CO ,CT, DE, FL, GA, HI, ID, IA, IN, KS, KY, LA, ME, MD, MA, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, WA, WV, WI, WY (47)\nAL, AK, AZ, AR, CO, DE, FL, GA, ID, IN, IA, KS, KY, LA, ME, MN, MS, MO, MT, NE, NV, NH, NM, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, VA, WA, WI, WV, WY (38)\nAK, AR, KS, KY, LA, MI, MO, NM, NV, OH, OK, TN, TX, UT, WY (15)\nAK, AZ, AR, ID, IN, IA, KS, KY, LA, MI, MS, MO, MT, NE, NM, NC, OK, SD, TN, UT, VA, WI, WY (23)\nAL, AK, AZ, AR, CO, FL, GA, IN, KY, LA, MI, MN, MO, MT, NH, NC, OK, SD, TN, TX, UT, VA, WA, WV, WY (25)\nAL, AK, AZ, AR, CO, FL, GA, ID, IN, IA, KY, LA, MI, MO, MT, NH, NC, OK, SD, TN, TX, UT, VA, WA, WV, WY (26)\nAL, AK, AZ, AR, CA, CO ,CT, DE, FL, GA, HI, ID, IA, IN, KS, KY, LA, ME, MD, MA, MI, MN, MS, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, WA, WV, WI, WY (47)\nAL, AK, AZ, AR, CO, DE, FL, GA, ID, IN, IA, KS, KY, LA, MI, MN, MS, MT, NE, NV, NH, NM, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, VA, WA, WV, WY (36)\nAK, AZ, AR, CA, CO, CT, FL, GA, ID, IN, IA, KS, KY, LA, MD, MA, MI, MN, MS, MO, NE, NV, NJ, NM, NY, NC, ND, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WA, WI, WV, WY (41)\nAK, AZ, AR, CO, FL, GA, ID, IN, IA, KY, LA, MI, MS, MO, NE, NM, NC, ND, OK, PA, SD, TN, TX, UT, VA, WI, WY (27)\nAK, AZ, AR, CA, CO, CT, FL, HI, ID, IA, KS, KY, LA, ME, MI, MN, MT, MO, NV, NJ, NM, NC, ND, OH, OK, OR, RI, SC, TN, TX, UT, VA, WV, WY (34)\nAK, AZ, AR, CO, FL, ID, IN, IA, KS, KY, LA, MI, MO, MT, NV, NC, ND, OH, OK, SD, TN, TX, UT, VA, WI, WY (26)\nAK, AZ, AR, KS, KY, LA, MI, MO, NE, NM, NC, OH, TN, RI, WV (15)\nAK, AZ, AR, ID, IN, IA, KS, KY, LA, MI, MN, MO, MT, NE, NC, OK, SD, TN, TX, UT (20)\nAL, AK, AZ, AR, CO, FL, GA, IA, ID, IN, KY, LA, MI, MO, MS, NC, ND, OK, PA, TN, UT, WY (22)\nAL, AK, AZ, AR, CO, FL, GA, ID, IN, IA, KY, LA, MI, MS, MO, NC, ND, OK, PA, SD, TN, UT, WY (23)\nNJ does not honor permits issued in other states.\nAK, AZ, ID, IN, IA, KS, KY, MI, MO, MT, NE, NC, OK, SD, TN, TX, UT (17)\nAK, AZ, CO, DE, FL, KY, MI, MN, MO, MT, NC, ND, OH, OK, SC, TN, TX , VA, WY (19)\nAK, AZ, AR, CO, DE, FL, ID, IN, IA, KS, KY, LA, MI, MN, MO, MT, NE, NV, NC, ND, OH, OK, SD, TN, TX, UT, VA, WV, WI, WY (30)",
"States that recognize permits issued in this state AK, AZ, ID, IN, IA, KY, MI, MO, MT, NC, OK, SD, TN, TX, UT, WI (16)\nAL, AK, AZ, AR, CA, CO ,CT, DE, FL, GA, HI, ID, IA, IN, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, WA, WV, WI, WY (47)\nAL, AK, AZ, AR, CO, DE, FL, GA, ID, IN, IA, KS, KY, LA, MI, MS, MO, MT, NE, NV, NH, NM, ND, OH, OK, PA, SC, SD, TN, TX, UT, VA, WA, WI, WV, WY (36)\nAL, AK, AZ, AR, CO, DE, FL, GA, ID, IN, IA, KS, KY, LA, ME, MI, MO, MT, NE, NH, NM, NC, OH, OK, PA, SC, SD, TN, TX, UT, VA, WA, WI, WV, WY (35)\nAL, AK, AZ, AR, CO, DE, FL, GA, ID, IN, IA, KS, KY, LA, ME, MI, MO, MT, NE, NH, NM, NC, OH, OK, PA, SD, TN, TX, UT, VA, WA, WV, WI, WY (34)\nAK, AZ, AR, DE, FL, ID, KS, KY, LA, MI, MO, NE, NM, NC, ND, OK, SC, TN, UT, VA, WA, WV, WY (23)\nAK, AZ, AR, DE, FL, ID, IN, IA, KS, KY, LA, MI, MN, MO, MT, NE, NV, NM, NC, ND, OK, SC, SD, TN, UT, VA, WA, WV, WY (29)\nAL, AK, AZ, AR, CA, CO ,CT, DE, FL, GA, HI, ID, IA, IN, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OR, PA, RI, SC, SD, TN, TX, UT, VA, WA, WV, WI, WY (47)\nAL, AK, AZ, AR, CO, DE, FL, GA, ID, IN, IA, KS, KY, LA, MI, MN, MS, MO, MT, NE, NH, NM, NC, ND, OH, PA, SC, SD, TN, TX, UT, VA, WA, WV, WY (35)\nOR does not honor permits issued in other states.\nAK, AZ, ID, IN, IA, KY, MI, MO, MT, NE, NC, OK, SD, TN, UT (15)\nAK, AZ, AR, CO, FL, GA, IA, ID, IN, KY, LA. ME, MI, MO, MT, ND, NH, NC, OK, SD, TN, TX, UT, VA, WI, WV, WY (27)\nAK, AZ, AR, CO, FL, GA, ID, IN, IA, KY, LA, ME, MI, MO, MT, NH, NC, ND, OK, SD, TN, TX, UT, VA, WV, WI, WY (27)\nRI does not honor permits issued in other states.\nAK, AZ, ID, IN, IA, KY, MI, MO, NE, NV, NC, OK, SD, TN, TX, UT (16)\nAK, AZ, AR, FL, KS, KY, LA, MI, MO, NC, OH, OK, TX, TN, VA, WV, WY (17)\nAK, AZ, AR, FL, ID, IN, IA, KS, KY, LA, MI, MO, MT, NE, NM, NC, ND, OH, OK, SD, TN, TX, UT, VA, WV, WY (26)\nAL, AK, AZ, AR, CA, CO ,CT, DE, FL, GA, HI, ID, IA, IN, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, WA, WV, WI, WY (47)\nAL, AK, AZ, AR, CO, FL, GA, ID, IN, IA, KY, LA, ME, MI, MS, MO, MT, NC, ND, OK, PA, TN, TX, UT, VA, WV, WY (27)\nAL, AK, AZ, AR, CA, CO ,CT, DE, FL, GA, HI, ID, IA, IN, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TX, UT, VA, WA, WV, WI, WY (47)\nAL, AK, AZ, AR, CO, DE, FL, GA, ID, IN, IA, KS, KY, LA, MI, MN, MS, MO, MT, NE, NV, NH, NM, NC, ND, OH, OK, PA, SC, SD, TX, UT, VA, WA, WV, WI, WY (37)\nAL, AK, AZ, AR, CA, CO, CT, DE, FL, GA, HI, IA, ID, IN, KS, KY, LA, MA, MD, MI, MS, MO, MT, NE, NM, NC, ND, NJ, NV, NY, OK, PA, RI, SC, SD, TN, UT, VA, WA, WV, WY (41)\nAL, AK, AZ, AR, CO, DE, FL, GA, ID, IN, IA, KS, KY, LA, MI, MN, MS, MO, MT, NE, NM, NC, ND, OK, PA, SC, SD, TN, UT, VA, WI, WV, WY (33)\nAL, AK, AZ, AR, CA, CO ,CT, DE, FL, GA, HI, ID, IA, IN, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, VA, WA, WV, WI, WY (47)\nAL, AK, AZ, AR, CO, DE, FL, GA, ID, IN, IA, KY, LA, MI, MN, MS, MO, MT, NE, NH, NC, ND, OH, OK, PA, SD, TN, TX, VA, WA, WV, WI, WY (34)\nVT does not require concealed weapons carriers to have a permit. Therefore, reciprocity does not apply in the state. Local statutes may vary.\nPermits from other states that are recognized by this state AK, AZ, AR, DE, FL, KY, LA, MI, MN, MS, MO, MT, NE, NC, ND, NM, OH, OK, PA, SC, SD, TN, TX, UT, WA, WV, WY (27)\nStates that recognize permits issued in this state AK, AZ, AR, DE, FL, ID, IN, IA, KY, LA, MI, MS, MO, MT, NE, NM, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, WV, WI, WY (29)\nAR, FL, LA, MI, MS, MO, NC, ND, OH, OK, TN, UT (12) AK, AZ, AR, FL, ID, IN, IA, KY, LA, MI, MS, MO, MT, NC, ND, OH, OK, SD, TN, TX, UT, VA, WI (23)\nDC does not honor permits issued in other states.\nAK, AZ, AR, DE, FL, KS, KY, LA, MI, MS, MO, NM, NC, ND, OK, OH, PA, SC, SD, TX, TN, UT, VA, WI (24)\nAK, AZ, AR, DE, FL, ID, IN, IA, KS, KY, LA, MI, MS, MO, MT, NE, NV, NC, ND, OH, OK, PA, SC, SD, TX, TN, UT, VA, WY (29)\nAZ, AR, CA, CO, CT, GA, HI, ID, IA, IN, KS, KY, LA, MD, MI, MN, MT, NE, NM, NY, NC, ND, PA, TN, TX, UT, VA, WA, WY (29)\nAK, AZ, AR, CO, GA, ID, IN, IA, KY, LA, MI, MS, MO, MT, NE, NV, NH, NC, ND, OK, PA, SD, TN, UT, WV (26)\nAL, AK, AZ, AR, CO, FL, GA, ID, IN, IA, KY, LA, ME, MI, MN, MS, MO, MT, NE, NH, NM, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, VA, WV (33)\nAL, AK, AZ, AR, CO, FL, GA, ID, IN, IA, KY, LA, ME, MI, MN, MS, MO, MT, NE, NH, NM, NC, ND, OH, OK, PA, SC, SD, TN, TX, UT, VA, WI (33)",
"",
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"In addition to the contacts named above, Kirk Kiester (Assistant Director), Aditi S. Archer, Willie Commons III, Michele C. Fejfar, Sally P. Gilley, Andrew C. Moore, and Janet G. Temko made significant contributions to the work. Also contributing to this report were Katherine M. Davis, Eric Hauswirth, Linda S. Miller, and Robert Robinson."
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{
"question": [
"How are the number of states with concealed carry permits changing?",
"How has the number changed since 2002?",
"How do \"shall-issue\" states differ in permitting rates from \"may-issue\" states?",
"How does this affect permitting standards across states?",
"To what extent do states recognize permits from other states?",
"To what extent do the 9 states studied take action to confirm continued eligibility?",
"How do these 8 states review continued eligibility?",
"If disqualified, how is the permit revoked?",
"How can law enforcement check permit validity?",
"How many concealed carry permits have been granted in the United States?",
"Who controls the issuance of concealed carry permits?",
"How is eligibility for these permits determined?",
"To what extent do states recognize permits from other states?",
"What does this report examine?",
"How did GAO source their data for this study?"
],
"summary": [
"The number of states allowing concealed carry permits is increasing, and states broadly differ in eligibility requirements and the extent to which they have reciprocity agreements.",
"In June 2002, 7 states and the District of Columbia prohibited the concealed carry of handguns. As of March 2012, individuals can carry concealed handguns in all but 1 state (Illinois) and the District of Columbia.",
"“Shall-issue” states—in which issuing authorities are required to issue a permit to an applicant that fulfills the objective statutory criteria— generally issue more permits than states with greater discretion in granting permits (“may-issue” states).",
"Because of differing eligibility requirements, some states would issue a permit to an applicant, while others would not. For example, some states define what constitutes a disqualifying felony differently or have different firearms training requirements.",
"As of March 2012, 39 states that issue permits and Vermont (permits not required) recognize concealed carry permits from other states. Of the 9 states that do not grant reciprocity, 8 are may-issue states.",
"Issuing authorities from all 9 states included in GAO’s case study stated that they take action to confirm an individual’s continued eligibility to hold a permit as part of the permit renewal process; and issuing authorities from 8 of these 9 states reported using mechanisms to monitor resident permit holders’ continued eligibility between issuance and renewal.",
"In these 8 states, issuing authorities told GAO that they are notified if a permit holder commits a disqualifying act within their state through law enforcement or state databases.",
"After detecting a disqualifying criminal offense or other disqualifying factors, each of the 9 states begins the revocation process by notifying the permit holder. The states have varying retrieval processes, and 3 of them have authority to impose a penalty for failure to surrender a revoked permit or continuing to possess one.",
"Law enforcement in the 9 case study states that issue permits told GAO that when encountering permits, such as during routine traffic stops, they visually check them and can take additional steps, such as checking state databases, as needed, to determine whether the permits are current and valid.",
"According to state reporting to GAO, there were at least 8 million active permits to carry concealed handguns in the United States as of December 31, 2011.",
"States and local authorities control the issuance of concealed carry permits.",
"Applicants who wish to obtain such permits are required to meet certain state eligibility requirements, such as minimum age and the lack of a felony conviction.",
"States also decide which other states’ permits to honor. Typically, states enter into reciprocity agreements that establish which out of- state permit holders can carry concealed firearms within each state.",
"This report describes (1) the extent to which states allow concealed carry permits, and how select states’ eligibility requirements and recognition of other states’ permits differ, (2) what processes select states use to help ensure they revoke permits when holders no longer meet eligibility requirements, and (3) how law enforcement officials in select states determine whether permits they encounter are current and valid.",
"GAO gathered information on the number of permits, laws, issuing authorities, and reciprocity agreements for 50 states and the District of Columbia, and conducted a case study on 9 states that issue permits. GAO selected these states to reflect differences among states’ eligibility requirements, state reciprocity of permits, and permit issuing processes; the results cannot be generalized across all states but provide a broad understanding of the different requirements and processes states utilized in issuing permits."
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CRS_R42363
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{
"title": [
"",
"Introduction",
"Defining Political Prisoners",
"Current Estimates",
"NLD-led Government's Stance on Political Prisoners",
"Legal Reforms",
"Constitutional Amendments",
"The Tatmadaw's Position on Political Prisoners",
"Political Prisoners and National Reconciliation",
"U.S. Sanctions, Laws, and Political Prisoners",
"Obama Administration's Position on Political Prisoners in Burma",
"Issues for Congress"
],
"paragraphs": [
"",
"The status of Burma's political prisoners is an important issue for U.S. policy towards Burma (Myanmar). The full removal of many of th e U.S. sanctions on Burma is contingent on certain conditions being met by the Burma's government in Naypyidaw and the Burmese military, including the unconditional release of all political prisoners. Moreover, the release of political prisoners may play a pivotal role in Burma's possible transition to a free and democratic country.\nThe 114 th Congress continues to be concerned about Burma's political prisoners. S. Res. 320, passed by the Senate on December 16, 2015, \"calls on the Government of Burma to release all political prisoners.\" The resolution also called on the President and Secretary of State to focus on several ongoing issues in Burma, including \"bringing about the immediate and unconditional release of all political prisoners, including those awaiting trial or sentencing.\"\nFor nearly 60 years, Burma was controlled by an authoritarian military junta that arrested and incarcerated an estimated 7,000 – 10,000 people for political reasons. In April 2011, the junta, then known as the State Peace and Development Council (SPDC), transferred power to a mixed civilian/military government headed by ex-SPDC Prime Minister, retired General and subsequently President Thein Sein. As President, Thein Sein granted amnesty to hundreds of political prisoners, but his government and the Burmese military continued to arrest and incarcerate alleged political prisoners.\nOn November 8, 2015, The National League for Democracy (NLD), led by Nobel laureate Aung San Suu Kyi, won a majority of the seats in nationwide elections for both chambers of Burma's Union Parliament. The NLD-led Union Parliament chose Htin Kyaw, childhood friend and close advisor to Aung San Suu Kyi, as President on March 15, 2016; he took office on March 30, 2016. Aung San Suu Kyi was subsequently appointed as Foreign Minister and to the newly-created position of State Counselor on April 5, 2016.\nFollowing her appointment as State Counselor, Aung San Suu Kyi reportedly outlined a strategy to release all the political prisoners that remained in custody. On April 8, 2016, President Htin Kyaw granted amnesty to 113 \"prisoners of conscience,\" including some awaiting trial. On April 17, 2016, he granted amnesty to 83 more political prisoners. Despite these actions, according to the Assistance Association for Political Prisoners (Burma), or AAPP(B), and the Former Political Prisoners Society (FPPS), two nonprofit organizations dedicated to identifying, locating, and assisting political prisoners in Burma, the Htin Kyaw government was incarcerating 67 political prisoners as of May 31, 2016, and another 189 were awaiting trial (including 47 in detention).\nSince the 2015 parliamentary elections, the NLD has been under domestic and international pressure to release all political prisoners, and undertake measures to prevent the arrest and detention of new political prisoners. In addition, the AAPP(B) and the FPPS have pointed out the need for greater assistance for released political prisoners, many of whom suffer from physical and mental conditions caused by their alleged mistreatment while in prison.\nSome observers, however, have questioned whether the NLD-led government has the power to fully address the political prisoner issue, noting the various means by which the Tatmadaw, Burma's military, still controls the arrest, detention, and release of political prisoners. All of Burma's security forces, including the national Myanmar Police Force (MPF), are controlled by the Tatmadaw and its Commander-in-Chief Senior General Min Aung Hlaing. Burma's security forces allegedly use laws—some promulgated by the military juntas and some passed during the Thein Sein government (2011-2016)—to arrest and detain people for political reasons. In addition, while the President has the authority to grant amnesty to prisoners under Burma's 2008 constitution, that is subject to the recommendation of the National Defense and Security Council (NDSC), a majority of its 11 members are appointed by the Commander-in-Chief.\nThe Obama Administration has recognized past releases of political prisoners as evidence of political progress in Burma, while reportedly continues to work with the new NLD-led government to press for the release of the remaining political prisoners and the prevention of the arrest and detention of new political prisoners. It is unclear, however, how prominent a role political prisoners will play in U.S. relations with the NLD-led government, given other important issues for Burma's potential transition to democracy, such as the ongoing low-grade civil war and efforts for national reconciliation, continuing ethnic and religious tensions, and the military's prominent role in the nation's governance.\nFor Congress, the continued existence of political prisoners in Burma raises a number of issues, including:\nDoes the unconditional release of all political prisoners in Burma remain a top priority for U.S. policy? Should the existence of political prisoners continue to be a factor in determining if restrictions on relations with Burma remain in effect? Should the release of all (or some) of the political prisoners be a precondition on certain forms of U.S. assistance to the NLD-led government and/or the Burmese military? What kinds of assistance, if any, should the United States provide to facilitate the identification, release, and support of political prisoners in Burma; as well as to prevent or avoid the arrest or detention of new political prisoners?\nThis report is one of a series of CRS reports on Burma, including:\nCRS In Focus IF10352, U.S. Relations with Burma: Key Issues for 2016 ; CRS In Focus IF10417, Burma's Peace Process: Challenges Ahead ; CRS Report R44436, Burma's 2015 Parliamentary Elections: Issues for Congress ; and CRS Report R44465, Energy and Water Development: FY2017 Appropriations .",
"At present, there is no consensus on how many political prisoners there are in Burma. One major reason is the lack of transparency of the records of Burma's 42 prisons and 109 labor camps. Another reason for variation in estimates is the use of different definitions of political prisoners. Moreover, reports of new political prisoners being arrested and detained periodically appear in the press suggest that the number of political prisoners is a moving target.\nOne factor complicating the determination of the number of political prisoners in Burma is a lack of agreement on the definition of a political prisoner. While the concept of political prisoner has a long history, there is no single international standard for defining political prisoners. Prisoners detained for political reasons are afforded some protection by international agreements, such as the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights.\nThe State Department's Bureau of Democracy, Human Rights, and Labor considers someone a political prisoner if:\n1. the person is incarcerated in accordance with a law that is, on its face, illegitimate; the law may be illegitimate if the defined offense either impermissibly restricts the exercise of a human right; or is based on race, religion, nationality, political opinion, or membership in a particular group; 2. the person is incarcerated pursuant to a law that is on its face legitimate, where the incarceration is based on false charges where the underlying motivation is based on race, religion, nationality, political opinion, or membership in a particular group; or 3. the person is incarcerated for politically motivated acts, pursuant to a law that is on its face legitimate, but who receives unduly harsh and disproportionate treatment or punishment because of race, religion, nationality, political opinion, or membership in a particular group; this definition generally does not include those who, regardless of their motivation, have gone beyond advocacy and dissent to commit acts of violence.\nIn applying this definition, the State Department recognizes that being accused of violent acts and committing violent acts are two different matters, and considers the circumstances pertaining to a particular person when determining if she or he is to be considered a political prisoner.\nIn Burma, one of the more critical issues in defining political prisoners is whether or not to include individuals who have been detained for their alleged association with Burma's ethnic-based militias or their associated political parties. Because these militias periodically have been involved in armed conflict with the Burmese military, some analysts exclude detainees allegedly associated with the militias from their estimates of Burma's political prisoners.\nEx-President Thein Sein consistently confined his definition to include only \"prisoners of conscience,\" and generally used that phrase when discussing the issue. He repeatedly stated that individuals who have committed criminal acts are not considered \"prisoners of conscience,\" and are expected the serve out their prison sentences. Similarly, Burma's military prefers to restrict the definition of political prisoner to only include \"prisoners of conscience.\" Some international groups, such as Amnesty International (AI), also prefer a narrower definition that only includes so-called \"prisoners of conscience.\"\nThe AAPP(B), an independent organization founded in 2000 by ex-political prisoners, and Human Rights Watch (HRW) use a relatively broad definition of political prisoners. The AAPP(B) defines a political prisoner as \"anyone who is arrested because of his or her perceived or real involvement in or supporting role in opposition movements with peaceful or resistance means.\" The AAPP(B) rejects the limitation of political prisoners to \"prisoners of conscience\" for several reasons. First, the AAPP(B) maintains that Burmese security forces frequently detain political dissidents with false allegations that they committed violent or nonpolitical crimes. Restricting the definition to \"prisoners of conscience\" would exclude many political prisoners. Second, the AAPP(B) maintains that the decision to participate in armed resistance against the government in Naypyidaw should be \"viewed with the backdrop of violent crimes committed by the state, particularly against ethnic minorities.\" In short, the AAPP(B) views armed struggle as a reasonable form of political opposition given the severity of the violence perpetrated by the Burmese military and police.\nThe Political Prisoners Review Committee (PPRC, also known as the Political Prisoner Scrutiny Committee), set up ex-President Thein Sein, reportedly attempted to develop a consensus definition of political prisoners. Bo Kyi, the Committee's AAPP(B) representative, told the press in May 2013 that the 19 members had agreed to a definition, but that the Thein Sein government did not formally adopt the definition.\nOn August 17 and 18, 2014, AAPP(B) and the FPPS held a workshop in Rangoon to discuss a common definition of political prisoners and to open a discussion with the Thein Sein government and Burma's Union Parliament on the topic. Representatives of various Burmese organizations and political parties, as well as the International Committee of the Red Cross, attended the workshop. The attendees at the conference agreed to the following definition of political prisoner:\nAnyone who is arrested, detained, or imprisoned for political reasons under political charges or wrongfully under criminal and civil charges because of his or her perceived or known active role, perceived or known supporting role, or in association with activities promoting freedom, justice, equality, human rights, and civil and political rights, including ethnic rights, is defined as a political prisoner.\nThe adopted statement of the conferees further explained:\nThe above definition relates to anyone who is arrested, detained, or imprisoned because of his or her perceived or known active role, perceived or known supporting role, or in association with political activities (including armed resistance but excluding terrorist activities), in forming organizations, both individually and collectively, making public speeches, expressing beliefs, organizing or initiating movements through writing, publishing, or distributing documents, or participating in peaceful demonstrations to express dissent and denunciation against the stature and activities of both the Union and state level executive, legislative, judicial, or other administrative bodies established under the constitution or under any previously existing law.\nFollowing the workshop, a member of Parliament from Aung San Suu Kyi's National League for Democracy (NLD) reportedly said that the NLD would submit a proposed definition of political prisoner to the Union Parliament.\nSince the NLD has assumed power, different voices have been raised about establishing a legal definition for political prisoners. In their May 2016 report cited above, the AAPP(B) and FPPS recommended that the NLD-led government adopt an internationally recognized definition of political prisoners. On June 2, 2016, Pe Than, an Arakan National Party (ANP) member of the Union Parliament's lower house, spoke on the chamber's floor in support of adopting legal definitions of \"political prisoners\" and \"political offenses\" to protect political activists. Deputy Minister of Home Affairs General Aung Soe voiced his ministry's opposition to Pe Than's proposal, stating that providing special treatment to political prisoners would discriminate against other people arrested for alleged violations of the law.\nIn addition, the plight of two segments of Burmese society has also been raised in association with the issue of political prisoners. First, allegations of corruption among local Burmese officials are fairly common, with officials reportedly frequently using their official power to detain people on falsified charges in order to confiscate property or otherwise exact revenge on their opponents. In addition, officials have reportedly used provisions in old and new laws to arrest and detain people protesting alleged violations of their legal rights. These reported abuses of power by officials have been portrayed as creating a special group of \"political prisoners.\" Second, past governments in Burma singled out the Rohingya, a predominately Muslim ethnic minority residing in northern Rakhine State along the border with Bangladesh, and allegedly subjected them to more extensive and invasive political repression, including restrictions on movement, employment, education, and marriage. In remains to be seen if the NLD-led government will continue the previous practice of discrimination against the Rohinyga.",
"Different groups provide varying estimates of the number of political prisoners being detained in Burma. According to the AAPP(B), as of June 30, 2016, 83 political prisoners remained in prison and an additional 203 were awaiting trial.\nThe State Department's \"Burma 2015 Human Rights Report\" states:\nWhile the government released dozens of political prisoners during the year [2015], it continued to arrest new ones. Groups assisting political prisoners estimated that more than 100 political prisoners had been convicted and sentenced as of December. As of September more than 400 were facing trial on various charges, of whom 100 or more were in detention. This number did not include detainees in Rakhine State, estimated to be in the hundreds.\nObtaining an accurate and current tally of the number of political prisoners in Burma is complicated by the lack of transparency of Burma's judicial and prison system. Burma has 42 prisons and 109 labor camps scattered across the country, with no publicly accessible records of who is being detained and where they are being detained. To estimate the number of political prisoners, groups rely on a network of sources to provide information concerning each of the prisons and labor camps. The AAPP(B), for example, reports that it uses inside networks, confidential sources, court trial files, recently released prisoners, and families of prisoners to compile its list of political prisoners.\nMaintaining an accurate tally of the number of political prisoners is also difficult because the Burma's security forces, including the Myanmar Police Force, allegedly continue to arrest and detain new political prisoners, or otherwise infringe on their civil liberties.",
"After her appointment as State Counselor, Aung San Suu Kyi announced that the NLD-led government would secure the release of all political prisoners \"as soon as possible.\" In Announcement No. 1/2016, issued on April 7, 2016, Aung San Suu Kyi listed three methods stipulated in the 2008 constitution and Burma's laws that the government would use to free the nation's political prisoners. Following the release of Announcement No. 1/2016, President Htin Kyaw granted amnesty to 113 people awaiting trial on April 8 and pardoned 83 political prisoners on April 17.",
"S. 3117 preventing the arrest, detention and trial of new political prisoners. One possible approach is to amend or repeal some of the laws that have been used in the past to arrest and imprison people for political reasons, including:\nThe Right to Peaceful Assembly and Peaceful Procession Act : 30 The act places a number of conditions and restrictions on the right to hold peaceful protests or assemblies. Failure to comply with the act can result in a sentence of one year in prison. The Ward and Village Tract Administration Law : 31 Enacted in 2012, the law requires all Burmese households to report overnight guests to local authorities, and allows security forces to perform house checks for unreported overnight guests. A previous, but similar version of this law was used to arrest and detain Aung San Suu Kyi in 2009 when an uninvited U.S. visitor swam across a small lake to her house. The Electronic Transactions Act (as amended): First adopted in 2004, the act imposes a sentence of up to seven years in prison for (a) \"doing any act detrimental to the security of the state or prevalence of law and order or community peace and tranquility or national solidarity or national economy or national culture,\" or (b) \"receiving or sending and distributing any information relating to secrets of the security of the State or prevalence of law and order or community peace and tranquility or national solidarity or national economy or national culture.\" The Penal Code (as amended): Originally adopted in 1861, but amended on multiple occasions, the code contains several provisions that have been used to suppress political dissent. Among those provisions is article 124A, which allows criminal penalties of up to three years in prison for speech that \"attempts to bring into hatred or contempt, or excites or attempts to excite disaffections towards\" the government; article 295A, which allows criminal penalties of up to two years in prison for insulting or attempting to insult religious feelings of any class of persons \"with deliberate and malicious intent;\" and article 505, which allows criminal penalties of up to two years in prison on anyone who makes, publishes or circulates any statement, rumor or report \"with intent to cause, or which is likely to cause, fear or alarm to the public or to any section of the public whereby any person may be induced to commit an offence against the State or against the public tranquillity.\" Unlawful Association Act : 33 Originally adopted in 1908, the law grants the President the authority to declare illegal any organization or association that \"has for its object interference with the administration of the law or with the maintenance of law and order.\" The law also stipulates a term in prison of no less than three years and no more than five years for persons convicted of being members of an unlawful association, or manages, promotes, or assists an unlawful association.\nIn addition, Burma's judicial system is widely considered either corrupt or incompetent, and in serious need of substantial reform. The Union Parliament's Judicial and Legal Affairs Complaints and Grievances Investigation Committee submitted a report in December 2015 indicating the existence of a \"chain of bribery\" in the judiciary, with judges at different levels taking instructions from their superiors and links between supervisory legal staff that often affects the outcome of criminal and civil cases. The NLD-government could undertake legal efforts to try to mitigate judicial corruption, but will need the cooperation of the Tatmadaw to make constitutional changes in the judicial system.\nGiven that the NLD has a majority in both chambers of the Union Parliament, it has the ability to amend or repeal these laws, despite military officers appointed by Commander-in-Chief Min Aung Hlaing occupying 25% of the seats in both chambers. If the NLD should chose to change the problematic laws, however, it must consider the possible implications for the Tatmadaw's cooperation on other pressing issues, such as ending the nation's low-grade civil war.",
"A third option available to the NLD-led government would be to propose amendments to the 2008 constitution to transfer some of the nation's security forces to civilian control. Article 20 states that \"The Defence Services is the sole patriotic defence force\" in Burma, and \"The Commander-in-Chief of the Defence Services is the Supreme Commander of all armed forces.\" Article 338 stipulates that \"All the armed forces in the Union shall be under the command of the Defence Services.\" This includes not only the three branches of the Burmese military (Air Force, Army, and Navy), but also the national Myanmar Police Force (MPF).\nThe MPF functions as the nation's local police force across the country, and is responsible for the arrest and detention of alleged criminals. It is part of the Ministry of Home Affairs, and under article 232 of the constitution, the Minister of Home Affairs is effectively appointed by the Commander-in-Chief of Defence Services, placing the MPF directly under the control of the Commander-in-Chief. Amending the constitution to either remove the MPF from the security forces under the command of the Commander-in-Chief and/or granting the President more control over the appointment of the Minister of Home Affairs could reduce the use of the MPF as a means of arresting people for political reasons.\nAmending the constitution, however, is a relatively difficult process. At least 20% of the members of the Union Parliament must support the proposed amendments before they can be considered by the Union Parliament. More than 75% of the members must vote in favor of the proposed amendments. For changes in most of the provisions of the constitution, more than half of all eligible voters must vote in favor of the changes in order for the amendment to be approved. Given the military hold 25% of the seats in the Union Parliament, some level of military support for the amendments is necessary to alter the constitution.",
"Burma's military leadership has a mixed record with regards to political prisoners. On the one hand, top military officers on the NDSC have periodically supported the granting of amnesty for political prisoners as required by the 2008 constitution. On the other hand, by means of their control of Burma's security forces, Burma's military leaders have continued to arrest new political prisoners for alleged violations of one or more of Burma's repressive laws. The Tatmadaw may have been more cooperative with the Thein Sein government than it will be with the NLD-led government because of their close ties during the reign of the State Peace and Development Council (SPDC). Of particular importance with be the Tatmadaw's stance on the release of persons with alleged ties to ethnic armed organizations that did not sign the October 2015 ceasefire agreement (see \" Political Prisoners and National Reconciliation \" below).\nDuring the Thein Sein government, the NDSC approved the granting of amnesty for political prisoners on several occasions, presumably in support of the President's pledge to release all political prisoners by the end of 2013. At the same time, the Burmese military and Myanmar Police Force continued to arrest and detain people engaged in peaceful protests for alleged violations of Burmese laws.\nSince the transfer of power to the NLD-led government, the Tatmadaw has continued to display mixed signals on political prisoners. The first two amnesties granted by President Htin Kyaw in April 2016 used constitutional powers that did not require the support of the NDSC, possibly to avoid confrontation over the issue. Following the amnesties, the Myanmar Police Force reportedly arrested 90 individuals for political reasons in May 2016, according to the AAPP(B), including 71 workers seeking better working conditions.\nThere are some indications that the Burma's military leaders intend to continue to arrest and detain political protesters. In his speech to assembled troops on Tatmadaw Day (March 27, 2016), Commander-in-Chief Min Aung Hlaing said, \"The two main hindrances to democratization are not abiding by the rule of law and presence of armed insurgencies. These could lead to chaotic democracy.\" Colonel Tin Aung Htun, Minister for Security and Border Affairs for Yangon Region, reportedly warned \"anarchical groups\" passing themselves off as peaceful organizations \"will be exposed and legal action taken.\"\nEfforts in the Union Parliament to amend or repeal some of the more repressive laws used to arrest protesters and other individuals expressing their opinions on political issues have been opposed by the military officers appointed to seats by Commander-in-Chief Min Aung Hlaing. On June 3, 2016, the upper house of the Union Parliament passed revisions to the Ward or Village Tract Administration Law, which requires households to report overnight guests to local authorities, despite opposition from the military members and the Ministry of Home Affairs. As previously mentioned, the military members of Parliament opposed a June 2016 proposal to establish a legal definition for \"political prisoners.\"",
"The release of political prisoners has potentially important implications for prospects for national reconciliation. Relations between the NLD and some of Burma's ethnic armed organizations (EAOs) are reportedly tentative. Some of the EAOs are cautious about Aung San Suu Kyi, given her father's military background and her willingness to participate in a government under the provisions of the 2008 constitution. Other EAOs think that Aung San Suu Kyi and the NLD will be willing to offer more favorable terms than ex-President Thein Sein in order to end the nation's six decade long low-grade civil war. One signal of such flexibility by the NLD might take the form of the release of prisoner detained for alleged association to EAOs which were declared illegal by Burma's past military juntas and the Thein Sein government under the Unlawful Association Act.\nOne of the outlawed ethnic armed organizations, the Shan State Progress Party (SSPP), and its associated militia, the Shan State Army (SSA), sent a letter to President Htin Kyaw calling for the release of any civilians who have been detained by the Burma Army for their alleged association with the groups. According to the AAPP(B), about 40 of the 64 political prisoners serving sentences as of May 2016 under the Unlawful Association Act. Other ethnic armed organizations have similarly called for the release of its alleged members, along with a cessation of attacks by the Burmese Army, as a precondition to peace negotiations aimed at national reconciliation.",
"Burma's detention of political prisoners was a major reason for the United States to impose sanctions on Burma between 1988 and 2008. The Customs and Trade Act of 1990 ( P.L. 101-382 ), which required the President to impose \"such economic sanctions upon Burma as the President determines appropriate,\" was passed after Burma's ruling military junta, the State Peace and Development Council (SPDC), refused to honor the results of May 1990 parliamentary elections and detained Aung San Suu Kyi and many other opposition leaders. Similarly, the Burmese Freedom and Democracy Act of 2003 (BFDA) ( P.L. 108-61 ) was passed after the SPDC cracked down on opposition parties, and once again detained Aung San Suu Kyi and other opposition leaders. The Tom Lantos Block Burmese JADE (Junta's Anti-Democratic Efforts) Act of 2008 (JADE Act) ( P.L. 110-286 ) was passed after the violent suppression of the autumn 2007 popular protests and the subsequent arrest and imprisonment of many of the protest leaders, including a number of Buddhist monks.\nThe release of all political prisoners is also one of the preconditions for the removal of many of the U.S. sanctions on Burma (see Table 1 ). The economic sanctions required by Section 138 of the Customs and Trade Act of 1990 are to remain in place until the President certifies to Congress that certain conditions have been met, including \"[p]risoners held for political reasons in Burma have been released.\" Section 570 of the Foreign Operations, Export Financing, and Related Programs Appropriations Act of 1997 (Section 570, P.L. 104-208 ) authorizes the President to ban new investments in Burma if \"the Government of Burma has physically harmed, rearrested for political acts [emphasis added] or exiled Daw Aung San Suu Kyi or has committed large-scale repression of or violence against the Democratic opposition.\" The BFDA requires a ban on all imports from Burma (including a ban on the products of certain Burmese companies), a freeze of the assets of certain Burmese officials and U.S. opposition to \"any loan or financial or technical assistance to Burma\" until certain conditions are met, including the release of \"all political prisoners.\" Finally, the JADE Act bans the issuance of visas to certain Burmese officials and their supporters, freezes the assets of certain Burmese officials and their supporters, and prohibits the provision of financial services to certain Burmese officials and their supporters until specific conditions have been met, including the unconditional release of all political prisoners.\nThe Burmese sanction laws, however, generally include provisions that allow for a presidential waiver if the President determines that it is in the national interest of the United States. The ban on new U.S. investments in Burma was waived on July 11, 2012. The BFDA import ban was waived on November 15, 2012, by the State Department using presidential authority granted in the BFDA. President Obama waived the financial sanctions in the JADE Act on August 6, 2013, as part of Presidential Executive Order 13651. As a consequence, most of the sanctions tied to political prisoners have been waived.\nBeyond the laws imposing sanctions on Burma, Congress has also enacted legislation addressing the issue of political prisoners in Burma. Section 7043(b)(3)(A) of the Consolidated Appropriations Act of 2014 ( H.R. 3547 , P.L. 113-76 ) stipulates:\nNot later than 60 days after enactment of this Act, the Secretary of State, in consultation with the USAID Administrator, shall submit to the appropriate congressional committees a comprehensive strategy for the promotion of democracy and human rights in Burma, which shall include support for civil society, former prisoners , monks, students, and democratic parliamentarians [emphasis added].\nThe explanatory statement by the Chairman of the House Committee on Appropriations regarding the law elaborates further on the required support for former prisoners, stating:\nIn addition to programs specified in section 7043(b)(2) of this Act, the Department of State and USAID shall support programs for former political prisoners (including health, education, and vocational training activities); … and programs to monitor the number of political prisoners in Burma.\nThe Senate version of the State Department, Foreign Operations, and Other Related Programs Appropriations Act, 2017 ( S. 3117 ) would reinstate the requirement in P.L. 113-76 that funds be provided for the implementation of the mandated comprehensive strategy.",
"U.S. officials have continued to call for the release of all political prisoners in Burma since 2011. The State Department welcomed the April 2016 release of political prisoners by the NLD-led government, but it remains to be seen how active it will be in encouraging the release of any remaining political prisoners and/or assisting the new government's efforts to prevent the arrest and detention of new political prisoners.\nSeveral years ago, the Obama Administration tied Burma's political prisoner issue with other major issues related to Burma's potential transition to democracy. President Obama spoke of the continued detention of prisoners of conscience during his first visit to Burma in November 2012. Then-National Security Advisor Tom Donilon stated in a presentation in Washington prior to the President's trip to Burma that:\nThe President's meetings—as well as his speech to the people of Burma—will also be an opportunity to reaffirm the progress that still must be made. This includes the unconditional release of remaining political prisoners [emphasis added], an end to ethnic conflicts, steps to establish the rule of law, ending the use of child soldiers, and expanded access for humanitarian assistance providers and human rights observers in conflict areas.\nIn her testimony at a December 4, 2013, hearing on U.S. policy in Burma, held by the House Committee on Foreign Affairs Subcommittee on Asia and the Pacific, then-State Department Senior Advisor on Burma Judith Cefkin stated:\nWe are committed to working with the [Thein Sein] government, Aung San Suu Kyi and political opposition, and with civil society to fully implement commitments announced before President Obama's visit just a year ago. In particular, we are watching closely the commitment to release all political prisoners by the end of the year.… We are committed to assisting the reintegration of these heroic individuals back into society and ensuring that they are released without conditions.\nIn its report to Congress required by Section 7043(b)(3)(A) of the Consolidated Appropriations Act of 2014, the State Department indicated that it intends to continue to work with the Thein Sein government \"to resolve remaining cases of prisoners convicted under repressive laws or for political activism.\" The report also stated that the technical assistance programs would be established to \"rehabilitate released political prisoners so they can effectively resume their role promoting democratic transition and human rights.\"\nThe political prisoner issue came up in during President Obama's November 2014 visit. Following his meeting with then-President Thein Sein on November 12, 2014, President Obama referred to past political prisoner releases as an example of past progress towards political reform, saying,\nIn part because of President Sein's leadership, the democratization process in Myanmar is real and we can point to specific changes that are making the difference. Domestically, we've seen political prisoners that have been released.\nPresident Obama also mentioned 'the release of additional political prisoners\" as evidence of \"renewal and reconciliation,\" during a press interview. In the same interview, he also mentioned the continued restrictions placed on former political prisoners as evidence of \"a slowdown in reforms.\"\nA number of Burmese activists, however, were disappointed with President Obama's second visit to Burma, including AAPP(B) secretary and former PPRC member Bo Kyi, who reportedly indicated that President Obama's assessment of Burma's reforms was \"out of touch with reality.\" These critics conveyed that many serious issues were unaddressed during President Obama's visit, including the continued imprisonment of political activists.\nThe State Department has also raised the issue of political prisoners in Burma with other governments. The previous U.S. ambassador to Burma, Derek Mitchell, traveled to China, Japan, and South Korea following Secretary Clinton's 2011 trip to Burma to discuss the status of U.S. policy towards Burma during his time as U.S. Special Representative and Policy Coordinator for Burma. The issue of political prisoners was reportedly raised during his meetings on that trip. Similar discussions have been held with other governments and the European Union. Following his visit to Burma, British Foreign Secretary William Hague told reporters that EU sanctions on Burma should not be lifted while political prisoners remain in detention.\nFollowing the political prisoner release on April 8, 2016, State Department Deputy Spokesperson Mark C. Toner stated:\nWe do welcome reports that the new democratically elected, civilian-led Government of Burma has released a number of political prisoners, including dozens detained during peaceful protests on education reform last year and who had been awaiting trial. Respect for and promotion of human rights and fundamental freedoms, including freedoms of expression and peaceful assembly, are critical components of a vibrant democracy, and we commend the new government's early demonstrated commitment to human rights. The United States stands ready to support Burma on further democratic reform.\nNo similar statement was made following the political prisoner release on April 17, 2016.",
"The continued detention of political prisoners in Burma—as well as the state of human rights in general—are likely to figure prominently in any future congressional consideration of U.S. policy towards Burma. In the coming months, Congress may decide to examine the status of the implementation of existing U.S. restrictions on relations with Burma. It may also assess the political prisoner issue, either in isolation or as part of a broader consideration of human rights in Burma and U.S. policy. Congress may take up legislation to amend or alter U.S. restrictions on relations with Burma, depending on the evolving conditions in the country. In addition, Congress may consider its funding for humanitarian programs in Burma to address the humanitarian needs of Burma's released political prisoners, as well as internally displaced people (IDPs), refugees, and other vulnerable populations.\nPrior to Secretary Kerry's August 2014 trip to Asia, which included two days in Burma, Members of the House of Representatives and the Senate sent letters to Secretary Kerry expressing concern about the conduct of U.S. policy toward Burma and indicating dissatisfaction with recent trends in the country. The House letter to Secretary Kerry, which was signed by 72 members, observed, among other things:\nPolitical prisoners remain behind bars and those released still have sentences hanging over their heads, despite President Thein Sein's explicit commitment to President Obama and the United States Congress that all such prisoner would be released.\nThe letter also cites the \"jailing and harsh sentences of 10 years of imprisonment with hard labor\" of the five Unity Journal journalists as evidence that \"press freedoms have gone awry.\" The letter to Secretary Kerry from Senator Marco Rubio and Senator Mark Kirk also indicates that \"[f]resh arrests of journalists for simply doing their jobs … have sent a chill through the press corps.\" Members individually or collectively may decide to continue to press the Obama Administration and the State Department to address the political prisoner issue with Burmese officials, as well as its implications for further political reform in Burma.\nIn addition, existing U.S. restrictions on relations with Burma are based on several laws specifically focused on Burma, as well as other laws that sanction nations that fail to comply with U.S. standards of conduct related to specific issues. The changing political situation in Burma, including the status of political prisoners, may result in congressional consideration of whether the laws placing restrictions on relations with Burma should be altered or removed. Similarly, the President has the authority—which he has used several times—to waive or suspend some of the existing restrictions on relations with Burma if he determines that the necessary conditions have been met, or if he determines that doing so is in the national interest of the United States. If the President were once again to exercise this executive authority, Congress may choose to review the President's determination.\nCongress may also choose, as it has done in the past, to include provisions in future appropriations bills regarding political prisoners in Burma. As previously mentioned, the Consolidated Appropriations Act of 2014 ( H.R. 3547 , P.L. 113-76 ) required the Department of State and the U.S. Agency for International Development (USAID) to \"support programs for former political prisoners\" and \"monitor the number of political prisoners in Burma,\" as well as develop a \"comprehensive strategy for the promotion of democracy and human rights in Burma,\" including support for former prisoners. Similar language was not included in the consolidated appropriations acts for fiscal years 2015 and 2016. The Senate version of the State Department, Foreign Operations, and Other Related Programs Appropriations Act, 2017 ( S. 3117 ) would reinstate the requirement in P.L. 113-76 that funds be provided for the implementation of the mandated comprehensive strategy, which would presumably include support for former political prisoners.\nCongress may also be called upon to consider additional funding for assistance to Burma. For FY2017, the Obama Administration requested $82.7 million for various projects inside Burma \"to promote national reconciliation, democracy, human rights, and the rule of law; foster economic opportunity; increase food security; and improve national and local health systems.\" If it chooses, Congress could consider placing conditions on the availability of assistance to Burma, including requirements related to the identification and release of political prisoners."
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{
"question": [
"What is a fundamental part of U.S. policy towards Burma?",
"How is the release of political prisoners required by U.S. legislation?",
"Why are there so many political prisoners in Burma?",
"How has the new president taken steps to reduce this number in the short-term?",
"What long-term plans have been made for reducing the number of political prisoners?",
"What is a challenge facing the reduction of political prisoners?",
"To whom do the Burmese security forces report?",
"What role have security forces played in arresting political dissidents?",
"To what extent are Burmese courts complicit in this?",
"Why do estimates of the number of political prisoners vary?",
"How easy is it to obtain accurate data from the prison system?",
"What is the definition of \"political prisoner\"?",
"How do definitions vary?",
"How may Congress examine the issue of political prisoners?",
"What does the Consolidated Appropriations act of 2014 require regarding Burma?",
"How does the State Department, Foreign Operations, and Other Related Programs Appropriations Act require funds to be distributed?"
],
"summary": [
"The release of all Burma's political prisoners is one of the fundamental goals of U.S. policy towards the nation.",
"Several of the laws imposing sanctions on Burma—including the Burmese Freedom and Democracy Act of 2003 (BFDA, P.L. 108-61) and the Tom Lantos Block Burmese JADE (Junta's Anti-Democratic Efforts) Act of 2008 (JADE Act, P.L. 110-286)—require the release of all political prisoners before the sanctions contained in those laws can be terminated.",
"Although the outgoing President Thein Sein provided pardons or amnesty for more than 1,000 alleged political prisoners, security forces continued to arrest new political prisoners and over 100 political prisoners remained in jail when he left office in March 2016.",
"Burma's new President, Htin Kyaw, released more than 200 political prisoners in his first month in office.",
"The leadership of the new Union Parliament, in which the National League for Democracy (NLD) led by Nobel laureate Aung San Suu Kyi holds a majority in both chambers, has stated plans to revise, amend, or repeal laws that have been used by Burma's security forces to detain people for political reasons.",
"While the new NLD-led government appears willing to address the political prisoner issue, it is unclear if Burma's military leadership and its security forces, which retain substantial power under Burma's new political structure, will desist in arresting and detaining people allegedly for political reasons.",
"All of Burma's security forces, including the national Myanmar Police Force, report directly to the Burmese military and Commander-in-Chief Senior General Min Aung Hlaing.",
"In the past, Burma's security forces have used provisions in laws promulgated by the nation's past military juntas to arrest and try political dissidents and protesters.",
"Burma's courts and judges have demonstrated a willingness to convict these people.",
"Differences in estimates of the number of political prisoners in Burma can be attributed to two main factors.",
"First, Burma's prison and judicial system is not transparent, making it difficult to obtain accurate information.",
"Second, there is no consensus on the definition of a \"political prisoner.\"",
"Some limit the definition of \"political prisoner\" to \"prisoners of conscience;\" others include detained members of ethnic militias as political prisoners.",
"Congress may choose to examine the political prisoner issue in Burma either separately or as part of a broader review of U.S. policy towards Burma.",
"The Consolidated Appropriations Act of 2014 (P.L.113-76) required the Secretary of State to submit to Congress \"a comprehensive strategy for the promotion of democracy and human rights in Burma,\" including support for former political prisoners.",
"The State Department, Foreign Operations, and Other Related Programs Appropriations Act, 2017 (S. 3117) would require funds be provided to implement the strategic plan, presumably including support for former political prisoners."
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CRS_RL34656
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{
"title": [
"",
"Background on the PBGC",
"The Two Kinds of Pension Plans",
"The PBGC's Benefit Guarantee",
"The Single-Employer Insurance Program",
"The Multiemployer Insurance Program",
"PBGC Benefit Limits",
"Sources of Funding",
"PBGC Premiums",
"Recent Reforms",
"Background on PBGC Investment Policy",
"PBGC's Investment Income",
"Accounting in the Federal Budget",
"Oversight of PBGC Investments",
"PBGC's New Investment Policy",
"Investment Strategies",
"The \"Total Return\" Approach",
"The \"Asset-Liability Matching\" Approach",
"Implications of the New Policy",
"PBGC's Future Financial Condition",
"Risks for Taxpayers"
],
"paragraphs": [
"",
"The Pension Benefit Guaranty Corporation (PBGC) is a federal corporation established under Title IV of the Employee Retirement Income Security Act of 1974 (ERISA, P.L. 93-406 ). The PBGC insures private pension beneficiaries against the complete loss of accrued benefits if their defined benefit pension plan is terminated without adequate funding. The PBGC receives no appropriations from general revenue. Its operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income from the assets in its trust fund, and recoveries from the companies formerly responsible for the trusteed plans.",
"There are two kinds of pension plans: \"defined benefit\" plans and \"defined contribution\" plans. A participant in a defined benefit plan receives a fixed benefit at retirement prescribed by a formula set forth in the plan, usually based on pay, years of service, or both. The employer makes contributions to the plan based on actuarial calculations designed to ensure that the plan has sufficient funds to pay the future benefit prescribed by the formula. Under a defined contribution plan, no particular benefit is promised. Instead, benefits are based on the balance of an individual account maintained for the benefit of the employee. The benefit received by a participant at retirement is generally dependent on two factors: total contributions made to the plan during the worker's participation in the plan and the investment experience of the amounts contributed on the employee's behalf. Under either type of pension plan, employees may be permitted to make contributions. The PBGC insures qualified defined benefit pensions provided by employers in the private sector. A plan is qualified if it meets the requirements of the Internal Revenue Code and ERISA and is thus eligible for favorable tax treatment. Defined contribution plans and nonqualified defined benefit plans are not insured by the PBGC.\nIn a defined benefit plan, the employer bears the risk of investment losses. The Internal Revenue Code and ERISA contain minimum funding standards that require the employer to make contributions to a defined benefit plan to fund promised benefits. If, for example, the plan experiences poor investment performance or actuarial miscalculations, the employer will be required to make additional contributions to the plan. The minimum funding rules provide for funding over a period of time and do not require the plan to have sufficient assets to pay all the benefits earned under the plan at any particular time. It is possible for a defined benefit plan to terminate without having sufficient assets to pay promised benefits. The PBGC insures defined benefit plan benefits up to certain limits to protect plan participants in the event of such a termination. However, the PBGC may not protect all benefits promised under a plan. Consequently, if a defined benefit plan is terminated while it is not fully funded, the participants might receive less from the PBGC than they were promised under the plan.",
"The PBGC currently insures the pension benefits of 44 million workers and retirees participating in more than 30,000 private-sector defined benefit pension plans. In FY2007, the PBGC paid about $4.3 billion in benefits to almost 1.3 million individuals whose pension plans had failed.\nThe PBGC insures both single-employer and multiemployer pension plans. The PBGC's single-employer program guarantees payment of basic pension benefits when an underfunded plan terminates. When an underfunded pension plan sponsored by a financially distressed company is terminated, the PBGC takes over the plan assets and assumes responsibility for paying retirement benefits to the plan's participants, subject to the statutory benefit limits.",
"In 2007, the PBGC's single-employer program insured the pensions of 33.8 million workers and retirees in about 28,900 plans. The program is directly responsible for the benefits of about 1.2 million workers and retirees in almost 3,800 trusteed pension plans. The PBGC insurance program for single-employer plans reported a deficit of $13.11 billion in FY2007, based on assets of $67.24 billion and liabilities of $80.35 billion. The deficit for 2007 was $5 billion less than the $18.1 billion deficit reported one year earlier. The PBGC reported that the decline in the deficit was due primarily to investment income of $4.7 billion and a $2.8 billion actuarial credit as a result of higher valuation interest factors.\nThrough the end of FY2006, the PBGC's single-employer program had incurred net claims of $29.0 billion (see Table 1 .) Of this amount, nine of the ten largest claims against the PBGC, totaling $19.8 billion, occurred between 2001 and 2005. The PBGC's net claims equal the portion of guaranteed benefit liabilities not covered by plan assets or recovered from the general assets of the employer. These claims will eventually have to be covered through premiums, earnings on PBGC assets, or other sources of revenue.",
"Multiemployer plans are collectively bargained plans to which more than one company makes contributions. The PBGC's multiemployer program provides financial assistance through loans to insolvent plans to enable them to pay benefits. The PBGC does not become the trustee of insolvent multiemployer plans. These loans (which are typically not repaid) generally continue year after year until the plan no longer needs assistance or has paid all promised benefits at the guaranteed level.\nIn 2007, the PBGC's multiemployer program insured the pensions of 9.9 million workers and retirees in about 1,530 plans. The multiemployer program reported a net deficit of $955 million, a $216 million net deterioration from the end of the previous year. The loss for the year was due largely to PBGC's booking of additional probable losses from expected future financial assistance to troubled plans. The program had assets of $1.2 billion and liabilities totaling about $2.2 billion.",
"There is a statutory ceiling on the benefits that are insured by the PBGC. A different benefit limit applies to each program. For plans that terminate in 2008, the annual limit for the single-employer program is $51,750 for a single life annuity payable at age 65. The guarantee for the multiemployer program is much lower. In 2008, for an individual with 30 years of service, the annual guaranteed limit is $12,870. The annual benefit limits are indexed each year to the average annual increase in wages in jobs covered by Social Security. Because the benefit limit is higher than the pensions earned by most participants in insured plans, most workers in single-employer plans taken over by PBGC receive the full benefit earned at the time of termination. However, the lower guarantee limit for the multiemployer program has left most of the retirees in insolvent plans without their full benefits.\nThe PBGC currently has a $14.1 billion deficit in assets necessary to satisfy all claims made through 2007. The Government Accountability Office (GAO) has identified PBGC's single-employer program as \"high-risk,\" stating that \"the program remains exposed to the threat of terminations of large underfunded plans in weak industries and of sponsors voluntarily terminating or freezing their [defined benefit] plans.\" In 2007, the PBGC's estimated potential exposure to future claims was approximately $66 billion, down from $73 billion in 2006. Not all underfunded pension plans are likely to present claims to the PBGC. The estimate of $66 billion represents underfunding of plan sponsors whose credit ratings are below investment grade or meet one or more financial distress criteria. It is not an estimate of likely claims against the PBGC.\nThe PBGC's liabilities are not explicitly backed by the full faith and credit of the federal government. However, should the agency become financially insolvent, the GAO has noted that \"Congress could face enormous pressure to bail out the PBGC at taxpayer expense.\"",
"The PBGC receives no appropriations from general revenues. Instead, by law the agency's operations are financed from four sources:\ninsurance premiums paid by the sponsors of covered private defined benefit pension plans, assets from terminated plans taken over by the PBGC, investment income, and recoveries from sponsors of terminated pension plans in bankruptcy proceedings.\nIn addition, the PBGC has the authority to borrow up to $100 million from the U.S. Treasury.",
"Unlike insurers in the private sector, the PBGC cannot set the premiums for the insurance it provides. Plan sponsors are required by law to purchase insurance from the PBGC, and the insurance premiums are set by Congress. Historically, premiums have been the most reliable source of PBGC revenue. The agency received $1.557 billion in premium revenue in 2007.\nAn employer that maintains a single-employer defined benefit pension plan must pay an annual premium for each participant in the plan. The PBGC's single-employer premium income was $1.48 billion in FY2007. Initially set at $1 per participant by ERISA in 1974, Congress has raised the premium periodically since then. The Omnibus Budget Reconciliation Act of 1987 ( P.L. 100-203 ) imposed an additional variable rate premium on underfunded plans. The variable rate premium was initially set at $6 for each $1,000 of the plan's unfunded vested benefits, up to a maximum of $34 per participant.\nThe Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ) increased the basic per capita premium to $19, and the variable rate premium to $9 for each $1,000 of the plan's unfunded vested benefits, up to a maximum of $53 per participant. Beginning in 1991, the maximum variable rate premium was $72 per participant. The Retirement Protection Act of 1994 ( P.L. 103-465 ) left the per capita premium at $19 per participant. However, the cap on the variable rate premium was phased out over a three-year period beginning in 1994.\nThe Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) increased the per capita premium from $19 to $30 for 2006 and indexed the premium to the annual rate of growth in the national average wage beginning in 2007. The 2008 premium rate for single-employer plans is $33 per participant. The DRA also created a new premium of $1,250 per participant to be assessed on any underfunded single-employer plan that undergoes a distress termination or is involuntarily terminated by the PBGC, to be paid annually for each of the three years following the date of termination, or if later, the employer's exit from bankruptcy. This premium is in addition to any other PBGC premiums that are due for the plan year. As enacted by the DRA, the special premium would not have applied to plans terminated after December 31, 2010.\nThe Pension Protection Act of 2006 (PPA, P.L. 109-280 ) made the special termination premium permanent for plans that undergo a distress termination or are involuntarily terminated by the PBGC. The PPA also made the variable rate premium of $9 per $1,000 of underfunding more widely applicable. Prior to enactment of the PPA, the variable rate premium was waived for an underfunded plan if it was not underfunded in any two consecutive years out of the previous three years. Under the PPA, the variable premium is assessed on all underfunded plans, regardless of the plan's funding status in earlier years.\nThe premium for multiemployer plans was initially $0.50 per participant. The Multiemployer Pension Plan Amendments Act of 1980 ( P.L. 96-364 ) raised the premium to $1.40 for years after 1980. This premium was set to increase gradually to $2.60. The DRA of 2005 increased the flat-rate per-participant premium for multiemployer defined benefit plans from $2.60 to $8.00. For the 2007 plan year and later plan years, the premium will be adjusted annually by the rate of growth in the national average wage. The PBGC's multiemployer premium income equaled $81 million in FY2007.\nAs shown in Table 2 , since 1998, growth in the PBGC's premium revenue has been outpaced by increases in benefit payments to plan beneficiaries and administrative and investment expenses.",
"Although the PBGC's net position has improved $9.2 billion since 2004, it fell $31.0 billion from 2001 to 2004. Many factors contributed to the large swing in PBGC's funded position, chief among them the terminations in 2002 and 2005 of several large pension plans in the steel and airline industries with high levels of underfunding. Falling interest rates (used to discount future benefit payments) significantly increased the value of PBGC's liabilities, and poor stock market returns in 2001 and 2002 resulted in negative investment income.\nIn part to address the PBGC's deteriorating funded status, Congress passed the Pension Protection Act of 2006, the most comprehensive reform of the nation's pension laws since the enactment of ERISA in 1974. The PPA established new funding rules for defined benefit plans, increased the flat-rate premium paid by pension plan sponsors, and required the variable premium to be assessed on all underfunded plans. The PPA provided for exceptions to some of the new funding rules for plans sponsored by commercial airlines.\nAlthough the impact of these reforms is still unclear, the Congressional Budget Office (CBO) has stated that the PPA failed to address the underlying structural problems facing the PBGC, because the increased premiums are not commensurate with the amount of unfunded pension claims from terminated plans that the PBGC is likely to assume in the future.\nThe future financial condition of the PBGC is highly uncertain because it depends greatly on how many private pension plans terminate and on the amount of underfunding in those plans. Both factors are difficult to forecast. Over its history, a relatively few pension plans with very large unfunded liabilities have dominated the PBGC's claims, and its future may likewise depend significantly on the fate of a few large plans. Future terminations will be influenced by overall economic conditions, the prosperity of particular industries, competition from abroad, and a variety of factors that are specific to particular firms—such as their competitiveness in their industries, their agreements with labor groups, and the credit ratings. In addition, the PBGC's losses with respect to future terminations will depend on how well companies fund their plans.\nThe PBGC's exposure to pension plan underfunding can shift dramatically from year to year in response to conditions in the stock market and changes in interest rates. A recent report by Credit Suisse Equity Research estimated that the funded status of defined benefit pension plans operated by companies in the Standard & Poor ' s 500 had declined by about $170 billion from the end of 2007 to the middle of 2008, due primarily to poor investment returns. In the aggregate, pension plans were overfunded by $60 billion at the end of 2007 and were underfunded by $110 billion by the middle of 2008. Pension plan funding levels had seen steady improvement since 2002, when pension plans had more than $200 billion in underfunding.",
"",
"In recent years, investment income from the PBGC's assets has outpaced premium income as a source of revenue, as shown in Figure 1 . The sources of the assets invested by the PBGC are premium revenues, assets of terminated plans, and recoveries from the general assets of plan sponsors. The termination of several large pension plans in 2002 and 2005 contributed to a large increase in the assets in PBGC's investment portfolio. As of September 30, 2007, the value of the PBGC's total investments, including cash and investment income, was approximately $62.6 billion. The PBGC's investment income in FY2007 was $4.76 billion. The rate of return on investment was approximately 7.6%.\nThe PBGC maintains two separate financial programs, each consisting of a revolving fund and a trust fund , to sustain its single-employer and multiemployer plan insurance programs. Premium revenues are accounted for in revolving funds that are included in the federal budget. By law, the PBGC is required to invest certain revolving fund assets in debt obligations issued or guaranteed by the United States, while other assets can be invested in other debt obligations. Current policy is to invest these revolving funds only in Treasury securities. At the end of FY2007, the revolving funds' value was $14.5 billion.\nThe assets from terminated pension plans and recoveries from the general assets of plan sponsors are accounted for in a trust fund that is not included in the federal budget. Trust fund assets were most recently valued at $48.1 billion. There are no statutory limitations on how the PBGC can invest the assets in its trust fund.\nFigure 2 diagrams the relationship between the PBGC's financing and its payment of guaranteed benefits to plan participants.\nAs shown in Figure 3 , PBGC's trust fund has grown significantly since 2003, while the size of the revolving fund has remained relatively steady, despite recent increases in both the variable premium and flat-rate premium.",
"The assets in PBGC's investment portfolio are only partly accounted for in the federal budget. The revolving fund is a budgetary account, meaning that cash flows into and out of the account appear in the federal budget. In contrast, PBGC's trust fund is nonbudgetary. When the PBGC assumes control of the assets of an underfunded pension plan that has been terminated, those assets do not appear on the federal balance sheet, and transfers of such assets to the PBGC are not treated as receipts to the government. Although investment returns to the revolving fund appear as a receipt or outlay (in the case of negative returns) for the federal government, investment returns to the trust fund do not.",
"Under federal law, the PBGC's investment policy statement must be approved by PBGC's Board of Directors, which consists of the Secretary of Labor, the Secretary of the Treasury, and the Secretary of Commerce. According to PBGC's by-laws, the Board reviews the investment policy statement at least every two years and approves the investment policy statement at least every four years. The PBGC's investment policy is implemented by PBGC's staff, but PBGC does not actively manage its portfolio. Invested assets are managed by professional management firms or are invested in passive market index funds, subject to PBGC oversight.",
"In February 2008, the PBGC announced that it had adopted a new investment policy aimed at generating higher investment returns while providing increased protection against the risk of increasing its deficit over time. As shown in Table 3 , the new policy allocates 45% of the PBGC's assets to fixed-income investments, 45% to equity investments, and 10% to alternative investment classes, including real estate and private equity.\nThe PBGC's previous investment policy, adopted in 2004, set an equity investment target of 15% to 25%, with the remaining assets to be allocated primarily to fixed income investments. In practice, the PBGC's actual asset allocation differed slightly from the target allocations. As shown in Table 4 , the PBGC's new policy significantly expands PBGC's exposure to alternative asset classes and equity securities.\nThroughout its history, the PBGC has shifted the investment of trust fund assets between bonds and stocks with changes in its leadership and in financial analysts' theories of risk management. From the agency's inception in 1974 until 1990, the PBGC Board approved a policy of investing primarily in equity securities, aiming to maximize investment returns. In 1990, the PBGC reduced its equity exposure and increased its investment in long-term bonds with maturities matched to the agency's liabilities. Beginning in 1994, it switched back to a policy of greater investment in equities.\nAs shown in Figure 4 , the PBGC's investments in equities have ranged between 18% and 40% of assets since 1990. The investment policy announced in February 2008, with a target of investing 45% of assets in equities, would result in the PBGC's highest percentage investment in equities at any time since 1990.\nThe PBGC has stated that the objective of the new investment policy is to \"prudently maximize investment returns in order to meet the Corporation's current and future obligations.\" The PBGC has stated that it expects the policy to generate higher returns and to reduce risk by diversifying its asset allocation, including investment in alternative assets such as private equity. A forecasting model developed by PBGC's investment consultant, Rocaton Investment Advisors, LLC, suggested that shifting the PBGC's allocation from fixed income to equities and/or alternative asset classes would improve the PBGC's financial condition in the long-run. According to the Rocaton analysis, the new asset mix chosen by PBGC gives the agency a 57% likelihood of full funding within ten years, compared to 19% under the previous policy. The study by Rocaton estimated that, compared to the previous policy, the PBGC's expected funded ratio would be higher, and its worst-case funded ratio would be lower, under the new investment policy compared to the previous policy.",
"Other things being equal, higher expected rates of return on investment are associated with higher levels of investment risk. However, the PBGC has asserted that even though its equity exposure is increasing, it expects its new investment policy to reduce its overall risk through asset diversification. Under the new policy, the PBGC would hold 45% of its assets in equities, 45% in bonds, and 10% in alternative investments. The PBGC's previous investment portfolio was less diversified, consisting mainly of long-term, investment-grade bonds.\nThe PBGC also has stated that its long-term investment horizon allows it to benefit from what is sometimes called \"time diversification.\" This is a theory of investment that asserts that the risk associated with investing in stocks decreases over time. In its analysis for the PBGC, Rocaton stated that, \"investors with time horizons of 10-20 years and greater seem well-positioned to wait out market volatility and realize the significant long-term rewards of investing in riskier assets.\" Although there is general agreement among economists on the benefits of asset diversification with respect to portfolio risk, there is a divergence of opinion as to whether or not investment risk associated with a particular asset or class of assets declines as the period of time that the asset is held increases.\nThe changes in the PBGC's investment policy in 2004 and 2008 embody two very different approaches to investment risk that reflect this divergence of opinion. These approaches can be referred to as a \"total return\" strategy and an \"asset-liability matching\" strategy.",
"The new PBGC investment strategy, with its emphasis on increasing the proportion of assets invested in equities, is based in part on the assumption that the higher expected rate of return on equities will result in the PBGC's assets growing faster than its liabilities. This approach is used by a majority of the pension plans that the PBGC insures (see Figure 5 ). Asset allocation decisions are based upon what investors believe will deliver the highest possible return for a given level of risk, measured as the likely deviation of rates of return around the average. Common stocks—equities—have a higher expected rate of return than bonds, but they also are riskier in that the actual rates of return vary more around the average than the rates of return on bonds. Investors with long time horizons often invest a greater percentage of assets in equities than investors with shorter-term time horizons. They expect that the higher long-run expected rate of return on equities will offset the risk associated with the greater volatility of the rate of return on equities.\nThe PBGC would now have a significantly higher funded status had the agency recently been more heavily invested in equities than its previous policy allowed. The PBGC is required by the Pension Protection Act of 2006 to estimate the effects of an asset allocation of 60% to the Standard & Poor's 500 equity index and 40% to the Shearson-Lehman Aggregate Bond Index. For the fiscal year ending September 30, 2007, this allocation would have increased the assets of the PBGC by an estimated $2.3 billion. Over the five-year period ending September 30, 2007, the PBGC's assets would have been an estimated $7.3 billion higher with a portfolio invested 60% in stocks and 40% in bonds.\nUnlike a corporate pension plan, however, the PBGC is fully exposed to the risk of investment losses. Corporate pension plans may be encouraged to invest in equities by the presence of PBGC insurance. A company sponsoring an insured pension has a sort of \"heads we win, tails you lose\" relationship with the PBGC. In contrast, the PBGC has no other party onto which it can offload its unfunded liabilities except, ultimately, the taxpayers. The GAO has noted that\nInvestments in riskier assets with higher expected rates of return may allow financially weak plan sponsors and their plan participants to benefit from the upside of large positive returns on pension plan assets without being truly exposed to the risk of losses. The benefits of plan participants are guaranteed by PBGC, and weak plan sponsors that enter bankruptcy can often have their plans taken over by PBGC.",
"The assumption that the risk of holding stocks decreases as the period of time that they are held increases is disputed by some economists. These economists assert that the risk associated with stocks actually rises with the length of time that they are held. They note that\nIf stocks were not risky in the long run, then the financial services industry would be quite willing to provide—maybe even for free—long-term financial contracts that provide a rock solid guarantee that investors would not lose money if they held on to a broadly diversified stock portfolio for, say, 30 years. Yet such long-term put option contracts do not even exist, because financial market participants believe that the risk of such a contract is increasing with the time horizon, not decreasing.\nModern portfolio theory holds that the higher expected return on stocks is exactly the price of the risk associated with the investment and that the risk-adjusted rates of return on stocks and bonds are equal. Despite the higher expected nominal rate of returns on stocks, the present value of $1 invested in bonds at any given time is equal to the present value of $1 invested in stocks. The higher rate of return on stocks—the so-called \"equity premium\"—represents compensation to an investor for taking on the additional risk, measured as the standard deviation on the expected rate of return, of holding stocks rather than bonds. Given this risk, a pension fund, for example, should choose an asset allocation that minimizes the risk that the fund will be unable to pay its liabilities when they come due as a result of an untimely decline in the value of equities. This approach—often called asset-liability matching—favors investment in fixed-income instruments, such as bonds, with maturities that are matched to the times at which the pension plan's liabilities will come due for payment.\nThe value of a pension plan's liabilities is greatly influenced by changes in interest rates. Like bonds, changes in pension plan liabilities are inversely related to changes in interest rates. Liabilities increase when interest rates fall and decrease when interest rates rise. Some economists have argued that pension plans should invest all of their assets in bonds that are matched to the plan's expected cash flows in order to avoid the possibility that the pension plan will be forced to sell bonds that have not yet reached maturity at a time of rising interest rates.\nIn contrast, investing assets in equities can be a poor hedge against interest rate swings. Stock prices often rise when interest rates fall, providing protection from interest rate risk, but there have been periods when this was not true, including the period from 2000 to 2002, when a bear market in stocks coincided with falling interest rates. In 2004, soon after experiencing capital losses in equity investment, the PBGC announced that it would adopt an asset-liability matching approach to investing its assets, thus reducing its equity exposure in favor of fixed-income securities matched to its liabilities. At that time, the PBGC noted that adopting a portfolio concentrated in high-quality, long-term bonds would bring it closer to the portfolios held by insurance companies, which have historically limited their equity exposure. According to the American Council of Life Insurers (ACLI), bonds represent the majority of assets held by private life insurance providers. While equity represents about 5% of total insurance company assets, 72% of insurance company assets are in bonds.\nThere is some evidence that corporate pension plans also are exploring asset-liability matching as an investment strategy. Provisions in the PPA and the enactment of Financial Accounting Standard No. 158 provide incentives for pension fund managers to move away from more volatile pension investments such as stocks. The PPA reduced the number of years over which plans can \"smooth\" (average) their investment gains and loses, and FAS 158 requires corporations that sponsor defined benefit pensions to put the funded status of the plan on their balance sheets, rather than in a footnote as was required before.\nThe pension actuarial firm, Milliman, Inc., reported in a recent study that the percentage of pension plan assets invested in equities declined from 60% in 2006 to 55% in 2007. A recent examination of investment allocations made in 2007 by the defined benefit pension plans of firms in the Standard & Poor's 500 index noted that firms were reducing their pension plans' investment in equities in favor of increased investment in bonds and other assets, including hedge funds and private equity. However, in this survey the median equity allocation in 2007 was still 63%, down only slightly from the 65% median allocation in 2006.\nBecause the pension plans that the PBGC insures are heavily invested in equities, an asset-liability matching approach would help to ensure that the PBGC's own financial condition would not deteriorate at the same time that the assets held by the pension plans it insures are declining in value. If the PBGC invests substantially in equities, it risks having to take over underfunded plans at the same time that its own assets are declining in value because pension plan underfunding often increases during periods of falling stock prices.",
"",
"The PBGC's decision in 2008 to reduce asset-liability matching in favor of a strategy aimed at generating higher expected returns was driven in part by the agency's concerns about its deficit. The PBGC's previous investment policy was not designed to maximize investment income, but to keep the agency's deficit from deteriorating further while policymakers pursued reforms to address PBGC's funding deficit. However, even after the PPA was enacted, the President's Budget for FY2009 noted that \"neither the single-employer nor multiemployer program has the resources to satisfy fully the agency's long-term obligations to plan participants.\"\nThe PBGC has limited authority to adopt policies that could directly affect its financial condition. Unlike insurers in the private sector, it has no authority to set the premiums for the insurance it provides. It cannot strengthen the funding requirements for insured plans, reduce the amount of pension benefits that it insures, or reject companies that it deems excessively risky to insure. All of these authorities rest exclusively with the United States Congress. The companies that sponsor defined benefit pension plans have a financial interest in lobbying Congress to persuade it not to make PBGC premiums too high or plan funding requirements too onerous, because increases in premiums and stricter funding standards directly affect these firms' annual profit-and-loss statements.\nThe PBGC is required by law to invest its income from premiums in securities backed by the full faith and credit of the U.S. government. It has the legal authority, however, to invest its trust fund, consisting mainly of the assets of underfunded plans for which the PBGC has become the trustee, in assets of its choice. In announcing the new investment policy adopted in 2008, the PBGC stated its desire to maximize its investment income, and thus reduce its deficit. However, while the PBGC has asserted that its new policy will be less risky in the long-term than its previous policy, some of the assumptions underlying that assertion are open to question.\nThe PBGC adopted its new investment policy in part in response to an analysis of investment options conducted for the agency by Rocaton Investment Advisors, LLC. The conclusions reached in that analysis are sensitive to the methods and assumptions on which they were based. An assessment of the relative risks of the PBGC's previous investment policy and its new policy, for example, depends largely on how the risk associated with each class of assets in the portfolio is measured, and on the relative weights of each class of asset in the old and new portfolios.\nThe risk associated with holding a given financial asset is that the actual rate of return will deviate from the expected rate of return. This risk is measured as the standard deviation of the rate of return. The more volatile the asset—that is, the more widely actual annual rates of return are dispersed around the average—the greater the standard deviation. In its study for the PBGC, Rocaton assumed that the rate of return on long-term Treasury bonds (with a 15-year average duration ) will have a standard deviation of 11.2%. CRS examined rates of return on long-term Treasury bonds over the period from 1926 through 2007 and found the standard deviation around the mean real rate of return to be 8.4% for 10-year Treasury bonds and 11.2% for 30-year Treasury bonds. The Rocaton study assumed that the rate of return on U.S. equities would have a standard deviation of 15%. CRS examined rates of return on U.S. equities as measured by the Standard & Poor's 500 index over the period from 1926 through 2007 and found the standard deviation around the mean annual real rate of return to be 20%. Rocaton's lower estimate of the volatility of returns on stocks could be significant to the extent that it could appear to make investments in stocks less risky than the historical data indicate.\nA determination as to whether the PBGC's new, more equity-heavy investment policy will be less risky than the previous, more bond-heavy investment policy depends in part on the estimated volatility of the rates of return on stocks and bonds. It is not clear from the report prepared by Rocaton whether the analysts conducted a sensitivity analysis in which the key assumptions—such as the standard deviations of the rates of return on stocks and bonds—were changed to evaluate the effect on the results of the analysis. To the extent that the relative riskiness of the PBGC's new investment policy compared to its previous policy is directly influenced by these and other key assumptions, it would be prudent for the model used by Rocaton to be subjected to a sensitivity analysis.\nIt is possible that the shift away from asset-liability matching to an investment policy focused on earning higher rates of return on investment could increase the risk that the PBGC will experience a decline in the value of its investments at the same time that the plans it insures are becoming increasingly underfunded. In a stock market downturn, the plans that PBGC stands to inherit are likely to have experienced a drop in the value of their assets. If it were more heavily invested in equities, the PBGC would be exposed to the same investment losses as the plans that it insures, effectively giving the PBGC \"double-exposure\" to the effect of a stock market decline as the agency's liabilities were increasing.\nAlthough the PBGC's statements about the new investment policy have emphasized the Corporation's long-term investment horizon, the PBGC still needs access to cash in the short-run to pay the benefits of beneficiaries in the plans it has trusteed. When looking at the PBGC's current and potential future cash needs, Rocaton noted that the duration of the PBGC's current liabilities allows the Corporation to weather short-term volatility in its investment portfolio. However, Rocaton did not examine PBGC's contingent liabilities—the liabilities that the PBGC has not yet assumed from underfunded plans that have yet to terminate—noting only that these liabilities are uncertain in both timing and magnitude.\nIn contrast to the PBGC's new investment policy, the asset allocation strategy of the Pension Protection Fund (PPF), the government-sponsored guarantor of defined benefit pensions in the United Kingdom, attempts to mitigate the risk of the Fund's assets declining concurrently with an increase in the under-funding of the pension plans it insures. As Table 5 shows, the PPF is invested predominantly in fixed income securities.",
"The PBGC's previous asset-liability matching investment strategy had very little chance of eliminating the PBGC's deficit. According to PBGC's former Director, Steven Kandarian, the previous investment strategy was a tool to keep the program from falling further into deficit while policymakers pursued long-term solutions to the problem of pension underfunding. The new policy will likely generate higher average annual returns than the previous policy. However, it also increases the likelihood that the PBGC will suffer investment losses concurrently with an increase in the underfunding of the plans that it insures.\nIf the PBGC's new investment policy generates higher expected returns, accompanied by reduced risk—as the PBGC and Rocaton have asserted—then U.S. taxpayers, as the de facto guarantors of PBGC insurance, will be better off. If the higher returns are accompanied by commensurately higher risk, then taxpayers are neither better nor worse off, because the PBGC's true financial condition will not have changed. However, if that higher risk results in investment losses that the agency would not have experienced under the previous policy, and the PBGC's deficit grows, then taxpayers will be worse off.\nTaxpayers also could be worse off if higher investment returns forestall fundamental reforms in PBGC financing, such as adopting risk-based premiums, that could improve the long-term financial condition of the agency and reduce the risk that they will at some point in the future have to bail out an insolvent PBGC."
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"question": [
"What does the PBGC do?",
"How many payouts did the PBGC make in FY2007?",
"To what extent is the PBGC able to fulfill these benefits?",
"To what extent is the PBGC backed by the credit of the federal government?",
"What would be a benefit if the PBHC's investment returns are accompanied by reduced risk?",
"How would this change if the returns were accompanied by commensurately higher risk?",
"How would taxpayers be affected by a stall in reforms in the system?",
"How will taxpayers be affected if the agency doesn't meet the predicted reduction in deficit?"
],
"summary": [
"The PBGC insures the pension benefits of 44 million workers and retirees.",
"In FY2007, the PBGC paid about $4.3 billion in benefits to almost 1.3 million workers whose pension plans had failed.",
"The PBGC currently has a $14.1 billion deficit in assets necessary to satisfy all claims made through FY2007.",
"Although the PBGC's liabilities are not explicitly backed by the full faith and credit of the federal government, Congress could face political pressure to bail out the PBGC at taxpayer expense should the agency become financially insolvent.",
"If the PBGC's higher expected investment returns are accompanied by reduced risk—as the PBGC has asserted—then U.S. taxpayers, as the ultimate guarantors of PBGC insurance, will be better off.",
"However, if the higher returns are accompanied by commensurately higher risk, then taxpayers are neither better nor worse off, because the PBGC's true financial condition will not have changed.",
"Taxpayers would be worse off under the new policy if higher investment returns forestall fundamental reforms in the pension insurance system—such as adopting risk-based premiums—that could result in improving the long-term financial condition of the agency.",
"Taxpayers, who would benefit from reduced exposure to the risk of having to bail out the PBGC if fundamental reforms in PBGC financing and governance were enacted, will be worse off if the agency does not achieve the reduction in its deficit that it has predicted the new investment policy will attain."
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CRS_RS22644
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{
"title": [
"",
"What Are Coordinated Party Expenditures?",
"Overview of Relevant Supreme Court Precedent8",
"Independent Spending Limits Found Unconstitutional and Contribution Limits Upheld: Buckley v. Valeo",
"Independent Party Spending Limits Found Unconstitutional and Coordinated Party Expenditure Limits Upheld: Colorado I and II",
"Recent Legislative Activity",
"Financial Overview and Analysis34"
],
"paragraphs": [
"",
"Federal campaign finance law provides political parties with three major options for providing financial support to House, Senate, and presidential candidates: (1) direct contributions, (2) coordinated expenditures, and (3) independent expenditures. With direct contributions , parties give money (or in the case of in-kind contributions, financially valuable services) to individual campaigns, but such contributions are subject to strict limits; most party committees are limited to direct contributions of $5,000 per candidate, per election. Since the 1996 Colorado I Supreme Court ruling (discussed below), parties may make independent expenditures , which are not limited, on anything allowable by law, but may not coordinate those expenses with candidates. Coordinated expenditures allow parties (notwithstanding other provisions in the law regulating contributions to campaigns) to buy goods or services on behalf of a campaign, and to discuss those expenditures with the campaign. Candidates may request that parties make coordinated expenditures, and may request specific purchases, but parties may not give this money directly to campaigns. Because parties are the spending agents, they (not candidates) report their coordinated expenditures to the Federal Election Commission (FEC).\nCoordinated party expenditures are subject to limits based on office sought, state, and voting-age population (VAP). Exact amounts are determined by formula and updated annually by the FEC. Limits for Senate candidates in 2016, adjusted for inflation, ranged from $96,100 in states with the smallest VAPs to approximately $2.9 million in California. In 2016, parties may make up to $48,100 in coordinated expenditures in support of each House candidate in multi-district states, and $96,100 in support of House candidates in single-district states. State party committees may authorize their nat ional counterparts to make coordinated party expenditures on their behalf (or vice versa). If such agreements exist, one party could essentially assume the spending limit for another in particular states, in which case the designated party could spend up to its own limit and up to the other party's limit. Parties may also make coordinated expenditures on behalf of presidential candidates. For 2016, the presidential limit is $23.8 million.",
"",
"In its 1976 decision, Buckley v. Valeo , the Supreme Court considered the constitutionality of the Federal Election Campaign Act (FECA), and determined that limits on independent expenditures were unconstitutional, while it upheld reasonable limits on contributions. FECA defines an \"independent expenditure\" to include spending for a communication that expressly advocates the election or defeat of a clearly identified candidate, and is not made in concert or cooperation with or at the request or suggestion of a candidate or a political party. In contrast, a \"contribution\" is generally given to a candidate or party, and is defined to include any gift of money or anything of value made by any person for the purpose of influencing a federal election.\nMost notably, the Buckley Court determined that the spending of money, whether in the form of contributions or expenditures, is a form of \"speech\" protected by the First Amendment. However, according to the Court, contributions and expenditures invoke different degrees of First Amendment protection. Recognizing contribution limitations as one of FECA's \"primary weapons against the reality or appearance of improper influence\" on candidates by contributors, the Court found that these limits \"serve the basic governmental interest in safeguarding the integrity of the electoral process.\" On the other hand, the Court determined that FECA's expenditure limits on individuals, political action committees (PACs), and candidates impose \"direct and substantial restraints on the quantity of political speech\" and are not justified by an overriding governmental interest.",
"In Colorado Republican Federal Campaign Committee v. Federal Election Commission (FEC) (Colorado I ( 1996 ) ) , the Supreme Court found that political parties have a constitutional right to make unlimited independent expenditures. The Court determined that FECA's coordinated party expenditure limit was unconstitutionally enforced against a party's funding of radio advertisements directed against a likely opponent.\nSpecifically, this case concerned the constitutionality of the coordinated party expenditure limit as applied to expenditures for radio ads by the Colorado Republican Party (CRP) that criticized the likely Democratic Party candidate in the 1986 U.S. Senate election. The Court's ruling turned on whether CRP's ad purchase was an \"independent expenditure,\" a \"campaign contribution,\" or a \"coordinated expenditure.\" The Court found that the CRP's ad purchase was an independent expenditure deserving constitutional protection, emphasizing that the \"constitutionally significant fact\" of an independent expenditure is the absence of coordination between the candidate and the source of the expenditure. Independent expenditures, the Court held, do not raise heightened governmental interests in regulation because the money is deployed to advance a political point of view separate from a candidate's viewpoint and, therefore, cannot be limited.\nThe Court's opinion in Colorado I was limited to the constitutionality of the application of FECA's coordinated party expenditure limit to an independent expenditure by the CRP. Later, in FEC v. Colorado Republican Federal Campaign Committee (Colorado II) , the Court considered a facial challenge to the constitutionality of the limit on coordinated party spending. In Colorado II, the Supreme Court ruled that a political party's coordinated expenditures—unlike genuine independent expenditures—may be constitutionally limited in order to minimize circumvention of FECA contribution limits. As the Court explained, coordinated party expenditures have no \"significant functional difference\" from direct party candidate contributions.\nRelying on its holding in Colorado I , in a case evaluating the constitutionality of the Bipartisan Campaign Reform Act of 2002 (BCRA), the Court invalidated a statutory provision that essentially required political parties to choose between making coordinated or independent expenditures after nominating a candidate. In McConnell v. FEC , the Court determined that the statute burdened the right of parties to make unlimited independent expenditures and therefore, was unconstitutional.\nIn Citizens United v. FEC , the Court overruled a separate portion of McConnell and invalidated BCRA's restriction on corporate and union spending for electioneering communications, as well as the long-standing ban on such spending for independent expenditures. As the U.S. Court of Appeals for the Fifth Circuit has found, it does not appear that Citizens United affected the Supreme Court's holding in Colorado II . In contrast to the coordinated party expenditure limit addressed in Colorado II , Citizens United evaluated the constitutionality of limits on independent —not coordinated—spending. Reiterating its holding in Buckley , the Court in Citizens United found that while large campaign contributions create a risk of quid pro quo candidate corruption, large independent expenditures do not. Therefore, in Buckley , the Citizens United Court observed, it determined that limiting independent expenditures fails to serve any substantial government interest in stemming either the reality or the appearance of such corruption.",
"Reconsidering coordinated party expenditure limits is a consistent part of the debate over the role of political parties compared with other political committees and \"outside groups.\" However, bills devoted specifically to altering the limits have not been considered recently. Perhaps most notably, H.R. 6286 (Cole) during the 111 th Congress, and S. 1091 (Corker) and H.R. 3792 (Wamp) during the 110 th Congress, would have eliminated existing caps on coordinated party expenditures. On April 18, 2007, the Senate Committee on Rules and Administration held a hearing on S. 1091 ; it was not subject to additional legislative action. H.R. 3792 was introduced on October 10, 2007; it did not receive additional action.\nSince that time, legislative activity concerning coordinated party expenditures has been limited. During this period, most proposals to alter coordinated party expenditure limits have been components of other bills. As Table 1 below shows, public financing and appropriations legislation considered during the 114 th Congress would increase or eliminate limits on coordinated party expenditures in some cases. As of this writing, only one such bill, S. 1910 , has advanced beyond introduction, but this appropriations bill was superseded by another measure that excluded the coordinated party expenditure language.",
"Although coordinated expenditures played a large role in party financial activity throughout the 1970s and 1980s, recent elections suggest that party reliance on coordinated expenditures is changing. As Table 2 and Figure 1 (below) show, although the Colorado I decision permitted parties to make unlimited independent expenditures during and after the 1996 cycle, those expenditures remained relatively modest through 2002. From 1996 to 2002, total party coordinated expenditures outpaced independent expenditures—often by large amounts.\nBeginning in 2004, however, party spending shifted dramatically, with far more total independent expenditures than coordinated expenditures. In 2004, the two major parties made more than four times in independent expenditures what they did in coordinated expenditures. That allocation of resources continued thereafter, albeit in some cases less dramatically than in 2004. In 2014, the two major parties spent more than eight times on independent expenditures what they did in coordinated party expenditures (approximately $229 million versus about $28 million). These data do not establish why independent expenditures were so heavily favored compared with coordinated party expenditures in 2014. However, some disparity would be expected because spending would be naturally lower without a presidential race on which to make coordinated expenditures. It also is possible that parties are relying on \"outside\" spending, such as by super PACs, and are instead focusing their efforts on other activities (including their own independent expenditures). The decrease also could reflect party decisions about whether to support particular House or Senate campaigns. As the table also shows, at various points since 1996, each major party has outspent the other in coordinated expenditures. Despite some exceptions, Democrats and Republicans generally have allocated similar amounts to coordinated party expenditures.\nOne potential concern about lifting the caps on party coordinated expenditures could be that one party would have an inherent advantage over the other. Recent fundraising totals suggest that the historic fundraising gap between Democrats and Republicans has narrowed, although disparities between the two parties still exist. As Table 3 and Figure 2 show, since 1996, local, state, and national Republican Party committees have accumulated more receipts than their Democratic counterparts, as has generally occurred since at least the 1970s. Although Republicans raised approximately 88% more than Democrats in 1996 ($416.5 million versus $221.6 million), beginning in 2004, the two parties began to raise roughly similar amounts. Despite a 24% Republican advantage in 2006 ($599 million versus $483.1 million), differences between the parties have been smaller since 2008. In 2012, the Democratic and Republican parties both raised about $800 million. In 2014, however, Democrats raised 16% more than Republicans ($657.2 million versus $565.7 million). On their own, these data do not suggest particular outcomes if caps on party coordinated expenditures were lifted, but they do indicate that one party might not necessarily have a major total financial advantage over the other if the caps are lifted in the near future. Although the parties would not choose to spend all those funds on coordinated party expenditures, the data suggest that they would likely be working with roughly equal resources.\nFor those who support lifting the caps on coordinated party expenditures, current limits impinge on parties' abilities to orchestrate unified campaigns with their candidates after the limits are reached. Unrestricted coordinated party expenditures could shift party spending away from independent expenditures, although each option would retain unique characteristics. Parties might continue to choose independent expenditures if they wish to distance campaigns from what many political professionals and some candidates view as necessary, but politically unpopular, purchases (e.g., for political advertising attacking opponents). On the other hand, coordinated expenditures would be more attractive for parties wishing to communicate freely with campaigns about campaign-related spending. Raising or eliminating coordinated party expenditure limits might also provide parties with additional resources to compete against independent expenditures from super PACs or other \"outside\" groups. Additional coordinated expenditures could, therefore, strengthen arguably weakening ties between parties and campaigns.\nProponents of limits on party coordinated expenditures contend that the caps reduce the amount of money in politics. They also potentially prevent circumvention of individual contribution limits by donors who may seek to indirectly support campaigns by making contributions to political parties. (However, it should be noted that FECA already restricts \"earmarked\" contributions.) For those who generally support regulating political money, lifting or raising the caps on party-coordinated expenditures would likely be objectionable on principle, could appear to undercut similar regulatory efforts adopted since the 1970s, and could go against public sentiment generally favoring limiting the amount of money in politics.\nFinally, revisiting coordinated party expenditure limits might also be relevant following a 2014 U.S. Supreme Court decision, McCutcheon v. FEC . The McCutcheon case, which concerned now-invalidated aggregate limits on contributions to political parties, is not centrally related to coordinated party expenditures. However, post- McCutcheon , some might argue that providing parties with increased limits (or none) on coordinated party expenditures is a logical extension of their newfound ability to solicit donors who previously would have been unable to contribute to as many party committees as they wished. Additional discussion of McCutcheon and potential party fundraising implications appears in other CRS products."
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"question": [
"To what extent are political parties limited in making independent expenditures?",
"What is an independent expenditure?",
"To what extent can coordinated expenditures be limited?",
"How do coordinated and independent expenditures differ?",
"Why is there support for existing limits on coordinated expenditures?",
"What do opponents of limits argue?",
"How would the removal of the limits affect the two main parties?",
"To what extent would individual circumstances affect funding and spending decisions?"
],
"summary": [
"In a 1996 ruling, Colorado Republican Federal Campaign Committee v. Federal Election Commission (FEC) (Colorado I), the U.S. Supreme Court found that political parties have a constitutional right to make unlimited independent expenditures.",
"Federal campaign finance law defines an independent expenditure to include spending for a communication that expressly advocates the election or defeat of a clearly identified candidate, and is not made in cooperation or consultation with a candidate or a political party.",
"In a subsequent case, Colorado II, however, the Court ruled that a political party's coordinated expenditures—that is, expenditures made in cooperation or consultation with a candidate—may be constitutionally limited in order to minimize circumvention of contribution limits.",
"According to the Court, in contrast to independent expenditures, coordinated party expenditures have no \"significant functional difference\" from direct party candidate contributions.",
"Those who support existing limits on coordinated party expenditures argue that the caps reduce potential corruption and the amount of money in politics.",
"Opponents maintain that the limits are antiquated, particularly because political parties may make unlimited independent expenditures supporting their candidates.",
"If the caps were lifted and fundraising patterns remained consistent with those discussed here, it appears that neither party would have a substantial resource advantage over the other.",
"It is important to note, however, that individual circumstances would determine particular fundraising and spending decisions."
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GAO_GAO-15-377
|
{
"title": [
"Background",
"U.S. Policy Commitments Related to G2G Assistance",
"Local Solutions and G2G Assistance",
"Accountability Standards",
"Planning: USAID Missions Completed Detailed Fiduciary Risk Assessments but Did Not Always Address Risks and Mitigation Steps in Project Design and Missed Opportunities to Coordinate with Other Donors",
"USAID Missions Conducted Detailed Fiduciary Risk Assessments and Identified Mitigation Steps but Did Not Always Incorporate Them into Project Planning",
"USAID Missions Missed Opportunities to Coordinate Risk Assessments with Other Donors",
"Implementation: Missions’ Disbursement of Assistance Funds Primarily on a Reimbursement Basis Reflects Accountability Standards and Adheres to USAID Policy",
"Missions Frequently Used Reimbursement Funding Mechanisms",
"Consistent with USAID Policy, Assistance Agreements and Implementation Letters Document Terms of G2G Assistance",
"M&E: USAID Missions Collected Audits, but Those We Reviewed Were Often Late; Project-Level M&E Planning Did Not Always Address Local Solutions Objectives",
"Audits Are a Key Monitoring Tool and Have Revealed Financial Management Weaknesses, but Late Submission Hampers Their Effectiveness",
"Project-Level M&E Plans Frequently Lacked Key Indicators and Evaluation Questions for Measuring Capacity Building, Country Ownership, and Sustainability",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Key Components of U.S. Agency for International Development Program Cycle Related to Government-to-Government Assistance",
"Planning",
"Country Development Cooperation Strategy",
"Risk Assessment and Risk Mitigation Plan",
"Project Planning Document",
"Implementation",
"Assistance Agreements",
"Funding Mechanisms",
"Monitoring and Evaluation",
"Audit",
"Monitoring and Evaluation",
"Appendix III: Summary of Reviews of U.S. Agency for International Development Government-to- Government Assistance in Afghanistan and Pakistan, Fiscal Years 2010 through 2014",
"Afghanistan",
"Planning",
"Implementation",
"Monitoring and Evaluation",
"Pakistan",
"Planning",
"Implementation",
"Monitoring and Evaluation",
"Appendix IV: Comments from the U.S. Agency for International Development",
"Appendix V: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"",
"Through its participation in a series of aid effectiveness forums beginning in 2005, the U.S. government, along with other donor and partner countries, has committed to improving the effectiveness of assistance programs, in part through increased use of partner-country systems and strengthening of local capacity to achieve development results. For example, the 2011 Busan Partnership for Effective Development Cooperation states that donor and partner countries will use country systems as the default approach for implementing development assistance, working with both donors’ and partner countries’ governance structures. In keeping with these commitments, the 2010 Presidential Policy Directive on Global Development, USAID’s 2011-2015 Policy Framework, and USAID’s Local Systems Framework all stress the need to build partner-country capacity to achieve shared development goals.",
"USAID’s Local Solutions initiative aims to increase funding for partner- country systems, including partner governments, private sector, and nongovernmental organizations, that have sufficient capacity—and to help strengthen their capacity when needed—in order to achieve sustainable development outcomes. In 2013, USAID created the senior position of Local Solutions Coordinator in the agency’s Counselor’s Office. The Local Solutions Coordinator is responsible for coordinating the functions and activities of the various headquarters offices and missions involved in carrying out the Local Solutions initiative.\nAccording to data USAID made available in May 2015, although overall obligations to partner-country systems increased in fiscal years 2010 to 2014, obligations to partner governments declined from about $929 million to $327 million during this period, as shown in figure 1.\nFollowing the launch of USAID Forward in 2010, USAID began to revise various policies related to planning, project design and implementation, and monitoring and evaluation—often referred to as USAID’s program cycle. While many of these policies apply broadly to all USAID assistance, some apply specifically to G2G assistance. For the purposes of this report, we identified the following key components of USAID’s program cycle as they relate to G2G assistance:\nPolicy: USAID policy related to G2G assistance is documented primarily in the agency’s Automated Directives System (ADS), which contains the policies and procedures that guide the agency’s operations. USAID first issued a policy chapter specifically related to G2G assistance in 2011 and updated it in March 2012 and July 2014.\nPlanning: The initial phase of USAID’s program cycle entails designing projects that are consistent with the mission’s country development strategy, assessing and addressing risks associated with implementing the projects, and preparing planning documents for mission director approval.\nImplementation: This phase entails selecting appropriate funding mechanisms and implementing G2G assistance activities according to the terms and conditions established in bilateral assistance agreements and other legal documents.\nMonitoring and evaluation (M&E): This phase entails conducting audits of partner-government entities and assessing the progress and results of G2G assistance activities.\nAppendix II provides a detailed summary of these components.",
"Agencies should have in place appropriate mechanisms to help ensure achievement of program results. GAO’s Standards for Internal Control in the Federal Government, which we refer to as accountability standards, emphasizes the importance of identifying goals and objectives, identifying and mitigating risks, and establishing and tracking performance indicators, among other things. As continuous, built-in components of agencies’ operations, such measures help provide reasonable assurance that funds are used as intended and help agencies meet their objectives.",
"USAID policy addresses accountability standards calling for identification, analysis, and mitigation of risks, and we found that USAID missions completed detailed risk assessments. However, missions did not always integrate risk mitigation measures into project and M&E planning when required by USAID policy. We found that risk assessments had often been completed after planning documents had been finalized. In addition, M&E plans we reviewed often did not incorporate steps USAID and partner governments agreed upon to address risks and build capacity. We also found that USAID missions missed opportunities to coordinate risk assessment activities with other donors.",
"By requiring missions to conduct detailed fiduciary risk assessments and incorporate them into project planning, USAID policy addresses accountability standards calling for identification, analysis, and mitigation of risk. According to USAID’s policy on G2G assistance, before providing funds directly to a partner-government entity, the missions must complete a fiduciary risk assessment of that entity. The goal of this assessment is to establish risk mitigation measures that will be integrated into the design of the project to help ensure that funds are managed appropriately. Possible risk mitigation measures include technical assistance for capacity building, disbursement of funds in tranches contingent on the achievement of certain milestones, establishment of benchmarks for the partner country to demonstrate progress in correcting financial management weaknesses, and limits on cash advances under cost- reimbursable funding mechanisms. Missions are required to include the findings of the risk assessments, as appropriate, in the planning documents approved by the mission director. In addition, missions should include provisions for ensuring partner-government compliance with risk mitigation measures in the M&E plans for projects with G2G assistance activities. Since fiscal year 2012, legislation governing the use of funds for direct G2G assistance has placed conditions on such assistance, including requiring the assessment of the partner-government entity that will receive the assistance funds and determination regarding whether it has the systems required to manage those funds. According to USAID, the agency meets these assessment requirements by means of its policies and procedures relating to G2G assistance.\nOn the basis of our review of 29 planning documents for G2G assistance activities with fiscal year 2012 obligations, we found that missions conducted risk assessments and formulated risk mitigation plans, as required. Table 1 provides illustrative examples of risks and associated recommendations identified in fiduciary risk assessment reports from our three case-study countries—Nepal, Peru, and Tanzania.\nThe planning documents we reviewed showed that in some cases, missions took concrete steps to avoid risk. In Tanzania, for example, the mission identified four government organizations as potential recipients of G2G funds for a governance project but proceeded with only three of them, because the assessment identified significant risks that would have required extensive mitigation measures.\nHowever, for most planning documents we reviewed, missions did not integrate risk mitigation measures into project design and M&E planning when required. Of the 29 planning documents we reviewed, 20 included no discussion of identified risks, and 17 of the planning documents did not address measures for mitigating risks. Furthermore, 25 of the 29 M&E plans did not integrate follow-up for ensuring partner government compliance with agreed-upon risk mitigation measures.\nIn most cases, missions had not completed the fiduciary risk assessments prior to finalizing project or activity planning: for 14 of the 20 planning documents that did not include risk mitigation information, we found that the fiduciary risk assessment was either under way or not yet initiated at the time of project planning. In some cases, our document review enabled us to identify possible reasons missions completed planning before the corresponding risk assessments were completed. In one instance, the planning document included non-G2G activities for which a fiduciary risk assessment was not required, according to the document; to avoid delays in the approval of these non-G2G activities, the mission approved the larger project and proceeded while the G2G- related risk assessment was under way. In another instance, the USAID mission had a previous funding relationship with the partner-government agency and thus may have decided to proceed because it was already aware of potential risks.\nUSAID policy on G2G assistance clearly underscores the importance of integrating risk mitigation measures into project and M&E planning. When missions finalize project planning without having the information from completed fiduciary risk assessments, they may not incorporate into the design of the project appropriate safeguards or measures that would strengthen partner-country systems. Furthermore, not integrating partner- government follow-up on risk mitigation measures into project M&E plans weakens oversight and accountability and creates potential reporting inefficiencies.\nIn some cases, missions documented risk mitigation measures and compliance-monitoring plans in other project-related documents. For example, in Tanzania, the mission sent implementation letters to the government entities receiving G2G assistance outlining agreed-upon action plans for mitigating risks and stating that the entities would report progress to the mission on a regular basis.",
"On the basis of our fieldwork in Nepal, Peru, and Tanzania and our review of 29 planning documents for projects with G2G assistance funding obligated in fiscal year 2012, we found that missions missed key opportunities to work with other donors. According to USAID policy on G2G assistance, missions may consider various means of coordinating with other donors, such as by conducting joint risk assessments, involving other donors in USAID’s assessment, sharing the results of USAID’s fiduciary risk assessments, or other measures. In the three countries we visited, USAID mission and partner-government officials, as well as other donor representatives, told us that USAID’s risk assessments provided valuable opportunities for learning and relationship building, but they also cited, in all three countries, opportunities for improved coordination.\nIn Nepal, representatives of bilateral and multilateral donor organizations participating in a working group dedicated to improving public financial management stated that each donor conducts its own risk assessment and that they were not aware of the results of USAID’s assessment. They also stated that there were opportunities for donors to better coordinate their risk assessment efforts and share information, thereby decreasing duplicative efforts and eliminating unnecessary burdens on the government of Nepal.\nIn Peru, the Swiss Agency for Development Cooperation assessed the management capacity of a subnational government partner that also underwent a USAID fiduciary risk assessment. Swiss officials stated they were not aware of the results of USAID’s assessments, and USAID’s assessments made no reference to the Swiss assessment.\nIn Tanzania, officials from a key recipient of G2G funds stated that the government organization had previously undergone capacity assessments and received technical assistance from the Swedish International Development Agency, but the findings of these assessments were not reflected in USAID’s risk assessment.\nIn addition, in our review of planning documents for 29 G2G assistance projects, we found that 18 (about two-thirds) included general information about the project’s relationship to other donors’ activities, but none of these 18 described how USAID planned to work with other donors to assess risks or follow up on mitigation plans and steps.\nAlthough we did not find any examples of risk assessments conducted jointly with other donors in the 29 planning documents we reviewed, in 2014, the USAID mission in Senegal conducted a risk assessment of the Senegalese Ministry of Health and Social Welfare jointly with the World Bank. USAID headquarters officials told us they consider this type of joint assessment to be a best practice. In addition, USAID headquarters officials noted that mission officials in Rwanda, Egypt, and Indonesia worked with other donors, including the World Bank, on public financial management capacity assessments. Nevertheless, mission officials in the three countries we visited told us that donor coordination on risk assessment can be difficult and cited several reasons, among them that USAID has more rigorous risk assessment requirements, donor budget and project planning cycles may not coincide with USAID’s time frames, and donor working groups may be organized around pooled funding arrangements in which USAID does not participate. In addition, two of the USAID missions had yet to determine who should take the lead on donor coordination focused on improving partner-government public financial management.\nDespite such difficulties, some USAID mission officials and donor representatives we spoke with described potential benefits of coordination on risk assessments. For example, they told us that since donors’ risk assessments tend to produce similar results, a lack of coordination among donors leads to duplication and increased costs associated with conducting the assessments, costs borne by donors (including USAID) and partner governments alike. Moreover, by not coordinating on risk assessments, USAID misses opportunities to build relationships among donors that can help strengthen implementation of partner countries’ risk mitigation activities, including efforts to strengthen partner-government capacity.",
"USAID policy on G2G assistance addresses accountability standards related to mitigating risk and safeguarding funds by encouraging missions to select one of three funding mechanisms for G2G assistance. We found that missions frequently established funding mechanisms whereby USAID reimburses partner governments for costs related to achievement of results. In addition, consistent with USAID policy addressing accountability standards related to the establishment of control activities, missions employed G2G assistance agreements and corresponding implementation letters with partner governments to commit funds and set objectives and conditions for funding, among other things.",
"USAID policy on G2G assistance addresses accountability standards related to mitigating risk and safeguarding funds by encouraging missions to select a funding mechanism that best achieves the purpose of the project or activity, fosters and deepens the partner government’s public financial management capacity, efficiently implements the project or activity, guarantees accountability, and promotes sustainability. Missions generally choose from among three possible funding mechanisms for G2G assistance: cost reimbursement, fixed-amount reimbursement, and resource transfer.\nCost reimbursement: USAID reimburses the partner-government entity for actual costs and expenditures incurred in carrying out the project activities, up to an estimated total cost specified in advance.\nFixed-amount reimbursement: USAID reimburses an amount agreed to in advance based on unit of output, such as kilometers of roads built, or on associated project milestones, after the mission has verified that quality standards have been met.\nResource transfer: USAID provides a transfer of funds or commodities to the partner government. Disbursement is generally dependent on the completion of specific actions by the partner government.\nSince 2012, legislation governing the use of funds for direct G2G assistance states that such assistance should be made on a cost- reimbursable basis.Our review of 29 planning documents for G2G assistance activities with fiscal year 2012 obligations showed that, in nearly all of these cases (26 of 29), USAID missions employed reimbursement-based mechanisms. In 11 of the 26 cases, missions also allowed funds to be advanced to the partner country. USAID policy allows for cash advances for projects that have been approved outside of the partner government’s budget cycle or when funding from the partner government is not available. In such cases, the partner government is required to provide documentation of the proper use of the funds. Finally, in 3 cases, USAID missions provided resource transfers. In our three case study countries, we noted the following examples of missions using these three types of funding mechanisms: In Nepal, the USAID mission used a resource transfer for a democracy and governance project, contributing to a multidonor trust fund managed by the government of Nepal; the mission also planned to use a fixed-amount reimbursement agreement to fund an accompanying capacity-building project with the Ministry of Peace and Reconstruction.\nIn Peru, the mission specified cost reimbursement as the funding mechanism in its planning document for a health, education, and alternative development project implemented through the regional government of San Martín. The planning document stated that this mechanism was appropriate because it would provide the mission flexibility to make adjustments during project implementation based on the regional government’s performance or in the event of any unforeseen circumstances.\nIn Tanzania, the USAID mission signed a fixed-amount reimbursement agreement with the Tanzania National Roads Agency for a rural roads rehabilitation project. However, to mitigate the agency’s lack of resources to finance the project start-up, USAID provided a 20 percent cash advance, conditional on the transportation agency’s agreement to certain terms.",
"USAID policy related to use of assistance agreements and implementation letters addresses accountability standards regarding documentation of significant events and establishment of control activities.\nAccording to USAID policy on G2G assistance, assistance agreements between USAID and partner governments commit U.S. funds; these agreements also generally set forth agreed-upon terms regarding time frames; expected results; means of measuring results; and resources, responsibilities, and contributions of participating entities for achieving a clearly defined objective. In addition, USAID policy on G2G assistance states that missions can use implementation letters, which are formal correspondence from USAID to another party, to commit funds, detail project implementation procedures, specify the terms of an agreement, record the completion of conditions precedent to disbursements, and approve funding commitments and mutually agreed-upon modifications to project descriptions. Since 2012, legislation governing the use of funds for direct G2G assistance requires USAID to enter into formal agreements with partner governments on the objectives of this assistance.\nOn the basis of our review of 29 planning documents for projects with G2G assistance funding obligated in fiscal year 2012, we found that USAID used one or more of four types of assistance agreements (see table 2) and associated implementation letters. For example, the USAID mission in Nepal has implemented G2G assistance through a broad assistance agreement with the national government with specific provisions spelled out in various implementation letters exchanged with the Ministries of Health and Population and Education, among others. Similarly, USAID Peru has implemented its G2G assistance through two broad assistance agreements, the first signed in 2008 and the second in 2012. The mission used implementation letters to approve work plans and establish funding amounts, among other things, with three government entities. In addition, the USAID mission in Tanzania implemented some of its G2G assistance through a strategic objective grant agreement with the national government to improve accountability and oversight of public resources through increased citizen engagement; the mission then used implementation letters to establish funding amounts, work plans, and reporting requirements with the National Audit Office, Public Procurement Regulatory Authority, and Ethics Secretariat.",
"Audit requirements that apply to USAID’s G2G assistance are a key control for monitoring G2G assistance. Some of the USAID missions included in our review provided audits of G2G assistance they had collected when required. We found that these audits revealed weaknesses in partner countries’ management of assistance funding. However, the audits were often submitted late, limiting their usefulness as a monitoring tool. In addition, we found that project-level plans for M&E rarely included indicators or evaluation questions for assessing the degree to which G2G assistance activities would build local systems capacity, increase country ownership, or enhance sustainability—the three interrelated goals of the Local Solutions initiative.",
"Audit requirements that apply to USAID’s G2G assistance are a key control for monitoring G2G assistance and thus support proper stewardship of U.S. government resources. According to USAID policy on audits, when a financial audit is required, the completed audit is to be submitted no later than 9 months after the end of the audit period. The main determinant for conducting an audit is whether G2G assistance recipients will expend more than $300,000 in the given fiscal year. USAID’s Office of Inspector General (OIG) reviews submitted audits and establishes recommendations for action. USAID policy on audits states that missions receiving such recommendations should take whatever steps are necessary to respond to the recommendations and provide documentation of the actions it takes.\nOn the basis of our review of 18 audits provided by five USAID missions, we found that these missions collected audits and used them to identify weaknesses in the management of G2G assistance, but the frequently late submission of these audits to USAID limited their usefulness as a monitoring tool. In response to our request for audits of G2G assistance, five USAID missions provided 18 financial audits. Six of the 18 audit opinions were unqualified, meaning the auditors found no significant problems. However, 12 of the audits received qualified audit opinions because of questions about costs identified by the audits. Examples of costs questioned by the audits included payment of value-added tax, grants or advances to other organizations, and training- and travel-related expenses. In addition, during reviews of the audits, OIG identified additional questionable costs in 6 audits it believed did not comply with the terms of the award agreement or lacked supporting documentation. Finally, audits reported material weaknesses in internal controls in 14 of the financial audits and a lack of compliance with agreements, regulations, or laws in 17 of the 18 audits. The auditors’ negative findings in these areas included payments to contractors for unverified work, procurement from suppliers not on approved vendor lists, and improper cash advances, among other things.\nOn the basis of its reviews of submitted audits, OIG made recommendations to USAID missions in all of the 15 OIG audit reviews we received from USAID missions. According to audit tracking data and supporting documentation provided by USAID, missions have taken final action on most of the recommendations in the OIG audit reviews we received. For example, one OIG audit review included a recommendation for USAID Nepal to correct deficiencies related to procurement and internal controls; in response, the mission agreed to ensure that goods and services are procured from authorized vendors only. In another example, OIG instructed USAID Ethiopia to determine whether questioned costs of about $28,000 were allowable or unallowable and, if appropriate, to recover unallowable costs; the mission found the costs to be unallowable and recovered the funds.\nNevertheless, on the basis of our review of these audits, we found that two-thirds (12 of 18) were submitted late (see table 3); in one case, OIG indicated it had received the audit report about a year late.\nThe late submission of audits delays subsequent audit follow-up activities required by USAID policy, including OIG’s review as well as USAID mission follow-up on OIG recommendations. For example, on the basis of its review of an annual audit of a government entity in Nepal, OIG recommended that the USAID mission ensure that the government entity correct one internal control weakness and address certain questioned costs, among other things. However, because the audit was submitted 1 year late—and near completion of the G2G assistance activity—the mission notified OIG that it would not take further action on the recommendations. The mission determined that although it did not plan to provide additional assistance to the government entity at that time, it would ensure corrective actions were taken prior to providing any future assistance. Late audit submission reduces the audit’s usefulness for selecting timely and appropriate responses to the audit findings—such as recovering funds, putting in place additional safeguards, or identifying ways to enhance financial management capacity. Moreover, by allowing weaknesses to continue unaddressed, late audits of G2G assistance activities increase the risk that those activities will not achieve their goals as efficiently and effectively as possible.",
"USAID policy on M&E for G2G assistance incorporates accountability standards through the identification of objectives and related performance indicators. USAID policy on M&E requires missions to describe in their project planning documents indicators and, when appropriate, evaluation methods that will be used to assess achievement. Furthermore, project planning documents, in describing the project’s M&E plan, must link to missions’ country development strategies and mission-wide performance management plans. In addition, USAID policy on G2G assistance states that carefully defining M&E roles and responsibilities during project design is critical for this type of assistance.\nIn our review of the M&E plans included in 29 planning documents for G2G activities with funding obligated in fiscal year 2012, we found that missions included general project-level M&E information, but often did not specify how they would monitor or evaluate achievement of Local Solutions goals the missions included in their mission-level strategies. Although some missions have begun to develop ways to measure and track progress in achieving these goals, at the time of our review, USAID did not have agency-wide guidance on how to do so.\nThe country development strategies of 13 missions we reviewed that obligated G2G funding in fiscal year 2012 included strengthening partner- government capacity, enhancing and promoting country ownership, and increasing sustainability—the three goals of the Local Solutions initiative—among their development objectives. For example, one of USAID Nepal’s three development objectives is “more inclusive and effective governance,” while one of USAID Peru’s three development objectives is “management and quality of public services improved in the Amazon Basin,” and one of USAID Tanzania’s three development objectives is “effective democratic governance improved.”\nHowever, we found relatively little information in the project-level planning documents we reviewed about how missions would track progress toward these goals. In our review of the M&E plans included in 29 planning documents for G2G assistance activities with fiscal year 2012 obligations, we found that nearly all of them included general M&E information—such as periodic progress reporting, illustrative indicators, and general plans for evaluating program results—as well as considerations related to program sustainability. However, 18 of 29 planning documents we reviewed made no mention of indicators for measuring capacity, ownership, or sustainability, and 24 lacked evaluation plans or questions addressing these goals.\nOur previous report on Local Solutions noted specific weaknesses in USAID’s proxy indicator for tracking Local Solutions progress—the percentage of mission program funds obligated to partner-country systems. In addition, we noted that a USAID-commissioned study, while it concluded that increasing funding to partner governments was associated with improved capacity of partner governments in some countries, also highlighted the need for more evidence demonstrating the impact of this approach on funding development assistance relative to other funding approaches. At the time of our prior review, USAID officials told us that other approaches existed within the agency for measuring progress toward strengthening partner-country systems and promoting sustainable development, particularly project-level indicators and evaluation data.\nSome of the planning documents we reviewed did include indicators or evaluation plans, suggesting that missions have begun to develop ways to measure and track progress in achieving the three Local Solutions goals of strengthening capacity to implement programs, enhancing and promoting country ownership, and increasing sustainability. For example, the planning document for a nutrition project in Ghana envisioned conducting an impact evaluation to assess the relative effectiveness in achieving results of direct G2G funding versus an indirect funding model. The same planning document also included several expected results related to local government capacity, such as strengthening district assemblies’ capacity to manage direct donor funding. In addition, the M&E plan for a USAID early-education project in Nepal identified as an illustrative evaluation question prospects for scale- up and sustainability of the project as a regular activity of the local Ministry of Education. Finally, the planning document for a democratic governance and accountability project in Tanzania indicated that an evaluation would identify the keys to sustainability of enhanced public resource oversight, as well as constraints to wider adoption of accountability practices. This planning document also stated that indicators of citizen perceptions of governance and accountability would be tracked through a survey in targeted districts.\nThe President’s Emergency Plan for AIDS Relief (PEPFAR), in which USAID is heavily involved, and other USAID-specific initiatives and programs have published guidance addressing how to measure and track progress toward enhancing capacity, country ownership, and sustainability. For example, PEPFAR’s guidance on capacity building provides illustrative examples of indicators, such as percentage of PEPFAR-supported government staff transferred to government salaries, number of workers trained and percentage of trainees retained, and percentage of partners with on-time reports and unqualified audits. With regard to sustainability planning, PEPFAR’s guidance calls on PEPFAR country teams to develop sustainability M&E plans. Similarly, the M&E guidance for the U.S. government’s global hunger and food security initiative (Feed the Future) states that it will measure public sector capacity and program sustainability primarily by tracking partner- government budgets allocated to agriculture and nutrition. With regard to measuring country ownership, the Global Health Initiative’s interagency paper on country ownership cites increases in health spending in the partner country and in direct funding to its government as possible indicators. Finally, USAID’s strategic framework for democracy, human rights, and governance cites improved governance and institutional capacity as key expected results of USAID activities.\nUSAID’s July 2014 policy on G2G assistance allows missions to collaborate with partner governments to identify indicators and select evaluation questions that address capacity building and sustainability. According to USAID headquarters officials, an internal discussion paper on M&E for G2G assistance activities elaborates on these concepts, and the agency is currently reviewing tools and methods used by missions to measure performance of partner governments. In addition, according to USAID, as of March 2015, the agency is in the process of developing supplemental guidance on indicators that can be used to track results of strengthening public financial management activities. Nevertheless, at the time of our review, USAID did not have agency-wide guidance on how to collect data or evaluate the development hypothesis that channeling funds through partner-government systems helps to achieve Local Solutions goals. Without integrating indicators or evaluations for assessing progress toward Local Solutions goals into the plans for ongoing and future projects that include G2G assistance activities, USAID missions risk committing resources to unproven funding strategies as the agency executes its plans to expand G2G assistance in scale and scope. Moreover, USAID missions forgo an opportunity to contribute to empirical knowledge about the effects of channeling funds through partner- government systems.",
"USAID’s policies guiding the processes that missions follow to plan, implement, and monitor and evaluate G2G assistance generally reflect an international consensus on how best to achieve development outcomes as well as accepted accountability standards. As designed, these policies permit USAID to work toward its goals of strengthening local system capacity, country ownership, and sustainability while providing reasonable assurance that U.S. resources are being used as intended. We found that USAID policies require that missions incorporate safeguards throughout the program cycle of planning, implementing, and monitoring and evaluating G2G assistance; however, we also found that missions have not yet fully applied these safeguards in all cases. In the cases we reviewed, USAID had carried out required fiduciary risk assessments, documented project planning, utilized assistance agreements and funding mechanisms, conducted audits, and devised key elements of monitoring and evaluation. However, missions in some cases had not completed the risk assessments in a timely manner, hampering their efforts to integrate assessment findings and mitigation measures into project planning and M&E plans, when required. Missions also encountered difficulties coordinating risk assessment and related activities with other donors, potentially leading to inefficiencies and less effective oversight of partner countries’ efforts to address financial management weaknesses. Because required audits we reviewed often were submitted late, the subsequent chain of OIG review and mission response also was delayed, decreasing the likelihood of resolving important audit findings such as questioned costs and other financial management weaknesses. Finally, though some missions demonstrated that they had begun to envision how to monitor and evaluate whether G2G assistance is achieving project goals while also enhancing capacity, country ownership, and sustainability, the agency as a whole has yet to identify indicators or evaluation approaches that would support expansion of these efforts.",
"We recommend that the USAID Administrator take the following five actions to improve accountability for G2G assistance: 1. develop an action plan to improve the timeliness of risk assessments so that these assessments can better inform project planning; 2. develop an action plan to ensure that M&E plans for G2G assistance activities incorporate risk mitigation measures; 3. disseminate information to missions regarding best practices for coordinating risk assessments with other donors; 4. identify the factors contributing to late submission of required audits and develop a strategy to improve on-time audit submission and follow-up; and 5. develop and disseminate guidance on assessing the effects of G2G assistance on partner-country capacity, ownership, and sustainability, including through the identification of indicators and evaluation approaches.",
"We provided a draft of this report to USAID for review and comment. USAID provided technical comments on the draft, which we incorporated as appropriate. USAID also provided written comments, which are reprinted in appendix IV. In its written comments, USAID agreed with all five of our recommendations and described steps taken, planned, or under way that it believes respond to the recommendations. With regard to the first two recommendations, given the actions it already has completed or has scheduled for completion by the end of 2015, USAID requested that we either remove the recommendations from our final report or indicate that the recommended actions have been completed and that we consider the recommendations implemented and closed. We appreciate USAID’s detailed description of its reported actions—including revised policy, training, and other guidance—aimed at improving the timeliness of risk assessments and ensuring that monitoring plans for G2G assistance incorporate risk mitigation measures. We will work expeditiously with USAID to collect and review evidence documenting its actions to address the first two recommendations. We also look forward to following up with USAID to monitor and collect information on the steps the agency noted it has already taken or planned to take in response to our other three recommendations.\nWe are sending copies of this report to appropriate congressional committees, the Administrator of USAID, and other interested parties. The report is also available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.",
"Our objectives in this report were to assess the extent to which U.S. Agency for International Development (USAID) policies and practices related to (1) planning, (2) implementing, and (3) monitoring and evaluating government-to-government (G2G) assistance provide reasonable assurance that this assistance is used as intended.\nTo address these objectives, we reviewed USAID policy outlined in the agency’s Automated Directives System (ADS) related to planning, implementing, and monitoring and evaluating G2G assistance activities. We also interviewed USAID officials in Washington, D.C., about the policies we reviewed. Some of the policy documents we reviewed apply broadly to all USAID assistance, while others were specific to G2G assistance. Specifically, the chapters we reviewed were the following:\nADS Chapter 220: Use and Strengthening of Reliable Partner Government Systems for Implementation of Direct Assistance (first issued August 2011, revised in March 2012 and July 2014);\nADS Chapter 201: Planning (most recently revised in December\nADS Chapter 203: Assessing and Learning (most recent revisions in January and November 2012 and January 2013).\nIn our summary of these policies, we drew from the most recent versions available at the time of our review, but in conducting our analysis, we used the versions that were in place at the time that we developed our tools for analysis. We also reviewed other chapters referenced in these policies, such as ADS 591: Financial Audits of USAID Contractors, Recipients, and Host Government Entities and ADS 350: Grants to Foreign Governments, as well as supplemental guidance (e.g., Public Financial Management Risk Assessment Framework Manual and Key Bilateral Funding Mechanisms). To assess the degree to which these policies reflect generally accepted accountability standards, we compared the most recent versions of these policies with relevant sections of GAO’s Standards for Internal Control in the Federal Government, which we refer to as accountability standards. These standards outline ways agencies can improve accountability, such as by assessing and mitigating risk and carrying out defined policies and procedures. We mapped the USAID policies listed above to relevant sections of the accountability standards, noting ways in which USAID policy addresses specific factors or elements that contribute to a supportive environment for accountability.\nTo review mission planning for G2G assistance activities, we began by identifying project appraisal documents (PAD) and activity approval documents (AAD) as key sources of information for our review. Starting in 2012, USAID policy on planning required missions with approved country development cooperation strategies (CDCS) to document planning for projects (which consist of one or more activities) in PADs. Prior to 2012, missions documented project and activity planning using AADs. We next identified 22 USAID bilateral missions that had obligated more than $500,000 in G2G assistance in fiscal year 2012 and had completed a stage 1 rapid appraisal at the time of our review, according to USAID Local Solutions data and other information provided by the agency. We then requested planning, implementation, and monitoring and evaluation documents—including risk assessments, activity approval documents, project appraisal documents, assistance agreements, implementation letters, and audits—from these 22 USAID missions.\nDuring the course of this preliminary work and as we reviewed the submitted documents, we removed 8 missions from the scope of our review for the following reasons. First, according to USAID headquarters and mission officials, all of the fiscal year 2012 G2G funds obligated by missions in Egypt and Mali were deobligated after fiscal year 2012.\nSecond, mission officials in Indonesia and Georgia determined that all of each mission’s respective fiscal year 2012 obligations had not, in fact, been implemented through partner government entities and, as such, were incorrectly characterized as G2G assistance. Third, project and activity planning documents for G2G assistance activities with fiscal year 2012 obligations were not available for USAID missions in Ethiopia and Rwanda. In response to our request for documents, these missions provided assistance agreements and implementation letters; in the case of Ethiopia, the mission stated that the agreements and letters documented authorization of G2G assistance activities. Finally, because GAO, the USAID Office of Inspector General (OIG), and the Special Inspector General for Afghanistan Reconstruction had each reviewed various aspects of USAID’s G2G assistance in Afghanistan and Pakistan, we did not include those two countries in our document review. (App. III provides a summary of other reviews of USAID’s G2G assistance in Afghanistan and Pakistan.) As a result of this process, we reviewed all 29 project appraisal or activity approval documents provided by 14 USAID missions: Armenia, Barbados, Ghana, Haiti, Honduras, India, Liberia, Mozambique, Nepal, Peru, Senegal, South Africa, Tanzania, and Zambia. Table 4 provides a list of the projects with G2G assistance activities for which we reviewed planning documents, by USAID mission.\nTo conduct our review of these planning documents, we developed a data collection instrument to gather information on the required elements of PADs, as described in USAID policies on G2G assistance, planning, and monitoring and evaluation (M&E). Table 5 provides information on the data fields in our data collection instrument.\nBecause USAID requirements differed for PADs and AADs (the two types of planning documents we reviewed), we tracked which of these documents each mission used and took this into consideration as we conducted our analysis of the information gathered. To determine the extent to which these documents contained the required elements, we reviewed each planning document and recorded any relevant information we found for each of the elements in our data collection instrument. We then analyzed this information and determined whether the information provided met requirements outlined in the USAID policies described above. With regard to project-level M&E plans, while we recognized that USAID missions may refine project M&E plans after completing project design, our interest was in the degree to which missions had integrated M&E into planning for G2G assistance activities. Accordingly, we reviewed the M&E information provided in the planning documents we collected and identified cases where these documents (1) included general M&E information and (2) specifically addressed sustainability, country ownership, or capacity. Finally, we also reviewed assistance agreements and implementation letters associated with the G2G activities in our review for information we did not find in the planning documents, including the funding mechanism used to implement the G2G activity and partner-government compliance with risk mitigation measures.\nTo identify examples of types of risks identified in USAID risk assessments, we selected illustrative examples from our case study countries for inclusion in this report. We selected these examples to demonstrate the type of information contained in these risk assessments, including risks identified, the risk level (i.e., low, medium, high, or critical), and the assessor’s recommendation for mitigating each risk.\nTo obtain insights into the use of financial audits as a key monitoring tool for G2G assistance, we requested the most recent completed financial audits from 22 missions with G2G assistance funds obligated in fiscal year 2012. In response to this request, 5 USAID missions provided 18 financial audits: Ethiopia (1), India (2), Nepal (7), Peru (7), and Rwanda (1). We reviewed audits submitted by these missions in response to our request, but did not seek to validate that all required audits were conducted or submitted. Accordingly, our findings are limited to the audits provided. We also reviewed agency or OIG reviews, memos, and related documentation provided by USAID headquarters and USAID missions. We recorded the following information from these documents: the type of auditor (third-party contractor, host country supreme audit institution, mission, or OIG), audited entity, time frame for audit and submission, audit findings, OIG recommendations, and status of implementation of the recommendations for each audit. The analysis we conducted is a reflection of the documentation provided by USAID, including the documents’ limitations. For example, OIG recommendations incorporate the findings and recommendations of the third-party contractor, supreme audit institution, and USAID auditors. We considered it reasonable to assume that if OIG had closed all its audit review recommendations, then the underlying auditors’ findings and recommendations for that audit could also be considered closed.\nWe also selected 3 USAID missions—Nepal, Peru, and Tanzania—for in- depth case studies. We chose these missions on the basis of fiscal year 2012 G2G funding levels; sector diversity (G2G assistance in at least two sectors, such as education or health), their progress in implementing projects and activities, and geographical diversity. While the results of our case studies cannot be projected across all USAID missions, these 3 missions provide what we believe to be an illustrative mix of USAID’s G2G assistance activities. While in these countries, we conducted site visits and interviewed USAID and partner-government officials as well as representatives of other donor countries and civil society.\nWe conducted this performance audit from April 2014 to June 2015 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"Following the launch of USAID Forward in 2010, USAID began to revise various policies related to the agency’s planning, project design and implementation, and monitoring and evaluation—often referred to as USAID’s program cycle. These policies guide the agency’s assistance program activities and operations. While many of these policies apply broadly to all USAID assistance, some apply specifically to G2G assistance. For the purposes of our report, we describe the program cycle in three stages: planning, implementation, and monitoring and evaluation. We summarize key components of USAID’s program cycle as they relate to G2G assistance below and conceptualize these components in figure 2.",
"According to USAID’s Automated Directives System Chapter 201, planning begins at the mission level, with the development of a country development cooperation strategy (CDCS). The CDCS reflects the agency’s development approach in each country and articulates how USAID’s strategy reflects partner-country priorities. Regarding G2G assistance, the policy states that missions should consider building local capacity, including that of partner governments, to achieve sustainable development results. According to USAID’s ADS Chapter 220: Use and Strengthening of Reliable Partner Government Systems for Implementation of Direct Assistance, planning for G2G assistance activities also entails risk assessment and formulation of risk mitigation plans; these assessments and plans are key elements of broader project planning, which is summarized in a project appraisal document (PAD).",
"USAID policy on planning states that a CDCS must include goals, results, and indicators, among other things, which help focus USAID investments in key areas affecting partner countries’ overall stability and prosperity. The policy states that missions should consider using partner-government systems in order to develop their capacity and improve sustainability— two key Local Solutions goals—during development of their CDCS. We found that these considerations were reflected in various parts of the CDCS, notably in general discussions of how the mission is addressing USAID initiatives as well as in the results framework, which identifies objectives and expected results. Table 6 summarizes key elements of CDCSs for USAID missions in our three country case studies: Nepal, Peru, and Tanzania.",
"According to USAID policy on planning, while developing the CDCS, missions considering the use of partner-government systems generally must conduct a “stage 1 rapid appraisal,” which is a country-level examination of the partner government’s public financial management environment and associated risks. The stage 1 rapid appraisal is used to determine whether G2G assistance is feasible—in other words, whether to proceed to the next risk assessment stage—and informs development of the CDCS. In addition, as of July 2014, USAID policy states that, when appropriate, certain missions may be asked to undertake an expanded democracy, human rights, and governance review for G2G assistance in order to aid consideration of the reputational risk to the U.S. government as well as the risk that U.S. government resources could be misused in a way that damages political freedoms or human rights or benefits a central government at the expense of its citizens. Following completion of the stage 1 rapid appraisal, missions may decide to conduct one or more risk assessments of partner-government organizations (e.g., ministries or subnational agencies), known as “stage 2” risk assessments. Intended to inform the larger project design process, stage 2 risk assessments identify fiduciary risks and propose measures to address them. According USAID’s policy on G2G assistance, USAID missions generally must complete a fiduciary risk assessment as part of the overall project design and authorization process before obligating funds to a partner government for implementation of G2G assistance activities.",
"According to USAID policy on planning, the PAD is used by missions to document the complete design of the project and serve as a reference document for project authorization and subsequent implementation. PADs must define the following: the development problem to be addressed by the project and how it links to the mission CDCS; a monitoring and evaluation (M&E) plan, including expected results and indicators; the financial plan and budget; and the overall project implementation plan.\nTable 7 describes projects with G2G activities in the three case-study countries.\nAccording to USAID policy on G2G assistance, PADs for projects with G2G activities must incorporate the findings of stage 2 risk assessments and a plan for mitigating risks identified in the fiduciary risk assessment. Possible risk mitigation measures may include the following: disbursement of funds in tranches, technical assistance for capacity building, inclusion of milestones and benchmarks for demonstrating progress in correcting financial management weaknesses,\nUSAID “no objection” reviews of actions taken by partner-government ministries or agencies receiving assistance before proceeding to the next step, and limits on advance of funds.\nThe policy also states that risk mitigation plans should be incorporated into the project M&E plan, which is a required part of the PAD, and include provisions for ensuring partner-government follow-up on any risk mitigation measures through periodic progress reports or meetings with partner-government officials as part of the project’s M&E plan. In addition, the policy states that missions may consider various means of coordinating with other donors, such as by conducting joint risk assessments, involving other donors in USAID’s assessment, sharing the results of USAID’s risk assessments, or other measures.",
"USAID’s policy on G2G assistance outlines use of assistance agreements and implementation letters as well as selection of funding mechanisms for G2G assistance. The assistance agreements and implementation letters specify the type of funding mechanism USAID will use for the G2G assistance project or activity. USAID policy on G2G assistance also describes factors missions should consider when selecting funding mechanisms.",
"According to USAID policy, assistance agreements between USAID and partner governments set forth mutually agreed-upon terms regarding time frames, results expected to be achieved, means of measuring those results, resources, responsibilities, and contributions of participating entities for achieving a clearly defined objective. In addition, because missions obligate funds through assistance agreements, missions must go through a set of preobligation requirements designed to ensure adequate planning prior to committing funds. USAID implements G2G assistance using one or more of four types of assistance agreements: development objective agreement: when obligating funds through development objective agreements, under USAID, policy missions must develop separate agreements for each development objective in an approved CDCS; bilateral project agreement: used to implement specific projects; limited scope grant agreement: used to award a grant to a partner- government entity for project obligations of less than $500,000; and program assistance agreement: used to provide resource transfers in the form of foreign exchange or commodities.\nIn addition, USAID missions use implementation letters, which are formal correspondence from USAID to another party, and can serve several functions, including detailing project implementation procedures, specifying the terms of an agreement, recording the completion of conditions precedent to disbursements, and approving funding commitments and mutually agreed-upon modifications to project descriptions. In some cases, missions use assistance agreements to obligate funds to several projects or activities implemented by different partners. For G2G assistance activities developed under some of these types of agreements involving multiple partners, missions may subobligate funds to partner-government entities—such as central government ministries and regional and local governing authorities— through the use of implementation letters. USAID policy effective as of July 2014 states that the assistance agreement or implementation letter should incorporate risk mitigation measures.",
"USAID policy describes factors missions should consider when selecting funding mechanisms for G2G assistance. The goal in each case is to select the funding mechanism that will best achieve the purpose of the project or activity, foster and deepen the partner government’s public financial management capacity, efficiently implement the project or activity, guarantee accountability, and promote sustainability. According to USAID policy, selection of the appropriate funding mechanism is also an important means of mitigating risk and safeguarding funds. USAID policy outlines three funding mechanisms:\nCost reimbursement: USAID reimburses the partner-government entity for actual costs and expenditures incurred in carrying out the project activities, up to an estimated total cost specified in advance. Cost reimbursements require missions to prepare a budget that reasonably estimates the cost of implementing the project, with the understanding that the final amounts may be further refined. Cost reimbursements may be used when unit costs cannot be estimated with sufficient accuracy at the beginning of the project because of price fluctuations over the life of a project that are outside the control of the partner-government. Because USAID reimburses actual costs incurred based on these estimates, the mission is responsible for closely monitoring project implementation to help ensure that it is on schedule and to resolve problems as they arise. When the partner government is ready to request a reimbursement for costs incurred during project implementation, it submits the request according to procedures specified in the assistance agreement or the implementation letter, along with certified financial reports detailing the amount of expenditures incurred and supporting documents, such as contracts, invoices, and payments. The reports and supporting documents are subject to USAID review and audit procedures outlined in the agreement. Under this funding mechanism, USAID may provide cash advances for projects that have been approved outside of the government’s budget cycle or when funding from the partner government is not available.\nFixed amount reimbursement: USAID reimburses an amount agreed to in advance, per output or associated milestone, after the mission has verified that quality standards have been met. This mechanism requires that the mission and the partner government invest a significant amount of time and resources to develop cost estimates for outputs and associated milestones during the design phase of the project. The partner-government entity implementing the project submits design specifications and cost estimates for each output or associated milestone for approval by the mission. The mission independently verifies that the estimate is reasonable and negotiates payment amounts with the partner government for each output or milestone. The amount of the mission’s contribution to the project is thereby fixed and the partner government bears the responsibility for any unforeseen cost increases. Similarly, if actual costs are less than estimated costs, the mission’s payment to the partner government is not reduced. However, the mission may make periodic adjustments for subsequent payment amounts in certain cases, such as unforeseeable inflation or price increases. Once the cost estimate has been established under this funding mechanism, the mission’s monitoring and oversight of the project is significantly less than that required for the cost reimbursement mechanism because the mission’s primary role is to verify that the outputs or associated milestones have been completed and meet the agreed-upon quality standards. In addition, during project planning, the mission must also determine that the partner-government entity has the qualified management staff with sufficient technical skills and experience to implement the project in a timely manner. As with the cost reimbursement mechanism, USAID may also provide cash advances under this funding mechanism, as long as these funds are then liquidated based on successful completion of outputs or associated milestones rather than actual costs incurred.\nResource transfer: USAID provides a generalized resource transfer in the form of foreign exchange or commodities to the partner government. According to USAID policy, resource transfer is used for either (1) sector program assistance, which provides cash or in-kind assistance used to carry out wide-ranging development plans in a defined sector without restriction on the specific use of funds, or (2) balance-of-payments or general budget support, commonly known as cash transfers. The transfer of resources is generally dependent on the completion of specific actions by the partner government. For example, the provision of funds under sector program assistance must be directly linked to the implementation of specific policies, institutional reforms, or other partner-government actions necessary to achieve agreed-upon development objectives. These actions must be specified directly or by reference in the assistance agreement as conditions that must be established before these funds are disbursed, and the mission is required to document how it reached the decision to disburse funds.",
"USAID’s general audit requirements outlined in ADS Chapter 591: Financial Audits of USAID Contractors, Recipients, and Host Government Entities apply to G2G assistance. The main determinant, in most cases, for conducting an annual audit is whether G2G assistance recipients expend more than $300,000 in G2G assistance funds in the given fiscal year. In addition, both USAID’s ADS Chapter 203: Assessing and Learning and its policy on G2G assistance establish M&E requirements. According to these documents, missions should begin preparing for M&E activities during the planning stage and must document M&E planning in the planning document for each project or activity. Notably, USAID policy on G2G assistance states that carefully defining M&E roles and responsibilities during project design is critical for this type of assistance.",
"According to USAID policy on audits, non-U.S.-based organizations— including partner governments—expending $300,000 or more of USAID- funded awards must be audited annually. In addition, a closeout audit must be performed for all awards in excess of $500,000. According to the guidelines, audits may be performed by independent audit firms, or by a government’s supreme audit institution, and must be in accordance with auditing standards approved by the U.S. Comptroller General. Completed financial audits are to be submitted to the USAID Office of Inspector General (OIG) for review no later than 9 months after the end of the audited period. Upon completing its review, OIG establishes recommendations for action, if appropriate, and provides copies of the audit reports to the responsible USAID management.\nAccording to USAID policy, designated mission officials maintain each mission’s annual audit inventory, decide when to conduct audits, and coordinate with OIG to develop the annual audit plan. According to USAID, in practice, the controller at each mission fulfills these duties and liaises with the audit manager at USAID headquarters. Controllers track audit requirements, timing, and completion, as well as audit recommendations and implementation status. According to USAID, as of March 2015, missions utilized two databases for tracking audits: the first to track audit timing and the second to monitor audit recommendation follow-up. According to USAID, the agency was in the process of introducing a new agency-wide database for tracking audits of non-U.S.- based organizations, which, when fully operational, would maintain a record of all non-U.S. vendors receiving USAID funds, as well as the timeliness of audits of these organizations.",
"USAID policy on M&E requires missions to describe how they will collect data and assess achievement during project planning in what is known as the project M&E plan. Furthermore, project planning documents, in describing the project’s M&E plan, must link to missions’ CDCS and mission-wide performance management plans; they are to be used to measure progress toward planned results and identify the cause of any delays or impediments during project implementation. Moreover, the policy states that defining the project M&E plan during project planning aids in adapting implementation to achieve sustainable results and future project planning. Notably, USAID policy on M&E for G2G assistance activities states that carefully defining M&E roles and responsibilities during project design is critical for G2G assistance.",
"According to U.S. Agency for International Development (USAID) data, in fiscal years 2010 through 2013, the agency obligated between about $44 million and $468 million per fiscal year in government-to-government (G2G) assistance in Afghanistan and about $149 million and $461 million in Pakistan. (See fig. 3.) Summarized below are key findings from reviews of USAID’s G2G activities conducted by the USAID Office of Inspector General (OIG) in Afghanistan, the OIG in Pakistan, the Special Inspector General for Afghanistan Reconstruction (SIGAR), and GAO.",
"In 2010, along with other donors, the United States pledged to provide at least 50 percent of development assistance funds directly through the Afghan budget by 2012. According to SIGAR, USAID and the government of Afghanistan signed a memorandum of understanding in December 2010 in support of the goals, objectives, and mechanisms for effective assistance in Afghanistan. SIGAR also reported that the memorandum of understanding focused on maximizing opportunities presented by USAID-funded assistance to increase capacity, institutional growth, and public ownership of the development process in Afghanistan. The memorandum also laid out financial requirements to ensure that direct assistance funds are used as intended, according to SIGAR. USAID’s assistance provided directly through the Afghan budget includes host-country contracts, G2G awards, and contributions to certain multidonor trust funds. According to USAID data, in 2014, the agency obligated funds for G2G assistance in the following sectors: agriculture, education, health, governance, rule of law and human rights, and private sector competitiveness.",
"While USAID Afghanistan does not have a country development cooperation strategy, the mission has taken steps to conduct fiduciary risk assessments of several Afghan government entities. In 2011, we reported that USAID had not completed preaward risk assessments before providing funds to two Afghan government entities. In 2014, SIGAR reported that the mission had contracted with private firms to conduct fiduciary risk assessments of 16 ministries and found that all 16 ministries were unable to manage direct funds without taking risk mitigation measures recommended in these assessments. The mission’s internal review of 7 of these ministries also found that these ministries were unable to manage funds without the implementation of significant risk mitigation measures. In 2012, the USAID Administrator approved the mission’s request to waive compliance with agency requirements for assessing risks associated with using partner-government systems and documenting any risk mitigation plans for funds appropriated through fiscal year 2013. In spite of this waiver, SIGAR recommended that the USAID Administrator require compliance with all USAID requirements for the use of partner-government systems, with the exception of the country- wide stage 1 assessment. USAID responded that in spite of the approved waiver, USAID Afghanistan continues to comply with all USAID requirements for the use of partner-government systems.\nIn 2011, we reported that USAID had not consistently followed its own policies for assessing risks associated with funds provided to a World Bank–administered trust fund for Afghan reconstruction. The Afghanistan Reconstruction Trust Fund was established in 2002 as a vehicle for donors to pool resources and coordinate support for Afghanistan’s reconstruction. We reported that for its initial $5 million contribution to the trust fund in 2002, USAID could not provide documentation supporting risk assessment procedures prior to disbursement, but determined afterward that (1) the trust fund had a comprehensive system in place for managing the funds and (2) the World Bank had a long history in managing multidonor pooled funding mechanisms. Similarly, the mission did not make preaward determinations for 16 of the 21 subsequent modifications to its contribution amounts. USAID agreed with our recommendation that the agency ensure adherence with its policies for assessing risks associated with multilateral trust funds and revised its guidance on awards to public international organizations in 2011.",
"In their reviews of USAID Afghanistan’s implementation of G2G activities, SIGAR and the OIG both identified issues related to the implementation of G2G activities. According to SIGAR, while USAID had instituted several controls to help protect its direct assistance funds, the mission had not ensured full implementation of a key control activity—the inclusion of corrective actions to be taken by the Afghan government entity as conditions precedent to the disbursement of funds in USAID’s agreements with the Afghan government. SIGAR noted that the mission had incorporated a very small percentage of risk mitigation measures identified in the fiduciary risk assessment into the assistance agreements signed by the mission and the Afghan government and outlines the terms of the agreement. SIGAR recommended that the mission develop a plan for each ministry that has a complete risk assessment that defines how each of the risks identified is being or will be mitigated, and suspend disbursements until these plans are completed. USAID agreed with this recommendation, and stated that the mission had prepared such plans for six ministries receiving assistance. The mission further noted that the agency’s use of conditions precedent is only one control activity for mitigating risk in a suite of interventions used in its work with the Afghan government.\nRegarding funding mechanisms, an OIG review of USAID’s financial management controls in G2G assistance found that most of USAID/Afghanistan’s G2G activities may not count as G2G assistance as described in USAID policy. According to USAID policy, to the extent possible, missions must avoid funding the establishment of separate donor-funded project management or implementation units that operate outside the existing partner-government structures. USAID aims to strengthen those government institutions already established by the partner government rather than create or maintain separately operated project management or implementation units that may be unsustainable in the long run. Similarly, USAID policy states that while missions may use host country contracts to engage with partner governments, this funding mechanism is different from using partner-government systems and therefore is not counted toward the agency’s 30 percent Local Solutions target. OIG found that most of the mission’s G2G activities in Afghanistan had been implemented through project implementation and management units. For example, USAID provides funds for an education program to a nongovernmental organization, which hires a team of consultants to work in the Ministry of Education to manage and implement the activities under this program. OIG considered the use of project implementation and management units as a key risk mitigation measure that helped safeguard funds and thus did not find issue with this finding or make any recommendations. Similarly, a SIGAR review of USAID’s health programs in Afghanistan also noted that the mission funds this activity through a host country contract, which is managed by a separate grants and contracts management unit.\nIn addition, SIGAR found that USAID Afghanistan’s use of cash advances in one G2G activity made funds more vulnerable to waste, fraud, and abuse because the activity is funded with monies paid in advance of costs incurred. USAID disagreed, stating that the activity is funded on a reimbursable basis through advances and liquidations.\nThe October 2014 OIG review of USAID’s G2G activities in Afghanistan identified additional issues related to the mission’s implementation of these activities. OIG found that USAID staff were not properly involved with the Afghan ministries’ procurement procedures required to mitigate risks; mission staff were not fully aware of their responsibilities for overseeing G2G activities; the mission did not properly document expectations concerning project objectives, results, resources, and timelines so as to avoid misunderstandings with the Afghan government; and transactions were often recorded late in the USAID accounting system. The mission agreed with all OIG recommendations and reported on steps it planned to take to address these issues.\nIn 2011, we reported on U.S. efforts to build public financial management capacity in the Afghan government and provided information on USAID- funded projects that provide training, mentoring, coaching, and technical assistance. We found that USAID had not consistently established baselines and targets, or reported actual performance data, and recommended that the agency establish targets and ensure that implementing partners report performance data. USAID agreed with these recommendation and noted steps it was taking to address them.",
"Regarding audits, 2014 OIG and SIGAR reports stated that the mission was conducting audits for all G2G activities with expenditures over $300,000 in a given fiscal year as called for in USAID policy. According to SIGAR, USAID contracted with an accounting firm to perform audits of all G2G activities in Afghanistan. Examples of audit objectives included assessments of project internal controls, determination of validity and reliability of information, and determination of whether the ministry was complying with agreement terms and applicable laws and regulations related to the USAID-funded program. However, according to the SIGAR report, these audits had not been completed within the 9-month period required by USAID policy. SIGAR stated that USAID’s lack of timely and regular audit results makes it difficult for the agency to take action to identify and reconcile ineligible expenditures and address other issues with direct assistance implementation. USAID acknowledged the need for timely third-party audits, stating that it has modified its audit requirements and is now contracting and actively managing the required audits of the ministries. In addition, OIG found that the mission did not fully adhere to the audit requirements as described in project documents nor did the mission ensure Afghan government adherence. As a result, contracts for audits were not awarded annually and audits were not completed on time.\nOIG recommended that the mission implement procedures to validate that audits had been conducted prior to disbursing funds and modify the audit requirements in its G2G activity documents to describe the requirements for the audit process. The mission agreed with these recommendations and explained steps it had taken and planned to take to address these issues.",
"The Enhanced Partnership with Pakistan Act of 2009 authorized up to $1.5 billion a year for development, economic, and democratic assistance to Pakistan for fiscal years 2010 through 2014. The act authorized civilian assistance for a wide range of activities, including projects to build the capacity of government institutions, promote sustainable economic development, and support investment in people through education and health programs. The act also encouraged, as appropriate, the use of Pakistani organizations, including Pakistani firms and community and local nongovernmental organizations, to provide this assistance. In order to increase the capacity of Pakistani organizations to manage U.S. funds and to implement this strategy in accordance with international commitments, USAID Pakistan launched the Assessment and Strengthening Program (ASP) in October 2010. The goals of this program are to assist potential Pakistani implementing partners, including the government of Pakistan organizations: (1) increase capacity to manage and account for U.S. government development assistance funds, (2) reduce the vulnerability of the funds to waste and misuse, and (3) increase speed and efficiency in getting USAID development resources to the intended beneficiaries. According to USAID data, in 2014, the agency obligated funds for G2G assistance in the following sectors: agriculture, education, and infrastructure.",
"In 2011, we reported that USAID planned to shift its program implementers from U.S.-based partners to Pakistani organizations, including local, provincial, and federal government and nongovernmental organizations. To mitigate risks associated with providing funds to organizations with limited institutional capacity, USAID guidance directed missions to conduct a preaward assessment of the organizations’ internal controls and financial management systems. We found that USAID guidance at the time did not contain information on whether weaknesses identified in the preaward assessment must be addressed or whether the assessment’s recommendations to enhance the accountability of U.S. funds must be implemented. For Pakistani organizations that were required to undergo a preaward assessment, we found that not all contracts, grants, or agreements required these organizations to address weaknesses identified in the preaward assessment. We recommended that USAID assistance provided through Pakistani organizations identified as high or medium risk be required to address weaknesses identified in the risk assessment. USAID agreed with our recommendation and provided examples of steps the agency had taken to address identified weaknesses.\nFurthermore, according to USAID policy, if a mission is planning to increase the amount of total estimated funding for existing G2G activities implemented by a previously approved government entity by more than 50 percent of the initially authorized amount, or authorizes an additional amount of more than $20 million, an updated assessment must be conducted and documented to ensure that the entity’s public financial management systems are sufficient to bear the increased risk associated with the increased funding levels. This updated assessment must also include a revalidation of the risk mitigation plan for every approved partner-government entity receiving the funding increase. In a 2013 OIG review of USAID’s G2G assistance programs in Pakistan, OIG auditors found that the mission had not reassessed the government of Pakistan implementing entities as required by USAID policy. For example, the mission increased its commitment to provide funds to the partner- government entity administering the Federally Administered Tribal Areas to a ceiling of $611 million as of October 2012 from an initial commitment of $55 million in 2010 without updating the fiduciary risk assessment. USAID cited various reasons for not updating the assessments, including conflicting agency and mission policies. While USAID agreed with the OIG recommendations to reassess partner government implementing entities and develop a plan for full compliance with USAID policy, at the time of the release of the OIG report, the agency had not reached a decision on how to address these issues. In response to this report, the mission stated that it has submitted a waiver on compliance with agency requirements for assessing risks associated with using partner- government systems, and, at the time of the review, was awaiting approval from USAID headquarters.",
"According to OIG, USAID Pakistan had been providing G2G assistance under the Enhanced Partnership with Pakistan Act in 2009, prior to the launch of the USAID Forward initiative in 2010 and the issuance of agency-wide policy on the use of partner-country systems in 2011. According to the OIG review, the mission developed and refined its own procedures for implementing G2G assistance and documented these procedures in mission orders. These mission orders incorporate lessons learned by the mission while planning and implementing its G2G activities and reflect the evolution of procedures during this period. As a result, OIG found that several mission orders related to G2G activities conflicted with agency-wide policy. For example, OIG found that while the mission order required a risk assessment, the mission order did not include a requirement for a Democracy, Human Rights, and Governance review as part of its assessment, as specified in the agency-wide policy. OIG did not specify whether the mission had neglected to conduct this governance review as a result of the conflicting policies. OIG also found examples of instances in which the mission was not following its own mission orders, primarily concerning the lack of clarity over the designation of roles and responsibilities.",
"According to OIG, USAID Pakistan launched the ASP in 2010, in part to increase the capacity of Pakistani organizations, including the Pakistani government, to manage U.S. funds, but found shortcomings in the mission’s oversight of this program. Furthermore, according to OIG, the agreement between USAID Pakistan and ASP implementers calls for annual validations to ensure ongoing compliance with the standards and procedures developed under the institutional capacity-building program and to establish benchmarks to allow government implementers to reach a point where annual validations are no longer necessary. According to OIG, the mission did not validate whether the training had improved the internal systems of these entities or increased ministry staff members’ ability to implement projects. According to mission officials, the mission did not conduct any validations because of changing policy from USAID headquarters. Two versions of USAID policy on the use of partner- country systems appeared over the course of 8 months, with a third revision pending at the time of the review. Mission officials said they had put off validations and reassessments so that they could form a Partner Government System team that met requirements outlined in the USAID agency-wide policy. The team would then help determine which government implementing entities should be part of the validation process, and which should be scheduled for reassessments. As a result of this delay, the mission did not establish the Partner Government System team until 3 years after ASP began. OIG recommended that the mission take the appropriate steps to ensure that it can validate the implementing partners’ capacity-building activities with the partner- government entities. The mission agreed with the OIG recommendations and has taken some steps to address these issues.\nIn a separate review of the ASP, OIG also found that (1) the program had not met first-year targets and had not completed all preaward assessments and capacity-building programs planned and (2) program planning was insufficient because the mission had not developed the results framework—an outline of the mission’s goals, objectives, expected results, and performance indicators—or the preliminary performance management plan—a tool for planning and managing the process of assessing and reporting progress toward achieving assistance objectives—until a year after the start of the program. The mission agreed with OIG’s recommendations and responded with steps it plans to take to address these issues.",
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"In addition to the contact named above, Jim Michels (Assistant Director), Todd M. Anderson, Martin De Alteriis, Jesse Elrod, W. Stephen Lowrey, Grace Lui, Kim McGatlin, Shirley Min, and Nikole Solomon made key contributions to this report. Additional technical assistance was provided by Amanda Bartine, Tina Cheng, David Dayton, José Peña, and Cristina Ruggiero."
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{
"question": [
"How does USAID implement G2G activities?",
"How did USAID missions usually select their funding mechanisms?",
"What was the purpose of the missions?",
"What does the M&E phase include?",
"What problems with the audits commonly occurred?",
"What three interrelated goals of the Local Solutions initiative were missing in the M&E plans?",
"What does USAID's Local Solutions initiative seek to accomplish?",
"What does the Local Solutions initiative aim to do?",
"What was the GAO asked to do?",
"What were the average annual obligations to G2G activities from 2012 through 2014?"
],
"summary": [
"Implementation: In this phase, USAID implements G2G activities according to the terms and conditions established in assistance agreements with partner governments.",
"USAID missions usually selected funding mechanisms in which USAID reimburses partner governments for costs related to completion of agreed-upon activities.",
"In addition, consistent with USAID policy, missions employed assistance agreements and corresponding implementation letters to commit funds and set objectives, among other things.",
"M&E. This phase includes conducting audits of partner-government entities and assessing the results of G2G assistance activities.",
"Annual audits GAO reviewed were often submitted late, which delays audit follow-up actions required by USAID policy and limits the audits' usefulness as a monitoring tool.",
"In addition, project M&E plans GAO reviewed rarely included indicators or evaluation questions for assessing the degree to which G2G assistance activities are building capacity, increasing ownership, or ensuring sustainability—the three interrelated goals of the Local Solutions initiative.",
"USAID's Local Solutions initiative, launched in 2010 as part of USAID Forward, seeks to reform how the agency administers development assistance and to increase funding implemented through partner-country systems, including partner governments.",
"The Local Solutions initiative aims to strengthen local capacity and enhance country ownership and sustainability of development efforts.",
"GAO was asked to review accountability under this initiative.",
"In fiscal years 2012 through 2014, average annual obligations to G2G activities were about $620 million."
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CRS_R42539
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{
"title": [
"",
"Introduction",
"Background",
"Definitions",
"Brief History of Precision Strike",
"U.S. Use of Precision Guided Munitions (PGMs)",
"Desert Storm",
"Kosovo",
"Operations Enduring Freedom/Iraqi Freedom",
"PGMs from Unmanned Aerial Vehicles (UAVs)",
"Beginnings of Global PGM Use: Non-State Actors",
"Hezbollah/Israel—2006",
"Results of U.S. Superiority/Near Monopoly of Precision Strike",
"Global Positioning Systems",
"Precision Strike and GPS Equivalent Systems",
"Cost of U.S. Global Positioning System",
"Russian Global Orbiting Navigation System",
"Chinese Regional System",
"Current/Developing Precision Strike Threats",
"China",
"DF-21D",
"Anti-Satellite (ASAT) Weapons",
"J-20 Stealth Fighter",
"Proliferation to Libya",
"Iran",
"High Precision Anti-Tank Rockets",
"Iranian-Made Cruise Missile",
"Strait of Hormuz73",
"Russia",
"Drones",
"Club K Cruise Missile",
"SA-24 \"Grinch\" Surface to Air Missiles to Venezuela",
"Potential Implications for Enemy Precision Strike Capabilities Against U.S. Forces",
"Forward Operating Bases (FOBs)",
"Carrier Operations",
"Amphibious Assault",
"Issues for Congress",
"Congressional Oversight of Plans and Programs—Technology",
"Fifth Generation Fighter",
"Aegis Combat System",
"Naval Research Advisory Committee's Counter G-RAMM Study",
"Strategic Precision Strike Plans and Programs",
"AirSea Battle102",
"Long-Range Strike System",
"Further Inquiry"
],
"paragraphs": [
"",
"This report provides background information and considers issues for Congress related to the worldwide proliferation of \"precision strike\" capabilities. Precision strike systems utilize projectiles, bombs, missiles, torpedoes, and other weapons that can actively correct for initial-aiming or subsequent errors by homing on their targets or aim-points after being fired, released, or launched. Some analysts state that \"the United States took an early lead in exploiting the promise of precision-strike systems and the use of precision weaponry has given the United States a battlefield edge for twenty years. However, these weapons are now spreading: other countries, and non-state actors, are acquiring them and developing countermeasures against them.\" As precision-strike capabilities spread, will the United States see its edge erode? The fact that this ability of the United States to project power could also diminish, possibly leaving U.S. forces—and eventually the United States itself—increasingly vulnerable to precision weapons in the hands of its adversaries, will raise a number of serious considerations for Members of Congress.\nSuch proliferation could lead to events such as the following:\nU.S. ground forces having to fight without the inherent safety of air superiority/supremacy, leaving them vulnerable to attack by enemy air forces for the first time in nearly 70 years. U.S. naval forces being restricted from protecting the world's waterways by anti-access/area denial measures, such as those under development in China, which could directly affect the U.S. ability to support key allies and greatly affect international trade and commerce. Use of Guided Rockets, Artillery, Mortars and other Missiles (G-RAMM) against a U.S. expeditionary force's Forward Operating Bases (FOBs).\nThe proliferation of precision strike creates potential issues for Congress. Oversight issues include whether the Department of Defense (DOD) is properly taking adversary precision strike weapons into account in its own plans and programs. Authorization and appropriations issues include whether Congress should approve, reject, or modify proposed DOD programs for responding to those weapons. Congress's decisions regarding combating the proliferation of precision strike in its oversight role could be wide-ranging, substantially affecting a variety of key factors, including\ncapabilities and funding requirements; service force levels and missions; technology proliferation strategy; forward-deployed basing considerations; level of support given to allies; strength of U.S. influence around the globe; and the defense industrial base.\nFinally, should Congress legislate requirements for DOD to develop precision strike countermeasures and then provide funding for that research and development?",
"",
"Precision Strike —Precision strike is the striking of an adversary while utilizing guided munitions.\nLong- Range Strike —\"The capability to achieve a desired effect(s) rapidly and/or persistently, on any target, in any environment, anywhere, at any time.\" For example, bomber aircraft such as the B-52, B-1, and B-2 are long-range strike aircraft capable of taking off from the continental United States (CONUS) and striking targets anywhere in the world.\nPrecision Guided Munition (PGM) —A weapon that uses a seeker to detect electromagnetic energy reflected from a target or reference point and, through processing, provides guidance commands to a control system that guides the weapon to the target. For definition's sake, the \"term guided munitions will hereafter refer to projectiles, bombs, missiles, torpedoes and other weapons that can actively correct for initial-aiming or subsequent errors by homing on their targets or aim-points after being fired, released or launched. Prominent examples of guided munitions in U.S. combat experience during the past six decades include naval surface-to-air missiles (SAMs) such as the American Talos, the Soviet built SA-2 SAM, laser guided bombs (LGBs), the Sidewinder and Sparrow III air-intercept missiles (AIMs), the Tomahawk Land Attack Missile (TLAM), the Conventional Air Launched Cruise Missile (CALCM) and the Joint Direct Attack Munition (JDAM).\"\nSmart Bomb —A steerable, radio-controlled, laser- or satellite-guided bomb designed to precisely hit a target and minimize collateral damage. A member of the PGM family.\nDumb Bomb —\"A bomb that is neither powered nor guided and depends on accurate dropping on the target for its effectiveness.\"\nAir Superiority —\"That degree of dominance in the air battle of one force over another that permits the conduct of operations by the former and its related land, maritime, and air forces at a given time and place without prohibitive interference by the opposing force.\"\nAir Supremacy —\"That degree of air superiority wherein the opposing air force is incapable of effective interference.\"\nAnti-Access —\"any action by an opponent that has the effect of slowing the deployment of friendly forces into theater, preventing them from operating from certain locations within that theater, or causing them to operate from distances farther from the locus of conflict than they would normally prefer.\"\nArea Denial —\"activities that seek to deny freedom of action within areas under the enemy's control.\"",
"Guided weapons, including the V-1 cruise missile and V-2 ballistic missile, but also the Fritz X air-to-surface weapon, were first used in combat by Germany during World War II. However, the United States took the lead in developing the precision weapons in the decades that followed.\nIndeed, many of the weapon systems associated with the information revolution—precision-guided munitions (PGMs), unmanned air vehicles (UAVs) and sensors—date back to the 1960s and 1970s, and many saw their debut in the Vietnam War.\nBetween 1968 and 1973, for example, the Air Force and Navy expended more than 28,000 laser guided bombs (LGBs) in Southeast Asia, mainly against bridges and transportation chokepoints.\nThese quotes highlight the fact that precision weapons are not a new idea, even though they have gained prominence in relatively recent years. In 2007, Center for Strategic and Budgetary Assessments (CSBA) analyst Barry Watts released a report detailing the history of precision-guided weapons starting at the end of World War II (WWII) covering the past six decades. He notes, \"The fact that early trials of weapons conceptually recognizable as guided munitions occurred so many decades ago suggest how long, uneven, and troubled an emergence many of these weapons have had, notwithstanding some early successes in actual combat.\" Only recently, starting with the successful use by the United States during Operation Desert Storm, has the world seen the kind of impact precision guided weapons can have.\nThe military services have accepted the development and employment of precision-guided weapons at both different rates and to different degrees. For example,\nthe U.S. Navy began employing guided torpedoes during World War II and, during the Cold War that followed, the only unguided torpedo the USN's submarine community accepted into operational service had a nuclear warhead. The U.S. Army's tank community, on the other hand, relies to this day primarily on aimed fire from a high-velocity main gun for tank-on-tank engagements. The fundamental reason for the wide variation in when different Services and communities within those Services embraced guided munitions appears to lie in the complexity of engagement dynamics. The more dimensions in which the delivery platform, the target platform, or both, can maneuver, the stronger the tactical imperative to move to guided munitions.\nIn addition, the Navy historically has faced a greater number of asymmetric threats requiring PGM technology in order to counter. Examples include the German U-boats, as well as the Japanese kamikazes, which explains, to a certain extent, the fondness the Navy has shown over the years for PGMs and their associated technology.\nEffective PGMs took some time to \"arrive.\" \"For the most part, the conventional guided weapons of the 1940s, 1950s, 1960s and early 1970s were too few, too inaccurate, too unreliable, or too susceptible to simple countermeasures to precipitate anything approaching a revolution of military affairs (RMA) comparable to the rise of armored warfare (Blitzkrieg) or carrier aviation during the interwar years 1918-1939.\" It was not until the 1991 Gulf War that PGMs as known today really came into their own.",
"",
"The unparalleled accuracy of PGMs has increased the effectiveness of the air campaign exponentially, and\nthe Gulf War showed how radically precision attack had transformed the traditional notion of running a military campaign and, especially, an air campaign. On opening night of the war, attacks by strike aircraft and cruise missiles against air defense and command and control facilities essentially opened up Iraq for subsequent conventional attackers. Precision attacks against the Iraqi Air Force destroyed it in its hangars, and precipitated an attempted mass exodus of aircraft to Iran. Key precision weapon attacks against bridges served to 'channelize' the movement of Iraqi forces and create fatal bottlenecks, and many Iraqis, in frustration, simply abandoned their vehicles and walked away.\nThe results were striking: \"this destruction had taken place in an astonishingly short time; whereas, in previous non-precision interdiction campaigns, it often took hundreds of sorties to destroy a bridge, in the Gulf War precision weapons destroyed 41 of 54 key Iraqi bridges, as well as 31 pontoon bridges hastily constructed by the Iraqis in response to the anti-bridge strikes, in approximately four weeks.\"\nThe Gulf War also illustrated the improved efficiency and effectiveness precision strike can yield:\nthe combination of the stealthy F-117 Nighthawk aircraft and PGMs gave U.S. forces extremely high effectiveness. A typical non-stealth strike formation in the Gulf War required thirty-eight aircraft, including electronic warfare and defense suppression aircraft, to allow eight planes to deliver bombs on three targets. By contrast, only twenty F-117s armed with 2,000 lb LGBs were able simultaneously to attack thirty-seven targets in the face of more challenging defenses. As a result, although F-117s flew only 2 percent of the total attack sorties in the war, they struck nearly 40 percent of strategic targets, such as leadership and command and control facilities.\nAdditionally, \"on one night alone, 46 F-111F attack aircraft dropped 184 LGBs, which destroyed 132 Iraqi armored vehicles.\"",
"Operations in Kosovo in 1999 represented a step forward in the use of precision strike.\nThe 1999 war over Kosovo saw the introduction of a new generation of PGMs guided by data from the Global Positioning System (GPS) satellite constellation, most notably the GBU-31 Joint Direct Attack Munition (JDAM). The weapon consists of a $20,000 kit, including a GPS receiver, sensors, and tailfins, that converts an unguided bomb into a guided weapon. In contrast with the laser-guided bombs used in Vietnam and the Gulf War, such weapons allow aircraft to strike at night and through inclement weather.\nThe B-2 bomber was instrumental in the successful air campaign, as it \"delivered 652 2,000-pound (lb) JDAMs and four 4,700-lb Global Positioning System (GPS)-Aided Munitions (GAMs) against Serbian targets during NATO's 78-day air campaign\" with an accuracy rate over 90% within 13 meters (42.7 feet).\nAs precise as the PGMs guided by GPS are, they are still only as good as the coordinates/data placed into their guidance systems. An example of an error in the use of PGMs was the accidental bombing of the Chinese Embassy on May 7, 1999. On this date, a B-2 bomber dropped two JDAMs onto the Chinese Embassy by mistake due to faulty targeting and maps. The bombs accurately struck their targets consistent with their programming; their programming was wrong.",
"By the time the United States initiated operations in Iraq and Afghanistan in the early 2000s, the situation with respect to precision strike had changed dramatically.\nBetween 1991 and 2003, PGMs grew from a niche capability to represent a new standard of warfare. Whereas 8 percent of the munitions employed during the Gulf War were guided, 29 percent of those used over Kosovo eight years later, 60 percent of those used in Afghanistan ten years later, and 68 percent of those used in Iraq twelve years later were guided. In Afghanistan, the JDAM became the weapon of choice for U.S. forces. Between October 2001 and February 2002, U.S. forces dropped 6,600 of the munitions; during just one ten-minute period on October 18, 2001, the Air Force dropped a hundred of the bombs. Two years later in Iraq, U.S. forces dropped more than 6,500 JDAMs in the march on Baghdad.",
"JDAMs were not the only new technology to be used during the Kosovo war. Modern UAVs, such as the Air Force RQ-1A Predator, were used for the first time for reconnaissance and surveillance. Today, as technology and tactics have evolved, those same UAV platforms armed with such weapons as Hellfire missiles are being used extensively in the war on terror. Hellfire missiles have multi-mission, multi-target precision-strike capability, and can be launched from multiple air, sea, and ground platforms. \"In November 2002, an AGM-114A Hellfire air-to-surface missile launched by a Predator destroyed a car carrying six terrorists, including Salim Sinan al-Harethi, Al Qaeda's chief operative in Yemen and a suspect in the October 2000 bombing of the destroyer USS Cole.\" More recently in September 2011, armed drones reportedly operated by the CIA successfully unleashed a barrage of Hellfire missiles at a car carrying Anwar al-Awlaki, an American-born Muslim cleric, and other top operatives of Al Qaeda's branch in Yemen, killing Mr. Awlaki after a two-year manhunt.\nThe use of precision strike has influenced warfare to such an extent that military forces now have the capability of accurately targeting specific individuals. There is also the inherent ability to limit collateral damage by picking the right-sized weapon for the respective target. A further example of this capability is provided by a DOD press release related to U.S. operations in Afghanistan:\nCoalition forces conducted a precision air strike August 21, 2010, targeting a Taliban subcommander in charge of about 10 fighters and facilitation of foreign fighters from Pakistan to Nangarhar. Afghan and coalition forces tracked the commander as he met with at least 25 insurgents armed with assault rifles and rocket-propelled grenades in Deh Bala district to plan an upcoming attack. The commander and a group of 15 insurgents eventually broke from the group and began walking toward an insurgent camp. After positively identifying the commander and ensuring no women or children were present, coalition forces conducted the precision air strike against the commander.... The security force estimated the strike killed 12 insurgents, possibly including multiple Pakistani fighters from Waziristan as well as Taliban fighters. No civilians were wounded or killed.",
"",
"Previous examples have shown how the United States, a major state actor, has used precision strike technology since World War II. However, these weapons are also becoming more available to non-state actors. In the July 2006 war between Israel and Hezbollah, elements of both conventional and irregular warfare were present. According to a study prepared for DOD,\nDuring the 33-day war Hezbollah not only used unguided surface-to-surface rockets, improvised explosive devices (IEDs), and rocket-propelled grenades (RPGs), it also employed a number of guided weapons against Israeli forces, in particular anti-tank missiles and, in one instance, an anti-ship cruise missile (ASCM). With the assistance of its patrons in Tehran and Damascus, Hezbollah was therefore able to acquire the weapons, C4ISR capabilities, and training necessary to develop an effective, \"low-end\" reconnaissance-strike complex designed to impose heavy costs on an invading ground force.\nThere are also reports that Hezbollah has not only restocked its arsenal of rockets and missiles, but that it has also expanded and improved its capabilities by acquiring systems of greater range and accuracy. Some analysts argue that Hezbollah's successful use of a Chinese-designed C-802 ASCM against an Israeli corvette off the coast of Lebanon should be viewed as \"a warning ... for other advanced naval forces: they cannot afford to overlook force protection and defensive requirements against maritime armed groups or hybrid threats that possess state-like capabilities despite their relative small size or non-state status.\"\nOthers note that this hybrid tactic used by Hezbollah, which included a large-scale use of laser-guided anti-tank missiles, as well as mines, made it difficult for the Israeli ground troops to maneuver their tanks and armored personnel carriers: \"The Israelis were forced to move slowly and carefully. Deprived of their traditional advantage of being able to move fast, the Anti-Access/Area Denial (A2/AD) tactics of Hezbollah, at least in the early stages of the war, was a success.\" They were able to show how a non-state actor could impose significant costs against a superior military force given sufficient resources and training. Some of these same costs can also be seen with China's emerging A2/AD network, although it has not been tested in combat, which nevertheless highlights a number of potential vulnerabilities in the United States military's posture in the western Pacific such as lengthy supply lines, reliance on foreign ports and airbases that could be held vulnerable, and as support for regional allies.",
"Over time, the United States has come to rely on some key elements in prosecuting its global responsibilities that are facilitated by its dominance in precision strike. The first is unfettered access in protecting the global commons. An appreciation that extends back as far as Mackinder and Mahan, \"the ability to protect and control the maritime commons gives unparalleled influence and underpins global systems of trade and commerce.\"\nA second key advantage stemming from U.S. success with precision strike is air superiority. Precision strike is not the only reason the United States has enjoyed air superiority over the years, but it does play a key role. U.S. ground forces have enjoyed the freedom of not having to fight under enemy attacks from the air for nearly 70 years. The Iraqi Air Force was all but destroyed by PGMs as its planes remained in their shelters. The outcome of Desert Storm may have been different had the United States not had air superiority/air supremacy from the beginning of the war. The ground forces could have been left to face a battle-hardened Iraqi force that, at the time, was the fourth-largest army in the world. U.S. casualties could have been significantly higher and could have extended the overall length of the war.\nA final key element of the U.S. monopoly of precision strike ties in with the previous two. It is freedom of movement. Freedom of movement is an essential element to warfare, whether on the ground as the sweeping, famed \"left hook\" the XVIII Airborne Corps performed during the Gulf War showed, or on the sea as was demonstrated in 1996 when President Clinton ordered two U.S. aircraft carrier battle groups into the waters near Taiwan in response to aggressive actions by the Chinese.",
"The Global Positioning System (GPS) is a space-based satellite navigation system that provides location and time information in all weather, anywhere on or near the Earth, where there is an unobstructed line of sight to four or more GPS satellites. It is maintained by the U.S. government and is freely accessible by anyone with a GPS receiver. Some civilian receivers are controlled by the U.S. government via export controls. All GPS receivers capable of functioning above 18kms (11 miles) and speeds in excess of 515 meters per second (1,000 nautical miles per hour) are classified as weapons or munitions capable for which State Department-approved export licenses are required. The restrictions attempt to prevent use of the receiver in a ballistic missile, but the restrictions would not prevent the use in a cruise missile, which travels at much lower altitudes and slower speeds.",
"Effective use of precision strike weapons goes beyond that of the weapon itself. The weapon is one part of an elaborate system or complex. To launch a precision strike, the actor would need to possess the weapon, some sort of guidance system (whether it is a Global Positioning System [GPS] or something different), sensors to locate the target, command and control of the weapon system, effective doctrine on implementation, and, finally, organization to bring all the components together. Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) plays a critical role in precision strike. Being able to develop and successfully implement the entire spectrum of these systems has given the United States the advantage in the precision strike arena. In addition, the United States has outspent everyone else for decades.\nHowever, some analysts state that\nwe should not be surprised by the spread of precision-strike capabilities. Some suggest it was historically inevitable, even if the process has been accelerated by the commercial availability of key supporting capabilities, such as imagery and command and control. Of greatest significance, however, is the universal free access to precision navigation and timing data, such as that from the U.S. GPS satellite constellation. Whereas the development of the precision guidance cost the United States billions of dollars over the course of decades, both state and non-state actors can now strike accurately with minimum investment.",
"One factor contributing to the long-term U.S. dominance in precision strike capabilities may be the cost of building and maintaining GPS:\nRockwell Collins International manufactured the original NAVSTAR satellites that comprise the current United States GPS system. This system was originally developed by the U.S. Department of Defense with an estimated cost of over $12 billion. The U.S. Navy and the U.S. Air Force combined to form NAVSTAR in 1973, and they launched the first satellite in 1974. Subsequent launchings, with satellites produced by Boeing and Lockheed Martin, have produced the current constellation of 24 operating satellites that became fully operational on December 8, 1993. The estimated annual cost to operate and maintain the GPS satellite system is $750 million.",
"Russia's Global Orbiting Navigation Satellite System (GLONASS) is a global positioning system like the American and European GPS networks. GLONASS is operated by the Russian Space Forces and uses radio time signals to locate people and vehicles on and above the surface of the Earth.\nIn 1982, the former USSR matched America's NAVSTARs with a new generation of high-flying navigation satellites when it launched the test satellites Cosmos-1413, Cosmos-1414 and Cosmos-1415 on one rocket to start GLONASS. The first operational satellites went into service in December 1983. Russia continued building the GLONASS system after the old Soviet Union dissolved in the early 1990s. The system was in full operation by December 1995.\nA poor economic situation after the fall of the Soviet Union left Russia with only eight GLONASS satellites in operation by 2002. Economic conditions improved and 11 satellites were in operation in 2004. A total of 14 were in orbit at the end of 2005.... Like the U.S. and European GPS networks, the complete GLONASS constellation was, and again in the future is to be, 24 satellites. That would include 21 operating in three circular orbital planes, and three satellites standing by on orbit as backup spares.\nOn December 8, 2011, GLONASS regained full operational capability.\nToday, GLONASS is still primarily a Russian military system but is being pushed more and more into the civilian marketplace by the Russian government. \"Russian Federation Presidential Decree from 17 May 2007 granted the international community unrestricted access to GLONASS navigation services free of charge.\" As such, GLONASS will continue to be pushed as a dual use (military and civilian) global navigation system.",
"On December 27, 2011, China started its own regional global positioning system. A regional system, as the name implies, focuses on a specific area or region of the globe. This differs from a global system, which requires many more satellites for worldwide capability. The Chinese regional system, called Beidou, or Big Dipper, is composed of \"10 orbiting satellites, covers an area from Australia in the south to Russia in the north. Signals can reach the Xinjiang Uygur autonomous region in the west and the Pacific Ocean in the east. With six more satellites to be launched next year, the system will cover a wider area and eventually the entire globe by 2020 with a constellation of 35 satellites.\" This new global positioning system capability will enable China to control its own precision strike weapons without reliance on any other country's system such as the U.S. GPS or Russian GLONASS.\nAn independent global navigation system could give China a considerable strategic military advantage in the event hostilities should break out in the Asia Pacific Region.\nMost notably, such an advantage would be useful in countering foreign naval forces and with particularity those of the United States. Of late, China has been posturing its desire to obtain the ability to eliminate United States' aircraft carriers through the use of its DF-21D ballistic missile. With an active GPS such as Beidou in place, China could theoretically use that capability in combination with drones to accurately guide these anti-ship missiles to their targets. Such an advantage could prove useful in deterring or hindering the ability of the United States or even India to project air power to intervene with any military operation China decides to take against Taiwan, the Philippines or any other interests China has in the South China Sea.\nSome analysts say China is accelerating its military space program to target U.S. aircraft carriers. The surge in development and launch activities has also caught the attention of the U.S. Secretary of Defense and has begun to affect DOD planning. Little U.S. or political and media attention has focused on this trend, which some are calling a new space race with only one participant.\nDuring 2010, China launched 12 military satellites, more than doubling its previous rates of three to five launches each year between 2006 and 2009. Since 2006, China has launched about 30 military-related spacecraft. Its total of 15 launches in 2010 set a new record for China and for the first time equaled the U.S. flight rate for a given year.\nAt least three or four different Chinese military satellite systems are being networked to support China's 1,500 km plus range DF-21D Anti-Ship Ballistic Missile (ASBM) program, say U.S. analysts. The DF-21D is being designed to force U.S. Navy aircraft carrier battle groups and other large U.S. allied warships to operate hundreds of miles farther away from China or North Korea than they do today.\nYaogan spacecraft form the core of Chinese military space operations. But this designation is a cover to maintain secrecy for at least four different military designs, including satellites with electro-optical digital imaging cameras, a totally different spacecraft with synthetic aperture radar imaging, a third type with signal intercept and a fourth with electronic eavesdropping capability. A fifth version is for formation flight and has ocean surveillance sensors. Thirteen Yaogan satellites launched since 2006 are engaged in military space activity and most remain operational.\nIn written testimony to the Senate Armed Services Committee on February 16, 2012, Defense Intelligence Agency Director Lieutenant General Ronald Burgass Jr. stated that China operates many satellites for research, weather monitoring, communications, and reconnaissance purposes. He continued that it is tough to know exactly what China is getting out of these spacecraft, as Beijing rarely acknowledges direct military applications of its space program and refers to nearly all satellite launches as scientific or civil in nature.\nAndrew S. Erickson, a Naval War College expert on China's naval and space forces, has written a number of articles on China's emerging space capabilities. He opines that China appears to have very advanced capabilities in both electro-optical and radar imaging, with very high resolution. These are capabilities that could be used to further develop space-based information, surveillance, and reconnaissance to support precision strike.\nSome see Chinese space launches as essential to an increased ASBM capability. Ian Easton, for example, a research fellow at the Project 2049 Institute, based in Arlington, VA, recently wrote in the \"Asia Eye\" blog, that \"unlike previous electro-optical and radar imagery satellites deployed in the series, the Yaogan 9 launch positioned three satellites (A/B/C) orbiting in a highly choreographed triangular formation, suggesting that China had deployed a dedicated Naval Ocean Surveillance Satellite system to bolster the ASBM program. Space-based surveillance and cueing capabilities represent an essential (and previously underdeveloped) element of the ASBM program.\" Some experts believe the September 2010 launch of the Yaogan-11A/B/C are radar imagery satellites with all weather, day/night capability and could be used to help track carrier strike groups.",
"Many experts believe the proliferation of precision strike has already begun and will continue to accelerate as more and more countries continue to develop and purchase precision strike weaponry. The chart below was developed by James Howe in association with the Office of the Secretary of Defense Net Assessment Summer Study in 2010 titled \"The Growth and Spread of the Precision Strike Regime.\" The chart displays a snapshot of estimated worldwide precision strike capabilities between 2020 and 2040.\nAccording to the study, \"this map offers a first-order estimate of the geography of the mature precision-strike regime. It shows that the growth and spread of the precision strike regime is likely to be quite uneven.\nCategory I countries are those that are capable of fielding all elements of a precision strike system. Category II countries are those that are capable of fielding some elements of a precision strike system and purchase the rest. Category III countries are those that will be forced to purchase most elements of a precision strike system. Category IV countries are those that will have commercial access to some precision strike munitions, particularly short range systems.\"\nIn addition, some countries are developing capabilities aimed at countering U.S. precision strike dominance. The following is a sampling of a few countries actively developing and/or purchasing precision strike weapons and/or countermeasures. These three countries are a sampling and by no means a comprehensive worldwide overview.",
"Some analysts believe an increasing effectiveness and reach of both piracy and the proliferation of long-range and sophisticated anti-ship weapons could alter today's unrestricted access to the global commons. China's Anti-Access/Area Denial (A2/AD) strategy in particular may highlight some of the potential challenges of the future.\nMany defense experts argue that China's A2/AD build-up is designed to disrupt potential U.S. power projection in the western Pacific, as well as project power within and beyond the South China Sea: \"The PLA's aggressive posture in the South China Sea and its increasing military edge over Taiwan are sources of concern—as are its investments in nuclear submarines, which suggest China is seeking to support operations well beyond Taiwan.\" Chinese use of PGM technology may allow China to effectively block U.S. forces from strategic areas such as the South China Sea and the defense of Taiwan.\nPrecision strike capabilities are central to Chinese military modernization, especially in development of its anti-access doctrine. According to CRS Naval Specialist Ron O'Rourke,\nDOD and other observers believe that the near-term focus of China's military modernization effort, including its naval modernization effort, has been to develop military options for addressing the situation with Taiwan. Consistent with this goal, observers believe that China wants its military to be capable of acting as a so-called anti-access force—a force that can deter U.S. intervention in a conflict involving Taiwan, or failing that, delay the arrival or reduce the effectiveness of intervening U.S. naval and air forces. Anti-Ship Ballistic Missiles (ASBMs), attack submarines, and supporting C4ISR systems are viewed as key elements of China's emerging anti-access force, though other force elements—such as Anti-Ship Cruise Missiles (ASCMs), Land Attack Cruise Missiles (LACMs) (for attacking U.S. air bases and other facilities in the Western Pacific), and mines—are also of significance.\nThe elements of China's new strategy (with the exception of mines) are heavily composed of precision guided weapons (ASBMs, ASCMs, LACMs, torpedoes). As mentioned previously, the developing Beidou satellite positioning system will eventually help serve as the guidance enabler for these PGMs.\nSome analysts state that precision strike is part of China's asymmetric response to U.S. air and naval superiority. One argues, for example, that\nwhen the cold war ended, the Pacific Ocean became, in effect, an American lake. With its air and naval forces operating through bases in friendly countries like Japan and South Korea, the United States could defend and reassure its allies, deter potential aggressors and insure safe passage for commercial shipping throughout the Western Pacific and into the Indian Ocean. Its forces could operate everywhere with impunity.\nChina has shown, and many in the Defense Department agree, that Beijing is not trying to match American power plane for plane or ship for ship. Rather, it is using this A2/AD strategy to prepare asymmetrically for any future potential clash with the United States.",
"In September 2010, then U.S. Secretary of Defense Robert Gates warned of anti-access and precision strike threats to the United States during an Air Force Association Convention. \"When considering the military-modernization programs of countries like China, we should be concerned less with their potential ability to challenge the U.S. symmetrically—fighter to fighter or ship to ship—and more with their ability to disrupt our freedom of movement and narrow our strategic options,\" he said. Gates went on to say that China's investment in cyber and anti-satellite warfare, anti-air and anti-ship weaponry, and ballistic missiles could also threaten America's primary power projection instruments of forward air bases and carrier strike groups. Some analysts believe the DF-21D is exactly this type of weapon.\nThe Chinese-designated DF-21 (East Wind-21) intermediate-range ballistic missile has the NATO designation CSS-5, and is a variant of the CSS-N-3 (JL-1) submarine-launched ballistic missile developed from the mid-1960s and first test launched in 1982. The road mobile DF-21 was first successfully test flown in 1985, and the missile is a replacement tactical nuclear missile for the liquid-fueled DF-2 (CSS-1). Continued program upgrades and versions appeared in the decades that followed, leading to the present version known as the DF-21D. Some analysts have stated it could be a game changer. The DF-21D version is believed to be for use against ship targets, with a maximum range of 1,450 to 1,550 km. The Re-entry Vehicle (RV) reportedly is maneuverable, which suggests that it could also fly at a low altitude (below 100 m). The target ship location would presumably be supplied by other sensors such as submarines, Unmanned Aerial Vehicles (UAVs), satellites, or even fishing boats, and then the target would be located by the terminal phase sensor in the RV as it approaches the selected ship. It is assumed that the Circular Error Probability (CEP) would be below 20 m, but no figure has been reported. Late maneuverability at such high speeds gives the DF-21D a very dangerous precision strike capability.\nA 2010 CRS report captured observers' concerns about the DF-21D. Such missiles, it argued, \"in combination with broad-area maritime surveillance and targeting systems, would permit China to attack aircraft carriers, other U.S. Navy ships, or ships of allied or partner navies operating in the Western Pacific. The U.S. Navy has not previously faced a threat from highly accurate ballistic missiles capable of hitting moving ships at sea. Due to their ability to change course, the maneuverable re-entry vehicles on the anti-ship ballistic missile would be more difficult to intercept than non-maneuvering ballistic missile re-entry vehicles.\" The DF-21D's 1,500+ km range could result in a large and strategically important denial area that stretches into the Western Pacific, going well beyond Taiwan and the first island chain, which \"stretches from the southern tip of Japan, south past Taiwan on the west and the Philippines and Malaysia on the east, curving around the South China Sea. The second island chain stretches from the middle of Japan far out in to the western Pacific curving southward to Guam and then to Indonesia.\"\nSome analysts worry that\nthe DF-21D ... could be the definitive threat to the surface warship, which has so far survived a century-long struggle against submarines, aircraft and more recently, cruise missiles. In the view of some analysts, surface warships—above all, aircraft carriers—are fundamentally too vulnerable to such a weapon, because their signatures are so large, while the missile is so hard to intercept.\nSkeptics respond that the DF-21D's kill chain can be broken in several places—for example, in target detection and tracking before launch or in the final homing descent. Still given the stakes, it seems that a navy facing DF-21Ds would have to be confident of breaking that kill chain every time.\nIn addition,\nit should be noted that the concept of using ballistic missiles to attack ships at sea has been raised on a number of occasions ... unfortunately for the proponents of such systems, the command loops involved and the difficulty in maintaining real-time targeting data with sufficient accuracy to make the concept viable have always conspired to defeat the successful implementation of the idea. There is no indication that the People's Republic of China has overcome these basic problems and, until more detailed data are forthcoming, these reports must be treated with reserve.",
"In addition to precision strike capabilities, China has also demonstrated an important countermeasure to U.S. precision strike in its anti-satellite weapons development. The first successful satellite intercept was made by China in January 2007 from the Xichang satellite launch center, demonstrating to the world its ability to take down elements of systems such as the U.S. Global Positioning System (GPS) or satellite communications networks without warning. The 2007 intercept was a kinetic weapon; however, high energy-directed weapons can also pose a threat to satellites: \"Given China's current level of interest in laser technology, Beijing probably could develop a weapon that could destroy satellites in the future. Although specific Chinese programs for laser ASAT have not been identified, press articles indicate an interest in developing this capability and Beijing may be working on appropriate technologies.\"\nU.S. military space capabilities remain critically important to the effectiveness of its precision strike weapons and systems. According to analysts,\nAccess to space—which has long been 'militarized' much to the advantage of the United States—is no longer a sure thing. And even where access might be retained, military dominance and supremacy are uncertain. This is a critical vulnerability for U.S. forces, whose weapons, operations, communications and more depend on it.... Intelligence satellites are essential in even the smallest, most irregular operations against the tiniest terrorist groups, but the loss of larger networks in a conflict against a more sophisticated foe—and China is at the forefront in developing and recently testing anti-satellite systems—would be catastrophic.\nAccording to the Director of the Defense Intelligence Agency,\nThe space program, including ostensible civil projects, supports China's growing ability to deny or degrade the space assets of potential adversaries. China operates satellites for communications, navigation, earth resources and intelligence, surveillance and reconnaissance. It has successfully tested a direct ascent ASAT and is developing jammers and kinetic and directed-energy weapons for ASAT missions. Technologies from its manned and lunar space programs enhance China's ability to track and identify satellites, a prerequisite for ASAT attacks. Beijing is also increasing the quantity and quality of its satellite constellations, enabling space-based intelligence, surveillance, and reconnaissance, in addition to navigation and communication services. Some Chinese military commentary heavily promotes the importance of controlling space, noting the role of space in long-distance targeting and other battlefield domains. Beijing, however, rarely acknowledges direct military applications of its space program and refers to nearly all satellite launches as scientific or civil in nature.\nSome analysts believe that ASAT weapons pose a substantial risk to both civilian and military systems:\nCommercial man-made satellites, for instance, offer little, if any, protection against the growing threat of anti-satellite systems, whether ground-based lasers or direct-ascent kinetic-kill vehicles. The Internet was similarly constructed with a benign environment in mind, and the progression toward potential sources of single-point system failure, in the forms of both common software and data repositories like the \"cloud,\" cannot be discounted.\nIn this manner, ASAT weapons could be thought of as counter precision strike in their ability to take down satellites either by kinetic action or jamming of the guidance networks associated with precision strike weapons.",
"When they say they are going to build 300 J-20s in the next five years, they will build 300 J-20s in the next five years.—Vice Chairman of the U.S. Air Force, General Breedlove, testifying before the House Armed Services Subcommittee on Readiness—July 26, 2011\nAnother part of China's ability to deliver precision strike weapons depends on its ability to develop an effective stealth fighter aircraft. Reports note that\nChina conducted its first flight test of the Chengdu J-20 Black Eagle Stealth Fighter during an official visit to Beijing by U.S. Secretary of Defense Robert Gates in January 2011. The J-20 is China's first stealth fighter jet. This flight test surprised many experts as it signaled that China was making faster-than-expected progress in developing advanced generation fighter jet technology. While the J-20 remains in the testing phase, an effective stealth fighter could enhance China's capability to implement an anti-access/area denial strategy to restrict U.S. military access to the region.\"\nThis capability would enable China to deliver precision strike weapons close to a wide range of U.S. targets, even in a robust anti-aircraft environment.\nThe J-20 aircraft appears to share Russian technology:\nExperts say the fifth-generation J-20 fighter ... could have its origins in the Mikoyan 1.44 stealth jet that never made it to the production line.... Similarities between the new Chinese fighter jet and a prototype Russian plane have brought suggestions that Moscow may be quietly helping Beijing compete with the world's military powers.... Only the United States has an operational fifth-generation fighter, which is nearly impossible to track on radar. Russia is working to start serial production of its prototype craft in the next five to six years.\nSome observers believe that the appearance of the J-20 shows significant investment by the Chinese in stealth technology, as well as a very formidable platform to employ precision strike weapons. It is also believed that the fighter is not expected to be operational at a \"significant level until 2018, as China grapples with production hurdles, in particular engine technology.\" In the Department of Defense's (DOD's) latest annual public threat assessment of China's military and security developments, DOD analysts appear to have concluded that the Chengdu J-20 fighter is optimized for air-to-ground missions. \"Systems such as the J-20 stealth fighter and longer-range conventional ballistic missiles could improve the PLA's ability to strike regional air bases, logistical facilities and other ground-based infrastructure,\" the report says, adding that \"the J-20 will eventually give the PLA Air Force a platform capable of long-range, penetrating strikes into complex air defense environments.\"\nThese evolving PLAAF precision-strike capabilities add another layer of anti-access competencies to deter, disrupt, or deny regional bases, as well as naval surface and carrier operations. These include upgraded or new fifth generation aircraft, such as the J-20, that can employ modern precision ordnance, including anti-radiation missiles, air-launched land attack and anti-ship cruise missiles, and a variety of other munitions using laser and Global Positioning System/Global Navigation Satellite System guidance. These last can include \"bunker buster\" munitions that can be employed in long-range attacks on hardened targets such as aircraft shelters and command and control bunkers at regional bases beyond China's periphery. These bases could include Kadena Air Base in Okinawa, Yokota Air Base outside of Tokyo, Japan, and Guam Air Base, potentially making staging, logistical supply/resupply, and force employment difficult.",
"As major state actors such as China continue to modernize and build their defensive arsenals, they also have the potential to provide these new, modern weapons and technologies to smaller, non-state actors. As an example, during what began as part of the Arab Spring uprising and ended ultimately in the death of embattled Libyan leader Moammar Gadhafi, Chinese arms brokers held negotiations with the Libyan government about sales of precision strike weapons:\nChina's Foreign Ministry acknowledged ... that state-run arms companies had met Libyan officials this summer to broker arms sales to Col. Moammar Gadhafi's besieged regime, apparently confirming information in Libyan government documents found by a Canadian journalist in Tripoli.... Officials of Libya's transitional government had expressed outrage over the documents, which were first reported by The Globe and Mail of Toronto. The records indicate that, during the meeting in Beijing in mid-July, Chinese arms merchants sought to sell Gadhafi representatives $200 million worth of sophisticated weapons, including portable surface-to-air missiles similar to the American made Stinger that potentially could bring down certain military aircraft. Chinese arms brokers suggested that the weapons be delivered via South Africa or Algeria, and said that Algeria's existing stock of Chinese arms could be immediately transferred to Libya and replenished by fresh shipments from China.\nThis \"attempted\" sale garnered so much attention due to the passing of United Nations Security Council Resolution (UNSCR) 1970, Libya Sanctions, which banned military assistance to the Gadhafi government. Ultimately there was no evidence that the sale was completed, and Chinese officials remain insistent that no weapons or funds changed hands.\nIn volatile situations such as Libya, the spread of precision weapons can take very uncertain forms. As the Libyan rebels were making progress against pro-Gadhafi forces, reports surfaced in the media that numerous surface-to-air missiles went missing. The Christian Science Monitor reported that\nthousands of shoulder-held surface-to-air missiles (SAMs) are unaccounted for. At one unguarded facility, empty packing crates and documents reveal that 482 sophisticated Russian SA-24 missiles were shipped to Libya in 2004, and now are gone. With a range of 19,000 feet, the SA-24 is Moscow's modern version of the American \"Stinger,\" which in the 1980s helped the U.S.-backed Afghan mujahedeen turn their war against the Soviet Union.\nThis is but one example of how high tech weaponry can spread from a major state actor (Russia) to a minor state actor (Libya) to possibly the black market and terrorist entities.",
"Given current tensions with Iran and its perceived intent to develop a wide range of sophisticated weapons, Iranian precision strike and counter precision strike capabilities are of concern to the United States. One analyst notes,\nThe second concern is Iran, which, like Beijing, is buying into the precision-guided weapons revolution. Its \"poor man's\" version of China's arsenal includes long-range ballistic missiles, supersonic anti-ship cruise missiles, smart anti-ship mines and fast attack boats to \"swarm\" enemy ships. The apparent goal is to turn the Persian Gulf's constricted waters, through which 40 percent of the world's oil shipping passes, into an Iranian lake. This challenge is compounded by Iran's efforts to acquire a nuclear capability, which may encourage it to become more aggressive in its efforts to undermine regional security.\nIn addition, according to the Director of the Defense Intelligence Agency,\nIran is making progress in developing ballistic missiles that can strike regional adversaries and central Europe. In addition to its growing missile and rocket inventories, Iran is boosting the lethality and effectiveness of existing systems with accuracy improvement, new munitions, and salvo launches. Iran's Simorgh space launch vehicle shows the country's progress toward developing an intercontinental ballistic missile.",
"In August 2011, Iran's Defense Minister, Brigadier General Ahmad Vahidi, reported that Iran's defense industry has begun producing a line of anti-tank rockets with the capacity to destroy tanks, armor, and enemy ammunition depots. \"The rocket strong warhead enables objects to be destroyed at a distance of 1,300 meters—it is light-weight with high precision to strike. It plays an important role in close combat and distant strikes,\" he said. The precision strike capability of this new anti-tank weapon sets it apart from Iran's other anti-tank rockets, which are primarily simple aimed projectiles. Moreover, Iran has a history of proliferating weapons to both state and nonstate actors such as Hezbollah, Hamas, and the Palestinian Islamic Jihad.",
"Iran claims to have developed a precision strike cruise missile. According to the Associated Press,\nTehran ... put on display a new Iranian-made cruise missile, which it says has a range of 124 miles and is capable of destroying a warship. The cruise missile, designed for sea-based targets, is the latest addition to Iran's growing arsenal. President Mahmoud Ahmadinejad attended a ceremony ... that showed off the weapon, dubbed \"Ghader,\" or \"Capable\" in Farsi. Iranian state TV says it can travel at low altitudes and has a lighter weight and smaller dimensions. Iran has an array of short and medium-range ballistic missiles capable of hitting targets in the region, including Israel and U.S. military bases in the Gulf. In 2010, Tehran displayed other Iranian-made cruise missiles but with a shorter range.\nOn January 2, 2012, Iran successfully test fired the new missile during a naval exercise practicing closing the Strait of Hormuz.",
"The strategic importance of keeping the Strait of Hormuz open cannot be overstated. The Strait of Hormuz is a narrow passageway connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea and separating Iran from the Arabian Peninsula. It is one of the world's vital oil transit chokepoints. The northern tip of the United Arab Emirates (UAE) forms the southern shoreline of the strait. The UAE, officially created in 1971, is a constitutional federation made up of Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Quaiwain, Ras al-Khaimah, and Fujairah. The Strait consists of 2-mile wide channels for inbound and outbound tanker traffic, as well as a 2-mile wide buffer zone.\nTwo-thirds of the world's oil is transported by ocean; straits and canals are therefore vital in reducing the time and costs of transporting oil, as well as other goods, globally. Any political disturbances or upheavals can cause the \"choking\" of the few important straits for world oil transit and thus disrupt world oil prices. Roughly 17 million barrels, or 40% of the world's oil, passes through the Strait of Hormuz daily.\nUPI reported in February 2011 that Iran announced it is mass-producing ballistic missiles that can travel three times the speed of sound and hit naval targets on the high seas. The head of Iran's elite military force, the Revolutionary Guard, said the missile has a range of 186 miles, is able to hit targets using high precision, and cannot be tracked. \"The announcement of the new missile comes as Iran had celebrations to mark the 32 nd anniversary of its Islamic revolution, which toppled the U.S.-backed Shah ... and the announcements sound a day after the chief of Iran's Revolutionary Guard warned it would close the Strait of Hormuz if Iran were to be threatened.\"\nU.S. defense analysts have said that Iran's Navy does not have the size for a sustained physical blockade of the Strait, but does have mine-laying and precision strike missile capability to temporarily close the Strait. The U.S. Fifth Fleet is based in nearby Bahrain reportedly keeping a close eye on Iranian activity and stated in a press conference that \"any disruption will not be tolerated.\" Iran's development of a precision strike guided missile could potentially increase the difficulty of keeping the Strait open.",
"",
"The use of unmanned aerial vehicles (UAVs) by the United States has demonstrated the capabilities and battlefield advantages that can be had by the use of such technology. From giving commanders aerial footage of the battlefield to launching precision strikes killing terrorists, their role has been ever expanding. Russia joined the armed UAV capable nations on September 2, 2011, when it introduced its first armed UAV, named \"Lutch.\" The aircraft can carry over 350 pounds of \"guided weapons on fuselage pylons including missiles. The pilotless aircraft is designed for optical reconnaissance, radar, radio-relay and electronic reconnaissance missions.\" Based on the Sigma 5 aircraft, it has a 250-350 kms surveillance range, which can be augmented to 500 kms. It can stay in the air for up to 18 hours and can be extended to 30 hours with additional fuel tanks attached. Once operational, these drones could be exported to both state and non-state actors unfriendly toward the United States and its allies. Even so, in order for these systems to fire precision weapons they would need to be utilized as part of a much larger, more complex informational battle space to fully exploit their capabilities.",
"A Russian defense company is currently marketing a new cruise missile system that can be hidden inside a standard shipping container. The housing of the system blends in with the hundreds of thousands of shipping containers used every day in carrying the world's commerce. Some defense experts have expressed fear that a weapon with such camouflage capability could give any merchant vessel the capability to wipe out an aircraft carrier. A Reuters story on the new system reports, \"Potential customers for the formidable Club-K system include Kremlin allies Iran and Venezuela ... and countries could pass on the satellite-guided missiles, which are very hard to detect, to terrorist groups.\"\nThe complete Club-K system is thought still to be primarily a marketing concept, although the basic components of the system all exist as individual items and a full-size, articulated mock-up was on display at the MAKS 2011 air show in Moscow. The system's maker, \"Concern Morinformsystem-Agat, is clearly looking for a customer willing to pay the sums needed to complete development and integration of the finished system.\" It is estimated the cost for the Club-K system is between $10 million and $20 million. For this reason, proliferation to non-state actors \"is unlikely as the manufacturer needs a serious paying customer—at state level—to complete the Club-K.\"\nIn terms of the system's elements,\nEach Club-K CMS incorporates four missile tubes, elevated as a single unit to launch vertically from their transport container (dubbed the Universal Launching Module, ULM). The complete system requires a combat-management module (CMM) and energy-supply and life-support module (ES & LSM). All these components are housed in similar standardized container modules. According to Concern Morinformsystem-Agat's own information the Club-K ULM can be carried by and launched from commercial ships, flatbed railway trucks and regular articulated road haulage vehicles.\nIf true, for anyone with the money to buy one, the Club-K has the potential to give long-range precision strike capability to ordinary vehicles that can be moved around without attracting attention.\nOn the other hand, the Club-K system requires a relatively sophisticated level of targeting data to be used effectively. A user needs precise geo-location data and/or the ability to conduct some level of over-the-horizon targeting to fully exploit the weapon. For use against large infrastructure targets this requirement is less demanding. For use against moving targets at sea, missiles require accurate positional data on targets before launch and then they must rely on the radar seeker to pick out the final target in the terminal phase. The seeker has the ability to assess target size and, therefore, (approximate) target type. Ideally, however, the anti-ship weapon would receive some form of mid-course guidance update support to improve its precision strike capability.",
"The potential sale of up to 2,400 Russian SA-24 \"Igla-S\" or \"Grinch\" missiles to Venezuela has created concern. The Igla-S (Igla-Super or Special) \"has been designed to engage front-line aircraft, helicopter, cruise missiles, and Unmanned Aerial Vehicles (UAVs) under direct visibility conditions both day and night. The system can take a target from both the head-on and tail chase in background clutter and thermal countermeasures environments.\"\nMedia reports have described the Grinch:\nThe Igla-S system (SA-24) became available in the mid-2000s. The missile itself ... is claimed to outperform its predecessors in effectiveness, reliability, service life and survivability. In addition, the system retains all merits of the previous Russian Man-Portable Surface-to-Air Missile Systems (MANPADs); shoulder firing by a single gunner, \"fire-and-forget\" concept, high resistance to background clutter and thermal countermeasures, easy aiming and launching, easy maintenance and training, high covertness of use, retained operability in extreme operational environments.\nIn 2010, U.S. Air Force General Douglas Fraser expressed concern that Venezuela was purchasing as many as 2,400 SA-24 MANPADs, which are considered to be some of the most sophisticated systems in the world and can down aircraft up to 19,000 feet above the ground. \"It's the largest recorded transfer in the U.N. arms registry database in five years, at least. There's no state in Latin America of greater concern regarding leakage that has purchased so many missiles ... referring to reports of Venezuelan arms flowing to Colombian guerrillas.... The Chavez regime also has close ties with Hezbollah and Iran.\"",
"Pentagon planners have considered the potential impact of the loss of U.S. precision strike dominance on future military operations.\nThe observation that U.S. opponents will employ asymmetric capabilities and strategies to counter American conventional military superiority has been made frequently over the past decade. This phenomenon is not new, however, nor is it limited to land warfare. Throughout the 19 th and early 20 th centuries rival nations sought to compete with British naval power while conserving their own resources by developing new weapons platforms, utilizing the inherent advantages of land-based firepower, and exploiting Britain's dependence on overseas resources and extended lines of communication. Although these efforts often failed due to technological and political constraints, in several cases they are being revived today by existing and prospective U.S. opponents, many of whom have a greater incentive to compete asymmetrically than their predecessors given the scale of U.S. dominance, in addition to having access to capabilities far superior in range, accuracy, and endurance than those employed a century ago. Most importantly, however, although it appears increasingly clear that nations such as China and Iran are pursuing these asymmetric capabilities and strategies, they are unlikely to be the only ones.\nMany observers believe that\nfuture adversaries are developing sophisticated new anti-access networks with long-range targeting capabilities, as well as advanced conventional missiles of greater range and precision that can attack both fixed land targets and ships at sea. In future crises, these developments could put some of the U.S.'s most prized Navy and joint-force assets at risk from far greater ranges than before. In other words, these developments threaten to eliminate the virtual operational sanctuaries the U.S. Navy-Marine Corps and joint team has enjoyed since the end of World War II.\nThe following are a few theoretical examples of the impacts on U.S. expeditionary warfighting that can potentially occur as precision strike capabilities grow and proliferate.",
"Setting up and using FOBs in Afghanistan over the past decade, coupled with the increased proliferation in precision guided weapons, has led some military experts to contend that forward-deployed troops could be much more vulnerable in the future to enemy munitions such as rockets and mortars. To address this issue, in the fall of 2011, the Naval Research Advisory Committee—which advises the Office of Naval Research on how to apply science, research, and development to the Navy and Marine Corps—was tasked with conducting a study for countering precision weapons. Reportedly, the draft terms of reference for the study on Marine Corps capabilities for countering precision weapon threats warns of an emerging potential for U.S. adversaries to adopt and employ precision weapons and munitions to improve their lethality. The goal of the study is to identify challenges for countering precision munitions and recommend opportunities to address this potential challenge.\nThe Naval Research Advisory Committee continues stating,\nWe saw the emergence of Forward Operating Bases (FOBs) during operations in Afghanistan, from which the Marine Corps sustains, deploys from, and accomplishes missions against the enemy with small units (squads to companies).... Should these FOBs become subject to precision enemy fire, the Afghanistan mission risk will increase. The Intel [sic] community is seeing greater proliferation of relatively inexpensive Guided Rockets, Artillery, Mortars and Missiles (G-RAMM), which can pose a great threat to future Marine operations. This threat is yet another example of cheap technologies with the potential to have a huge impact on future missions, much like the [improvised explosive devices] have had on recent ones.\nAn example of how this could drastically affect operations occurred approximately five years ago:\nDuring its war with Israel in 2006, Hezbollah fired more than 4,000 relatively inaccurate RAMM projectiles—rockets, artillery, mortars and missiles—into Israel, leading to the evacuation of at least 300,000 Israelis from their homes and causing significant disruption to that country's economy. Out of these thousands of munitions, only a few drones and anti-ship cruise missiles were guided. But as the proliferation of guided munitions—G-RAMM weapons—continues, irregular warfare will be transformed to the point that the roadside bomb threats that the United States has spent tens of billions of dollars defending against in Iraq and Afghanistan may seem trivial by comparison.\nIf a greater percentage of the 4,000 projectiles had been guided, the amount of damage and suffering they caused would have undoubtedly been significantly higher.\nThe same relationship holds true for U.S. forward deployed troops. Some of the larger FOBs in Afghanistan also have airfields from which USAF, USA, and USMC aviation platforms operate. The threat to operations would likely be much greater if the Taliban or another adversary fired a barrage of G-RAMM toward the personnel and equipment. A trained and experienced adversary would have the capability to target specific aircraft or troop facilities with impunity. The resulting casualty rate has the potential to be harmful and may require counter-assets that are capable of successfully targeting and defending against such a threat.",
"The growing threat to carrier operations has been mentioned earlier in this report. It is a potential threat to U.S. Navy operations that many experts believe cannot be ignored. One main aim of carrier operations is the U.S. ability to project power anywhere in the world:\nPower projection, broadly defined to include amphibious operations, has numerous strategic benefits. It can serve to deter many forms of aggression, because aggressors will realize that we can respond appropriately if they try to take a preemptive action. It assures allies of U.S. capability to intervene decisively on their behalf, with forces that can regain ground or compel compliance. It provides the ability to gain and exploit operational access into theaters at a time and place of U.S. choosing, regardless of political or geographical limitation. Finally, it serves as a key element of a cost-imposing strategy to make expensive demands on any potential adversary's plan.\nSome experts believe that given the very clear\ntechnology trends toward precision long-range strike and increasingly sophisticated anti-access and area-denial capabilities, high-signature, limited-range combatants like the current aircraft carrier will not meet the requirements of tomorrow's Fleet. In short, the march of technology is bringing the super carrier era to an end, just as the new long-range strike capabilities of carrier aviation brought on the demise of the battleship era in the 1940s. Factors both internal and external are hastening the carrier's curtain call. Competitors abroad have focused their attention on the United States' ability to go anywhere on the global maritime commons and strike targets ashore with pin-point accuracy. That focus has resulted in the development of a series of sensors and weapons that combine range and strike profiles to deny carrier strike groups the access necessary to launch squadrons of aircraft against shore installations.\nOthers believe carriers will not disappear so quickly, but changing enemy capabilities must still be addressed. As such, in the future the United States may not have the luxury of being able to position forces forward for a period of time so they can commence fighting at a time and in a manner of their choosing. Quite possibly forces will be more vulnerable to attack, forcing U.S. maritime forces to be positioned farther away from shore. If this is the case, then new systems would be needed to help U.S. forces fight through a precision strike network en route to the battlefield.",
"The U.S. Marine Corps' amphibious assault capability has been a key mission for many years. With the advent of precision weaponry, some analysts believe this capability is in question:\nFor example, land-based anti-ship cruise missiles could pose a significant danger to amphibious ships operating over-the-horizon, assuming that initial targeting data could be gathered by UAVs, spotters on civilian vessels, or coastal radars (if amphibious ships were operating relatively close to shore). This situation could grow even more dangerous if advanced Anti-Ship Cruise Missiles (ASCMs) such as the Russian-designed Sizzler—which is capable of supersonic closing speeds and terminal maneuvers, making point defenses against them extremely difficult—become more widely available. Closer to shore, elements of an amphibious assault force could be vulnerable to shorter-range precision weapons. Landing Craft Air Cushions (LCACs), for instance, could be targeted by Anti-Tank Guided Missiles (ATGMs) or short-range missiles located on land near the shoreline, while guided mortars would present an anti-personnel threat that would be difficult to counter, particularly if enemy units were dispersed, highly mobile, and camouflaged by complex terrain.\nAirborne insertion as well as aerial reconnaissance and fire support could prove equally difficult when adversaries possess even rudimentary reconnaissance-strike complexes. An opposing force equipped with Man-Portable Surface-to-Air Missile Systems (MANPADs) and a basic radar system could pose a major threat to rotary-wing platforms, particularly if it employed swarming tactics to attack from multiple angles and utilized the cover of a dense urban environment. More advanced systems, such as truck mounted medium range anti-air missiles, could pose an even greater threat, even against low-to-medium altitude fixed-wing aircraft.\nAdversary precision strike capability against an amphibious assault presents several challenges to current U.S. Navy and Marine Corps operational concepts. An analysis prepared for DOD by the Center for Strategic and Budgetary Assessment says,\nFirst, when facing an opponent that is equipped with ATGMs and precision-guided mortars, efforts to establish a secure beachhead may become prohibitively costly because any large concentration of forces could be the target of extremely accurate attacks that will be difficult to prevent. Second ... the proliferation of land-based ASCMs could enable an opponent to target high signature amphibious assault ships at even greater distances, forcing those ships to make a difficult choice: accept the risk of an attack or operate from beyond the maximum range of their assault vehicles.\nFor these reasons, some analysts criticize the Navy's amphibious assault requirements against this new precision strike challenge. However, some analysts believe that as precision-guided weapons proliferate more widely, a very good case can be made that a forcible entry capability is more valuable than it has been during the recent past:\nFor example, if staging areas for ground troops grow increasingly vulnerable to both short- and long-range guided munitions, then deploying forces over an extended period of time and massing them at a small number of locations close to a theater of operations—both of which are hallmarks of post-Cold War American power-projection—may no longer be tenable. Commanders, for example, may be unable to adequately defend forward staging areas and reluctant to put troops in harm's way before an operation even begins, while host nations may be unwilling to accept the possibility of retaliation against their territory. In theory, troops could be dispersed to a greater number of locations to complicate an enemy's targeting problem, but this would exacerbate political problems (by relying on access from additional countries) and introduce new operational and logistical challenges, in particular supplying and coordinating more widely-dispersed forces. An amphibious assault force, by contrast, could assemble quickly and would not be dependent on the consent of U.S. allies. Alternatively, against an opponent equipped with only a modest Guided Rockets, Artillery, Mortars and Missiles (G-RAMM) inventory, an amphibious assault force could compel the adversary to expand its target set, thus limiting the overall impact of its guided weapons.\nIn a 2011 House Armed Services Committee joint hearing on Seapower and Projection Forces Outlook, Lieutenant General Richard Mills, Deputy Commander for Combat Development and Integration at the Marine Corps Combat Development Command, reiterated his staunch support for the relevance of USMC amphibious assault capabilities. Part of his testimony follows:\nThe Marine Corps and amphibious warfare go back, as you know, quite a while. The initial question we had to answer was: Was amphibious warfare even feasible back in the 1930s as we began to look at an expanding Japanese threat in the Pacific? There were many people back there who said no, it was not a feasible military strategy and was foolish for us to pursue and try to train and equip our forces to do so. I think the success, obviously, in World War II as it evolved and as our tactics changed and our equipment changed, in proven fact, that was a very feasible strategy.\nIn the years since World War II, time and time again, the feasibility of amphibious operations has been questioned, whether it be in 1949 when it was General Bradley who questioned the very idea that an amphibious attack were ever to take place again, followed very shortly thereafter, of course, by the Inchon landing and what many people would describe as the decisive stroke of the Korean War.\nEach time, things have changed. The threat's been more. People have questioned whether or not that was still a feasible military operation. Each time, I think, the Navy and Marine Corps team, backed by the entire joint community, has proven in fact not only is it feasible, but it's extraordinarily valuable as you pursue operations whether across the entire spectrum of military operations, everything from humanitarian relief to full combat operations.\nSo, I would say that those who question the ability of amphibious forces to conduct operations today just don't understand the way that we constantly study, that we constantly adapt, that we constantly change. And we face a threat and we believe that we can overcome it.",
"",
"This report highlights a growing number of precision strike weapons and threats that are becoming available to both state and non-state actors, as well as the increasing potential for proliferation. These developments pose a number of potential issues for Congress that could have a direct impact on U.S. national security. One issue for Congress in its oversight role is whether DOD is properly preparing for potential future conflicts by taking adversary precision strike weapons into account. Doing so requires both acquiring the appropriate capabilities to counter these challenges and developing effective doctrine for exploiting them. Congressional oversight could focus on both aspects.\nThe following are a few potential U.S. military technologies that could be used to combat the growing precision strike threat. This list is a sampling and not meant to be all-encompassing.",
"The United States is the only country that currently possesses an operational fifth generation fighter—the F-22 Raptor. According to the F-22 Raptor Team (Boeing and Lockheed Martin) website, the \"F-22 Raptor is the world's first stealthy air dominance fighter and is capable of multiple missions. Deadly and unseen at long range, unmatched at close-in dogfighting and with superb, precision-strike ground attack capabilities, the F-22 will establish absolute control.\" The Air Force originally planned to procure 750 F-22s to replace the aging F-15A-D fleet. Due to budgetary constraints and cost overruns, the program eventually ended with a final production target of 187 aircraft, well below the original 750 planned. Both China and Russia are currently producing their version of a fifth generation fighter with precision strike capabilities, some analysts argue, that could potentially challenge the F-22 and U.S. air superiority/supremacy dominance.\nCongress may wish to look at the costs and possibilities of restarting the production line should these new threats bear fruit. In addition, it also may look to the Air Force to begin research and development of a sixth generation fighter to ensure technological dominance from the air in terms of precision strike, as well as the ability to fight in any anti-access/area denial environment. Both of these options would be expensive. For example, a study completed in 2009 showed \"the production of an additional 75 F-22s beyond the ... 187 units would increase per-unit cost by an estimated $70 million if the production line were ... to be re-opened.\"",
"The Aegis combat system has served the United States well for a number of years. Many observers speculate, though, that the current Aegis system might not be able to protect adequately against anti-ship missiles such as China's DF-21D. They state the Aegis system was not designed for this type of threat and is vulnerable. A description of the Aegis combat system follows:\nAegis, which means shield, is the Navy's most modern surface combat system. Aegis was designed and developed as a complete system, integrating state-of-the-art radar and missile systems. The Aegis Combat System is highly integrated and capable of simultaneous warfare on several fronts—air, surface, subsurface, and strike. Shipboard torpedo and naval gunnery systems are also integrated. Anti-Air Warfare elements of the Aegis Weapon System MK-7, a component of the Aegis Combat System, include the Radar System AN/SPY-1B/D, Command and Decision System, and Weapons Control System. This makes the Aegis system the first fully integrated combat system built to defend against advanced air, surface, and subsurface threats.\nThe Aegis Combat System (ACS), which is the center of the Arleigh Burke-class destroyers and Ticonderoga-class cruisers, relies on a separate sonar system to track undersea threats like mines, torpedoes, and submarines. The complete package can simultaneously follow land, air, and undersea threats and attacks. The SPY-1A and -1B radar classes are designed for the cruisers, while the -1D class is for the destroyers. The letter \"V\" in SPY-1D(V) means variant.\nThe complete integration of all these systems serves to enhance the capability of a ship to engage and defeat numerous multi-warfare threats simultaneously. The computer-based command-and-decision element is the core of the Aegis combat system. This interface makes the Aegis combat system capable of simultaneous operation against almost all kinds of threats. The Aegis system is being enhanced to act in a Theater Missile Defense role, to counter short- and medium-range ballistic missiles of the variety typically employed by rogue states.\nAn oversight issue for Congress is to verify with the U.S. Navy the current capabilities of the Aegis Combat System. Does it currently allow for adequate protection against missiles such as the DF-21D? Does this protection also include a barrage attack and how effective is the system against this threat every time? Some experts believe that the current Aegis system will require a significant logistical train to support kinetic action against incoming projectiles.",
"As mentioned earlier, the Naval Research Advisory Committee plans to study U.S. Marine Corps capabilities for countering precision weapons. The study is slated to characterize known and potential precision weapons and munitions types that could be potentially exploited by hostile governments and non-state actors, to include relatively inexpensive, home-made weapons. In addition, according to one source,\nthe panel will review and assess the current and planned Marine Corps policies, strategies, approaches (including training), and capabilities for responding to these potential precision weapons and munitions.\nFurther, the panel must identify promising science and technology areas for Marine Corps capabilities that could help detect, track, identify, and engage precision weapons while countering damage caused by the weapons. The study would also recommend any other steps the Marine Corps should take to address the threat posed by precision weapons.\nAll services are affected by this technology, however, with the greatest impact being on the Army and Marine Corps. An issue for Congress is whether or not the entire DOD is taking the proliferation of G-RAMM technology and weapons into account in its programming of future weapon systems? In addition, Congress could ask the services for a briefing detailing work that has been, is being, or is projected to be done on countering precision G-RAMM weapons.",
"The following examples have received attention in various defense publications as well as among think tanks. A related issue for Congress is whether DOD is adequately preparing for current and future containment strategies, such as China's rising anti-access/area denial efforts, which incorporate numerous precision strike platforms and weapons.",
"Appreciating the need to address the growing challenge posed by the emerging A2/AD environment, the Secretary of Defense directed the Department of the Air Force and the Department of the Navy to develop an AirSea Battle concept as announced in the 2010 Quadrennial Defense Review (QDR). (Very little in terms of specificity has been released regarding AirSea Battle, as it still remains a highly classified program.)\nIn response, the services designed an operational concept, focused on the ways and means necessary to neutralize current and anticipated A2/AD threats, to ensure our Joint force maintains the ability to project power and protect U.S. national interests.\nThe AirSea Battle Concept centers on networked, integrated, attack-in-depth to disrupt, destroy and defeat (NIA-D3) A2/AD threats. This approach exploits and improves upon the advantage U.S. forces have across the air, maritime, land, space and cyberspace domains, and is essential to defeat increasingly capable intelligence gathering systems and sophisticated weapons systems used by adversaries employing A2/AD systems. Offensive and defensive tasks in AirSea Battle are tightly coordinated in real time by networks able to command and control air and naval forces in a contested environment. The air and naval forces are organized by mission and networked to conduct integrated operations across all domains.\nThe concept organizes these integrated tasks into three lines of effort:\n1. Air and naval forces attack-in-depth to disrupt the adversary's intelligence collection and command and control used to employ A2/AD weapons systems; 2. To destroy or neutralize A2/AD weapons systems within effective range of U.S. forces; 3. To defeat an adversary's employed weapons to preserve essential U.S. Joint forces and their enablers.\n\"Through NIA-D3, air and naval forces achieve integrated effects across multiple domains, using multiple paths to increase the resilience, agility, speed and effectiveness of the force.\" DOD announced at the beginning of November 2011 the establishment of a new AirSea Battle office, which will \"coordinate military and interagency efforts related to AirSea Battle; supervise how the concept is implemented in terms of organizing, training, and equipping forces; and guide, facilitate and monitor the execution of AirSea Battle force development.\"\nProponents of the concept say it promotes interoperability between the Services, stressing the importance of incorporating this interoperability into the acquisition cycle of new weapon systems, thus improving tactical results/competency and cost effectiveness. Even though a Taiwan scenario against China is the obvious example, the concept has supposedly been developed to work in any generic A2/AD situation. Finally, the AirSea Battle concept combined with the effective use of high-tech weaponry should allow the United States to break the enemy precision strike kill chain in a number of areas, helping to preserve U.S. power projection and freedom of access capabilities.\nCritics, on the other hand, raise a potential negative issue with the concept that deals with escalation. Many question how China, a nuclear power, would react to strikes on its mainland.\nAirSea Battle is intended to inject significant uncertainty into the calculations of adversaries, ideally so that conflict doesn't occur in the first place. This objective of deterring the enemy from initiating acts of aggression in the first place is laudable, but it's also worth considering escalation control. While the AirSea Battle concept is still not presented in detail publicly and its future is unclear, some have noted the escalatory dynamics that lurk within the concept itself. Should deterrence collapse, it is important to keep the conflict as limited as possible, so starting a conflict at the upper end of the escalation ladder would seem to be flawed strategic thinking.\nA potential issue for Congress could be the risk to the United States associated with the aforementioned escalation dynamics.\nA second potential issue for Congress stemming from the AirSea Battle concept is whether DOD is focusing the concept in a broad strategic context or responding solely to a Taiwan-China scenario. Although a Taiwan scenario is probably the most complex, should the final concept be applicable world-wide since substantial funding and weapon acquisition decisions may be based upon it?\nThirdly, Congress may consider the implications of how AirSea Battle accounts for \"geostrategic factors, such as U.S. treaty and legal obligations to defend formal allies and friends in the region. Even more importantly, AirSea Battle is not a U.S. only concept. Allies such as Japan and Australia, and possibly others, must play important enabling roles in sustaining a stable military balance.\"\nFinally, a potential oversight issue for Congress is the effectiveness of the AirSea Battle concept in countering developing military vulnerabilities in the region: \"U.S. ground, air and naval forces have long been accustomed to operating from sanctuary.... The growing Chinese A2/AD capabilities, to include its cyber weapons, threaten to violate these long-standing sanctuaries.\" Many experts believe that future U.S. weapon systems must be able to fight through a precision strike network and not rely on the aforementioned sanctuaries of old.",
"Experts opine that adversary precision strike weapons such as ASBMs and ASCMs may drive the need for an advanced, stealthy, long-range precision strike system as a counter: \"As the U.S. military focuses on fighting in a world where it can no longer count on unfettered access to the airspace over hostile territories, the Pentagon is looking at developing a new generation of precision weapons that can penetrate 21 st -century air defenses and hit targets from thousands of miles away.\" \"Long-range strike is the American javelin that can leapfrog A2/AD defenses and destroy targets on the ... mainland at minimal risk to U.S. forces.\" The U.S. Air Force's next-generation bomber is one such long-range strike program that proponents say can penetrate \"no go\" zones and destroy key enemy defenses, opening the door for non-stealthy platforms which currently make up a majority of DOD's arsenal.\nThe 2010 Quadrennial Defense Review (QDR) states:\nEnhanced long-range strike capabilities are one means of countering growing threats to forward-deployed forces and bases and ensuring U.S. power projection capabilities. The Secretary of Defense has ordered a follow-on study to determine what combination of joint persistent surveillance, electronic warfare and precision-attack capabilities, including both penetrating platforms and stand-off weapons, will best support [U.S. power projection until 2040].\nThese long-range strike systems are also intended to play a significant role in the new AirSea Battle concept. Air Force Vice Chief of Staff General Philip Breedlove stated,\nLong-range strike is the heart of AirSea Battle. Whether that's from a carrier, a bomber, a sub, a flying jammer, or all of them working together, the point is that the Navy and the Air Force have to come from anywhere in the world to overwhelm weapons systems that would otherwise keep the United States at bay. It allows us to penetrate from lightly contested to severely contested airspace and networks.\nThere has been high-level support for the next-generation bomber. When then Secretary of Defense Robert Gates addressed cadets at the United States Air Force Academy on March 4, 2011, he stated that \"a new, optionally-manned, nuclear-capable, penetrating Air Force bomber ... remains a core element of this nation's power projection capability.\"\nAdditional proponents stated the new bomber is the Air Force's biggest new program and is \"a must-have as anti-access/area denial threats improve and proliferate. Such threats are emerging even in what were once considered 'low end' conflicts, which means the service must buy weapons, like the bomber, that can be used across the spectrum of war.\" A new bomber would have the stealth capability to fly long distances, penetrate congested airspace, and destroy adversary precision strike area denial weapons, allowing for U.S. conventional forces to quickly follow.\nFurther, using China as an example, some argue that\ngiven the dispersal of China's bases and its bomber fleet, the U.S. must develop a credible long-range strike bomber, in part as a way to ensure escalation control in any conflict with China. Relying solely on land- or sea-launched missiles for mainland strikes may prove to be destabilizing in a crisis, whereas stealthy manned bombers that can be recalled can serve to hold major targets at risk while preserving operational flexibility.\nThe ability to strike targets worldwide is still an important deterrent for DOD.\nA criticism of the USAF long-range bomber program deals with the next-generation bomber in terms of manned vs. unmanned configuration as well as the complexity of the aircraft. The recall capability has been one argument proponents have used for keeping the bomber manned, while critics argue that neither an SLBM nor an ICBM is manned. Why, they ask, should the bomber be any different? In addition, it has been argued that the next-generation bomber should be programmed for the acquisition of hundreds at a lower cost vs. a few at an extremely expensive price, as was the case with the B-2. In an age of austerity and budget cuts, some say, these \"exquisite systems\" may no longer be viable.\nA potential authorization and appropriation issue for Congress is whether to approve, reject, or modify the proposed long-range strike system such as the next-generation bomber.",
"This report focuses primarily on proliferating precision strike weapons systems and not the myriad issues associated with the ramifications of such proliferation or strategies to defend against them. The following is a short list of possible further questions for Congress to consider:\n1. What are some asymmetric examples of combating the proliferation of precision strike? What are the benefits and risks associated with targeted technology proliferation to U.S. friends and allies? Should the United States increase its building of allied/partner defense capabilities in countries near or surrounding aggressor state and non-state actors? If so, what type of equipment, capabilities and to what extent? 2. In areas that exploit precision strike capabilities to build sophisticated anti-access/area denial capabilities, does the United States have enough surface and sub-surface ships to economically cripple the aggressor state through a naval blockade? If not, what additional assets need to be acquired? What is the cost of these additional assets? What type of timeline is required? 3. What are the ramifications to current DOD overseas and forward-deployed basing considerations due to the proliferation of precision strike? During the build up to Operation Desert Storm, the United States had access to numerous key foreign bases with little threat from Iraq. Would that type of dynamic still be possible today? What about 10, 20, or 30 years into the future? If not, then what is DOD doing to mitigate these threats? Does the DOD need to readjust and develop a new strategy to conduct U.S. expeditionary warfare? 4. In regard to the developed and developing precision strike weapons possessed by China, how does that affect U.S. ability to support democratic Taiwan? What is the impact to the region if the United States appears inattentive to China's rapid military buildup? Conversely, what are the risks and implications to a bold and aggressive U.S. posture toward China? How does the United States maintain the freedom of movement, trade routes, and global commerce that are key to the United States and world economies, as well as to U.S. national security?"
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{
"question": [
"What military development did Iron's emergence in the eighth century B.C. allow for?",
"In what manner have new technologies enhanced new military developments?",
"What challenges will Members of Congress confront due to this continually evolving environment?",
"What allowed the United States to gain a monopoly on the development of precision strike?",
"What do many experts agree with regarding this U.S. advantage?",
"What is one example of how the U.S. advantage is eroding?",
"What did this event demonstrate?",
"Why is access to the global commons fundamental to global commerce and security?",
"What do many experts believe regarding the proliferation of precision strike?",
"Which countries are an example of this concern?",
"What does China's participation in the development and purchase of precision strike weaponry look like?",
"What does Iran's participation in the development and purchase of precision strike weaponry look like?",
"What does Russia's participation in the development and purchase of precision strike weaponry look like?",
"What is one additional concern regarding Russia's development of cruise missiles and systems?"
],
"summary": [
"Iron emerged in the eighth century B.C., helping to usher in the use of cavalry instead of chariots.",
"Today's new technologies, including the development of precision-guided weaponry, have given rise to new methods of war fighting, thus bringing dramatic change to the operational battlefield.",
"As will other decision makers, Members of Congress will confront significant challenges in making their choices about how to adapt to the continually evolving environment, particularly with respect to what are called \"precision strike\" capabilities.",
"The United States took the early lead in the development of precision strike and has enjoyed a monopoly on these systems for over 20 years.",
"However, many experts agree that the U.S. advantage is eroding as these systems spread.",
"A demonstration of this proliferation occurred in 2006, when Hezbollah successfully used a Chinese-designed C-802 Anti-Ship Cruise Missile (ASCM) against an Israeli corvette off the coast of Lebanon.",
"This event demonstrated a non-state terrorist organization's successful use of precision strike technology.",
"In addition, access to the global commons is fundamental to global commerce and security—the proliferation of technology could threaten U.S. unfettered access.",
"Many experts believe the proliferation of precision strike has already begun and will continue to accelerate as more and more countries continue to develop and purchase precision strike weaponry.",
"Three such countries include China, Iran, and Russia.",
"China's recent military buildup and its strategy with an apparent focus on anti-access/area denial capabilities entails a number of precision strike weapon systems to include the DF-21D anti-ship ballistic missile, which some defense analysts have labeled a \"game changer.\"",
"Iran, although at a much smaller and less elaborate scale, has also entered the precision-guided munitions regime with an outward belligerence toward closing the economically vital Strait of Hormuz, where 40% of the world's oil passes daily.",
"Russia continues to supply arms to the international community and is focusing on developing its own fifth generation fighter comparable to the U.S. F-22 Raptor. Finally, a Russian defense company is currently marketing a new cruise missile system that can be hidden inside a standard shipping container.",
"The housing of the system blends in with the hundreds of thousands of shipping containers used every day in carrying the world's commerce. Some defense experts have expressed fear that a weapon with such camouflage capability could give any merchant vessel the capability to wipe out an aircraft carrier."
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GAO_GAO-17-52
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{
"title": [
"Background",
"Women’s Health Care at VA Medical Facilities",
"Environment of Care at VA Medical Facilities",
"VA Care in the Community Programs",
"VHA Lacks Complete and Accurate Data on VAMC Compliance with Environment of Care Requirements for Women Veterans and Does Not Consistently Identify or Address Noncompliance",
"VHA Lacks Complete and Accurate Data on VAMC Compliance with Environment of Care Requirements for Women Veterans",
"VHA’s Oversight Processes Do Not Consistently Identify or Address Noncompliance Due to Weaknesses in Environment of Care Rounds and Related Policies",
"While the Number of VHA Gynecologists and Women’s Health Primary Care Providers Has Increased Overall, Availability Was Limited in Some Locations",
"The Number of VA Gynecologists Has Increased Over Time, but More than a Quarter of VAMCs and VA Health Care Systems Did Not Have an Onsite Gynecologist",
"The Number of VHA Women’s Health Primary Care Providers Has Increased Over Time, but Almost One-Fifth of VA Clinics Offering Primary Care Lacked Such a Provider",
"While the Number of Obstetricians and Gynecologists Participating in Choice Networks Has Increased, VHA Does Not Have Performance Measures for Monitoring Access to Sex-Specific Care under Choice",
"Obstetricians and Gynecologists Participating in Choice Networks Have Increased Nationally, though Some Geographic Areas Lack These Types of Providers",
"VHA Does Not Have Performance Measures for Monitoring Access to Sex- Specific Care under Choice",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments",
"Appendix I: Comments from the Department of Veterans Affairs",
"Appendix II: Veterans Health Administration (VHA) Environment of Care Requirements Inspected by GAO",
"Appendix IV: Veterans Health Administration (VHA) Gynecologist Availability",
"Appendix V: Veterans Affairs (VA) Clinics Without a Women’s Health Primary Care Provider",
"Appendix VI: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"VA’s national health care system is one of the largest in the United States and provides enrolled veterans—including women veterans—with a full range of services including primary care, mental health care, inpatient care, and residential treatment. VA’s national health care system is organized into regionally organized VISNs containing individual VAMCs and health care systems made up of multiple VAMCs. In addition, VAMCs operate VA community-based outpatient clinics that provide basic primary care services on site. VHA is responsible for oversight of the provision of health care at all VA medical facilities.",
"Through its medical facilities, VA provides a wide range of sex-specific health care services to women veterans. Basic women’s primary care services are typically provided by women’s health primary care providers who are trained in providing sex-specific primary care to women veterans. Women’s health primary care providers must maintain clinical competency through ongoing education and training and by having a certain percentage of women veterans on their patient panel. Sex- specific primary care for women veterans includes breast examinations, cervical cancer screenings, management of contraceptive medications, and menopause management. More specialized sex-specific care for women is typically provided by a gynecologist. Services provided by a VHA gynecologist include treatment of menstrual disorders, fertility assessments, treatment of gynecological malignancies, and performance of gynecological procedures such as colposcopy.",
"VHA requires all facilities to follow certain standards related to the environment of care in accordance with agency policy and Joint Commission standards. VHA policies specify privacy, dignity, sense of security, and safety considerations that all clinical spaces in VA medical facilities must meet.\nTo ensure compliance with environment of care standards, VHA directs VAMCs to conduct weekly inspections of the facility (known as environment of care rounds), and all patient care areas must be inspected twice every fiscal year. An environment of care rounds team made up of representatives from various facility departments—such as nursing, police service, and environmental management—is responsible for identifying any instances of noncompliance. The women veterans program manager—a staff person at each VAMC or health care system who is responsible for helping to coordinate services for women veterans—is a member of the environment of care rounds team and is responsible for ensuring compliance with requirements related to women veterans. The environment of care rounds coordinator is responsible for examining rounds data and closing the inspection on an online tool, which then automatically sends a notification to the appropriate medical facility departments to address instances of noncompliance; this data then also becomes available to officials at VHA Central Office. According to VHA policy, noncompliance must be addressed within 14 days, including developing an action plan, if necessary. VHA Central Office maintains a database that contains all noncompliance reports and periodically follows up with facilities to check on the status of open reports.",
"If veterans cannot receive timely care within VA or need care that a VA medical facility cannot provide, VHA is authorized to purchase care for veterans from non-VA providers, known as VA care in the community. Non-VA care is frequently used for women veterans because some VA medical facilities do not offer certain types of sex-specific health care, such as mammography or maternity care. According to VHA, based on fiscal year 2014 data—the latest available data at the time of our review— women utilize more non-VA outpatient care than men. Veterans may be referred to a care in the community program by a VHA clinician, but VA medical facility staff must determine the veteran’s eligibility before authorization for care is granted. Current VA care in the community options include:\nVeterans Choice Program. Choice was established in November 2014 under the Veterans Access, Choice, and Accountability Act of 2014. According to VHA policy, it typically must be the first option considered for providing care in the community to veterans. According to VHA data from March 2016, the majority of care in the community authorizations are for Choice. After a veteran is authorized for Choice, the TPA that administers the relevant Choice network is responsible for (1) contacting the veteran to determine whether she would like to receive Choice care, (2) identifying community providers in the TPA’s network who can meet the veteran’s needs and asking the veteran if she wants to see a specific provider, (3) scheduling an appointment, and (4) ensuring that the veteran’s appointment is within specified time frames. Specifically, after the TPAs have confirmed veterans would like to receive Choice care, the TPAs are contractually required to, among other things: schedule appointments within 5 business days (for routine care) from the time the veteran agrees to participate in Choice or within 2 business days (for urgent care) of accepting the authorization from the referring VA medical facility; ensure that veterans receive care within 30 days of scheduling an appointment for routine care or within 2 business days (for urgent care) of accepting the authorization from the referring VA medical facility; return authorizations to the referring VA medical facility when appointments cannot be scheduled within required time frames; and track the number of authorizations for which they did not schedule appointments for veterans and the reasons why.\nPatient-Centered Community Care (PC3). In September 2013, VHA awarded contracts to two TPAs to develop regional networks of community providers of specialty care, mental health care, limited emergency care, and maternity and limited newborn care when such care is not feasibly available from a VA medical facility. VHA and the TPAs began implementing the PC3 program in October 2013, and it was fully implemented nationwide as of April 2014. In August 2014, VHA expanded the PC3 program to allow community providers of primary care to join the networks. PC3 is a program VHA created under existing statutory authorities, not a program specifically enacted by law, like Choice. Currently, the two TPAs that administer PC3 also administer Choice. The regional networks built for PC3 provided a basis upon which the Choice networks were established.\nIndividually authorized care. VA medical facilities may approve individual authorizations for care in the community from providers who agree to see VA patients. Historically, individually authorized care was the primary means by which VHA provided care in the community to veterans.\nChoice is scheduled to expire in August 2017, or when appropriations for the program are expended, whichever occurs first. The upcoming expiration of Choice does not extend to VHA’s other care in the community programs, which VHA has proposed to consolidate into a single program.",
"VHA Central Office lacks complete and accurate data on the extent to which VAMCs are in compliance with environment of care requirements. VHA relies on VAMC staff to self-report their facilities’ level of compliance with environment of care requirements; however, almost all of the noncompliance that we identified at the six VAMCs we visited was not reported to VHA Central Office. In addition, during site visits, we found that levels of compliance with VHA’s environment of care requirements for women veterans varied.",
"VHA Central Office does not have complete and accurate information on VAMCs’ compliance with the environment of care requirements for women veterans and, as discussed later, does not verify the data it receives from facilities. Based on our inspections, we observed 155 instances of noncompliance at six VAMCs we visited, and almost all (152) of these instances had not been reported to VHA Central Office and entered into its database, according to our analysis of VHA data. For four of the VAMCs we visited, none of the instances of noncompliance we observed had been reported to VHA Central Office. Because VHA Central Office uses this database to track facility compliance, the accuracy of the data is vital for the agency to perform its oversight duties effectively.\nAmong the six VAMCs we visited, based on our inspections, we observed varying levels of compliance with selected VHA requirements related to the environment of care for women veterans, ranging from 65 percent to 81 percent. Across all six VAMCs, outpatient clinics had lower rates of compliance than inpatient units and residential treatment programs. Specifically, outpatient clinics complied with 74 percent of selected VHA requirements related to the environment of care for women veterans; in comparison, inpatient units and residential programs across the six VAMCs each complied with 96 percent of selected VHA requirements. (See table 1.) The number of instances where requirements were applicable varies by facility, due to facility size and types of services available. In addition, at the time of our inspections, circumstances may have precluded us from observing each requirement in every instance; for example, some exam rooms may have been occupied or some clinics were not open. VHA requires VAMCs to comply with its environment of care requirements in all instances where they are applicable. (See appendix III for VAMC compliance rates by each individual requirement we inspected.)\nOutpatient setting. Across the six selected VAMCs, rates of compliance with the selected outpatient environment of care requirements varied. Figure 1 shows how frequently each of the VAMCs was in compliance with the applicable environment of care requirements in the outpatient areas we reviewed.\nSome common areas of noncompliance that we observed in outpatient clinics included the following:\nLack of auditory privacy at check-in clerk station. VHA policy requires that check-in clerk stations must be positioned in a way that protects the privacy of patients who are checking in. However, over one-third (14 out of 40) of all check-in stations we observed across the selected VAMCs were located in such close proximity to the waiting room area that conversations between the patient and the check-in clerk could be heard by other patients. Only one of the six VAMCs we visited ensured adequate auditory privacy at the check-in clerk station in all outpatient clinical settings.\nLack of auditory privacy in procedure and testing areas. VHA policy requires that patients be assured auditory privacy while they are in procedure and testing areas to help protect the confidentiality of their health conditions and treatments. However, in over one-third (11 out of 32) of all outpatient clinics in the selected VAMCs, we observed at least one examination room from which conversations between a patient and provider could be heard from the hallway despite a closed door. Only one of the six VAMCs that we visited was fully compliant with VA’s requirement of auditory privacy in all procedure and testing areas.\nPrivacy curtains not present in all examination rooms. VHA policy requires that all examination rooms be equipped with a privacy curtain. However, in over one-quarter (8 out of 28) of all outpatient clinics that we observed where this requirement was applicable, at least one examination room where women veterans could be asked to disrobe was missing a privacy curtain. Additionally, in many exam rooms where privacy curtains were present, the curtains were positioned in a way that did not adequately shield adjustable exam tables. Figure 2 (right) shows an example of an examination room we inspected that was missing a privacy curtain. In addition, the examination room featured an adjustable exam table placed with the foot facing the door. Both of these are inconsistent with VHA policy.\nSanitary products not available in all women’s restrooms.\nAccording to VHA policy, sanitary napkins and tampons must be made available in all women’s restrooms. However, in over half (40 out of 69) of all women’s restrooms that we inspected across the six selected VAMCs, there were no sanitary napkins or tampons provided. One facility official stated that she places sanitary products only in the restrooms that are most frequently used by women, but this is inconsistent with VHA policy.\nUnrestricted access to examination and procedure areas.\nAccording to VHA policy, access to clinic examination and procedure areas must be limited only to authorized clinic staff and patients with appointments. However, 38 percent (15 out of 39) of the examination and procedure areas that we observed across the selected VAMCs either had unlocked doors that allowed for unrestricted access or were adjacent to other unrestricted clinic hallways, potentially allowing non-clinic staff or individuals that are not patients into the exam area.\nInpatient setting. The only instances of noncompliance that we observed in inpatient units were the following:\nTwo out of the 12 units we visited did not have privacy curtains available in every examination room.\nWhile visiting one unit, we observed a staff member entering a patient room without knocking.\nResidential treatment programs. The only instances of noncompliance that we observed in residential treatment programs were the following:\nOne out of the seven programs we visited did not have appropriate private space for women veterans to visit with children.\nWhile visiting one program, we observed a staff member entering a patient room without knocking.",
"We found weaknesses in VHA’s oversight processes of the environment of care rounds and related policies. Specifically, we identified the following weaknesses:\nEnvironment of care rounds not always conducted in a thorough manner. VHA requires all patient care areas in a medical facility to be inspected twice per fiscal year. According to an official at one facility, when environment of care rounds are conducted at a time of day when care is being provided, the rounds team will not inspect examination rooms and other areas that are being used. As a result, the environment of care rounds team may not inspect every room in a facility twice per fiscal year, as required. Additionally, we found that the checklist—which was developed by an environment of care field advisory committee and is used across VAMCs to conduct the environment of care rounds—lists only 22 requirements for the environment of care, while VHA’s women’s health handbook contains 46 requirements. For example, the checklist does not require inspection teams to examine whether clinical procedure and testing areas have auditory privacy. In our review of the six selected VAMCs, we found that all six exhibited noncompliance with women’s health handbook requirements that are not included on the environment of care rounds checklist.\nResponsibility for addressing noncompliance not always clear.\nAt three of the selected VAMCs we visited, facility staff were unable to identify the medical center department, such as engineering or building maintenance, responsible for correcting identified instances of noncompliance with certain environment of care policies. Without clearly delineated roles and responsibilities, instances of noncompliance are not addressed in a timely manner. For example, at one selected VAMC, we observed a privacy curtain missing from a primary care exam room. The provider who uses this room explained that she reported this noncompliance to the facility’s maintenance department but was told that the replacement of the curtain was not the responsibility of the maintenance department. When we spoke with the provider, it had been 6 months since she had reported the noncompliance, and the issue had still not been addressed. Furthermore, this instance of noncompliance was also among those that the VAMC had not reported to VHA Central Office.\nNo systematic process to verify that medical facilities conduct thorough reviews and fully report noncompliance issues. VHA Central Office does not have a systematic process to independently verify the compliance information it receives from VAMCs. According to an agency official, VHA is largely dependent on the environment of care rounds coordinator at each facility to report information on instances of noncompliance to VHA by entering this information into VHA’s data system. However, VHA does not verify the accuracy and completeness of this information. VHA Central Office officials told us that they do conduct periodic site visits to VAMCs to review the work done by facilities’ maintenance departments, and that one component of these reviews is examining the VAMCs’ compliance with environment of care standards. According to VHA officials, only 4 of these visits were conducted in fiscal year 2015, and 9 of the 12 visits scheduled for fiscal year 2016 were conducted by June 2016. In addition, the sites to be reviewed are not selected randomly but instead are selected based on a request from VAMC or VISN leadership.\nIn our 2010 report, we found similar problems with data accuracy and a lack of clarity in delegated responsibilities. Specifically, none of the medical facilities we visited had fully reported their noncompliance, and we recommended that the agency establish a process to independently validate facilities’ self-reported compliance with environment of care requirements for women veterans. At the time, VA agreed with our recommendation, and agency officials told us that VHA Central Office directed VAMCs to report, on a quarterly basis, information on their noncompliance with the environment of care standards. Agency officials also told us that VHA Central Office directed VISNs to verify this information by conducting separate environment of care rounds as part of the VISNs’ oversight of VAMCs. However, our current findings suggest that there are weaknesses in the operational effectiveness of these actions. Additionally, according to VHA Central Office officials, as of July 2016, VISNs are not conducting these rounds and verifying the extent of compliance among VAMCs. We have previously expressed significant concerns about inadequate oversight and accountability within VA, including that VHA’s oversight efforts have been impeded by the agency’s reliance on facilities’ self-reported data, which lack independent validation and are often inaccurate or incomplete.\nThis failure to verify reported information is inconsistent with federal internal control standards for monitoring, which call for management to establish activities to monitor the quality of performance over time and promptly resolve the findings of audits and other reviews. Additionally, the lack of thorough inspections and of clearly delegated responsibilities is also inconsistent with federal internal control standards for control environment, which require management to establish an organizational structure, assign responsibility, and delegate authority to achieve agency objectives and to evaluate performance and hold individuals accountable for their internal control responsibilities. By not acting in accordance with federal internal control standards, VHA does not have reasonable assurance that its facilities are meeting the agency’s standards when delivering care to women veterans.",
"",
"Our analysis of VHA data shows that the number of VHA gynecologists increased about 3 percent nationally from fiscal year 2014 to fiscal year 2015. Specifically, in fiscal year 2014, there was the equivalent of about 75 full-time gynecologists, and in fiscal year 2015, the number increased to the equivalent of about 77 full-time gynecologists. While the increase in gynecologists exceeded the rate at which women veterans enrolled in VA’s national health care system for the same time period, it remains unclear whether the number of current VHA gynecologists is sufficient to meet demand and whether the distribution of these gynecologists across VA medical facilities is optimal. Thirty-nine of 145 VAMCs or VA health care systems in fiscal year 2015 (about 27 percent) did not have an onsite gynecologist. VHA Central Office officials said that, based on workload, not all VA medical facilities need an onsite gynecologist, and women veterans may receive necessary gynecological services through a care in the community program.\nAt facilities where onsite gynecology was available, the number of VHA gynecologists available to treat women veterans varied. In fiscal year 2015, the number of full-time equivalent gynecologists (for VAMCs or VA health care systems that had them) ranged from 3.18 (Gainesville, Florida) to 0.02 (Dayton, Ohio), which corresponds to less than 1 hour per week. VA data also show that the number of completed gynecology appointments increased across VA, from about 81,000 in fiscal year 2014 to about 85,000 in fiscal year 2015—an increase of about 5 percent. The increase in completed gynecology appointments suggests a greater overall utilization of gynecology services in VA medical facilities. (See appendix IV for more information on the number of full-time equivalent gynecologists by VISN and the number of completed gynecology appointments by VISN.)",
"Our analysis of VHA data indicates that the number of women’s health primary care providers increased by almost 15 percent from fiscal year 2014 through fiscal year 2015. Specifically, in fiscal year 2014, there were 2,130 providers, and in fiscal year 2015, there were 2,439 providers. The increase in providers significantly outpaced the increase in women veteran enrollment (1 percent) during the same time period. In addition, VHA data show that the number of completed women’s health appointments increased across VHA, from about 304,000 in fiscal year 2014 to about 331,000 in fiscal year 2015—an increase of about 9 percent.\nVHA data show that a women’s health primary care provider was available to see veterans about 31 clinical hours per week, on average, at the end of fiscal year 2015. However, that availability included any clinical time women’s health primary care providers spent seeing male veterans. Because women’s health primary care providers see both men and women, according to VHA, it is highly likely that a typical women’s health primary care provider was available for less than 31 hours per week to see women veterans. When VHA adjusted clinical availability data by the proportion of women veterans seen for primary care at each VA medical facility, the data show that a women’s health primary care provider’s availability was estimated at about 6 hours per week, on average, at the end of fiscal year 2015. Fiscal year 2015 was the first year for which VHA collected and validated data on the clinical availability of women’s health primary care providers, and according to VHA officials, the data are considered preliminary and not yet robust enough to compare with the demand for services.\nDespite the increase in providers nationally, VHA data show that 17 percent of VA community-based outpatient clinics that provide primary care and 3 percent of VAMCs or VA health care systems lacked a women’s health primary care provider at the end of fiscal year 2015. Specifically, 151 out of 881 outpatient clinics that provide primary care and 4 out of 155 VAMCs lacked a women’s health primary care provider at the end of fiscal year 2015. (See appendix V for more information on the number of outpatient clinics that provide primary care lacking a women’s health primary care provider.) At least 1 of the 4 VAMCs lacking a women’s health primary care provider also lacked an onsite gynecologist based on VHA fiscal year 2015 data.\nThe fact that nearly 18 percent of VAMCs and outpatient clinics providing primary care lacked a women’s health primary care provider in fiscal year 2015 suggests that VHA may face challenges ensuring that all women veterans have timely access to these providers, as required under VHA policy. Specifically, each VA medical facility must ensure that eligible women veterans have access to comprehensive medical care that is comparable to care provided to male veterans, and veterans should not wait more than 30 days from either the date an appointment is deemed clinically appropriate by a VA provider or, if no such clinical determination has been made, the date a veteran prefers to be seen for care. A VHA official told us that if a women’s health primary care provider is not available at a veteran’s local facility, women veterans can seek sex- specific care at other VA medical facilities, though in these cases women veterans may face longer wait times and potentially longer driving distances. Eligible women veterans may also receive care through Choice or another care in the community program.\nIn our interviews with VHA officials, they acknowledged a shortage of women’s health primary care providers at VA medical facilities. A VHA official told us that facilities have difficulty recruiting and retaining primary care providers who are interested and proficient in caring for women veterans, particularly in rural areas. According to an agency memo, VHA needs at least 675 additional women’s health primary care providers, under a guiding principle that each VA medical facility—VAMCs and community-based outpatient clinics—should have, at a minimum, two women’s health primary care providers. In addition, according to the agency memo, VA medical facilities with 2,000 or more women veteran enrollees should have the equivalent of an additional one full-time women’s health primary care provider for every 1,000 women veteran enrollees or fraction thereof. According to the memo, these providers do not all have to be new hires, but could be drawn from VHA’s existing pool of primary care providers and trained to provide sex-specific care. According to VHA, existing providers may participate in a VHA-sponsored women’s health training to become women’s health primary care providers, unless providers already possess the necessary training and experience.\nWhile VHA has taken steps to hire and train additional women’s health primary care providers, these efforts have not yet yielded a sufficient number of such providers. According to VHA, as of August 2016, using funding from the Veterans Access, Choice, and Accountability Act of 2014, VHA had hired 45 women’s health-specific providers, including 11 gynecologists, since September 30, 2015. However, due to subsequent turnover in staff as well as growth in the demand for services, VHA reported that the number of women’s health primary care providers needed to meet VHA’s criteria of a minimum of two per VA medical facility has remained approximately the same. A VHA official told us that the agency has a plan to train existing VHA providers so that there will be at least 500 additional women’s health primary care providers in fiscal year 2016. According to VHA documents, 305 providers attended the agency’s national training program in the spring and summer of 2016, and a VHA official said an additional 230 providers will be trained by the end of fiscal year 2016 at nine different VA locations across the country.",
"",
"Our analysis of VHA data show that the number of obstetricians and gynecologists participating in Choice networks nationally increased significantly from about 6,200 in May 2015 to 10,100 in May 2016, an increase of about 64 percent. While the number of obstetricians and gynecologists increased, some geographic areas lacked these types of providers, which provided access challenges for women veterans seeking care. For example, our analysis of VHA data for VISN 19 indicated that as of May 2016, there were almost 33 percent more community obstetricians and gynecologists participating in Choice (615) compared to the number of these providers (464) who delivered care to women veterans through individually authorized care prior to the implementation of Choice in fiscal year 2014. However, according to a VHA analysis of VISN 19 based on May 2016 data, certain areas within VISN 19 lacked these providers. (See fig. 3). Specifically, VHA’s analysis found that two VA medical facilities in Montana offered gynecology services, and there were no VHA or Choice obstetricians and gynecologists located north and east of Billings, Montana. Parts of central Utah also lacked VHA or Choice obstetricians and gynecologists. The Salt Lake City/Provo/Ogden area was the only area in Utah that offered VHA gynecology services, and Choice providers were also concentrated in this area. According to the analysis, the areas lacking Choice obstetricians and gynecologists generally had fewer veterans (male and female) relative to other areas of these states.\nOur analysis of VA data for VISN 10 showed that there were 4 percent fewer non-VA community obstetricians and gynecologists participating in Choice as of May 2016 (431) than there were providers who delivered care to women veterans through individually-authorized care prior to the implementation of Choice (451). According to a VHA analysis of VISN 10 based on May 2016 data, 15 percent of Choice obstetricians and gynecologists in VISN 10 are located outside of VHA’s gynecology service areas—the roughly 40 miles surrounding a VA medical facility—suggesting that most Choice obstetricians and gynecologists in VISN 10 are not extending significant access to veterans living outside of VHA’s gynecology service areas.",
"VHA lacks performance measures for the availability under Choice of sex- specific care, such as mammograms, maternity care, or gynecology. In contrast, for another VA care in the community program, PC3—a program that the Choice TPAs also administer—VHA has performance measures to evaluate women veterans’ access to mammography and maternity care, sex-specific services that are not routinely provided at most VA medical facilities. Specifically, as part of PC3, VHA monitors women veterans’ driving distances to obtain mammograms and maternity care services as a measure of network adequacy. One VHA official responsible for monitoring the TPAs’ performance on Choice contract requirements told us that the PC3 performance measures specific to sex- specific care were simply overlooked in the haste to implement Choice. VHA could monitor driving distances for women veterans to receive mammograms and maternity care services delivered through Choice, as the TPAs currently collect these data as part of PC3, according to VHA officials.\nWhile VHA doesn’t have performance standards for sex-specific care under Choice, it does have performance standards for all care delivered through Choice. For example, VHA’s contracts with the two TPAs require the timely scheduling and completion of appointments, and VHA also monitors the rates at which the TPAs return Choice authorizations to VHA medical facilities without appointments. However, VHA data show that the TPAs did not meet VHA’s performance standards for providing timely access for veterans, including women veterans. See table 2 for TPA average monthly performance under Choice for certain access-related performance measures.\nIf VHA monitored access to sex-specific Choice care for women veterans, it is possible that delays in care would be identified and actions could be taken to minimize future occurrence. For example, if VHA were monitoring sex-specific Choice care, it might have identified the three cases of delayed maternity care through Choice we found as part of an ongoing review of 196 Choice authorizations for care (of both men and women) from early calendar year 2016. In one case, almost a month and a half elapsed from the time of the veteran’s initial pregnancy confirmation appointment at VA (when she was 6 weeks pregnant) to when the Choice authorization was sent by the VA facility to the TPA for scheduling. It then took two additional weeks for the TPA to attempt to schedule a prenatal appointment; by that point, she was almost 15 weeks pregnant. At 18 weeks pregnant, she finally scheduled her initial prenatal appointment herself, almost 3 months after her pregnancy was confirmed at VHA. In another case, about a week and a half elapsed from the time the veteran’s Choice authorization was created (when she was 6 to 7 weeks pregnant) to when the VA facility sent it to the TPA for scheduling. It then took the TPA nearly a month to reach the veteran and determine if she wanted to participate in Choice. After the veteran agreed to participate in Choice, it took more than 2 weeks for the TPA to schedule an appointment. The veteran was about 14 weeks pregnant by the time her first appointment was scheduled.\nFederal standards of internal control for monitoring call for management to establish activities to monitor the quality of performance over time and promptly resolve the findings of audits and other reviews. VHA does not currently have performance measures for sex-specific care under Choice. While VA does monitor access to Choice care for all veterans, the past performance of TPAs on access-related measures highly suggests that veterans have problems obtaining timely access to these services as required under Choice. Since women are more likely to use non-VA care than male veterans, according to VHA, the lack of timely access to Choice care may affect women veterans more so than male veterans. In addition, we found instances where women veterans’ care under Choice was significantly delayed and we found a lack of participating obstetricians and gynecologists in some areas, both of which further underscore the importance of VHA’s ability to monitor access to sex- specific care for women veterans. Without performance measures, VHA does not have reasonable assurance that women veterans can obtain timely access to sex-specific care.",
"Our review shows that, despite some progress since 2010, VHA still has a significant problem ensuring that its medical facilities are complying with VHA’s environment of care requirements, which are intended to protect the privacy, safety, and dignity of women veterans when they receive care. This lack of oversight reflects long-standing weaknesses in the policies and guidance for the environment of care rounds inspections process, including how data is collected by facility staff and what information is reported to VHA Central Office. For example, facility staff do not inspect all applicable areas within the facility and the list of requirements they inspect does not include all requirements in the VHA women’s health handbook. In addition, responsibilities for addressing noncompliance are not clearly delegated, and VHA does not verify the noncompliance information it receives from its facilities. These weaknesses are similar to those we identified in our 2010 report, and the problems have persisted even though VHA agreed with our previous recommendations to strengthen oversight of its environment of care standards. These findings further underscore the agency’s continued lack of adequate oversight and accountability, which resulted in our adding VA health care to our High Risk List in 2015. If VHA does not strengthen its environment of care inspections policies, it will remain unable to provide reasonable assurance that it is protecting the privacy, safety, and dignity of women veterans who receive care at VA medical facilities.\nOur review also suggests that VHA faces challenges ensuring that women veterans have access to sex-specific care at its own medical facilities and through community providers participating in Choice. VHA has acknowledged that there are an insufficient number of women’s health primary care providers across the national health system, and some services, such as mammography, maternity care, and gynecology, are not offered at many VA medical facilities. To the extent that VA medical facilities cannot deliver sex-specific services, women veterans will need to receive these services through Choice or other care in the community programs. However, VHA does not monitor access for women to sex-specific care through Choice. Unless VHA establishes performance measures that monitor access to sex-specific services, VHA will not have reasonable assurance that women veterans have adequate access to these services.",
"To improve care for women veterans, we recommend that the Secretary of Veterans Affairs direct the Under Secretary for Health to take the following two actions:\nStrengthen the environment of care inspections process and VHA’s oversight of this process by expanding the list of requirements that facility staff inspect for compliance to align with VHA’s women’s health handbook, ensuring that all patient care areas of the medical facility are inspected as required, clarifying the roles and responsibilities of VA medical facility staff responsible for identifying and addressing compliance, and establishing a process to verify that noncompliance information reported by facilities to VHA Central Office is accurate and complete.\nMonitor women veterans’ access to key sex-specific care services— mammography, maternity care, and gynecology—under current and future community care contracts. For those key services, monitoring should include an examination of appointment scheduling and completion times, driving times to appointments, and reasons appointments could not be scheduled with community providers.",
"We provided a draft of this report to VA for review and comment. While VA was reviewing a draft of this report, the agency requested further clarification on the scope of our second recommendation; as a result, we revised the recommendation to be more clear and specific. In its written comments, which are reproduced in appendix I, VA concurred with our recommendations. VA stated it will charter a workgroup to examine issues related to VA facility compliance with environment of care requirements for women veterans. VA also said it is focused on providing community care to all eligible veterans and will ensure that future community care contracts incorporate areas for improvement based on lessons learned. VA also provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Veterans Affairs, the Under Secretary for Health, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-7114 or williamsonr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI.",
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"Appendix II: Veterans Health Administration (VHA) Environment of Care Requirements Inspected by GAO Inpatient Units Is patient-identifiable information not visible in hallways?\nResidential Programs Are client records not left unattended?\nAre patient names not posted in public areas? Are patient records not left unattended?\nAre female bathrooms either private or lockable if accessible from unit hallways or other public spaces?\nAre patient names not called out loudly?\nWhen doors are closed, do staff knock and wait until they are invited to enter?\nAre female bedrooms located in a separate and secured area of the unit or located near main staff offices or nursing stations?\nAre sanitary napkin and tampon dispensers available in the women’s public restrooms nearest to this clinic or unit?\nAre privacy curtains present in all rooms (mental health units are exempt)?\nIs there appropriate private space available for female veterans to visit with children?\nAre disposal bins available in the women’s public restrooms nearest to this clinic or unit?\nAre rooms assigned either to only one client or to same-sex clients (except in facilities where spouses share rooms)?\nWhen doors are closed, do staff knock and wait until they are invited to enter?\nAre baby changing tables available in women’s public restrooms nearest to this clinic or unit?\nDo women patients have access to women- only toilet and shower facilities in close proximity to the patients’ rooms?\nAre rooms assigned either to only one client or to same-sex clients (except in facilities where spouses share rooms)?\nDoes the interview/intake area have auditory privacy?\nDo women have door locks, access bar codes, or controlled access ID card scanners?\nIs the access to hallways restricted for patients/staff not using or working in that clinic area?\nIs patient-identifiable information not visible in hallways?\nWhen doors are closed, do staff knock and wait until they are invited to enter?\nDo restrooms not open into a public waiting room or high traffic corridor?\nAre privacy curtains present in all examination rooms?\nAre examination tables placed with the foot facing away from the door?\nDo procedure and testing areas have auditory privacy?\nIs a women’s restroom available within or in close proximity to this clinic?\nAre sanitary napkin and tampon dispensers available in the women’s restroom nearest to this clinic?\nAre disposal bins available in the women’s restroom nearest to this clinic?\nOutpatient Clinics Is special consideration given to privacy and dignity in gynecology?\nIs special consideration given to privacy and dignity in radiology dressing areas (e.g., mammography)?\nIs special consideration given to privacy and dignity in ultrasound, transvaginal ultrasound testing, etc.?",
"",
"Number (percentage) of clinics without a women’s health primary care provider 7 (16) 6 (18) 4 (14) 10 (20) 4 (24) 2 (7) 9 (20) 10 (18) 15 (28) 3 (9) 2 (6) 0 (0) 12 (20) 5 (8) 5 (14) 8 (18) 5 (12) 13 (30) 11 (26) 4 (13) 16 (26) 151 (17)",
"",
"",
"In addition to the contact named above, Marcia A. Mann (Assistant Director), Stella Chiang (Analyst-in-Charge), Carolyn Fitzgerald, Arushi Kumar, and Alexis MacDonald made key contributions to this report. Also contributing were Krister Friday, Jacquelyn Hamilton, Emily Wilson, and Vikki Porter."
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"question": [
"What data is missing or incomplete?",
"What does the policy require, in regards to women veterans?",
"What is required by the VHA Central Office?",
"What was the evidence of the inspection conducted via the GAO?",
"What examples demonstrated this lack of reporting?",
"Due to these shortcomings, what may not be guaranteed for women veterans?",
"What is the purpose of the federal internal control standards for monitoring call for management?",
"What role does the Veterans Choice Program play for veterans who need to receive care?",
"What limitations do the Choice facilities have, regarding access to care?",
"In what areas do the VHA's data show poor performance?",
"What was the response of the federal government?",
"What did the GAO discover in 2010?",
"What was the GAO asked to do?",
"What does the report examine?",
"What information needed to be reviewed by the GAO?",
"What other aspects were investigated by GAO?"
],
"summary": [
"The Department of Veterans Affairs' (VA) Veterans Health Administration (VHA) does not have accurate and complete data on the extent to which its medical centers comply with environment of care standards for women veterans.",
"VHA policy requires its medical facilities, including VA medical centers, to meet environment of care standards related to the privacy, safety, and dignity of women veterans.",
"VHA Central Office relies on medical centers to conduct regular inspections and to report instances of noncompliance, which are compiled in a VHA database.",
"However, almost all the noncompliance GAO identified through inspections at six VA medical centers it visited had not been reported or recorded in the VHA database, and compliance rates ranged from 65 percent to 81 percent.",
"For example, GAO found a lack of auditory privacy at check-in clerk stations and a lack of privacy curtains in examination rooms, as required by VHA policy. GAO also found weaknesses in VHA's oversight of the environment of care for women, including a lack of thorough inspections and limited verification of facility-reported data which results in inaccurate and incomplete data.",
"As a result, the privacy, safety, and dignity of women veterans may not be guaranteed when they receive care at VA facilities.",
"Federal internal control standards for monitoring call for management to establish activities to monitor the quality of performance over time and promptly resolve any identified issues.",
"The Veterans Choice Program (Choice) is a primary option for veterans to receive care from non-VA providers in the community if care cannot be provided at VA facilities.",
"While the number of obstetricians and gynecologists under Choice has increased, some areas lack these providers, according to a VHA analysis. While VHA monitors access-related Choice performance measures (such as timely appointment scheduling) for all veterans, it does not have such measures for women veterans' sex-specific care, such as mammography, maternity care, or gynecology.",
"VHA's data show poor performance on access-related performance measures for all veterans, and GAO found cases where women veterans' maternity care was significantly delayed, suggesting that veterans, including women, face challenges receiving timely access to care.",
"Federal internal control standards for monitoring call for management to establish activities to monitor the quality of performance over time and promptly resolve any identified issues.",
"In 2010, GAO found a number of weaknesses related to care for women veterans at VA medical facilities.",
"GAO was asked to update that study.",
"This report examines (1) the extent that VA medical centers complied with requirements related to the environment of care for women veterans and VHA's oversight of that compliance; (2) what is known about the availability of VHA medical providers who can provide sex-specific care for women veterans at VA facilities; and (3) VHA's efforts to provide and monitor access to sex-specific care for women veterans through Choice.",
"To do this work, GAO reviewed VHA data on environment of care deficiencies; the number, location, and availability of VHA and Choice medical providers; women veteran enrollment; and Choice access-related performance measures.",
"In addition, GAO inspected the environment of care for compliance with VHA policy at a nongeneralizable sample of six VA medical centers, which were selected to achieve variation in different care models, the size of the women veterans' population, and geographical locations. GAO also interviewed VHA Central Office and VA medical center officials."
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{
"title": [
"",
"Introduction",
"Market Situation",
"Milk Production Grows",
"Demand Slows",
"Feed Costs Climb",
"Outlook for 2009 and 2010",
"Current Dairy Policies to Assist Producers",
"Milk Income Loss Contract (MILC) Program",
"Dairy Product Price Support Program (DPPSP)",
"Milk Marketing Orders",
"Dairy Export Incentive Program (DEIP)",
"Requests for Action",
"USDA Actions To-Date",
"Increase Price Support for Cheese and Nonfat Dry Milk",
"Transfer Product to Domestic Feeding Programs",
"Activate Dairy Export Incentive Program (DEIP)",
"Potential Policy Responses",
"Status Quo",
"Dairy Herd Buyout Program",
"Modifying Existing Programs to Enhance Dairy Farmer Income",
"Current Regulatory Issues",
"Dairy Import Assessment",
"Producer-Handler Exemptions in Federal Milk Marketing Orders"
],
"paragraphs": [
"",
"U.S. dairy producers are caught in a classic \"price-cost squeeze,\" with farm milk prices declining sharply from record highs while feed costs remain high. From January through September 2009, the all-milk price received by farmers was 36% below a year earlier. (The all-milk price is the weighted average farm price of fluid-grade and manufacturing-grade milk produced.) Meanwhile feed costs, as measured by alfalfa prices, were down only 20% from a year earlier. The deteriorating economic picture has prompted calls for policymakers to consider how well current dairy policies are assisting dairy producers and what other options might be available.",
"The dairy market since 2007 illustrates how an agricultural boom can turn into a bust. Dairy farmers enjoyed excellent returns in 2007 and most of 2008 as strong demand pushed up the price of dairy products and the farm price of milk. In November 2007, the all-milk price hit a record $21.90 per hundredweight (cwt.). In 2008, milk prices remained high, but feed prices rose rapidly, creating concern for dairy farmers. The financial danger was a further escalation of feed prices or a price reversal in dairy product prices. Product prices have, in fact, dropped. Feed costs have declined some, but not enough to offset the drop in milk prices.\nOne simple measure of today's price-cost squeeze affecting dairy farmers is the milk-feed price index, as reported by the U.S. Department of Agriculture (USDA). The ratio averaged 2.01 in 2008, the lowest since at least 1985 and down from 2.81 in 2007, a year with record-high milk prices. Thus far in 2009 (January-September), the ratio has averaged 1.56, down from the 10-year average of 2.90. A ratio near 3 or higher is considered positive for milk production.\nThe major factors leading to the current economic stress in the dairy industry are continued weak demand relative to milk supplies and relatively high feed costs. In 2009, USDA expects the all-milk price to average between $12.05 per cwt. and $12.25 per cwt., down from $18.29 per cwt. in 2008 and 17%-19% below the 10-year average of $14.83.",
"Productivity growth is a hallmark of U.S. agriculture, and dairy is no exception. Over the years, improved dairy cattle genetics and better feed management practices have increased output per cow. Dairy farmers continued the advancement last year: USDA estimates milk per cow in 2009 at a record high of 20,493 pounds, up from 20,396 in 2008 (one gallon of milk equals about 8.6 pounds).\nNormally, higher productivity is partially offset by a decline in cow numbers, resulting in more modest gains in total milk production. However, in 2008, dairy farmers increased herds in response to attractive returns, particularly in 2007. As a result, U.S. milk production rose 2.3% in 2008, compared with the increase in milk per cow of only 1.0%. Milk supplies expanded at about the same time that demand started to weaken.\nIn 2009, lower returns have encouraged farmers to cull dairy cows, with the national herd declining 123,000 head or 1.3%. Productivity gains, though, are expected to offset some of the reduction in cow numbers, leaving U.S. milk production down just 0.8%. In 2009, the decline in production has been less than the drop-off in demand, resulting in sharply lower prices than a year ago.",
"Dairy exports account for a relatively small but important share of U.S. dairy product sales. On a fat basis, exports were estimated at 3% of total use in 2007 and 4% in 2008. (On a skim-solids basis, the export shares were 12% in 2007 and 15% in 2008.) Growth in U.S. dairy exports stemmed from lower product availability from New Zealand and Australia (and other countries) and the lower-valued dollar. U.S. cheese exports saw particularly strong gains.\nExport prospects have weakened in 2009, with USDA forecast exports dropping below 2007 levels. Among the factors USDA cites for the decline in export demand are the global recession, lower incomes, higher dairy production abroad, and a stronger dollar. The drop-off in export demand means that more product must be sold on the domestic market, which has driven down dairy product prices and farm milk prices.\nDomestic demand has also reportedly slowed, given reduced restaurant sales and sales of premium food products, including some dairy items, as consumers reduce overall spending. However, increased purchases of food for home consumption are likely supporting the market to some degree in 2009.",
"Feed costs rose sharply in mid-2008. Expanding corn demand for ethanol use, strong global demand for grain, and heightened investment in commodity markets collided with uncertain prospects for U.S. corn and soybean yields. In spring/summer 2008, massive flooding in the Midwest led to fears that the U.S. corn and soybean supplies would be sharply curtailed at a time when demand seemed limitless. In July 2008, the farm price of corn peaked at $5.47 per bushel, up nearly $2 per bushel from a year earlier. Alfalfa prices followed suit, with farm prices reaching $180 per ton in August compared with $135 a year earlier.\nThe commodity price boom of 2008 began to collapse in September when financial and commodity markets faltered. Large amounts of investment money began to leave the market, and crop yield prospects for both corn and soybeans firmed up. Supply fears essentially evaporated.\nAs 2008 came to a close, prices for dairy feedstuffs had dropped substantially from highs earlier in the year but remained well above year-earlier levels. Corn prices in December averaged $4.10 per bushel compared with $3.77 in December 2007. The price of alfalfa was $155 per ton in December 2008, compared with $135 in December 2007. In contrast, soybean prices, which had seen a faster rise the year before, averaged $9.24 per bushel, down from $10.00 in December 2007.\nThus far in 2009, average prices for dairy feed have moderated from 2008 highs but remain well above 2007 levels. In recent months, USDA has revised its forecasts of 2009 corn and soybean prices downward based on prospects for larger crops this fall.",
"Given the downturn in dairy farm income, dairy economists expect producers in 2009 to send more cows to slaughter and adjust feed rations to save money, which together would result in a slight decline in total milk production in 2009. On the demand side, dairy exports in 2009 have declined as global economic weakness slows foreign demand. Based on USDA forecasts, the expected supply adjustments and higher support prices announced by USDA on July 31 will lift milk prices in the last quarter of 2009. Average farm-level milk prices are expected to rise from $11.60 per cwt. in the April-June quarter to $12.90 per cwt. in October-December 2009 (midpoint of the USDA forecast range). The October-December 2008 prices averaged nearly $17 per cwt.\nIn 2010, USDA expects milk production to decline further as farmers cull more cows following low returns in 2009. Also, exports are expected to pick up slightly as the global economy improves, although USDA expects export prospects will be limited by higher domestic prices and larger exportable supplies in competitor countries. With less milk and somewhat higher demand, the all-milk price is forecast to increase from $12.15 per cwt. in 2009 to $15.05 per cwt in 2010.",
"U.S. dairy policy has been developed over the last seven decades. The early policies addressed three main problems: (1) producers lacked bargaining power with milk buyers; (2) producers suffered from volatile or low prices; and (3) market participants encountered severe shortages/gluts resulting from marketing a highly perishable commodity (fluid milk). The policy response resulted in the development of two major government activities that still function today: federal milk marketing orders (FMMOs) and the Dairy Product Price Support Program (DPPSP). While both FMMOs and the DPPSP have their roots in the 1930s and 1940s, the programs have changed modestly over the years as the industry structure and markets changed.\nTwo other components of U.S. dairy policy are relatively new programs. First, the 1985 farm bill established the Dairy Export Incentive Program (DEIP) to counter foreign competitor subsidies. Second, the Milk Income Loss Contract (MILC) program was established in the 2002 farm bill as a government payment for dairy farmers in times of low milk prices. Like U.S. crop programs, the MILC program pays dairy producers when prices decline below a specified level.\nThe following sections describe each of these four components and how they relate to the current market situation. Lower milk and dairy product prices since late 2008 have generated new program activity. USDA began purchasing dairy products last fall under the DPPSP; MILC payments were triggered beginning in February.",
"The Milk Income Loss Contract (MILC) program pays dairy farmers when farm milk prices fall below an established target price. Section 1506 of the 2008 farm bill ( P.L. 110-246 ) extends authority for the MILC program until September 30, 2012. This program is similar to long-time subsidy programs for crops (e.g., wheat, corn, and soybeans) that pay farmers when farm prices drop below certain levels. USDA's Farm Service Agency implements the MILC program.\nUnder MILC, participating dairy farmers nationwide are eligible for a federal payment whenever the minimum monthly market price for farm milk used for fluid consumption (Class I; see discussion on \" Milk Marketing Orders \") in Boston falls below $16.94 per cwt. Eligible farmers then receive a payment equal to 45% of the difference between the $16.94 target price and the lower monthly market price. The payment quantity is limited to 2.985 million pounds of annual production (equivalent to about a 160-cow operation). Since the inception of the MILC program, large dairy farm operators have expressed concern that the payment limit has negatively affected their income. For larger farm operations, their annual production is well in excess of the limit, and any production in excess of that receives no federal payments.\nTo address the issue of rising feed costs, the 2008 farm bill includes a provision that adjusts upward the $16.94 target price in any month when feed prices are above a certain threshold. The law requires USDA to calculate monthly a National Average Dairy Feed Ration Cost based on a formula that USDA currently uses to calculate feed costs. In any month that the average feed cost is above $7.35 per cwt., the $16.94 target price will be increased by 45% of the difference between the monthly feed cost and $7.35.\nFor the latter half of 2007 and all of 2008, farm milk prices remained well above the MILC trigger price, precluding the need for any MILC payments. However, milk prices have since declined below the trigger for MILC payments. The Class I Boston farm milk price for February 2009 (advance pricing) was $13.97 per cwt. With the adjustment for feed costs raising the trigger to $17.33 per cwt., MILC payments were activated for the first time in two years at a payment rate of $1.51 per cwt. (($17.33 - $13.97) times 45%). The payment rate rose to $2.01 per cwt. in March. Given current prospects in the futures markets for milk, corn, and soybeans, payments are expected to continue during 2009, but at smaller rates. Individual producers must select which month to begin receiving payments, based on their projection of potential payment rates and the possibility of hitting the production payment limit. As of October 26, 2009, total MILC payments distributed to date were $775 million ( Table 1 ).\nThe timing of the payments has caused some concern for producers this spring. While milk price data become available during the payment month, data needed for the feed cost adjustor are not available until USDA publishes monthly average feed prices in Agricultural Prices at the end of the next month. Consequently, MILC payments for a particular month are not processed until two months later.",
"The Agricultural Act of 1949 first established a dairy price support program by permanently requiring USDA to support the farm price of milk. Since 1949, Congress has regularly amended the program, usually in the context of multiyear omnibus farm acts and budget reconciliation acts. Historically, the supported farm price for milk is intended to protect farmers from price declines that might force them out of business and to protect consumers from seasonal imbalances of supply and demand.\nUSDA's Commodity Credit Corporation (CCC) supports milk prices by its standing offer to purchase surplus nonfat dry milk, cheese, and butter from dairy processors. Whenever market prices fall to product support levels, processors generally make the business decision of selling surplus product to the government rather than to the marketplace. Consequently, the government purchase prices usually serve as a floor for the market price, which in turn indirectly supports the farm price of milk for all dairy farmers. The effectiveness of the dairy price supports depends on removal of products from the market and placement into government storage.\nThe Dairy Product Price Support Program (DPPSP) as authorized by the 2008 farm bill requires USDA to purchase products at the following minimum prices: block cheese, $1.13/lb.; barrel cheese, $1.10/lb.; butter, $1.05/lb.; and nonfat dry milk, $0.80/lb. Under previous law, the support price for farm milk was statutorily set at $9.90 per cwt., and USDA was given the administrative authority to establish a combination of dairy product purchase prices that indirectly supported the farm price of milk at $9.90. Although the 2008 law does not specifically state that the overall support price is $9.90 per cwt, each of the mandated product prices in the law is equivalent to the existing product purchase prices, so farm milk prices effectively continue to be supported at $9.90.\nIn late 2008 and 2009, after several years of relative inactivity, the price support program resumed purchases when dairy product prices approached support levels. As of September 11, 2009, USDA estimated that it purchased 111 million pounds of nonfat dry milk under the program in 2008 and expects to purchase 379 million pounds in 2009, along with small amounts of butter and cheese (including amounts exported under the Dairy Export Incentive Program). Total expenditures on the DPPSP were $223 million from October 1, 2008, through September 10, 2009. With an expected rise in milk and product prices next year, USDA forecasts only a small amount of butter to be purchased in 2010.\nFollowing heightened industry and congressional interest in taking action to boost milk prices for farmers, USDA announced on July 31, 2009, a temporary increase in price support for cheese and nonfat dry milk from August 2009 through October 2009. (See \" Increase Price Support for Cheese and Nonfat Dry Milk \" below for more information.) Subsequently, the Senate approved an amendment to the Senate-passed FY2010 agriculture appropriations bill to increase Farm Service Agency funding by $350 million, ostensibly for an additional increase in dairy product price support levels. However, the conference agreement for the FY2010 Agriculture appropriations bill, which was enacted on October 21, 2009, provides for a different use of the funds ($60 million to purchase dairy products and $290 million in direct payments to farmers). See \" Modifying Existing Programs to Enhance Dairy Farmer Income ,\" below, for more information.",
"Federal milk marketing orders (FMMOs) mandate minimum prices that processors must pay producers for milk depending on its end use. This compares with the MILC program, which provides direct payments to producers, and the DPPSP, which buys surplus dairy products at specified minimum prices. The DPPSP serves as a price floor for products and undergirds FMMO minimum milk prices.\nThe farm price of approximately two-thirds of the nation's fluid milk is regulated under FMMOs. Federal orders, which are administered by USDA's Agricultural Marketing Service, were instituted in the 1930s to promote orderly marketing conditions by, among other things, applying a uniform system of classified pricing throughout the market. Some states, California for example, have their own state milk marketing regulations instead of federal rules.\nFMMOs also address how market proceeds are distributed among producers delivering milk to federal marketing order areas. Producers are affected by two fundamental marketing order provisions: the classified pricing of milk according to its end use, and the pooling of receipts to pay all farmers a blend price.\nFederal orders regulate dairy handlers (processors) who sell milk or milk products within a defined marketing area by requiring them to pay not less than established minimum class prices for the Grade A milk they purchase from dairy producers, depending on how the milk is used. This classified pricing system requires handlers to pay a higher price for milk used for fluid consumption (Class I products) than for milk used in manufactured dairy products such as yogurt, ice cream, and sour cream (Class II), cheese (Class III), and butter and dry milk products (Class IV). These differences between classes reflect the different market values for the products.\nBlend pricing allows all dairy farmers who ship to the market to pool their milk receipts and then be paid a single price for all milk based on order-wide usage (a weighted average of the four usage classes). Paying all farmers a single blend price is seen as an equitable way of sharing revenues for identical raw milk directed to both the higher-valued fluid market and the lower-valued manufacturing market.\nManufactured class (Class II, III, and IV) prices are the same in all orders nationwide and are calculated monthly by USDA based on current market conditions for manufactured dairy products. The Class I price for milk used for fluid consumption varies from area to area. Class I prices are determined by adding, to a monthly base price, a \"Class I differential\" that generally rises with the geographical distance from milk surplus regions in the Upper Midwest, the Southwest, and the West. Class I differential pricing is a mechanism designed to ensure adequate supplies of milk for fluid use at consumption centers. The supply of milk may come from local supplies or distant supplies, whichever is more efficient. However, local dairy farmers are protected by the minimum price rule against lower-priced milk that might otherwise be hauled into their region.\nOver the years, dairy farmers have supported minimum prices afforded by FMMOs because they help balance marketing power traditionally held by processors. In contrast, dairy processors generally oppose them. Mandated minimum prices, they say, do not allow for timely adjustments in a rapidly changing market and can leave product manufacturers in unprofitable situations. Also, they contend that the FMMO system distorts markets, saying fixed differentials contributed to high fluid milk prices last year.",
"First authorized in 1985, the Dairy Export Incentive Program (DEIP) provides cash bonus payments to U.S. dairy exporters. The program was initially intended to counter foreign—mostly European Union—dairy subsidies (while removing surplus dairy products from the market), but subsequent farm bill reauthorizations have added market development to the role of DEIP. Payments since the program's inception have totaled $1.1 billion. The program was active throughout the 1990s, peaking in 1993 with $162 million in bonuses. DEIP funding is a mandatory account provided through the Commodity Credit Corporation (CCC) borrowing authority from the U.S. Treasury, rather than through annual USDA appropriations bills. The program had not been used since FY2004 until USDA announced its reactivation on May 22, 2009. (See \" Activate Dairy Export Incentive Program (DEIP) ,\" below.)\nU.S. dairy product exports made with DEIP bonuses are subject to annual limitations under the Uruguay Round Agreement of the World Trade Organization (WTO). The limits are 68,201 metric tons of skim milk powder, 21,097 tons of butterfat, 3,030 tons of various cheeses, and 34 tons of other dairy products (quantity limits are on a July-June year). Total expenditures under WTO commitments are now capped at $117 million per year (value limits on a October-September year).",
"The reversal of market fortunes for dairy farmers since 2008 has prompted calls from dairy producer groups to address the situation. The National Milk Producers Federation (NMPF), the largest trade association representing milk producer cooperatives, wrote to the Secretary of Agriculture on January 8, 2009, asking the Department to take several steps to assist dairy producers. Subsequently, letters to the Secretary were also sent by Members of Congress. On January 26, the International Dairy Foods Association, which represents dairy manufacturers and marketers, wrote to the Secretary, focusing only on ways to bolster demand for dairy products. The recommended industry actions deal also with revisions in the support program to increase dairy product purchases by the government, specifically asking USDA to be more flexible with the acceptable types and forms of eligible dairy products. Additional purchases are expected to spur domestic demand and slow the decline in prices. The request from NMPF also included reactivation of the Dairy Export Incentive Program to boost exports and remove excess inventory while helping exporters maintain business relationships developed in recent years.\nIn early May 2009, the National Milk Producers Federation reiterated its request that the U.S. government restart the Dairy Export Incentive Program to help remove excess dairy products from the market. Subsequently, NMPF asked USDA to increase the support prices of both cheese and nonfat dry milk.\nAnother policy proposal is a dairy herd buyout to reduce the milk supply. A federal buyout has not been included in the NMPF requests, but it had been discussed in the agricultural media earlier in 2009. The industry currently operates a voluntary, producer-funded program to remove dairy cows from milk production. USDA operated a federal dairy herd buyout program in the mid-1980s.\nIn July 2009, the Subcommittee on Livestock, Dairy, and Poultry of the House Agriculture Committee held a series of hearings to review economic conditions facing the dairy industry. The subcommittee heard a range of opinions from the witnesses, with some asking for increased intervention in the form of higher support prices or supply management. Others argued that the industry would benefit if the government did nothing because inaction would more quickly bring supply in line with current demand.",
"USDA has taken several actions in 2009 to support dairy farm income, including increasing dairy product price supports, transferring dairy products to domestic feeding programs, and activating the Dairy Export Incentive Program. USDA expects to spend about $1 billion in fiscal 2009 on purchases of dairy products and payments to producers under the Milk Income Loss Contract (MILC) program.",
"Following heightened industry and congressional interest in taking action to boost milk prices for farmers, USDA announced on July 31, 2009, a temporary increase in price support for cheese and nonfat dry milk from August 2009 through October 2009. This raises the government purchase price for nonfat dry milk from $0.80 per pound to $0.92 per pound, the price for cheddar blocks from $1.13 per pound to $1.31 per pound, and the price of cheddar barrels from $1.10 per pound to $1.28 per pound. Prior to the change, USDA expected that temporarily raising the price of these dairy products would increase the price that dairy farmers receive for their milk, boost U.S. dairy farmers' revenue by $243 million, and result in the government purchase of an additional 150 million pounds of nonfat dry milk and an additional 75 million pounds of cheese. According to USDA, the purchases will be a no-net-cost transaction because the product will presumably be resold at higher prices when the dairy product market recovers next year. Following USDA's announcement, cheese prices rose to and above the new support levels, with the government purchasing less than 1 million pounds of nonfat dry milk (some of this product was sold as part of a packaging test). Separately, market observers have noted a modest strengthening in product markets overseas, with milk powder prices increasing in recent months following improved demand in Asia.",
"On March 26, 2009, USDA announced that approximately 200 million pounds of nonfat dry milk (purchased under the Dairy Product Price Support Program) would be transferred from the Commodity Credit Corporation to USDA's Food and Nutrition Service for use in domestic feeding programs. Besides helping needy families by providing food through the National School Lunch program and others, the transfer is expected to increase dairy product consumption, thereby supporting the prices farmers receive for milk.",
"On May 22, 2009, USDA announced allocations under DEIP for the marketing year that ends June 30, 2009, as allowed under the rules of the World Trade Organization (WTO). During the month of June, USDA accepted bids for nonfat dry milk, cheddar cheese, mozzarella cheese, butter, and anhydrous milk fat from exporters shipping to Africa, the Middle East, and Asia. On July 6, 2009, USDA announced initial DEIP allocations for the marketing year spanning July 1, 2009, through June 30, 2010. Subsidized export quantities are limited on a July-June marketing year basis. USDA had committed $18 million in DEIP awards through September 10, 2009.\nThe use of export subsidies has the economic effect of moving more product into market channels, reducing inventories, and raising farm prices. However, economists say significant quantities would be necessary to appreciably move farm prices from current levels based on prevailing supply and demand. Free trade supporters caution that if price-enhancing DEIP export quantities are above the limits agreed to in the Uruguay Round Agreement, the U.S. government will need to break its World Trade Organization commitments; otherwise the action might result in little impact on farm milk prices.\nFree trade supporters also say that policymakers need to weigh the merits of returning to an aggressive export subsidy stance, how export subsidies fit with current overall U.S. trade policy, and the potential reaction from major agricultural trading partners.\nProducer groups favoring the reactivation of DEIP point to the European Union (EU), which has already taken action to address falling dairy prices in Europe. In January 2009, the EU announced it would restart its dairy export subsidy program for butter, cheese, and milk powder in an attempt to stabilize the domestic market.\nFor more information on DEIP, see CRS Report R40584, Implications of Reactivating the Dairy Export Incentive Program (DEIP) , by [author name scrubbed] and [author name scrubbed].",
"Most policy responses that are currently being discussed fall into three categories: (1) maintain the status quo and allow remaining programs to operate, (2) implement a new program such as a dairy buyout, and (3) modify existing programs to enhance dairy farmer income. Each is discussed in sections below.\nA change in federal milk marketing orders could also be used for boosting dairy farm returns. The Federal Milk Marketing Improvement Act of 2009 ( S. 1645 ; first introduced as S. 889 ) is expected to \"help farmers get a fair price for their milk\" and provide relief and assistance to dairy farmers by using the cost of milk production as the basis for pricing milk. While the bill could raise farm milk prices, some are concerned that it could also reduce the competitiveness of the U.S. dairy industry because, they argue, a pricing system based on cost of production potentially rewards inefficiency. Also, some are concerned that provisions in the bill for USDA to influence supply may not be sufficient to bring supply and demand into balance.\nIncreasing import barriers is another approach for addressing the issue of low milk prices. The Milk Import Tariff Equity Act was introduced in the Senate ( S. 1542 ) on July 30, 2009, and in the House ( H.R. 3674 ) on September 29, 2009, to impose tariff-rate quotas on imports of casein (the main protein found in milk) and milk protein concentrates. Similar bills have been introduced in virtually every Congress over the last decade, but no action has occurred. For more information, see CRS Report R40839, Proposed Import Restrictions on Milk Protein Concentrates (MPCs) .\nThe current and prospective price environment complicates the policy decision. Given reduced returns, producers are culling herds and reducing milk production, which is expected to lift farm prices. However, the full effect of the production decisions is expected to take several more months.",
"One option for policymakers is to do nothing and allow current programs to operate as intended. U.S. dairy programs, particularly the DPPSP and MILC, are now operative. USDA has been purchasing dairy products in 2009 under the DPPSP. These actions take excessive inventory off the market and support overall milk prices.\nSimilarly, the MILC program is expected to continue making payments to dairy farmers in 2009. To the extent that feed prices remain above the threshold level, the feed cost adjustor plays a role in compensating dairy farmers to offset the high cost of feed.\nSupporters of the status quo argue that current dairy programs already encourage additional milk production when the market is not calling for it. The International Dairy Foods Association (IDFA), representing dairy manufacturers, contends that the MILC program, the dairy product price support program, and recent USDA decisions on FMMOs contribute to excess milk supplies. Similarly, some farmers do not favor raising support prices because \" ... it has the strong potential to send the wrong signal to the market to increase or at least maintain, rather than to decrease, production.\" As a result, modifications to enhance producer incomes could exacerbate the milk supply and price situation. At any rate, any proposals that involve new budgetary outlays could be challenged as adding to an already large federal deficit and/or burdening consumers with higher costs.\nProponents of additional action point out that many producers are facing significant income loss and that without additional assistance, they may not survive financially. Also, some producers argue that the level of support—no longer specified for milk directly, but effectively providing support at roughly $9.90 per cwt—is too low given current feed prices.",
"In 1986 and 1987, the Dairy Termination Program, authorized under the Food and Security Act of 1985 ( P.L. 99-198 , the 1985 farm bill) was designed to reduce government costs associated with federal purchases of surplus dairy products. The program paid participating farmers to remove more than 1 million dairy cows from milk production, or about 9% of the U.S. dairy herd in 1985. Participating farmers were barred from the dairy industry for five years. The program temporarily reduced the nation's milk production capacity and was designed to ease farmers' transition to a lower price support level that was also included in the 1985 farm bill.\nOne concern with pursuing another buyout is raised by the beef industry. Beef producer groups note that dairy cow slaughter under the 1980s program added beef to total meat supplies, which reduced beef and cattle prices. Under the Dairy Termination Program, USDA purchased beef for other programs as a way to lessen the price impact on the beef and cattle markets.\nThe National Milk Producers Federation (NMPF) currently operates its own, producer-funded dairy buyout program called Cooperatives Working Together (CWT). It has purchased and removed from dairy production 276,000 cows representing more than 5 billion pounds of annual milk production during its first six herd retirement rounds, which began in 2003. In early February, the NMPF said it was not pursuing a new federal program.\nOn May 1, 2009, the CWT closed its seventh round of bidding for dairy cow purchases. Dairy cow culling reportedly slowed in March and April as farmers who had applied for the program awaited the results. CWT announced in mid-May that it had accepted bids representing nearly 101,000 cows and almost 2 billion pounds of milk production capacity, CWT's largest single herd retirement program to date. Herd culling occurred over the summer months. On July 10, 2009, CWT announced its eighth round, which was completed September 24, 2009. Compared with previous rounds, the bid period was shortened to two weeks in order to have a more immediate impact. In this round, CWT accepted bids on 74,114 cows, representing 1.5 billion pounds of milk. Also, nearly 3,000 bred heifers were sent to processing plants. Most recently, on October 1, 2009, CWT announced yet another round, with bids due by October 15.\nA herd buyout-related bill was introduced in Congress on July 23, 2009. H.R. 3322 would direct USDA to use Section 32 funds to enter into a contract with a producer association or other third party to encourage dairy producers to remove dairy cows from production. It would also temporarily increase MILC payments (see next section).",
"Another option being offered to address the current market situation is to modify existing programs. The National Farmers Organization (NFO) and other farm groups have proposed adding funds to increase the amount of Milk Income Loss Contract (MILC) payments, which resumed in February 2009. The groups contend that adding payments to the existing income support program provides a necessary addition to dairy farmer income. Several bills have been introduced in Congress to increase MILC payments. However, opponents of this option argue that additional payments could slow the supply adjustment process needed to bring the dairy market back into balance. Congressional leadership has reportedly been reluctant to act on the proposal because the move would be considered as re-opening the 2008 farm bill, which would likely result in a multitude of requests from other groups seeking changes.\nEarlier in 2009 , the National Milk Producers Federation proposed several administrative changes to the price support program, such as loosening packaging requirements and expanding the list of eligible products. Such changes would likely remove additional products from the market and provide some additional support to prices. Similarly, the International Dairy Foods Association (IDFA) proposes to boost demand by exchanging government-owned bulk dairy inventory for consumer-ready dairy products and using existing authorities to purchase and donate additional dairy products like yogurt. A regulation addressing some of these issues in currently in review at USDA.\nIn October, low financial returns for dairy farmers prompted Congress to make additional financial assistance available by including funds for dairy farmers in the FY2010 Agriculture appropriations bill ( P.L. 111-80 ), which was enacted on October 21, 2009.\nThe enacted appropriation (in the General Provisions, Section 748) provides a total of $350 million, divided between $290 million for supplemental income payments to dairy farmers and $60 million for the purchase of cheese and other dairy products to be distributed through food banks and similar locations. Provisions for expedited rulemaking are expected to allow USDA to make the additional payments in a timely manner.\nThe bill does not specify how the Secretary should allocate the funding for direct payments among producers. This issue is a source of contention because the eventual distribution method used by the Secretary will determine which size of farm will receive the most benefits. Under the Milk Income Loss Contract (MILC) program, for comparison, the payment quantity is limited to 2.985 million pounds of annual production (equivalent to about a 160-cow operation), as specified in the 2008 farm bill.\nThe idea for an additional dairy appropriation originated in the Senate-passed bill, which included an amendment for an additional $350 million in FSA salaries and expenses, ostensibly for dairy disaster assistance through an increase in dairy product price supports. Amendment proponents in Congress expected that the additional funding, if used for the price support program, would raise minimum purchase prices another $0.05 per pound for nonfat dry milk and $0.09 per pound for cheese from levels USDA announced on July 31, 2009. The House-passed appropriations bill did not have a similar provision.\nThe National Milk Producer Federation (NMPF), representing dairy farmers, favors direct purchases, while the National Farmers Union supports higher purchase prices. NMPF contends removing surplus products would raise overall price levels and provide benefits through higher market prices that would be nearly four times greater than the value of benefits derived from either higher purchase prices under the DPPSP or additional direct farmer payments. In contrast, the International Dairy Foods Association (IDFA) favors other options to minimize market impacts, including additional MILC payments and government purchases of a wide variety of products rather than a large-scale purchase of a single product such as cheese. IDFA also argues against higher purchase prices that, they say, would increase costs for food processors and encourage additional milk production, exacerbating the milk surplus problem.",
"Recent USDA regulatory actions have included a dairy import assessment as part of the 2008 farm bill implementation, as well as proposed changes to federal milk marketing orders.",
"On May 19, 2009, USDA published a proposed rule in the Federal Register to establish a dairy import assessment program as required by the 2002 and 2008 farm bills. U.S. dairy producers in the 48 contiguous states currently pay a 15-cent per cwt. assessment on all milk produced to fund a national dairy producer program for generic dairy product promotion, research, and nutrition education. Authorization for the program stems from the Dairy Producer Stabilization Act of 1983 (7 U.S.C. 4501-4514). The 2002 farm bill (Section 1505) amended the act requiring that the assessment also be collected on all imported dairy products. After consulting with the Office of U.S. Trade Representative (USTR), the Secretary of Agriculture determined that a mandatory dairy import assessment was not permissible, since Alaska and Hawaii are exempt from the domestic assessment. According to USDA, the exemption treats some domestic producers more favorably than importers, thereby violating U.S. trade obligations.\nTo remedy the situation, Section 1507 of the 2008 farm bill extends the domestic assessment to Alaska, Hawaii, and Puerto Rico. The statutory change is designed to make the definition of the United States consistent with the definition used by the USTR and U.S. trading partners, thus allowing the assessment on imported products. The enacted 2008 farm bill also sets the assessment on imports at 7.5 cents per cwt.\nThe import assessment is supported by most dairy producer groups because importers \"benefit from domestic dairy promotion efforts without contributing to programs aimed at growing the U.S. market.\" However, milk producers in Alaska and Hawaii were opposed to any definition change that required them to contribute to the program. Dairy importers and processors are opposed to the import assessment, contending that it is an unfair tax on imported products which they say could be challenged as trade-distorting in the World Trade Organization, regardless of whether Alaska and Hawaii are included. The argument is that because some imported products are subject to quantity limits under tariff rate quotas, importers will not benefit from the assessment in terms of building additional demand for their product.",
"In May 2009, USDA held a public hearing on proposals to amend federal milk marketing orders (FMMOs) regarding producer-handler provisions. Producer-handlers are dairy farmers who process milk from their own cows in their own plants and market their packaged fluid milk and other dairy products themselves.\nCurrently, dairy farmers who qualify as producer-handlers under federal milk marketing orders are exempt, as handlers, from the pricing and pooling provisions of the orders. The provisions require handlers to pay minimum prices to dairy farmers for milk depending on its use (e.g., fluid milk, cheese). The pooling process redistributes revenue among producers from across a marketing area (10 regions in total) so that all producers receive the same \"blend\" price. Thus, as handlers, the producer-handlers can produce and sell their milk without being required to participate in the pool, and therefore not be subject to paying minimum prices as other handlers must do. As a result, producer-handlers may have a cost advantage over other handlers. This possibility helped motivate proposals to eliminate the producer-handler exemption.\nThe proposed changes would eliminate or modify who is exempt from federal marketing orders. Some of the proposals allow for continued exemptions for producer-handlers based on the size of the operation, ranging from milk production of 450,000 pounds of milk per month (equivalent to about a 275-cow operation) to 3 million pounds per month (about 1,750 cows). Nationwide, about 15 producer-handlers fall into that range of production. Three other firms are larger yet.\nOn October 21, 2009, USDA issued a recommended decision that would limit exemption from pooling and pricing provisions of federal orders to those producer-handlers with total route disposition of fluid milk products of 3 million pounds or less per month. After a 60-day comment period, USDA will issue a final decision. A referendum is then conducted among individual producers (or as represented by cooperatives) and, if approved by two-thirds of producers, the amendment to the order is made effective by final rule in the Federal Register . A negative vote on an amended order would eliminate the order."
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{
"question": [
"What drove the government to reactivate government programs to support dairy prices and dairy farm income?",
"What did the dairy price support program do for dairy products as prices approached support levels?",
"What does the U.S. Department of Agriculture estimate and project regarding the amount of nonfat dry milk, butter, and cheese?",
"What triggered the Milk Income Loss Contract in 2009?",
"Since February 2009, what has happened to payments in subsequent months?",
"What has prompted calls for policymakers to consider how well current dairy policies are assisting dairy producers?",
"What measures were taken to address this issue?",
"What program removed excess dairy products from the market?",
"What products did the USDA temporarily increase price support for?",
"What did the FY2010 agriculture appropriations bill include?",
"What sort of business choices are being made, in consideration of the economic climate?",
"What questions have these policies brought up?",
"What options are available in order to address the current dairy market situation?",
"What are the concerns of those who believe in keeping the status quo regarding dairy programs?",
"Why could proposals that involve new budgetary outlays be challenged?",
"What claims are made by those who support additional action?",
"Why might producer groups and processors want to increase demand?"
],
"summary": [
"Declining milk and dairy product prices in late 2008 and early 2009 reactivated government programs to support dairy prices and dairy farm income.",
"During this period, after several years of relative inactivity, the dairy price support program resumed purchases of surplus dairy products as prices approached support levels.",
"The U.S. Department of Agriculture (USDA) estimates that it removed 111 million pounds of nonfat dry milk in 2008 and expects to remove 379 million pounds in 2009, along with small amounts of butter and cheese.",
"In February 2009, milk prices declined below the trigger for Milk Income Loss Contract (MILC) payments to dairy farmers for the first time in two years.",
"Payments have been triggered in all subsequent months to date, totaling $775 million as of October 26.",
"The deteriorating economic picture has prompted calls for policymakers to consider how well current dairy policies are assisting dairy producers and what other options might be available.",
"Throughout 2009, the National Milk Producers Federation (NMPF), the largest trade association representing milk producer cooperatives, has requested that USDA take steps to assist dairy producers. Members of Congress have also engaged the Secretary of Agriculture.",
"On May 22, 2009, USDA restarted the Dairy Export Incentive Program to help remove excess dairy products from the market.",
"On July 31, 2009, USDA announced a temporary increase in price support for cheese and nonfat dry milk.",
"In October, Congress passed the conference agreement for the FY2010 agriculture appropriations bill, which includes an extra $350 million for emergency dairy assistance ($60 million to purchase dairy products and $290 million in direct payments to farmers).",
"Given the economic climate, producers are making business choices that are expected to reduce milk production and lift prices.",
"However, the full effect of those decisions is underway, raising the question of what, if any, policy changes are needed.",
"Options to address the current dairy market situation include (1) keeping the status quo and allowing remaining programs to operate, (2) implementing a new program such as a dairy buyout, and (3) modifying existing programs to enhance dairy farmer income.",
"Proponents of keeping the status quo argue that current dairy programs—specifically the dairy product price support program and the MILC program—already encourage additional milk production, and that more production-related support will slow the supply adjustment process needed to bring the dairy market back into balance.",
"At any rate, any proposals that involve new budgetary outlays could be challenged as adding to an already large federal deficit, and/or burdening consumers with higher costs.",
"Proponents of additional action point out that many producers are facing significant income loss and that without additional assistance, they may not survive financially.",
"Producer groups and processors alike want to increase demand as a way to bolster milk and dairy product prices."
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GAO_GAO-12-795
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{
"title": [
"Background",
"Original Budget, Financing, Schedule, and Scope of the CMP",
"Changes to the CMP Authorized by the UN General Assembly: 2006- 2009",
"Progress Made on CMP, but Two Building Renovations May Not Be Completed and Project Is Projected to Be Approximately $430 Million over Budget",
"Progress Made on CMP Renovations",
"Renovations for Two Buildings May Not Be Completed",
"CMP Office Projects 2014 Completion, but Risks to Schedule Exist",
"Projected Total CMP Cost Overruns Approximately $430 Million",
"Use of Best Practices May Address UN General Assembly Concerns Regarding CMP Cost Estimates",
"UN General Assembly Has Expressed Concerns Regarding CMP Cost Estimates",
"Use of Best Practices in Future CMP Cost Reporting May Address UN General Assembly Concerns",
"UN Considering Consolidation Building to Address UN Office Space Needs, but a Cost Estimate Has Not Been Completed",
"The UN Anticipates Office Space Needs at Its Headquarters Will Exceed Capacity by 2023",
"Consolidation Building Proposed as an Option to Address UN Long-Term Office Space Needs",
"Cost Estimate for the Consolidation Building Not Completed",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: UN Tax Equalization Fund",
"Appendix III: Comments from the Department of State",
"GAO Comments",
"Appendix IV: Comments from the United Nations",
"Appendix V: GAO Contacts and Staff Acknowledgments",
"GAO Contacts",
"Staff Acknowledgments",
"Related GAO Products"
],
"paragraphs": [
"",
"In 2001, we reported that the UN headquarters complex in New York City—built largely between 1949 to 1952—no longer conformed to current safety, fire, and building codes or to UN technology and security requirements. The UN General Assembly noted that conditions in the UN headquarters complex posed serious risks to the health and safety of staff, visitors, and tourists. Thus, in December 2006, after several years of design and planning, the UN General Assembly unanimously approved the CMP to renovate the UN headquarters complex, at a budget not to exceed $1.88 billion.\nTo finance the CMP, the UN General Assembly approved a strategy to assess member states for the cost of the CMP, under which they could choose to pay their assessment in either a lump sum or over a 5-year period, from 2007 to 2011. CMP assessments, whether collected as lump-sum or multi-year payments, were invested to earn interest income. The UN General Assembly also approved a $45 million working capital reserve to cover any temporary cash flow deficits. According to the CMP office, member states would receive this reserve back in the form of a credit at the end of the project’s construction phase. The United States chose to pay its assessment for the CMP in five equal payments of $75.5 million per year starting in 2007, for a total of approximately $378 million. The United States also paid a separate assessment to the project’s working capital reserve of about $9.9 million in 2007. In the resolution approving the CMP, the UN General Assembly decided that, in the event of cost escalations over the approved budget of $1.88 billion, member states would be subject to a further assessment to meet the revised requirements of the CMP.\nThe UN General Assembly approved the completion of the CMP’s scope during the scheduled period of 2006 to 2014. This scope included the renovation of five buildings on the UN headquarters complex—the General Assembly Building, the Conference Building, the Secretariat Building, the Library, and the South Annex—as well as renovation of the basements connecting several of those buildings and the construction of a temporary conference building on the North Lawn of the complex. Figure 1 shows the existing buildings of the UN headquarters complex, along with the temporary conference building.\nTo house UN staff during the renovation, the CMP included plans to lease swing space in nearby buildings. Additionally, the CMP included landscaping, demolition of the temporary conference building, additional blast protection, measures to promote environmental sustainability, and improvements to the reliability and redundancy of headquarters systems such as emergency power.",
"In several resolutions, the UN General Assembly noted that it has the sole prerogative to decide on any changes to the CMP’s scope, budget, and implementation strategy. Since December 2006, the UN General Assembly has exercised this prerogative to make changes to the CMP or authorize changes proposed by the Secretary-General. These changes include:\nAccelerated Strategy IV: In December 2007, the UN General Assembly approved an expedited strategy for the CMP known as accelerated strategy IV. This approach approved the renovation to proceed in two concurrent phases: one to renovate the Secretariat Building and one to renovate the Conference Building, General Assembly Building, and other buildings. Under the previous approach, the UN had planned on renovating buildings in multiple phases, including renovating the Secretariat Building while it was 75 percent occupied. The accelerated strategy called for the temporary relocation of most of the staff of the Secretariat Building during the renovation— which required the CMP office to increase the amount of leased swing space—and expedited the schedule for the Secretariat Building’s renovation by reducing construction time from 6 to 3 years. The strategy also affected the schedules for the construction of the temporary conference building, as well as the renovation of the Conference Building and General Assembly Building. The CMP office reported that such an implementation strategy would reduce risks associated with the CMP. The CMP office also estimated that the strategy would produce an estimated cost overrun of $190 million, which it would seek to reduce through the process of value engineering.\nAssociated Costs: In April 2009, the UN General Assembly decided that certain costs related to the CMP—known as associated costs— would be financed from within the $1.88 billion CMP budget. Associated costs cover a wide range of requirements, such as broadcast equipment, new furniture, and additional staffing requirements to manage information technology and security. According to CMP officials, these costs were originally expected to be funded by UN program offices through the regular UN budget process. Therefore, the CMP office’s original cost estimates for the CMP did not include new furniture or equipment except where the equipment was part of the permanent infrastructure of the UN. For instance, according to the CMP office, the original CMP scope only provided for furniture for three new mid-sized conference rooms and supplemental office furniture associated with swing spaces. While associated costs are funded from within the CMP budget, UN departments other than the CMP office manage these costs. For example, the UN Department of Safety and Security manages costs related to security. Prior to the UN General Assembly’s decision on associated costs, the CMP office reported that the CMP budget could not absorb associated costs without exceeding $1.88 billion. However, the UN General Assembly argued that the CMP office could realize further cost reductions that would enable the CMP to absorb associated costs.\nSecondary Data Center: In April 2009, the UN General Assembly requested that the CMP partially absorb costs associated with a secondary data center, including leasing a commercial facility and establishing a service delivery agreement to provide equipment and services. The secondary data center serves as a backup system to enable the UN to respond to emergency situations that may impair operations of critical elements of its information and communications technology infrastructure and facilities. In resolutions in April 2009 and December 2009, the UN General Assembly requested that the CMP budget absorb $16.7 million to fund the secondary data center.",
"While the CMP nears completion of the renovation of two of the five buildings, the project has suspended the originally planned renovation of two buildings, faces risks meeting its 2014 completion date, and is projected to be approximately $430 million over budget. The CMP office may not renovate two buildings that were originally part of the scope of the project, due to the lack of a workable design solution to address security requirements. In addition, the CMP office predicts that it will complete the CMP by the end of 2014, but risks, such as a compressed schedule with work yet to be contracted, exist. Moreover, as of February 2012, the CMP office estimates that the project will be about $430 million over its approved budget of $1.88 billion—an increase of approximately 53 percent (approximately $149 million) from its last reported estimate. According to the CMP office, a number of factors, such as unforeseen conditions and complexities in the basements and Conference Building, contributed to the increase in projected cost overruns. The CMP office has proposed options to address a portion of these cost overruns; however, even if approved, additional funding will be needed to address the remainder. The United States could potentially use credits it has with the UN to fund an assessment related to the CMP.",
"The CMP office has nearly completed the first two building renovations of the CMP—the Secretariat and Conference Buildings—which began in 2010. By February 2013, both buildings are scheduled to be completely renovated and back in use. Specifically, the CMP office plans for the Secretariat Building to be primarily reoccupied and in use by November 2012. The CMP office predicts completion of the renovation of the Conference Building by the end of 2012, with the building reoccupied and in use in February 2013. The CMP office has reported a number of other achievements of the CMP, such as:\nModernizing 1 million square feet in the basements, including installation of chilled water piping, electrical conduit and wire, telecommunication conduit and copper cable.\nRedesigning the Conference Building to take into account enhanced security upgrades.security upgrades include two major activities: structurally enhancing the Conference Building and associated basements to withstand blast threats and installing protective structures, including bollards and gates, along the perimeter of the UN complex. The CMP office anticipates that the enhanced security upgrades will be completed by 2014.\nAccording to the CMP office, the enhanced\nSubstantially completing the removal and replacement of the glass curtain wall in the Secretariat Building, shown in figure 2.\nThe UN General Assembly has requested that the CMP office provide information on contracts awarded for the CMP. The CMP office posts information on contract awards on the UN Procurement Division and CMP websites. According to the CMP office, 85 percent of the value of CMP contracts has gone to U.S. firms.",
"Security requirements and concerns have led the CMP office to suspend originally planned renovations for two buildings—the Library and the South Annex. In 2010, UN security studies found these buildings to be vulnerable to vehicle blast threats. As of April 2012, CMP officials stated that they lacked a workable design solution to address these security concerns. Specifically, according to CMP officials, the only solution to the risk of blast threats would be to close a nearby highway exit ramp. However, based on discussions between the UN and the United States, the CMP office does not view this outcome as likely. To renovate the Library and South Annex to the required security standards, CMP officials told us that they would have to demolish the buildings and begin new construction. CMP officials also told us that since they do not have a viable renovation option for these buildings, they have not updated their initial design and cost estimates. Absent a solution to the security vulnerabilities of the Library and South Annex, CMP officials told us that only limited use of the buildings would be possible. In May 2012, the CMP office reported that it plans to consult with UN departments affected by the suspension to determine where to relocate functions impacted by potentially not renovating the buildings.",
"The CMP office expects to complete the CMP by 2014, but its schedule faces risks, such as a compressed schedule with some work yet to be contracted. As of February 2012, the CMP office estimates completing renovations by mid-2014, about 1 year behind the schedule it reported in October 2008. As shown in table 1, while the completion date for the project is still estimated to be mid-2014, the projected completion dates for key CMP activities have experienced delays for various reasons.\nCMP officials attribute schedule delays mostly to enhanced security upgrades added to the CMP in 2011. We reported in 2009 that security upgrades to the CMP represented a key risk to the project’s progress.\nAccording to the CMP office, implementing enhanced security upgrades to address security issues resulted in a delay of about 1 year in the schedule of the Conference Building. Although it reported a mid-2011 completion date as of October 2008, the CMP office now estimates that the Conference Building renovation will be completed in late 2012.\nAccording to the CMP office, despite delayed start dates for a number of activities, the CMP office has maintained a 2014 project completion date. However, the CMP office faces two key risks related to meeting this date:\nCompressed schedule. CMP officials noted that maintaining the 2014 project completion date while experiencing delays to the start dates for several projects has created a compressed schedule, which reduces the ability to develop workaround solutions if problems arise. For example, CMP officials identified the completion of the Conference Building renovation as a “critical path” of the project’s schedule, because renovations to the General Assembly Building cannot begin until those to the Conference Building are completed. Once the CMP office moves conference functions back into the Conference Building, it will reconfigure the temporary conference building to house the functions of the General Assembly Building while the General Assembly Building undergoes renovation. Previously, as a result of delays in the Conference Building’s schedule, the CMP office delayed the completion date of the General Assembly Building from mid-2013 to mid-2014. CMP officials said that the amount of time that the Conference Building renovation can be delayed without impacting the overall project’s completion date is minimal.\nWork yet to be contracted. The CMP office has yet to contract work for various remaining parts of the project and thus does not have agreed upon completion dates with the contractors that will be doing the work. For instance, as of March 2012, the CMP office reported that it had not committed any funds for the renovation of the General Assembly Building. CMP officials told us that conditions in the General Assembly Building—such as the potential for asbestos and weaknesses in the building’s concrete slab—also constitute potential risks. Additionally, the CMP has not fully contracted for renovation work in the basements. CMP officials have noted that renovation in the basements is linked to the overall renovations, as the basements house the infrastructure for the UN complex. CMP officials have described the work in this area as highly complex and have noted that to date it has taken longer than expected.",
"As of February 2012, the CMP office projected total cost overruns of about $430 million over the CMP’s approved budget of $1.88 billion. According to the CMP office, the estimated cost overruns result from a number of factors, including about $266 million in direct project costs and about $164 million in scope additions authorized by the UN General Assembly to be financed from within the project’s approved budget, as shown in table 2.\nProjected CMP cost overruns increased significantly between May 2011 and February 2012. The UN General Assembly described the increase as “sudden and unexplained.” In October 2011, the CMP office reported that it had committed 84.5 percent of the CMP funding against the original $1.88 billion budget, which significantly reduced the risk of unexpected, adverse events during the remainder of the project. As shown in table 3, estimated cost overruns increased by approximately 53 percent (roughly $149 million) between May 2011 and February 2012, driven primarily by direct costs to the CMP.\nAlthough the increase in estimated cost overruns reported in February 2012 are attributable to the direct costs of the CMP, a portion consists of costs added to the CMP over time by the UN General Assembly without a corresponding increase in the CMP budget—such as associated costs and the secondary data center. CMP officials told us that they assume responsibility for direct costs of the CMP—which include renovation, swing space, contingency, and escalation—but have no control over additional related costs added to the CMP. In explaining the reasons for the estimated cost overruns directly attributable to the project, the CMP office cited several factors, including the following:\nAsbestos abatement. According to the CMP office, when the renovations began, the volume of asbestos found far exceeded its expectations. Moreover, new regulations enacted by New York City in 2010 made the abatement of that asbestos even more complicated and expensive.\nUnforeseen conditions in the Conference Building. The CMP office reported that the actual construction of the concrete floor slabs in the Conference Building differed from the original design drawings. The construction of the concrete floor slabs required the CMP office to amend the design of the Conference Building. As of March 2012, the CMP office reported that it expected to find similar conditions in the General Assembly Building.\nComplexities in the basements. The CMP office noted that work in the basements was more complex than expected due, in part, to limited documentation of the basement infrastructure and relocation of essential mechanical systems. For instance, the CMP office reported that UN documentation did not account for the large quantity of existing telephone, electrical, and security cables in the ceilings of the basements. According to the CMP office, each of these cables had to be individually tested to ensure that the CMP office did not remove active infrastructure, which was a labor-intensive process. Figure 3 shows examples of ceiling conditions in the basements before and after CMP renovations.\nTo address cost overruns of the CMP, the CMP office recommended that the UN General Assembly endorse two financing proposals. Specifically, the CMP office proposed utilizing the working capital reserve fund and the interest income on CMP funds. As of February 2012, $45 million was available in the working capital reserve fund and the interest income amounted to $107.2 million. As of May 2012, the UN General Assembly had not made a decision to approve the use of these funds, but the Advisory Committee on Administrative and Budgetary Questions had reviewed and supported the proposals. If the UN General Assembly approves the utilization of the working capital reserve fund and the interest income, these funds will cover about a third of the projected cost overruns, but cost overruns in the amount of approximately $277.7 million will still not be addressed.\nThe CMP office is also exploring options to further address estimated cost overruns by not fully renovating two buildings included in the original CMP renovation scope. With no solution to the security issues related to the Library and South Annex, CMP officials told us that they would propose limiting the scope of the renovations to these buildings. Rather than renovating as originally planned, the renovations to the Library and South Annex would only include connecting them to new building systems, such as heating and air conditioning. Based on the original cost estimate for these buildings, the CMP office estimates that not fully renovating the two buildings would eliminate $65 million in planned work, which could be applied to address projected cost overruns of the CMP. CMP officials also told us that they plan to explore additional opportunities to reduce work and achieve savings related to site landscaping and the General Assembly Building, but have not estimated the potential savings of these options. As shown in table 4, combining the proposed financing options with reductions in the project’s planned scope would still leave the project with a shortfall of $212.7 million.\nAnother potential financing option is an additional member assessment. In the resolution approving the CMP, the UN General Assembly decided that, in the event of cost escalations over the approved budget of $1.88 billion, member states would be subject to a further assessment to meet the revised requirements of the CMP. The actual amount of such an assessment would depend on the decisions of the UN General Assembly regarding proposed financing and reduced scope options. The U.S. share of any future assessment would be 22 percent.\nOne potential option for funding all or part of an additional U.S. member assessment for the CMP would be using credits in the UN Tax Equalization Fund (TEF) account—a UN fund used to reimburse U.S. nationals working at the UN for U.S. taxes paid on their UN salaries. (For more information on the UN TEF, see appendix II.) According to the UN, as of December 31, 2011, there was a balance of $134 million in TEF credits attributable to the United States. This balance remained after the UN applied $100 million in TEF credits attributable to the United States to fund the enhanced security upgrades to the CMP in 2011. Congress has since passed legislation related to the use of TEF credits. The Consolidated Appropriations Act of 2012, passed in December 2011, required that TEF credits shall only be available for the United States’ assessed contributions to the UN and shall be subject to the regular notification procedures of the Committees on Appropriations. State told us that it is complying with these provisions.2012, the U.S. Mission to the UN requested that the UN apply $13.1 million of TEF credits attributable to the United States toward the United States’ regular UN budget assessment for calendar year 2011. After the application of these credits, the balance of TEF credits attributable to the United States stood at $120.9 million, as of May 2012. However, under this policy, TEF credits could be used to fund cost overruns of the CMP if the cost overruns are funded through a member assessment as called for by the resolution approving the CMP.",
"In April 2012, the UN General Assembly issued a resolution expressing concerns regarding the transparency, timeliness, and clarity of the CMP’s February 2012 cost estimates. To address these concerns, the UN General Assembly requested that the CMP office improve reporting on the underlying causes of the projected CMP cost increases. While the UN General Assembly resolution did not specifically identify how the CMP office should report its future cost estimates, we have identified best practices associated with high-quality and reliable cost estimates. Applying these best practices, as appropriate, may address the UN General Assembly’s concerns regarding CMP cost estimates.",
"After evaluating the CMP office’s February 2012 cost information, the UN General Assembly reported a number of concerns with these estimates, such as a lack of transparency, timeliness, and clarity. For example, with regard to transparency, member states inquired why the CMP office did not include $38 million in increased swing space leasing costs in earlier CMP cost estimates. The CMP office noted that it negotiated swing space leases for a period longer than necessary to mitigate the risk of CMP schedule delays. The CMP office did not include these costs in its earlier estimates because it assumed these leases could be terminated early or used by other UN departments in the event the CMP project no longer needed the swing space. According to the CMP office, in a healthy rental market, early termination or subleasing is common; however, the economic downturn prevented it from taking such actions. In addition, member states inquired about the main factors that led to the projected increase in cost overruns. According to the CMP office, a key factor of the projected cost overruns was increased asbestos abatement costs related to asbestos found in the basements and Conference Building in late 2011. However, the CMP office had previously reported that all asbestos was abated from Conference Rooms 1-3 of the Conference Building in February 2011. Further, the 2011 CMP annual report considered the abatement of asbestos and the removal of obsolete materials from the Secretariat and Conference Buildings a significant achievement. For additional information regarding the concerns of the UN General Assembly and issues raised by member states, see table 5.\nOfficials from the U.S. Mission to the UN (USUN) also raised concerns with the explanation of the projected CMP cost overruns, both during and at the conclusion of the March 2012 session. For example, a U.S. representative at the March 2012 session asked about the amount and utilization of the remaining contingency fund for the CMP. While the CMP office reported that $89.1 million remained in funds for contingency and price escalation, this amount was as of May 2011, before the increase in estimated cost overruns reported in March 2012. Moreover, USUN officials told us that despite the briefings and information provided by the CMP office, there was still insufficient information as to why and when the projected cost overruns occurred.\nWhile CMP officials told us that they could not currently quantify the individual cost drivers of the $149 million increase in projected cost overruns that occurred between May 2011 and February 2012, they stated that the February 2012 estimates were the best available. Further, they noted that it is difficult to attribute the causes for cost overruns to specific buildings. For example, asbestos abatement is a campus-wide activity that affects the cost of all building renovations.\nAfter evaluating CMP cost estimates, the UN General Assembly issued a resolution in April 2012 requesting that the CMP office produce additional reporting related to CMP costs. Specifically, the UN General Assembly requested more information on the underlying causes of the projected cost increases and practical options to address them.",
"While the UN General Assembly resolution did not explicitly identify how the CMP office should report future cost information, we have found that a high-quality and reliable cost estimate should exhibit certain best practices, including being comprehensive, well-documented, accurate, These best practices include elements for documenting and credible.and reporting cost estimates. For example, a cost estimate that is well- documented and accurate should allow for the cost estimate to be traced back to and verified against its sources and explain the variances between planned and actual costs.\nThese best practices may also help address some of the concerns raised by the UN General Assembly regarding the CMP’s cost estimates. For example, using the best practices associated with a well-documented cost estimate can improve an estimate’s transparency, by capturing in writing such things as the source of the data used, the calculations performed, and the rationale for choosing particular estimating methods. Table 6 shows how the concerns of the UN General Assembly regarding the CMP’s cost estimates could be addressed by using our best practices, as well as the potential benefits of this approach.\nCMP officials told us that they plan to present the additional information requested by the UN General Assembly in fall 2012. Applying these best practices, as appropriate, may help the CMP office as it prepares updated cost materials.",
"To address its future office space needs, the UN is considering the option of a new building that would be separate from the CMP, but it does not have an estimate of the project’s costs. The UN estimates that its office space needs will exceed the capacity of its current real estate portfolio by 2023, due primarily to expiring leases. As a potential solution, the City and State of New York have proposed the construction of a new office building, to be located across the street from UN headquarters, known as the consolidation building. This proposal requires UN General Assembly approval, but the UN has not entered into any formal agreements regarding the building and the current lack of a cost estimate makes its cost implications for the UN and its member states unclear. We have previously reported that reliable cost estimates are critical to program success, including informed resource investments.",
"In September 2011, the Office of the Secretary-General completed a report on future office space accommodation needs for UN headquarters. The study estimates that, as of 2014, its real estate portfolio in New York will consist of approximately 3.4 million square feet of space—about 39 percent owned and 61 percent leased. The UN headquarters campus comprises the majority of the UN’s owned space, with office space in the Secretariat Building, Conference Building, Library, basements, and General Assembly Building. The UN also leases space in various locations around its headquarters campus to accommodate staff that cannot be housed in its owned space.\nHowever, due to the combination of expiring leases and estimated staff growth, the Secretary-General’s report estimates that by 2023 the UN’s office space needs will exceed the capacity of the owned and leased buildings currently in its real estate portfolio. Leases for the UN’s two largest leased office spaces expire at the end of March 2018, with options to extend to the end of March 2023, but no renewal options beyond that date. The UN Development Corporation (UNDC)—a public benefit corporation of the State of New York whose mission is to provide office space and other facilities to help meet the current and future space needs of the UN—constructed these buildings in 1976 for use by the UN. The buildings provide approximately 670,000 square feet of office space, housing about 2,500 staff. The UN currently leases these buildings at below-market rates. According to the Secretary-General’s report, renegotiating the leases beyond 2023 would likely result in lease rates set at market rates, rather than the favorable below-market rates currently Additionally, the Secretary-General’s report projects enjoyed by the UN.that headquarters staff levels will increase from 10,711 in 2014 to 11,911 in 2023. Using the report’s estimate that each additional staff person requires an additional 250 square feet of space per person, this increase will require an additional 300,000 square feet of office space. We have not independently verified the report’s per person space estimate. However, in October 2011, the UN’s Advisory Committee on Administrative and Budgetary Questions found that a more in-depth and comprehensive analysis of the factors affecting the UN’s space requirements was needed.",
"The City and State of New York have initiated a proposal to construct a new office building—known as the consolidation building—that could help the UN address some of its long-term office space needs, but the UN has not entered into any agreements on the proposal. In July 2011, the Governor of the State of New York signed legislation authorizing the City of New York to transfer parkland to UNDC to construct a new office building for the UN as large as 900,000 square feet and located across the street from UN headquarters. In October 2011, key officials of the City and State of New York entered into a memorandum of understanding (MOU) regarding the consolidation building. The MOU, to which UNDC consented, obligates UNDC to specific actions, including initial funding for and issuance of bonds to finance the project. Per the MOU, the property will not convey to the UN until UNDC and UN reach agreement on the terms, with a deadline of December 31, 2015. According to UNDC officials, they would like to receive agreement from the UN by early 2014.\nUN officials told us that they were informed of the MOU by UNDC officials shortly before it was finalized and signed, but have not entered into a formal agreement regarding the consolidation building. UN officials stated that they did not see the MOU prior to the City and State of New York signing it in October 2011 and therefore had no input to the document. Moreover, while the UN is not a party to the MOU, the document contains requirements to which the UN must agree for the consolidation building to move forward. For example, the UN would have to agree to lease the new office building from UNDC, potentially in a lease-to-own or similar arrangement. UN officials expressed concern that some of the terms of the MOU could increase costs and risks to the UN. For instance, according to UN officials, leasing the building would likely require the UN to pay an amount roughly equivalent to the bonds issued by UNDC to design and construct the consolidation building. UN officials told us that since they will not know the potential lease costs until the bonds are issued, they would like the option to opt out of the project upon review of the potential costs. Additionally, according to the MOU, as a condition of agreeing to lease the consolidation building, the UN would have to extend the leases at two of its largest leased spaces at increased rental rates and with additional costs. For instance, according to the terms of the UN’s current lease, its rates will increase from $27.50 per square foot (about $18.2 million per year) to $30 per square foot (about $19.8 million per year) if the organization exercises the option to extend its lease from 2018 to 2023. However, according to UN officials, under the MOU, the UN would have to extend the leases from 2018 to 2023 and its rates could rise to market rates, estimated by the UN to be approximately $77 per square foot. Additional costs include an amount equal to real estate taxes attributable to the space, which UN officials said was not originally included in the lease renewal terms. Finally, UN officials cited concerns related to “risk sharing” in the proposal. Specifically, officials expressed concern that the proposal places the entire risk for the cost of the project on the UN, rather than sharing the risk between the UN and UNDC. UN officials told us that they continue to discuss the consolidation building and its potential costs with UNDC officials. However, as of June 2012, the UN had not entered into a formal agreement regarding the consolidation building.\nUN officials told us that the UN General Assembly’s Fifth Committee, which reviews administrative and budgetary issues, plans to discuss options related to the consolidation building at its fall 2012 session.",
"While the UN has held discussions with UNDC, neither organization has completed a cost estimate for the consolidation building. In October 2011, the UN’s Advisory Committee on Administrative and Budgetary Questions reviewed the Secretary General’s office space study. The committee noted that future UN space requirements could vary significantly depending on the underlying assumptions for estimating staff growth and space allowance per person, as well as alternative workplace policies. The committee also concluded that it was not fully convinced of the assumptions used to establish the baseline estimates of the UN’s future office space requirements. Moreover, the committee stated its desire to compare all potential options for future office space accommodation, and recommended that the Secretary-General complete a detailed cost analysis of the consolidation building comparing the potential cost of the building to other options.\nWe have previously reported that a reliable cost estimate is critical to the success of any program. Such an estimate provides the basis for informed investment decision making, realistic budget formulation and program resourcing, meaningful progress measurement, proactive course correction when warranted, and accountability for results. While the UN’s recommendations did not clarify what to include in the cost estimate for the consolidation building, our research has identified a number of best practices that form the basis of effective program cost estimating and should result in reliable and valid cost estimates that management can use for making informed decisions. As noted earlier, a high-quality and reliable cost estimate is comprehensive, well-documented, accurate, and credible. For example, a comprehensive cost estimate should include all life-cycle costs of a project, document all cost-influencing ground rules and assumptions affecting the estimate, and completely define the program and its schedule, among other best practices. See table 7 for the best practices associated with a high-quality and reliable cost estimate.\nUN officials told us that they plan to conduct a cost analysis of the consolidation building. However, as of June 2012, the UN had not completed such an estimate. A cost estimate using our best practices could assist the UN in predicting the level of confidence in meeting the project’s budget by quantifying risks and uncertainties associated with the project. Such an estimate gives decision makers perspective on the potential variability of the estimate, should facts, circumstances, and assumptions change. We have found that, without the ability to generate reliable cost estimates, projects risk experiencing cost overruns, missed deadlines, and performance shortfalls. As a result, absent a completed cost estimate for the consolidation building, the potential cost implications for the UN and its member states are not clear.",
"As the CMP nears completion of the renovations of the Secretariat and Conference Buildings, the project is estimated to be approximately $430 million over budget and risks remain as some renovations have yet to begin. Financing options exist to address a portion of the projected cost overrun; however, the United States and other UN member states may be asked to provide an additional assessment to finance the remainder. Aware of this risk, the UN General Assembly has requested that the CMP produce additional reporting on its costs. We have found that the best practices of developing high-quality and reliable cost estimates help inform decisions to manage capital projects effectively. Given the cost overruns and challenges of the CMP, as well as the risks and unknown costs associated with the UN’s potential consolidation building project, these practices should be used to enhance the CMP’s future cost estimates and to develop cost estimates of prospective projects to address the UN’s long-term space needs. Such an approach would likely improve the quality and reliability of cost information provided to the UN and its member states, as well as help decision makers evaluate costs and risks associated with these projects.",
"To improve the quality and reliability of information provided to the UN and its member states, we recommend that the Secretary of State and U.S. Permanent Representative to the United Nations work with other member states to take the following two actions: 1. Direct the CMP office to implement, as appropriate, GAO’s best practices for cost estimation when it updates information on CMP costs. 2. Direct the UN to ensure the development of a cost estimate for the consolidation building utilizing GAO’s best practices for cost estimation.",
"We provided a copy of this report to State and the UN for review and comment. State and the UN provided written comments, which are reproduced in appendixes III and IV, and technical comments, which we have incorporated as appropriate.\nState concurred with our recommendations and expressed its concern that projected cost overruns of the CMP had grown to approximately $430 million. State also noted that it is not actively considering the use of TEF credits to address a U.S. share of a potential additional assessment for the CMP since member states have yet to decide on proposed funding options to address cost overruns. However, given that the estimated cost overruns of the CMP would still be approximately $212.7 million even if the UN approves the use of proposed funding sources, we maintain that an additional member assessment may be needed and that TEF credits attributable to the United States are a possible source of funding such an assessment.\nThe UN noted that our report was an accurate assessment of the status of the CMP and that it provided constructive recommendations.\nWe are sending copies of this report to interested congressional committees, the Secretary of State, the U.S. Mission to the United Nations, and the UN. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact Thomas Melito at (202) 512-9601 or melitot@gao.gov, or David Wise at David Wise, (202) 512-2834 or wised@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.",
"This report provides information on the progress of the United Nations (UN) Capital Master Plan (CMP) and the status of the UN consolidation building. Specifically, we examine (1) the extent to which the CMP is meeting its planned renovation scope, schedule, and budget; (2) the UN General Assembly’s evaluation of CMP cost estimates; and (3) the status of the UN consolidation building project.\nTo address our objectives, we reviewed and analyzed relevant planning, schedule, and budget documents related to the CMP, as well as relevant planning and legal documents related to the consolidation building. Additionally, we discussed the progress, plans, risks, and costs of the CMP and consolidation building project with officials from the Department of State’s (State) Bureau of International Organizations, the U.S. Mission to the UN, New York City, and UN offices, including the CMP office and Central Support Services. We also discussed efforts related to the consolidation building project with the UN Development Corporation, a public benefit corporation created to develop and operate office space for the benefit of the UN. We focused on these agencies because they are involved in the efforts of the CMP and the UN consolidation building project.\nTo examine the extent to which the CMP is meeting its planned renovation scope, schedule, and budget, we analyzed documents such as CMP annual reports, UN Board of Auditors reports on the CMP, and UN General Assembly resolutions. We compared current planned renovation scope, projected completion dates, and cost estimates with previously reported scope, schedule, and budget projections. For our baseline comparison, we referred to UN General Assembly resolutions that approved the planned renovation scope and schedule from accelerated strategy IV in 2007 and the $1.88 billion budget for the CMP in 2006. Further, we examined other relevant CMP documentation, including information on risk assessments, monthly reports, and procurement information. To understand the project’s cost estimates, we examined materials provided by the CMP office to the UN General Assembly’s Fifth Committee documenting the project’s financial condition as of February 2012, and analyzed reports on CMP progress and associated costs produced by the Advisory Committee on Administrative and Budgetary Questions and the Program Planning and Budget Division. We also discussed these costs and the CMP’s integrated master schedule with CMP officials. To understand options for funding projected CMP cost overruns, we reviewed UN Financial Rules and Regulations, UN Financial Report and Audited Financial Statements, and relevant congressional requirements in Appropriations Law, such as the Consolidated Appropriations Act of 2012. Further, we held discussions with officials from the CMP office, the UN Program Planning and Budget Division, UN Board of Auditors, and State’s Bureau of International Organizations to understand the various options that the United States could utilize to finance its portion of projected CMP cost overruns. We also traveled to New York City, New York, to tour the renovation sites and observe the progress of the CMP. During these visits, we met with officials from the CMP office, various UN departments—Program Planning and Budget Division, Board of Auditors, Office of Internal Oversight Services—and the U.S. Mission to the UN to discuss the ways in which the CMP is meeting its planned renovation scope, schedule, and budget.\nTo examine the UN General Assembly’s evaluation of CMP cost estimates, we reviewed and analyzed documents provided by the CMP office to the UN General Assembly’s Fifth Committee describing the project’s financial condition as of February 2012, UN General Assembly resolution 66/258 issued in April 2012, the 2011 CMP annual report proposing financing options, and the Advisory Committee on Administrative and Budgetary Questions report A/66/7/Add.11 on costs of the CMP. Further, we analyzed the extent to which best practices for cost estimating from our Cost Estimating and Assessment Guide could potentially address concerns raised by the UN General Assembly with regard to the cost information provided by the CMP office. We did not conduct a full assessment of the CMP’s February 2012 cost estimates, as (a) the estimates were updated projections provided in response to questions from the UN General Assembly’s Fifth Committee during briefings, rather than comprehensive cost estimates; and (b) the CMP office intends to provide a full report on the project’s costs, including new cost estimates, in fall 2012. Although we did not audit the CMP cost data and are not expressing an opinion on them, based on our examination of the documents received and our discussions with cognizant officials, we concluded that the data were sufficiently reliable for the purposes of this engagement. We also held discussions with officials from the CMP office, UN Program Planning and Budget Division, UN Board of Auditors, and the U.S. Mission to the UN on a number of factors affecting CMP cost estimates.\nTo examine the status of the UN consolidation project, we analyzed the memorandum of understanding (MOU) signed between the City and State of New York to identify actions required by the MOU. Additionally, we reviewed UN documents such as the Secretary-General’s Feasibility Study on the United Nations Headquarters Accommodation Needs 2014- 2034 and a related report by the Advisory Committee on Administrative and Budgetary Questions to understand the UN’s long-term office space needs. We conducted interviews with officials from New York City, the UN Development Corporation, and the UN regarding negotiations related to the consolidation building and lease costs for buildings potentially affected. Further, we reviewed how our best practices for cost estimating could provide insight on potential project costs to inform UN decision making.\nWe conducted our work from January 2012 to July 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform our work to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our objectives.",
"The United States annually pays assessed contributions to the UN General Fund to support the UN’s programs and activities. One of these activities is a staff assessment, which is an amount deducted from the gross pay of all UN employees and used to fund the UN Tax Equalization Fund (TEF). The UN established the TEF to equalize the net pay of all UN staff members whatever their national tax obligations. While most UN employees are exempt from paying income tax on their UN earnings in their home country, some UN employees, including U.S. nationals, are not. For member states that levy income taxes on the earnings of UN employees, such as the United States, contributions to the TEF are first used to reimburse UN employees for the taxes they paid on their UN income. Unused TEF credits remain as a balance in a member state’s TEF account.\nThe UN reports TEF credits on a biennial basis. According to U.S. and UN officials, various factors, such as modifications in U.S. tax laws or changes in the number of U.S. employees at the UN, can result in TEF credits or debits in a member state’s account. As shown in table 8, credits in the TEF attributable to the United States and reported by the UN rose by over $160 million between 2001 and 2009—from $17.6 million to $179 million.\nIf a member state’s TEF account has a balance, the Financial Rules and Regulations of the UN state that such a balance shall be credited against the mandatory assessed contributions due from that member state the following year. However, notwithstanding UN financial regulations that TEF credits should be applied toward a member state’s assessed contributions, TEF credits attributable to the United States were applied to fund enhanced security upgrades to the CMP. In October 2010, the UN requested State’s endorsement of the use of up to $100 million of TEF credits accrued in prior years. In a January 2011 letter to the UN, State acknowledged the UN’s use of up to $100 million in U.S. TEF credits described as “attributable to annual U.S. regular budget contributions” to fund the enhanced security upgrades.\nThis transaction differs from previous uses of TEF credits. For example, State has previously requested that TEF credits be applied toward assessed contributions for the UN. Specifically, we reported that in 1997 the U.S. payment for its regular budget assessment included a $27.3 million credit from surplus funds in the TEF.TEF credits attributable to the United States were previously applied toward U.S. assessed contributions; however, they noted that in the case of the enhanced security upgrades the credits were used for a different purpose.",
"",
"1. We maintain that an additional member assessment may be needed and that Tax Equalization Fund credits attributable to the United States remain a possible source of funding for such an assessment. Given the Capital Master Plan’s (CMP) projected cost overruns of approximately $430 million, even if the United Nations (UN) General Assembly approves the use of proposed funding sources and reductions in planned renovations, the estimated cost overruns of the project would still be $212.7 million. In the event of cost escalations over the approved budget of the CMP, the UN General Assembly decided that member states would be subject to a further assessment. The U.S. share of any future assessment would be 22 percent. 2. Our report makes clear that the CMP project is separate from the consolidation building proposal. However, we maintain that regardless of whether the UN directly manages the construction of the consolidation building, a sound cost estimate should be developed as the UN will be responsible for financing the building should it agree to its construction.",
"",
"",
"",
"In addition to the contacts named above, Maria Edelstein, Assistant Director; Biza Repko; Adam Yu; Mark Dowling; Debbie J. Chung; Jason Lee; and Karen Richey made key contributions to this report. Joshua Ormond provided technical assistance.",
"United Nations: Renovation Still Scheduled for Completion in 2013, but Risks to Its Schedule and Cost Remain. GAO-09-870R. (Washington, D.C.: July 30, 2009).\nUnited Nations: Renovation Schedule Accelerated after Delays, but Risks Remain in Key Areas. GAO-08-513R. (Washington, D.C.: April 9, 2008).\nUpdate on the United Nations’ Capital Master Plan. GAO-07-414R. (Washington, D.C.: February 15, 2007).\nUnited Nations: Renovation Planning Follows Industry Practices, but Procurement and Oversight Could Present Challenges. GAO-07-31. (Washington, D.C.: November 16, 2006).\nUnited Nations: Early Renovation Planning Reasonable, but Additional Management Controls and Oversight Will Be Needed. GAO-03-566. (Washington, D.C.: May 30, 2003).\nUnited Nations: Planning for Headquarters Renovation is Reasonable; United States Needs to Decide Whether to Support Work. GAO-01-788. (Washington, D.C.: June 15, 2001)."
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"question": [
"What issues does the Capital Master Plan face?",
"What concerns remain about the project's scope?",
"What concerns remain about the project's schedule?",
"What funding issues are currently occurring?",
"What financing solutions have been proposed?",
"What are the two potential funding options available?",
"Why might the UN consider the option of a new building?",
"What would the name of a new building be?",
"What has been the response to the UN, regarding this idea?",
"What is the substantial barrier to moving forward with a consolidation building?",
"For what purpose was the $1.88 billion CMP approved?",
"What other options are being considered by the UN?",
"Why does the United States have a significant interest in these projects?",
"What was the GAO asked to report on?"
],
"summary": [
"The Capital Master Plan (CMP) has made progress, but may not deliver the project’s original scope, faces risks meeting its scheduled completion date, and is projected to be about $430 million over budget as of February 2012.",
"Regarding the project’s scope, the CMP office may not renovate the Library and South Annex—two of the five buildings in its original scope—due to the lack of a workable design solution to address security concerns.",
"Related to schedule, the CMP office expects to complete the CMP in 2014, but reports that previous schedule delays have reduced its ability to respond to unforeseen events without affecting the project’s end date.",
"According to the CMP office, the project’s approximately $430 million in projected cost overruns are due to a number of factors, including about $266 million in direct project costs and over $164 million from scope additions authorized without a corresponding increase in budget by the United Nations (UN) General Assembly.",
"The CMP office has proposed financing options that could address a portion of these cost overruns. However, even if approved, an additional member assessment may be needed.",
"One option for funding the U.S. portion of an additional member assessment is the use of credits attributable to the United States in the UN Tax Equalization Fund (TEF)—a fund used to reimburse U.S. nationals working at the UN for taxes paid on their UN salaries. According to the UN, as of May 2012, the balance of TEF credits attributable to the United States stood at $120.9 million.",
"To address its future office space needs, the UN is considering the option of a new building that would be separate from the CMP, but it does not have an estimate of the project’s costs. The UN estimates that by 2023 its office space needs will have exceeded the capacity of its current real estate portfolio, primarily due to expiring leases.",
"As a potential solution, the City and State of New York have proposed the construction of a new building known as the consolidation building.",
"The UN has indicated its willingness to consider this proposal, but has not entered into any formal agreements.",
"The current lack of a cost estimate for the consolidation building makes its cost implications for the UN and its member states unclear. GAO has previously reported that cost estimates are critical to program success, such as informed resource investments.",
"In December 2006, the UN approved a $1.88 billion CMP to modernize its headquarters in New York City by 2014, with a scope to include the renovation of five buildings.",
"Separately from the CMP, the UN is also considering the option of a new office building, known as the consolidation building, to be located across the street from UN headquarters.",
"As the UN’s largest contributor, the United States has a significant interest in these projects.",
"GAO was asked to report on (1) the extent to which the CMP is meeting its planned renovation scope, schedule, and budget; (2) the UN General Assembly’s evaluation of CMP cost estimates; and (3) the status of the consolidation building project."
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CRS_R44823
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{
"title": [
"",
"Tax Revisions in the Blueprint",
"Individual Income Tax",
"Tax Rates",
"Standard Deduction, Itemized Deductions, Personal Exemption, and the New Dependent Credit",
"Alternative Minimum Tax",
"Earned Income Credit and Child Credit",
"Interest, Dividends, and Capital Gains",
"Pass-Through (Noncorporate) Business Income",
"Other Individual Tax Provisions",
"Corporate Income Tax: A Destination-Based Cash-Flow Tax",
"Estate and Gift Tax",
"Economic Efficiency and Growth",
"Effects on Labor and the Allocation of Spending",
"Effects on Investment and Saving",
"The Allocation of Capital by Physical Type and Sector",
"A Note on Dividend Payout Rates and Capital Gains Realizations",
"Debt Versus Equity Finance",
"Total Tax Rates",
"Tax Policy Center's Estimates of Business Effective Tax Rates",
"Effects on Growth",
"International Issues",
"Imports and Exports With a Border Tax Adjustment",
"Growth and Efficiency",
"Distributional Issues",
"Distribution Across Income Classes",
"Horizontal Equity",
"Tax Treatment of Families of Different Size and Composition",
"The Marriage Penalty or Bonus",
"Other Aspects of Tax Changes Reflecting Horizontal Equity",
"Inter-Generational Distributional Effects: A Cash-Flow Tax as an Existing-Assets Tax",
"Effects on Distribution of Border Tax Adjustments: Dollar Appreciation and Trade Deficits",
"Revenue Effects",
"Administrative Issues",
"Incentives to Recharacterize Labor Income of Pass-Throughs as Capital Income",
"Addressing Exporters' Losses with a Border Adjustment",
"Taxing Imports That Are Direct Business-to-Consumer Sales with a Border Adjustment",
"Substituting Interest Payments for Sales Price with a Border Adjustment",
"Overstating Exports and Understating Imports with a Border Adjustment",
"New Tax Planning Possibilities with a Border Adjustment",
"Other Issues",
"Consequences for International Agreements: The WTO and Bilateral Tax Treaties with a Border Adjustment",
"Issues for State and Local Governments",
"To What Extent Are Public Firms' Investments Affected by Financial Accounting?",
"Financial Transactions",
"Appendix. Growth and Stock Market Models"
],
"paragraphs": [
"O n February 16, 2016, House Speaker Paul Ryan announced the creation of six committee-led task forces to formulate proposals. The Tax Reform Task Force was led by Ways and Means Committee Chairman Kevin Brady. On June 24, 2016, Speaker Ryan released the Tax Reform Task Force Blueprint, or the Better Way tax reform. For the individual income tax, the plan would broaden the base, lower the rates, and alter some of the elements related to family size and structure. For business income, the current income tax would be replaced by a cash-flow tax rebated on exports and imposed on imports, with a top rate of 20% for corporations and 25% for individuals. The proposal would also repeal estate and gift taxes. The repeal of the Affordable Care Act taxes is not in the Better Way tax reform proposal, but these taxes along with subsidies are addressed in the House-passed American Health Care Act of 2017 ( H.R. 1628 ).\nThe border adjustment (tax on imports and rebate on exports) has garnered a lot of attention and, along with international tax issues in general, was the subject of a hearing before the Ways and Means Committee. A recent announcement by congressional and administration leaders indicated that border tax adjustments would be dropped from future tax plans. The effect of eliminating the border tax adjustment will be discussed in the relevant sections.\nNote that the blueprint is a general outline rather than a detailed proposal, with many features not fully determined. This report reviews the plan as reported in that document. The inclusion of additional features could alter this analysis.\nThis report describes current law and the proposed changes. It discusses economic efficiency, distributional and equity issues, administrative and compliance issues, revenue effects, and other tax-related issues.",
"This section describes the changes in the individual income tax, the treatment of unincorporated business, the corporate tax, and the repeal of estate and gift taxes.",
"The main structural elements of the individual income tax that apply to all taxpayers include the rate structure, the standard deduction or itemized deductions, personal exemptions, and the earned income tax credit. Lower- and moderate-income taxpayers with qualifying children are eligible for a partially refundable child credit. The earned income tax credit (fully refundable) is also available for lower- and some moderate-income taxpayers. Taxpayers at higher incomes are potentially subject to an alternative minimum tax. The blueprint revises all of these elements except the existing refundable child credit and the earned income credit. The values reported below for current law are for 2016, the year the plan was announced. (With low inflation rates, the dollar amounts are similar in 2017.) Most elements of current law are indexed for inflation, including rate brackets and deductions and exemptions. An exception is the child credit.",
"Under current law, tax rates apply at rates of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% brackets. Rate brackets are wider for joint returns (i.e., married couples) than for head of household (i.e., households with a single head with children), which are in turn wider than returns for single taxpayers. The blueprint proposes three rates: 12%, 25%, and 33%. It would replace the 10% and 15% rate with a 12% rate; the 25% and 28% rates with a 25% rate; and the remaining rates with a 33% rate. The dollar size of the rate brackets would be unchanged.\nLess than 0.7% of taxpayers are subject to the 39.6% rate, and less than 0.1% to the 35% rate, which applies to a narrow bracket; taxpayers paying at these marginal rates, however, account for 15.6% and 1% respectively of adjusted gross income (AGI). The 33% bracket accounts for 1.3% of taxpayers and 7.1% of adjusted gross income.\nThe most common top marginal tax rate for returns is the 15% bracket, which, in 2014, accounted for 28.9% of taxpayers (who accounted for 21.8% of adjusted gross income, AGI), followed by the 0% bracket, accounting for 24.2% of returns and 1.6% of AGI, then the 10% bracket accounting for 18.4% of returns and 6.5% of AGI. The 25% bracket accounted for 16.6% of returns and 26.6% of AGI. For a small share of taxpayers (6.3%) and AGI (9.6%), the top rate is the capital gains tax rate.\nHigh-income taxpayers are also subject to a provision termed a phase out of itemized deductions, but that effectively acts as an additional increase in tax rates of 3%, by increasing taxable income by 3% of AGI up to 80% of itemized deductions. For most taxpayers, the itemized deduction constraint is not binding. In 2016, the phase out began at $259,000 for singles and $311,000 for joint returns.\nHigh-income taxpayers are also subject to an additional tax of 3.8% of investment income (including capital gains, dividends, interest, and passive investments in unincorporated business), in excess of $200,000 for single returns and $250,000 for joint returns. There is also a 0.9% tax on wage income exceeding these amounts that goes into the Hospital Insurance Trust Fund. These provisions were enacted in the Affordable Care Act (ACA). The Better Way proposal does not address these taxes but indicates that all taxes imposed by the ACA will be repealed in different task force proposals.\nTax brackets are currently indexed for inflation and that feature would be retained.",
"Taxpayers may take a standard deduction or itemize deductions. About 30% of taxpayers itemize their deductions. Taxpayers may take personal exemptions for themselves and their dependents. Personal exemptions are phased out at higher-income levels, and a phase out of itemized deductions is also in place although it effectively operates as an additional tax. In 2016, the standard deduction was $6,300 for singles, $9,300 for head of household returns (single heads with children), and $12,600 for joint returns. The personal exemption was $4,050, and began phasing out at the same levels for itemized deductions.\nThe revision eliminates personal exemptions, but offsets this elimination for the taxpayer with a larger standard deduction: $12,000 for singles; $18,000 for head of household returns, and $24,000 for joint returns. The plan adds a nonrefundable credit of $500 for dependents (child or non-child), again an offset for eliminating the personal exemption for dependents.\nThe plan eliminates all itemized deductions except for mortgage interest and charitable deductions. The most important deduction eliminated is the state and local taxes (income, sales, and property) deduction.\nAlthough the standard deduction and current personal exemption are indexed for inflation, the blueprint would index the standard deduction, but apparently not the child and dependent credit. The credit will also apparently phase out at a lower-income level than the personal exemptions: $75,000 for single and $150,000 for joint returns.",
"Current law imposes an alternative minimum tax that applies a lower tax rate of 26% (and 28% at higher-income levels) to a broader base with a large flat deduction, which is indexed for inflation. The primary provisions added back to the base are personal exemptions, the standard deduction, and itemized deductions for state and local taxes. This tax applies only to relatively high-income individuals, but does not affect the very highest income levels. The blueprint would repeal this tax.",
"Current law provides for a fully refundable earned income tax credit, with a significantly higher rate for families with children. It also provides a $1,000 per child partially refundable credit. Both provisions are phased out as income rises. The blueprint leaves these provisions in place, except that it increases the child credit phase-out starting point for joint returns (from $110,000 to $150,000), making it twice the phase-out starting point for singles ($75,000). The phase-out levels for the earned income credit are indexed for inflation; the child credit level and phase-out levels are not: these features are retained.",
"Under current law, interest income is taxed at ordinary rates. Dividends and capital gains are subject to lower rates: a zero rate for individuals with ordinary rates in the 15% bracket or below and 15% for those in higher brackets, except that high-income returns at the beginning of the top, 39.6%, bracket (for 2016, above $441,000 for single returns, $441,000 for head-of-household returns, and $466,950 for joint returns) are subject to a 20% rate. There are higher rates for capital gains arising from prior depreciation and for collectibles.\nThe proposal would tax 50% of capital gains, dividends, and interest at ordinary rates. Thus the rates would be 6% for the new 12% bracket (rates were formerly zero for capital gains and dividends and 10% or 12% for interest), 12.5% for the 25% bracket (formerly 15% for capital gains and dividends and 25% or 28% for interest), and 16.5% for the 33% bracket (formerly 15% and 20% for capital gains and dividends and 33%, 35%, and 39.6% for interest).",
"Business income earned from pass-through businesses taxed under the individual income tax (including sole proprietorships, partnerships, and Subchapter S firms with limited numbers of stockholders that are incorporated but can elect to be taxed as unincorporated businesses) is currently subject to ordinary rates. The blueprint applies a maximum rate of 25%. Earnings will be allocated to reflect the labor services of the owner-operator, which will be taxed at regular rates.\nPass-through businesses are subject to the same current capital recovery and other tax rules as corporations and will be subject to the new cash-flow tax rules as well. Corporate tax treatment is discussed below.",
"The blueprint indicates a variety of additional provisions will be studied and potentially changed. It indicates that incentives for retirement saving and benefits for higher education will be retained (although potentially revised). Provisions for health insurance, such as the exclusion of employer-provided insurance, are being studied by the Health Care Task Force.",
"Under current law, corporations are subject to a 35% tax on taxable income. Some industries are allowed a 9% deduction for domestic production, lowering the tax rate on that income to 31.85%. In measuring taxable income, overhead, taxes, labor compensation, interest, and the cost of goods sold are deductible. Capital cost recovery provisions allow the cost of capital investment to be deducted over a period of years. Investments in plant and equipment are recovered through depreciation. A temporary provision, bonus depreciation, allows a fraction of investment in equipment to be deducted immediately. Intangible investments, such as research and development and advertising that create assets with future value, are deducted immediately as well. Small businesses are able to expense equipment investments in full. Research investments are also eligible for a research credit. In addition, corporations may be subject to a corporate alternative minimum tax.\nThe U.S. tax system technically applies on a worldwide basis so that income from foreign operations is taxed, with a credit allowed against U.S. tax for foreign income taxes paid. Income earned by foreign subsidiaries incorporated abroad is not subject to tax (except for certain types of easily shifted income taxed under Subpart F) until repatriated, or paid to the U.S. parent as a dividend. As a result of this tax deferral and the foreign-tax credit, relatively little tax is paid on foreign source income.\nThe blueprint would impose a 20% corporate income tax and allow investments to be expensed, but disallow the interest deduction. It would eliminate the domestic production activities deduction, but would retain the research credit. This treatment would convert the income tax to a cash-flow tax and impose a zero effective marginal tax rate on investment (and a negative tax rate on research investment). The same rules (except for the tax rate) would be applied to pass-through businesses. A cash-flow tax converts an income tax into a consumption tax. A consumption tax base is composed of two parts: cash flow and labor compensation. By converting the tax on capital income to a cash flow tax, it could be viewed as a part of a value-added tax, with the other part labor compensation. The resulting overall system would be a tax referred to as an X-tax, which imposes a value-added tax.\nThe blueprint would have some slight modifications compared to a full cash-flow tax. It would not allow land acquisitions to be expensed, and it is unclear whether inventories are to be expensed, because it refers to retaining a certain type of inventory accounting (last in-first out), which is different from expensing. The blueprint also does not spell out any details of transition rules, such as allowing depreciation recovery on existing assets, interest income and deductions on existing debt, or for carryforwards for unused credits. Net operating losses (where firms' costs exceed their revenues) will be carried forward indefinitely, with interest. There are other tax code provisions whose treatment is not clarified.\nValue-added taxes only apply to physical and not financial assets. A cash-flow tax could also include financial transactions and the blueprint appears to do so as it refers to disallowing net interest deductions. How to treat financial firms such as banks under a standard value-added tax is challenging, and a variety of potential approaches exist. The blueprint notes that the plan will address the particular circumstances of financial institutions.\nThe new cash-flow tax would also be imposed on a destination basis, that is, based on where output is consumed rather than the current system that largely imposes the income tax on where output is produced (with a small share of output produced abroad subject to tax). The destination-based tax would be implemented by taxing imports, allowing a deduction for export income, and excluding foreign-source income from tax. Value-added taxes are also imposed on a destination basis.\nHouse Ways and Means Committee Chairman Kevin Brady has recently suggested the possible inclusion of a five-year phase in of the border adjustment and the possible inclusion of special considerations for some industries, such as financial services, shipping, communication, digital services and insurance. The committee has also been considering an allowance of interest deductions for small businesses. Eliminating the border tax adjustment would make the tax a cash-flow tax imposed on production rather than consumption.\nThe U.S. tax system would be territorial in the sense that no tax would be imposed on foreign-source income of U.S. firms by virtue of its being foreign source (i.e., producing abroad for the non-U.S. market). Under existing law, a substantial amount of earnings abroad have been deferred and never repatriated. The proposal would tax this accumulated income over an eight-year period at 8.75% for earnings held in cash or cash equivalents and otherwise at 3.5%. If the provision follows past practice, the U.S.-foreign tax credit would be allowed but scaled back proportionally, as was the case in the 2004 repatriation holiday that allowed amounts to be brought back at a lower rate on a voluntary basis. Anti-abuse rules under Subpart F would mostly be eliminated except for certain rules about passive income, such as interest income.",
"Current law has a 40% estate tax with an exemption of $5.45 million in 2016 and $5.49 million in 2017. The blueprint will repeal the estate tax. Its companion, the generation-skipping tax that prevents donors from passing on assets to the generation after the next (e.g., to grandchildren) also will be repealed. The blueprint does not mention the gift tax, but it might also be repealed, as it could be avoided by foregoing large gifts and keeping assets in the estate. Retaining the gift tax would discourage inter vivos giving.",
"Gains in economic efficiency are a traditional objective of tax reform. Efficiency gains have often been conflated with economic growth, but the concepts are different. Efficiency gains arise from an improved allocation of resources whereas economic growth arises from increases in labor and capital. The efficiency objective is to maximize well-being (referred to as utility in economics terms). The two are related to some of the measures but viewed differently. For example, if a marginal tax rate cut increases labor supply the growth effect is the value of additional output, but the efficiency gain is the increased income minus the loss in the value of leisure or unpaid work (such as child care). Increased work always adds to economic growth but does not necessarily add to efficiency or well-being.\nLabor supply is affected by income and substitution effects. When effective rates are cut, a rise in income allows individuals to consume both more goods and leisure, and thus reduces work effort. The substitution effect causes goods to be cheaper and encourages more work. Only the substitution effect and the marginal rate relate to efficiency gain (reducing the distortion between the consumption of goods, financed by working, and the consumption of leisure).\nSimilarly, an increase in the rate of return has two conflicting effects on savings: a higher rate of return means that individuals can consume more both in the present and the future; consuming more in the present means a reduction in savings. A higher rate of return also encourages the substitution of future consumption for present consumption, increasing savings. The effect on savings also, however, depends on the timing of tax payments. To the extent, for example, that consumption taxes shift tax payments to the future (when assets may be drawn down in retirement and used to consume), a taxpayer should save more to finance those future tax payments.\nWhereas growth effects depend on income and substitution effects, and thus on both average and marginal rates, efficiency effects depend on marginal effective tax rates, for both labor and capital. As with labor, the efficiency gain from reducing marginal tax rates on capital income is not the amount of consumption it allows in the future, but the difference in the value of that consumption compared to foregone present consumption.",
"The Tax Policy Center (TPC) estimated the effective marginal tax rates on wages, salaries, and self- employment income for current law and under the blueprint. TPC found that the average marginal income tax rate fell from 24.7% to 22.9%, or a 1.9 percentage point decrease. Its revenue analysis indicates that the tax's structural elements that drive these effects are roughly revenue neutral suggesting there would be no income effect. The percentage increase in net of tax wage (1 minus the tax rate) was 2.4% (based on the 0.771 to 0.753 ratio). Based on the Joint Committee on Taxation's labor substitution elasticity, 0.1 to 0.2, the effects would increase labor input by 0.24% to 0.48%. With labor accounting for about two-thirds of gross domestic product (GDP), the effect on output would be 0.16% to 0.32% in the short run. The effects would be closer to 0.24% and 0.48% in the long run.\nThese effects are overstated, however, because they do not account for the base broadening effect on marginal effective tax rates. Disallowing state and local tax deductions is an increase in the share of taxes out of an additional dollar. Similarly, any item of expenditure (such as charitable contributions or mortgages interest) that is paid for out of labor income would affect the marginal effective rate for individuals who shift to the standard deduction. The major itemized deductions are mortgage interest, charitable contributions, and state and local taxes.\nTo determine the importance of this issue in general, data from the Internal Revenue Service's Statistics of Income indicate that 23.2% of total wages accrued to itemizers who are likely to continue to itemize (income classes above $200,000) but would no longer be able to deduct state and local taxes, which accounted for 7.65% of AGI. Using the marginal tax rate for the top quintile, 28.4%, overall marginal tax rates would increase by 0.5 percentage points. The remainder of itemizers account for 36.3% of wage income, have itemized deductions equal to 24.1% of income, and using the tax rate for the fourth quintile of 19.3% have an increase of 1.7 percentage points. The total, 2.2 percentage points, more than offsets the direct marginal rate reductions.\nIt is unclear whether mortgage interest and property tax deductions should be seen as labor income or capital income benefits. If they are considered capital income subsidies, then the offset would be reduced by 47% of the 1.7 percentage point effect, and a negligible amount of the 0.5 percentage points, for a total of 1.4 percentage points. With this view, the base broadening from itemizing deductions would offset three quarters of the rate reduction.\nNote also that the mortgage interest deduction may not have a marginal impact in the short run because it is largely affected by existing mortgages. It should have an effect in the longer term.\nAlthough this is a rough calculation, it suggests negligible effects on labor supply from reducing marginal individual income tax rates, in turn suggesting little effect on growth or efficiency.\nThe base broadening changes as well as rates can also have an effect on the allocation of consumption. The direct disallowance of itemized deductions or the reduction in itemizers (largely as a result of disallowing state and local taxes as a deduction) and to a lesser extent the lower top rate would reduce the degree to which the tax system subsidizes these deductions. The deductions, in turn, favor certain types of consumption provided through labor and other incomes: state and local goods and services, owner-occupied housing (through mortgage interest and real estate tax deductions), and charitable contributions.\nAlthough a full treatment of these subsidies is beyond the scope of this report, there is some disagreement about the justification for subsidizing these items. Many economists criticize the deductions that favor home ownership as encouraging too much investment in housing, although some arguments (contributing to stable communities and providing an important retirement asset for much of the middle class) could be made in favor of those provisions. Those arguments, however, largely justify benefits for moderate income taxpayers and not wealthy ones. State and local tax deductions require all taxpayers to subsidize spending in particular states, although some spillover effects from this spending may occur (e.g., use of highways by nonresidents and spillovers from education because of mobility). Charitable contributions have been viewed more favorably because charitable giving is undersupplied in a market economy. At the same time, some would argue that tax subsidies favor the charities that benefit higher-income taxpayers (such as the arts and higher education) and that some response estimations to the tax subsidy suggest that a dollar of revenue loss results in less than a dollar of charitable contributions, indicating that the government could deliver more to charity per dollar through direct spending.\nNote that some itemized deductions also repealed by the blueprint—such as extraordinary medical expenses, casualty losses, investment expenses, and employee expenses—are seen to reflect an ability to pay or to be an appropriate measure of income, rather than an incentive.\nIn addition, note that the incentive for charitable contributions will also be reduced through repeal of the estate and gift tax.",
"In several respects the proposal will likely lead to efficiency gains in the allocation of capital, by type and by form (equity or debt). Its effect on growth via an increase in the capital stock depends on potential offsetting forces of increases in the rate of return and increases in public borrowing due to debt.",
"The current income tax is characterized by significant variations in the effective tax rate due to variations in how rapidly costs are recovered. Table 1 shows estimates of effective tax rates on the returns to investment at the margin for different types of equity investments under two sets of assumptions regarding the taxability of shareholders (see table notes). The table excludes land, which is not reproducible, and inventories, whose short holding period makes investment in them relatively insensitive to tax rates.\nEffective tax rates measure the share of the return to investment at the margin that is collected in taxes. The primary differences between the two sets of assumptions are the shares of taxable shareholders; the CRS assumptions allocate based on ownership and include foreign owned shares and their U.S. taxes. The CBO assumptions consider the distribution among U.S. shareholders with adjustments for the shares of taxable and nontaxable excluding those below the ceilings of retirement accounts. The CBO estimated tax rates are also slightly higher.\nThe first column of estimates shows the tax rates at the corporate level, which would be 35% without any type of subsidy. Investment in intangibles is already subject to cash-flow treatment, and investment in research has a negative effective tax because of the research credit. Tax rates are higher for equipment and public-utility structures and even higher for other structures. The corporate total rates add the shareholder level taxes on capital gains and dividends. These effects are small because of the low rates and limited shares of assets held by taxable shareholders. Tax rates are higher for the corporate sector, depending on the asset, but the differences are small in the aggregate because the corporate sector has a larger share of tax favored intangibles and equipment. The differences between sectors are larger for tangible assets.\nEffective tax rates for the blueprint are shown in Table 2 . Because the tax is a cash-flow tax, all firm-level taxes are at zero except for investment in research, which benefits from the credit. Total tax rates are close to zero. The blueprint has no differences across assets except for research intangibles within a sector and very small effects across sectors. Thus the blueprint tax plan reduces and largely eliminates the misallocation of capital across asset types. Moreover, there could be justifications for the favorable treatment for research, which has positive spillovers.",
"The current tax treatment also has effects on dividend policy and capital gains realizations, which produce distortions, because capital gains taxes are not due until income is realized. The somewhat lower capital gains and dividend tax rates would reduce this effect, although this effect would be offset by higher after-tax rates of return. Under current law, very high-income taxpayers pay 23.8% (the income tax rate and the tax on investment income) and that rate would fall to 16.5%. Some taxpayers currently subject to a 15% rate would now pay 12.5%. These tax rate changes are relatively small, and, in addition, a significant portion of assets is held in nontaxable forms (i.e., retirement savings), so the effect would be relatively small.",
"Some investment is financed by debt rather than equity, resulting in two effects. Debt is currently favored over equity and thus the tax creates a distortion between debt and equity finance. At the same time, because taxes on debt finance are lower (because interest is deductible), debt finance leads to overall lower taxes, narrowing the distortions between the corporate and noncorporate sectors (because the corporate sector's higher tax rate favors debt finance). Table 3 shows the aggregate tax rates on equity, debt, and combined debt and equity. As shown in the table, debt finance is subject to negative tax rates in the corporate sector because tax at which the interest is deducted is much higher than the rate imposed on the creditor (mainly because of the large share of tax-exempt creditors). The difference between debt and equity is more pronounced in the corporate sector because of the higher corporate tax rate (relative to the rates for noncorporate firms).The CBO estimates assume a larger share of taxable creditors with that share larger for the noncorporate sector and thus results in a small estimated positive rate for the noncorporate sector. Tax-favored debt-financed investment also reduces overall effective tax rates and reverses the relative tax burdens across the sectors with aggregate noncorporate burdens higher than corporate ones (although for the basic assumptions the difference is negligible.) CBO also assumes a lower leveraging ratio for the noncorporate sector, which increases the overall tax rate in that sector compared with the corporate tax rate. Nevertheless, in both cases, the differences in overall tax rates are not large.\nTable 4 shows the effective tax rates for the blueprint. Tax burdens on equity finance fall and those on debt rise, with an overall decline, small negative tax rates with the CRS assumptions reflected in CRS Report R44638, Corporate Tax Integration and Tax Reform , and small positive ones with the CBO assumptions.",
"For purposes of considering overall savings and investment, it is important to consider the overall effective tax rates. The CBO assumptions may be more appropriate for measuring domestic savings effects, whereas the Congressional Research Service (CRS) assumptions may be better for a U.S.-investment effect (including investment from abroad).\nCombining the tax rates on the corporate and noncorporate sections in Table 3 and Table 4 indicates that, under current law, the combined business tax rate is 10.5% and 17.9% for the basic estimates and those using CBO assumptions about debt levels and taxability of shareholders and creditors. Under the blueprint, they would fall to 1.4% and 3.0%, respectively.\nAlthough the size of inventories is not likely to be sensitive to tax rates, inventories' taxes should be included in the total calculations for savings and overall investment. The returns are taxed at the statutory rate or higher, depending on the inventory method used. Total effective tax rates on business investment were 12.7% (22.7% under the CBO assumptions). Under the blueprint, these rates fall to 5.3% and 6.5%.\nAnother asset to consider including in the savings effects calculations is owner-occupied housing. Based on CBO assumptions, owner-occupied housing comprises 41% of total investment. Estimated tax rates were -9% for the CRS estimates and -1.1% for the CBO estimates. Under the blueprint, owner-occupied housing rates rise to -1.1% and 3%.\nOverall effective tax rates combining business and housing investments are estimated at 4.8% under current law (14.4% for CBO assumptions). These effective rates are -2.9% and 5.1%, respectively, for the blueprint provisions.",
"The Tax Policy Center (TCP) also reported estimated effective tax rates. The TCP estimates an overall effective business tax rate of 22% falling to a 6.3% rate, an estimate similar to the business investments' estimates, using the CBO assumptions.",
"Three estimates have been made of the growth effects of the blueprint and project very different effects. Different estimates reflect, in part, different sources of growth. There are three sources: (1) short-run stimulative effects, which are transitory and depend on the Federal Reserve's response; (2) supply side effects, where labor and capital respond to tax rates and capital can flow from abroad or result from domestic savings (where effects depend on behavioral responses); and (3) crowding out due to deficits, which depend on the magnitude of the deficit and the extent to which it can be financed by borrowing from abroad.\nThe Urban-Brookings Tax Policy Center's (TPC's) analysis used two different models. One model captures all three effects using a demand-side (Keynesian) model that transitions to a neoclassical growth model. In a neoclassical growth model output increases with individuals' increase in labor supply and savings, with the capital stock changing slowly. That model estimates a 1% increase in output in the first full fiscal year (FY2017). This effect would decline to 0.7% in the second year, and 0.2% in the third year. These effects are demand-side effects. The short-run effect disappears after the first four years and the effect turns negative by FY2021 (at a loss of 0.2%). Negative effects occur when crowding out reduces the capital stock more than induced saving increases it and the resultant reduction in output from the smaller capital stock more than offsets any increased labor supply. In the first 10 years, the plan reduces output by 0.5% overall; in the second 10 years, it reduces output by 1%. Note that these are not cumulative growth rates but rather the difference in each year in output with and without the tax change. The second model is a dynamic life cycle model (a model where many generations coexist and make savings and work decisions over a lifetime) that captures both supply-side effects and the crowding-out effects of increased deficits, but not the short-run demand-side effects. It begins with an increase in output of 0.9% in FY2017, declining to 0.1% by 2022, becoming negative (-0.1%) in 2023, and declining to a loss of 0.5% in 2026. In the first 10 years, output is reduced by 0.5% and in the second ten years by 2.6%.\nThe Tax Foundation finds a significant positive effect. Its estimate projects output in the long run to increase by 9.1%, primarily due to changes in capital income taxes. The basic model type is a neoclassical growth model with an immediate transition to the long run. The results reflect only supply side effects and do not include short-run demand effects or crowding out.\nAuerbach, Kotlikoff, and Koehler hereinafter AKK) provide an estimate of wage growth of 8% using the Global Gaidar Model. They characterize this result as optimistic. While they don't report output growth, that growth rate should be similar. The basic model type is a life-cycle model with multiple worldwide regions. Their results appear to arise largely from an increase flow of capital from abroad in a mode where capital is perfectly substitutable across countries. This model also does not consider short-run demand effects or crowding out.\nThe TPC has some sensitivity analysis in their life-cycle model, with an optimistic scenario where output increases quickly to a 1% increase which is fairly stable over time. A pessimistic scenario shows a decline in output by 2019 and, by 2040, a reduction of 9% of GDP. The growth effects appear to be positive in the optimistic case in part because it apparently assumes that deficits can be largely financed with borrowing from abroad, and negative in the pessimistic case in part because all deficits must be financed through the crowding out of investment.\nTo assist in understanding how estimates for growth effects arising from supply side effects can vary widely, a simple growth model showing the steady state effects has been constructed (see Appendix ). This model relies on three elasticities: (1) savings elasticity (denoted as ER), (2) labor supply elasticity (denoted as ES-EI, which reflects a net of the substitution and income elasticities), and (3) factor substitution elasticity (denoted as S, which reflects the ease with which labor and capital can be substituted in the production function). An elasticity is a percentage change in quantity divided by a percentage change in price. For the savings response, it is the percentage change in the savings rate divided by the percentage change in after tax rate of return. The labor substitution elasticity is the percentage change in labor supply divided by the percentage change in after tax wage at the margin or last increment of work. The labor income elasticity, which is negative, is the percentage change in labor supply divided by the percentage change in after tax average wage. The factor substitution elasticity is the percentage change in the ratio of labor to capital divided by the percentage change in the ratio of the wage rate to the pretax return.\nThe model is a closed model that is similar to the one used by the Tax Foundation (open economy issues will be discussed subsequently). It is important to understand how estimates for the effects of a tax change of this nature depend on so many fundamental values and estimates.\nTo illustrate the uncertainties with supply side effects, first consider the two sets of estimated tax rate differentials; Table 5 and Table 6 estimate the long-run results using the two tax rate effects discussed in this analysis. Also, consistent with the discussion of marginal taxes on wages, the calculations assumes there is no direct effect on labor from tax reductions, although an expansion of the capital stock drives up wages and labor supply increases in response.\nThese tables illustrate the importance of both the measurement of the tax change and the various elasticities. If the TPC's marginal tax rates on wages were also included in the estimate (not considering the offset of base broadening provisions), there would be an additional increase in output. These same changes applied to the Tax Foundation estimates, with a labor supply elasticity of 0.3, would produce an additional 0.7% increase in output. These effects would be smaller in the short run.\nThe Tax Foundation model uses an infinite savings elasticity and, as noted above, a 0.3 labor supply elasticity. Their large output effect is difficult to explain with the model above: using the CRS estimates of tax rate with CBO assumptions about shareholders and debt, a projected 2.8% growth rate would be expected with an infinite elasticity of savings, and a 0.3 labor supply elasticity. Using the TPC's measure of marginal effective tax rate change on labor income, this elasticity would add 0.7%. Larger effects would be expected in a model that did not include economic depreciation in the cost of capital or had a smaller depreciation rate. In the model above, with the same elasticities, a model without depreciation would produce an effect of 4.4%, which added to the labor supply effect would be 5.1%. A likelihood may be that a full or an additional explanation is that the Tax Foundation's tax change is much larger. This larger effect could be partially explained by a different mix of capital stock, focusing more on the capital assets whose rates were reduced by the change and not including those (intangible assets and owner-occupied housing) that were increased by the change.\nThe AKK model is likely to closely approach the results for an infinite elasticity because it has an open economy and its lifecycle elements are likely to lead to significant growth. AKK report the tax rates they use are estimated to fall from 34.6% to 16.1%. The effect of the tax rate changes on capital income, which is the main driver of effects, is 3.1 times the CRS tax rate changes with CRS assumptions and 2.4 times the effects of the CRS tax rate changes with the CBO assumptions. The tax rate differential alone would suggest an output effect of around 6% at an infinite savings elasticity and the other most generous assumptions (the higher labor supply and factor substitution elasticities). The effect is 36% higher than the rate reported by the TPC, and using the infinite elasticity that rate would imply a 5% output increase. The TPC and AKK rates exclude owner-occupied housing and that is a significant reason for the larger tax rate effects.\nThis growth effects discussion illustrates that assumptions that go into models, including behavioral responses estimates, crowding out treatment, and a proper measurement of the tax rate changes, are important and reinforce each other in some cases, that is, high elasticities magnify differences in the measurement of tax rate changes on output.\nWhat might be a reasonable estimate of the savings and labor supply effects? Both the empirical evidence and the agencies' practices are reviewed in a report of dynamic scoring. Considering models like the one depicted here and the one used by the Tax Foundation, empirical evidence suggests a labor substitution elasticity from close to zero to 0.3, an income elasticity of 0 to -0.1, and a net labor supply elasticity ranging from -0.1 to 0.3. The JCT has used a substitution elasticity of 0.2 and an income elasticity of -.1 for a net labor supply elasticity of 0.1 in their model of this type, whereas CBO used a substitution elasticity of 0.24, an income elasticity of -0.05, and a net labor supply elasticity of 0.19. Empirical evidence on savings elasticities suggests an elasticity around zero, which ranges from negative to positive. In their model of this type, CBO used a 0.2 elasticity. JCT modifies this model by using a life cycle element, but indicates that it produces effects similar to a 0.29 elasticity.\nIf the growth effects (without counting crowding out) were calculated with the JCT assumptions, using the tax rates under CRS assumptions and CBO assumptions, the effect would be an increase of 0.7% to 1.0%. If CBO assumptions on elasticities were used, the growth effects would be 0.6% to 0.8%. (These estimates assume a unitary factor substitution elasticity, which is a feature of most models, although some empirical evidence suggests the elasticity is lower.) These effects would likely lead to significant output decreases if crowding out were included.",
"A number of important effects on international tax issues arise from the tax change.",
"A true destination-based tax should not discourage imports or favor exports as is sometimes claimed. The import tax initially makes imports less attractive than domestic production, and the export subsidy, that initially permits firms to charge less for exports, makes exports more attractive to foreigners than their home production. These shifts in demand ultimately change demand for imports and exports, leading to changes in the demand and supply of dollars that causes the dollar to appreciate by 25% with a 20% tax rate. This dollar appreciation offsets the effects of the tax, so that U.S. consumers see no change in prices of imported goods, foreign exporters continue to receive the same price and foreigners buy and sell the same amounts for the same prices in their own currency.\nSome caveats or objections have been raised about this effect. Perhaps the most important of these is that the export subsidy is not refundable, so that exporters that have loss positions will not be able to use the subsidy. Although loss carryforwards are allowed with interest, these firms may be in a permanent loss position. A recent study that simulated the effect of the border adjustment on firms in loss positions found that, weighted by assets, going to a cash-flow tax without border adjustments caused the fraction of loss firms assets to change very little (remain at around 20%). Adding border adjustments increased the share to, typically, around 40%. Firms with losses will not be able to benefit from the export subsidy and to the extent that the subsidy does not have a value, it will cause the border tax adjustment to act partially as a tariff (and thus discourage imports).\nPotential ways for firms to address this inability to use the subsidy include merging with an importer, adding a business as an import broker, or shifting supplies of intermediate goods from domestic to foreign producers. All of these approaches, however, produce some distortions and market inefficiencies, and a better approach from an efficiency perspective might be to allow refundability or to allow the subsidy to be credited against other taxes, such as employer payroll taxes.",
"In Table 5 and Table 6 , these international considerations include the possibility of attracting more capital from abroad and would suggest perhaps increasing the savings elasticity to account for more investment than that generated by domestic savings, although the upper limit that elasticity is nevertheless infinity. Evidence suggests that the portfolio substitution elasticity is considerably less than infinity and probably around 3. Moreover, because the United States is a large country, the portfolio elasticity will be larger than the supply elasticity, with the latter, approximately 1.8. If that elasticity were used to compute the effects, they would be 1.8% and 2.5% at the top of the range (labor supply elasticity of 0.5 and factor substitution elasticity of 1) and 0.8% and 1.1% at the bottom (labor supply elasticity of 0.1 and factor substitution elasticity of 0.5).\nAnother reason the inflow of foreign investment might be less than suggested by the estimates, or even be negative, is the likelihood that debt is more mobile internationally than equity. The new system encourages more equity investment, but discourages debt-financed investment. Some studies have suggested that a cut in the corporate rate would decrease the U.S. capital stock because it would discourage debt inflow from abroad.\nThe effects in the AKK study appear to arise largely, at least initially, from international capital flows and they appear to assign an infinite elasticity (perfect substitution) to equity capital (there does not appear to be debt-finance in their model although the tax rates incorporate it). If equity capital is imperfectly substitutable, and debt more substitutable, their results would be too large and possibly in the wrong direction. Their model also appears to treat all capital in the economy as corporate capital, whereas a large share is from pass-through businesses and owner-occupied housing.\nThe destination basis of the tax (which is coupled with moving to a territorial tax that does not tax foreign source income) will eliminate some distortions that currently exist due to tax rules affecting international relationships. For example, the current tax discourages repatriation of income earned abroad by foreign subsidiaries because tax is not due when earned, only when returned to the parent firm as a dividend. This effect would no longer exist with a tax that is only imposed based on the place of consumption. The destination basis would also eliminate the incentive for firms to invert (shift their headquarters to another country), which may require a tax induced merger. In addition, it likely would reduce or largely eliminate artificial profit shifting, which is a paper transaction, but requires real resources and possibly some real effects (e.g., setting up a subsidiary operation in a tax haven).\nThe blueprint will introduce inefficiencies with respect to its border adjustment if the export subsidy is not refundable. For firms in a permanent loss position, tax-motivated changes, such as merging with importers, establishing import brokerage businesses, or substituting foreign for domestic inputs, will introduce distortions motivated by a desire to use loss positions. To the extent these actions are not taken and firms do not receive the subsidy, the proposal will distort trade.\nWithout the border tax adjustment, the territorial tax will still eliminate the tax on repatriations. The territorial tax, lower rate, and disallowance of interest deductions will reduce, and probably largely eliminate, the incentive for inversions. Profit shifting will be reduced because of the disallowance of interest deductions, but the shifting of profits into low tax countries through the pricing of intangibles, which is a more important method of profit shifting, would be increased with a territorial tax and no border adjustment.",
"Several distributional consequences arise in considering the blueprint. This section discusses four issues: (1) distribution across income classes (vertical equity), (2) horizontal equity (or the treatment of taxpayers with the same abilities to pay), (3) intergenerational distribution (through the cash-flow tax and its effects on assets), and (4) international distribution (through the exchange rate effects of the border tax adjustment on assets).",
"The measure commonly used for capturing the distributional effects on relative incomes is the percentage change in after-tax income.\nThe TPC provides distributional analysis for 2017, that indicates the percentage increase in after-tax income is 2.5% overall. The effects across income classes depend on the assumption about the border tax adjustment and exchange rates. With no exchange rate adjustment, which might occur in the short run, the increase in income is 0.4% for the first two quintiles and 0.5% for the next two, and the increase is 4.6% for the top 20%. After-tax income is projected to rise by 13.4% for the top 1% and 16.9% for the top 0.1%. With an exchange rate adjustment, the increase for the first two quintiles and the fourth quintile is 1%, the increase for the third quintile is 1.1%, and the increase for the top quintile is 4%. The increase for the top 1% is 10.8% and the increase for the top 0.1% is 13.1%. With no border tax adjustment, the increase for the first two quintiles is 1.2%, the increase for the third and fourth quintiles is 1.4%, and for the top quintile is 5.5%. The increase for the top 1% is 14.1% and the increase for the top 0.1% is 17.4%.\nThe Tax Foundation also presents distributional analyses, but with a smaller effect, 0.7% of income. It finds an increase of from 0.2% to 0.5% for the bottom 80% and 1% for the top 20%. The top 10% has an increase of 1.5% and the top 1% an increase of 5.3%.\nThe overall increase in income is more than three times as large in the TPC analysis for 2017 and more than twice as large in 2025 compared with the Tax Foundation estimates. One difference between the two calculations is that the TPC analysis includes the repeal of the taxes in the Affordable Care Act, whereas the Tax Foundation does not. Because these taxes tend to grow more rapidly in the future, the revenue cost of repealing them accounts for a growing share of the total cost: 9% in 2017, 24% in 2021, 26% in the first 10 years, and 64% in the second 10 years.\nBoth analyses, however, show a general pattern of favoring higher-income individuals, probably largely because of the reductions in business and corporate taxes.\nThe Tax Foundation also provides a distributional analysis after the growth effects are incorporated with much larger and more even benefits. Aside from issues as to whether these increases could be as large as projected (particularly using an infinite savings elasticity, measuring a tax rate change that appears to be too large, and not allowing for crowding out), the sources of growth come at a cost. For example, the individual who increased savings reduced consumption to do so, and the benefit of the policy should capture what is lost and what is gained. Similarly, the worker who increases work effort is giving up unpaid work or leisure. That said, if the capital stock grows disproportionally, there will be some benefit accruing to lower-income workers because of capital deepening. The opposite would occur if capital declines, as suggested would eventually be the case, by the TPC's analysis.\nThe AKK study provides a distributional analysis but, reflecting the life cycle nature of the model, provides distributional effects for lifetime spending and net wealth for the 40-49 age cohort. Its analysis indicates that the shares are essentially the same under the plan. The study also examines shares after the growth effects are incorporated and finds the distribution, again, essentially the same.",
"Horizontal equity addresses the relative tax treatment of taxpayers with the same ability to pay who differ in other respects. The most important way that most taxpayers with the same ability to pay could experience different tax rates is family composition. Some families are headed by a married couple and some by a single individual. Taxpayers differ in the number, if any, of children. Differential tax rates can also apply to couples that live together with or without being married (the marriage penalty or bonus). Current law treatment of both these cases is addressed in a recent CRS report, and these rates are compared with the proposed treatment in the blueprint. Finally, individuals can differ in their ability to pay because of circumstances, such as large medical expenses.",
"To examine the first horizontal equity issue, the effective tax rates arising from current and proposed structural elements of the tax system are compared across family types. These structural features include the rate structure, personal exemptions, child credits, standard deductions, itemized deductions and the alternative minimum tax. The comparison does not reflect the differential treatment of capital and labor income, although outside of high-income families, most taxpayers have relatively small shares of capital income.\nTo make the comparisons, families that have an equal ability to pay are assigned an income required to match the reference income (that of a married couple without children) through an equivalency index. This index accounts for the ability of families to enjoy economies of scale (such as sharing kitchens and bathrooms) and for the size and nature (adults or children) of the family. The economy of scale issue means that although two people need more income than one person to achieve the same standard of living, they do not need twice as much income.\nTable 7 shows the effective average income tax rates for lower-and middle-income levels under current law and the blueprint. The table shows within one income level single, joint (headed by a married couple), and head of household (headed by a single parent with children) returns. The blueprint does not have an effect on the lowest income levels because these returns do not have positive tax liability and are not affected by the changes in nonrefundable provisions. At all of these income levels, there is some favoritism in current law for families with children, due to the earned income credit and the child credit, with the most generous treatment for families with two or three children. That favorable treatment becomes relatively small at the $25,000-income level and virtually disappears by the $50,000-income level. The blueprint generally maintains this pattern.\nTable 8 and Table 9 show the effective tax rates on higher incomes. (Tax rates that reflect payment of the alternative minimum tax are bolded.) Under current law, at middle and higher incomes, tax rates become more even across family size, although at higher-income levels families with children are taxed more heavily. This effect occurs because the allowances for children are either phased out or are not large enough relative to income to make the adjustments for large families. This pattern is largely continued under the blueprint because the basic structure of the current system is retained.",
"A second horizontal equity issue concerns the treatment of couples who live together with and without marriage. Married couples file a joint tax return and couples that live together each file a single return if there are no children. If there are children, one taxpayer can file a head of household return and the other a single return. These choices can produce either a marriage penalty or a marriage bonus, depending on the income splits, income levels, and family circumstances. As shown in Table 10 and Table 11 for families without children, either penalties or bonuses can occur. Penalties can arise at low-income levels because of phase outs, particularly in the earned income credit. (Tax rates arising from the alternative minimum tax are bolded). No marriage penalties occur in the middle incomes because the rate brackets, standard deductions, and personal exemptions are twice those in a single return. Marriage bonuses arise when income is unevenly divided, although penalties can occur due to the earned income credit. Tax rates vary more widely when children are involved, and at low income levels an unmarried partner who is the primary earner but does not have custody can pay significantly higher taxes. As shown in Table 12 and Table 13 , these basic patterns are retained in the blueprint. As in the case of the basic horizontal equity issues, the structural elements are not that different from current law, with larger standard deductions offsetting the loss of itemized deductions, the new child and dependent credit largely replacing the personal exemption, and the limits on itemized deductions offsetting the flattening of the rate structure.",
"Some features of the current tax law recognize that certain costs may have differential effects on ability to pay. One of these is allowing an itemized deduction for extraordinary medical expenses (i.e., expenses over 10% of income). Unlike most itemized deductions, these deductions are much more concentrated at lower and moderate income levels, in part because lower and moderate income individuals are less likely to have health insurance.\nSimilarly, individuals deduct casualty losses as an itemized deduction and individuals with large losses in property have lost income (in the value of the return on their property), which would affect their ability to pay. The casualty loss is also allowed in excess of a percentage of income.\nSome itemized deductions are appropriate to the measurement of income and are included as itemized deductions as a simplification. These deductions include investment costs and employee expenses. In the case of professional gamblers, gambling losses are a cost of earnings income.\nSome of these issues may be addressed in the final proposal.",
"Economists recognize that the incidence of a consumption tax, whether a retail sales tax, a value-added tax, or a flat tax (i.e., a flat rate tax imposed on wage earners and the same rate imposed as a cash-flow tax on businesses), falls on wages and asset values. By contrast, the income tax falls on wages and investment income. If a cash-flow tax is substituted for the corporate tax, as a separate move, the tax would fall on assets. These issues are outlined in numerous sources. That means there is an inter-generational distributional aspect to the cash-flow tax because it is a one-time tax that falls on the generation alive at the time (although some of the burden may be shared with future generations through inheritance). Returns to investment going forward are not subject to tax, except in the case of economic rents (i.e., returns in excess of the amount needed to attract investment).\nWhich asset holders bear the burden for debt-financed investment depends on whether there is a general price rise (which requires an expansion of the money supply). For example, with a retail sales tax or a value-added tax, such a price rise might be desirable, so that the price of consumption goods rises while wages and asset values do not change. In this case, although these values do not change, their purchasing power falls, which is equivalent to a fall in asset value. If the tax is enacted in a way that does not require a price increase (such as a flat tax or a separate cash-flow tax) or a price rise is not accommodated, debt will retain its value, and the fall in the value of equity-owned assets is larger. For example, if a firm has a third of its assets debt financed, the stock market values would fall by 50% (one-third divided by two-thirds) more than their effective fall when prices change. That is, equity owners bear the full burden of the asset tax.\nPerhaps the best intuition behind the expectation that stock market prices would fall is that a new investment has a higher return than the old investments because it has a subsidy. Therefore, a new investment (such as a new issue of stock) is more attractive than existing investments. To make individuals, who could purchase a new investment with a higher return, willing to purchase existing shares, the price of existing stocks must fall so as to match the return on new issues.\nA fall in asset prices is not confined to the wealthy, although stock held by individuals is concentrated among high-income individuals. As noted earlier, about half of the stocks in U.S. firms is held by nontaxable shareholders, largely in retirement accounts (about 5% is held by charitable and other nonprofit organizations, such as university endowments).\nNote that the fall in the value of assets would not be recouped as in the case of normal market fluctuations: it would be permanent, although as time goes on more of the stock market would be owned by younger generations who would increasingly have purchased stock at a discount and therefore, increasingly do not bear the burden of the tax (although even after all individuals alive have died, some burden will remain because of inheritances).\nIf the current income tax were fully an income tax, and the new tax proposal applied its cash-flow effects to all purchases, then the estimated fall in the stock market would be relatively straightforward. However, the current income tax contains significant aspects of a cash-flow tax through accelerated depreciation and expensing of intangibles. Thus it already has discounted prices. In addition, the new cash-flow tax system excludes land purchases from expensing and it is not clear whether inventories would be excluded.\nThe formula for estimating the existing estimates of accelerated depreciation and expensing is shown in the Appendix . Based on the asset data and tax model used in previous CRS reports and data (particularly on land and inventories) in a recent CBO study, the estimated 12% discount, before adjusting for debt, in the current stock market is due to consumption tax elements of the current income tax. About half that effect is due to the expensing of intangible investments, including research and development, advertising, and human capital investment; the remainder is due to accelerated depreciation. The discount estimated for a 20% cash- flow tax that does not apply to land or inventories is estimated at 15.4% (with somewhat less than a quarter of assets in investments that do not qualify). The differences between the two numbers, adjusted to reflect debt and the existing stock market value, ranges from 5.9% to 6.2% (depending on the debt share). Some ambiguity exists regarding the treatment of inventories. If inventories were allowed to be expensed, the estimates would be 8.6% to 9.0%. If a true cash-flow tax were chosen, which would also apply to land, the estimated effects would be 16.9% to 17.3%.\nThese estimates have many caveats. The proposed cash-flow tax is a destination-based tax rather than an origin-based one, and it is unclear how this rule would affect the estimates. Although all estimates are subject to uncertainty, estimating intangible assets, particularly for human capital investment, which accounts for about half of intangibles, is especially uncertain. The estimates of the existing discounts assume uniform debt shares and growth rates across assets. The proposal is unclear on transition rules that allow depreciation on existing assets, which would reduce the discount (although values would eventually fall to the permanent levels as deductions were taken).\nOne important implication of this burden of a cash-flow tax is that proposals to increase the tax rate above 20% to address revenue shortfalls (because there would be little effect on real investment in plant and equipment) would increase the discount. With the exclusion of land and inventories reducing the discount to about three quarters, but debt increasing it by 1.125% for each percentage point. Thus increasing it to 25% would increase the discount by 5.6%, increasing it to 30% would increase the discount by 11.3% and leaving it at the current statutory rate would increase it by 16.9%.",
"A final set of distributional effects could arise from the border tax adjustments. The first effect is from the dollar appreciation expected from the border adjustments. Because foreign currency would experience a decline in its power to purchase American goods or dollar denominated assets, U.S. holders of foreign assets would lose value, whereas foreign holders of U.S. assets would gain value. Those with debt denominated in U.S. dollars, including many third-world countries, find that their debt obligation has increased in terms of their own currency. One study estimated that U.S. holders of foreign assets could lose as much as $4.9 trillion, and foreign holders of U.S. assets could gain as much as $8.1 trillion. (These measures assumed the full export subsidy would be allowed and thus the full exchange rate adjustment would occur.)\nThese distributional effects also suggest that to increase the tax rate from 20% to achieve revenue neutrality would exacerbate the exchange rate adjustment and the shifts in asset values. For example, raising the rate to 25% would lead to a dollar appreciation of 33%, over 30% larger that at a 20% rate. A 30% rate would lead to a 43% appreciation in the dollar and retaining the rate at the current 35% rate would lead to a 54% appreciation.\nThe current trade deficit means that the border adjustment leads to a larger tax base, projected to raise more than a trillion dollars in the next 10 years. There appears to be no one bearing the burden of that additional tax, because U.S. consumers and producers have taxes offset by exchange rates and foreign producers and consumers buy and sell at the same level in their own currencies. These additional tax revenues are, in effect, loans from the rest of the world, because the country cannot perpetually have trade deficits. The trade balance must be zero in present value throughout a country's history and thus trade surpluses will occur in future years with tax revenues lost due to the border adjustment.",
"The TPC, Tax Foundation, and AKK have estimated the blueprint's revenue effects, although the TPC included repeal of the Affordable Care Act taxes and the Tax Foundation and AKK did not. AKK also excluded the effects of the estate tax. These revenue losses are significant. All three studies also reported effects after macroeconomic feedback.\nNone of the revenue estimates reflects the elimination of the border adjustment, which is estimated to add $1.2 trillion to the ten year cost.\nThe TPC estimates a revenue loss of $3,100.9 billion for the first 10 years and $2,225.6 billion for the second 10 years. If the Affordable Care Act taxes are excluded, the cost is $2,297.6 billion in the first 10 years and $795.6 billion in the second 10 years. (The repeal of these taxes cost $803.1 billion in the first 10 years and $1,430.0 billion in the second 10 years.)\nOf these, the individual income tax costs are $1,219.0 billion in first 10 years and $303.9 billion in second 10 years, or less than half. Structural elements (rates, standard deduction, itemized deductions, personal exemptions, child and dependent credits, and alternative minimum tax) are close to revenue neutral, losing $95.9 billion in first 10 years but gaining $202.4 billion in the second 10 years. These results are consistent with the findings of limited changes from current law in the previous section on distribution and horizontal equity. Most of the losses on the individual side are from the treatment of business and investment income. The maximum tax rate on business income and expensing plus the disallowance of net interest deductions loses $1,050.3 billion in first 10 years and $221.9 billion in the second 10 years. The timing difference reflects the pattern of expensing whose revenue loss (assuming depreciation on existing assets is continued) loses significant revenue initially and then a smaller amount over time, plus the disallowance of net interest deductions, which gains more revenue over time as more loans are covered. The more generous treatment of capital gains, dividends, and interest results in losses of $497.8 billion in the first 10 years and $848.6 billion in the second 10 years. TPC also includes other tax expenditures assumed at a gain of $385.2 billion in the first 10 years and $515.7 billion in the second 10 years.\nCorporate revenue losses are $890.7 billion in the first 10 years and $192.5 billion in the in second 10 years. As with the case of business income, the significant decline in revenue loss over the two periods is due to the pattern of expensing and disallowance of net interest deductions. There is also a small offset from the deemed repatriation of foreign source income; without that one-time gain, the loss in the first 10 years would be $1,062.4 billion. The border adjustment accounts for a significant offset to loses, gaining $1,179.6 billion in the first 10 years and $1,689.3 billion in the second 10 years.\nThe estate and gift tax repeal costs $187.4 billion in the first 10 years and $299.1 billion in the second 10 years.\nThe Tax Foundation estimated a revenue loss of $2,418 billion in the first 10 years, with $981 billion from the individual income tax, $1,197 billion in corporate income taxes, and $240 billion in estate and gift taxes. The Tax Foundation also finds the structural change in the individual income tax change to be roughly revenue neutral, losing $104 billion in the first 10 years, thus also indicating that most of the revenue loss from the individual taxes arises from the treatment of business and investment incomes.\nAKK estimate a loss of $212 billion annually without identifying a time period. The estimate do not include the Affordable Care Act taxes or transition effects (such as the cost of depreciating old capital and the allowance of interest deductions on existing debt), although it appears that the model does not include debt. The estate tax repeal is also not included in the model. The AKK model does not appear to have other forms of capital, such as that of unincorporated businesses and owner-occupied housing.\nFor a dynamic score, the TPC's Keynesian/neoclassical growth model shows a negligible change in revenue cost in the first 10 years from economic feedback effects and a 21% increase in the second 10 years, whereas the life cycle model shows a 2% offset in the first 10 years and a revenue loss that is 51.5% larger than the static loss in the second 10 years. The Tax Foundation finds a 92% offset. AKK find a revenue gain of $38 million annually and thus a revenue offset of 118%, although they once again stress that these estimates appear to represent an upper bound on wage growth.\nNote that the TPC's estimate, although it includes the effects of crowding out, does not include the much larger costs of interest payments on the debt. The Tax Foundation's estimate reflects neither.\nThe revenue shortfalls, likely to be significant because the Tax Foundation's estimate reflects large supply side and tax rate effects and no crowding out, are a major challenge for the tax reform proposals, given the already unsustainable nature of the debt. The revenue losses would be more serious in the short run without the border tax adjustment, although, as noted above, this revenue could be thought of as a loan and not affect the longer-term burdens of the revenue shortfall.",
"Many elements of the blueprint could produce simplification in tax administration and compliance. On the individual income tax side, the reduction in the share of taxpayers who itemize will be the major simplification, eliminating the need to keep records (particularly with charitable deductions), although there are potential simplifications if education and retirement benefits are consolidated. The repeal of the estate and gift taxes would end tax planning surrounding those taxes.\nThe cash-flow treatment will simplify business accounting by eliminating the need to depreciate assets, although transition rules could extend the period that depreciation must be calculated. Firms would no longer need international tax planning to shift profits from U.S. jurisdictions into tax havens with low or no taxes because disallowance of net interest deductions would remove earnings stripping through leveraging and the destination-based treatment would remove profit shifting through transfer pricing. U.S. firms would no longer be interested in moving their headquarters for tax reasons, and thus no longer engage inefficient mergers to do so. Without the border adjustment, however, profit shifting would be reduced by the lower-tax rate and disallowance of interest deductions, but increased when using the more important source of profit shifting, transfers of intangibles, due to a territorial tax. With a territorial tax, profits shifted out of the United States under a production-based tax would have a larger benefit because they would never be taxed. Incentives to invert would be reduced substantially, but not entirely eliminated.\nAlthough the blueprint introduces some significant simplification, new administrative costs and complexities arise. A full exploration of these issues is beyond the scope of this report; however, the following are the main issues that have been under discussion. Many of them relate to the border adjustment and would no longer be of concern without that adjustment.",
"Because the business income of taxpayers in the new 33% bracket is granted a lower rate (25%), the incentive (which already exists) to characterize labor income as capital income will be increased. The incentive currently exists because labor income is subject to the payroll tax, even for high-income individuals above the Social Security tax threshold in which the Medicare tax on labor income applies. All income of sole proprietorships and general partners is considered labor income subject to payroll tax.\nThe lower rate will further encourage the recharacterization of income as capital rather than labor income. Moreover, to apply the lower capital income tax rate across the board, sole proprietors would have to allocate income between capital and labor, at least for purposes of the maximum income tax rate.\nAn option that would also raise revenue would be to eliminate the 25% cap on tax rates. That elimination would exacerbate the distortion in entity choice (which already exists to a limited degree in the current law, where the top individual rate is 39.6% and the top corporate rate is 35%), leaving a 13 percentage-point spread (rather than a five-percentage point spread) between the rates.",
"Exporters, whose deductions for export sales along with costs that lead them into a permanent loss position, would need to undertake potentially costly and complicated mechanisms to take advantage of these losses. The options include merger with importing firms, acquiring a separate business as an import broker, shifting supply sources from domestic production to imports, and engaging in leasing to delay the timing of deductions for investments or the loss of the value of expensing.\nIt is possible to avoid the problem by refunding taxes that would be the case for a normal consumption tax. Alternatively, the burden could be reduced by refunding the tax against the employer payroll tax or, actually enacting a standard value-added tax and combining it with a set of income tax subsidies and surcharges to achieve an identical outcome.",
"Although the import tax can be imposed by disallowing the import cost deduction, taxing direct business-to-customer sales is more complex. This issue is also a challenge for the value-added tax, particularly in the digital economy where the policing of digital goods is especially complex. Basically there are two approaches, neither entirely successful. One is to require customers to pay the tax, which has been the case with state sales taxes in which the seller did not have nexus (or a direct connection to the state through a permanent establishment). Compliance with such an approach is poor. The alternative is to require remote sellers to withhold the tax. This approach is also problematic as there is no way to compel a seller out of one's jurisdiction to collect taxes. This is, nevertheless, the approach recommend by the Organisation for Economic Co-operation and Development's (OECD's) project on base erosion and profit shifting. This option might work better because large-scale well-known firms have a reputational value in being tax compliant.\nTo the extent that the tax is not complied with, there is a further incentive for U.S. producers to avoid the tax. For example, U.S. producers could sell to affiliates abroad (deducting the exports) who could then resell back into the United States. This issue is particularly a problem with sales of intangible goods, such as computer software, e-books, and music downloads.",
"For sales to consumers, firms can substitute higher interest payments for sales prices. For a firm with net interest, additional interest income does not increase tax liability but additional sales does. To prevent abuse, interest rates for these sales would have to be regulated and enforced. Similarly, because net interest payments are no longer deductible, firms subject to tax may prefer to substitute deductible costs where possible for interest payments.",
"These problems arise because the system would apply to intangibles, which are more difficult to police than tangible goods and because administration of the tax relies on accounting entries rather than actual tracking of tangible goods as is the case in a credit invoice value-added tax.",
"An example of the potential type of tax planning that might occur centers around the exemption of the export of intangibles combined with a territorial tax system. A U.S. parent company invests in research (deducted as a cost) to develop technology for an electronic device; it sells the technology (as an exempt export) to its manufacturing subsidiary in a low-tax country. The subsidiary manufactures for the U.S. and foreign markets. With sales, the technology increases in value and the subsidiary distributes the rights back to the parent, which would be treated as a nontaxable dividend, and the parent now receives a royalty from the foreign subsidiary, which would be exempt as export income.\nThis potential exclusion of income from intellectual property, including royalties embedded in the value of devices sold back into the United States, could occur given the lack of clear principles about how to treat intangibles under a destination principle tax. It also illustrates the unexplored waters of a new and untried type of tax system.",
"Several other issues may be of concern to policymakers and are briefly highlighted below.",
"The blueprint's border adjustments may be found to be illegal tariffs and export subsidies by the World Trade Organization (WTO). This determination is largely a legal matter which, according to some experts, is unlikely to be influenced by economic issues. Thus, although economic analysis indicates that as long as both the taxation of imports and exclusion of exports occur at the same rate, border adjustments do not influence trade, this point may not be taken into consideration. Even if it were, the lack of refundability of export subsidies could bring this issue into question. Most lawyers considering this issue appear to believe that the border adjustments will not be legal, especially the tax imposed on imports by disallowing deductions.\nSimilarly, there are issues about the new tax coverage under the existing income tax treaties. If the tax is treated as an income tax and thus falls under these treaties' rules, it would violate income tax treaties. One of those violations would be imposing an import tax on sellers without a permanent establishment in the United States, which is not allowed under current treaties.\nAlthough the issues as to whether the tax complies with WTO and tax treaties are legal, the consequences would be economic. If the WTO rules are violated there would need to be major changes to the tax law (either abandoning destination basis or converting the tax into a true value-added tax) or being subject to penalties, such as countervailing duties.",
"Changing to a different basis of taxation would present issues for state and local income tax systems and their enforcement. Most states use the federal income tax as the base for their own taxes. For businesses, the movement to expensing would require states to either adopt the same rules or make numerous adjustments to require depreciation and interest deductions, to allow deductions for imports, and deny exclusion of export revenues. Enforcement would become more difficult.\nIndividual income taxes (outside of pass-through income) would be less radically changed, although the significant reduction in the number of itemizers could have revenue consequences for the states. If most of these non-itemizers now move to the state standard deduction, which may have been less generous than itemizing at the state level because most states add back state income taxes, revenues could be lost. States would also have to determine their own conformity with federal itemized deductions.\nTo the extent that the states and localities retained a traditional income tax base, the simplification for businesses from cash-flow taxes would no longer be realized, because these measures would have to be calculated for state income tax purposes.",
"Some arguments have been made that large publicly traded firms are more sensitive to the effects on profits in their financial accounts in making decisions to undertake investment. This concern raises issues for the destination-based cash-flow tax. The first is whether the tax will be treated as an income tax, with the expensing provisions treated as temporary timing provisions that do not change profits (because profits reflect deferred tax liabilities), or as a consumption tax, in which the tax is treated as a sales tax and profits rise. If treated as an income tax, arguments have been made that expensing will not provide the type of incentive discussed in the sections on investment and growth.\nMost economists have difficulties with this argument because it means that firms are not maximizing profits.",
"A value-added tax is normally imposed on real income (sales of goods and services) and not financial income. The blueprint, modified from an income tax, includes financial income. For example, it appears that net interest income will be included in the base (and thus the only change for deductions is when net interest payments are present). If financial transactions are included in the tax base (including not only interest, but capital gains, royalties, and other items) then should the border adjustments also apply? These are questions that may remain to be answered.",
"Growth Model\nEstimating the long-run growth effects begins with a production function:\nQ=A(aK1-1S)+1-aL(1-1S))1/(1-1S)\nwhere Q is output, A and a are constants, K is capital, L is labor, and S is the factor substitution elasticity.\nMaximizing profits subject to the payments for capital and labor yields the two first order conditions:\nQK= a-S A1-1S-S (R1-t+d)S\nand\nQL= a-S A1-1S-S WS\nwhere R is the after tax rate of return, t is the effective tax rate on capital income, d is the economic depreciation rate, and W is the wage rate.\nLabor supply is a function of after-tax wages:\nL=B(W(1-ta))-EI (W(1-tm)ES\nwhere B is a constant, ta is the average tax rate on wage income, tm is the marginal tax rate on wage income, EI is the absolute value of the income elasticity, and ES is the absolute value of the substitution elasticity.\nThe equation for R is based on the steady state equilibrium that the savings equals investment and thus the savings rate times output equals the growth rate times the capital stock. The savings rate is in turn a constant elastic function of the rate of return, thus:\nC RERQ = gK\nwhere C is a constant, g is the (constant) growth rate, and ER is the savings rate elasticity with respect to the after tax return.\nTo solve the model, substitute the value of K and L from equations (2) and (3) into equation (1) to derive the relationship between R and W. Also combine equations (2) and (3) to express the capital-labor ratio as a function of relative prices. There is a set of five equations and five unknowns, which are differentiated and combined to yield the percentage change in output (which is a function of the percentage change in inputs of capital and labor, which are in turn determined by tax rate changes).\nThe analysis yields a percentage change in output dQ/Q, which is a function of the changes in the tax rate on capital income, the average tax rate on labor income and the marginal tax rate on labor income:\ndQQ=αS+ES-EI(1- α) Vdt1-t+EIdta(1-ta)-EStm(1-tm)\nwhere α is the share or capital income\nV=ER (R1-t)/(SR1-t+ER R1-t+d)\nBecause this model applies to small changes, to get a better approximation of discrete changes, the initial tax rate is set at the midpoint of the old and new tax rates.\nCalculating Stock Market Effects\nThis simplified formula does not include debt and interest payments, but these terms would disappear in any case. The calculations used a weighted average of debt and equity costs to determine the real after tax return, R, but there was virtually no difference if the higher equity return were used.\nThe value of stock per dollar of the existing capital stock begins with the annual flow of profits net of reinvestment (or dividends):\nΠ=C(1-u)-d+g+d+g uζ\nwhere Π is net profit, C is gross profit before depreciation, u is the statutory tax rate, d is the depreciation rate, g is the growth rate, and ζ is the value of depreciation discounted at the nominal growth rate (the value of depreciation deductions as a percent of investment).\nIf profits grow with the inflation rate p and the real growth rate g, and are discounted at the nominal interest rate (R+p), where R is the real after tax discount rate, the value of an indefinite stream of profits net of investment is:\n(9) V=C1-u-d+g+d+guζ/[R-g)\nTo determine C, use the standard user cost of capital, which relates gross profit to the after tax discount rate, economic, depreciation, tax depreciation, and the tax rate, for an investment that breaks even:\n(10) C= (R+d)(1-uz)(1-u)\nwhere z is the present value of tax depreciation deductions (which is discounted at the nominal interest rate, R+p).\nSubstituting (10) into (9) results in:\n(11) V=R+d1-uz-d+g1-uζ/(R-g)\nor\n(12) V=1-[R+duz-d+guζ]/(R-g)\nCalculation of ζ is the same as the calculation of z, except that R is replaced by g. If depreciation is economic depreciation d/(R+d) for z and d/(d+g) for ζ, the value of V is 1, as the values in the numerator of the second term in (12) cancel out. Also if assets are expensed so that both z and ζequal 1, the value is (1-u).\nCalculations were done for each type of asset (equipment, public utility structures, nonresidential structures, residential structures, and intangibles). The value of p was set at 0.02, g at 0.03, u at slightly below 0.35 (0.334) for equipment, nonresidential structures, and intangibles to reflect the production activities deduction, and 0.35 otherwise, and R at .05538, reflecting a weighted average of debt and equity."
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"question": [
"What does the Better Way Tax Reform Task Force Blueprint do?",
"What does this reform do, in regards to individual income tax?",
"What does this reform do, in regards to business income?",
"What effect does this have on the cash flow?",
"What does this reform do, in regards to territorial tax?",
"What effect does this have on estate and gift taxes?",
"What effect does this have on the taxes associated with the Affordable Care Act?",
"What is one objective of tax reform?",
"How does the plan's estimated output effects initially appear?",
"What is the direct effect of a lower marginal tax rate on labor supply?",
"What is the influence of capital income effects?",
"Why are growth effects also limited?",
"What is the effect on the revenue, as a result of the tax reform as it currently is proposed?",
"What effect will a true border-adjusted tax have on imports and exports?",
"What could cause the plan to act as a tariff?",
"What might the methods be used to obtain?"
],
"summary": [
"On June 24, 2016, House Speaker Paul Ryan released the Better Way Tax Reform Task Force Blueprint, which provides a revision of federal income taxes.",
"For the individual income tax, the plan would broaden the base, lower the rates (with a top rate of 33%), and alter some of the elements related to family size and structure by eliminating personal exemptions, allowing a larger standard deduction, and adding a dependent credit.",
"For business income, the current income tax would be replaced by a cash-flow tax rebated on exports and imposed on imports, with a top rate of 20% for corporations and 25% for individuals.",
"The cash-flow tax would be border-adjusted (imports taxed and exports excluded), making domestic consumption the tax base, although a recent announcement from congressional leaders has indicated that a border adjustment would be dropped in any future tax plan.",
"The system would also move to a territorial tax in which foreign source income (except for easily abused income) would not be taxed.",
"In addition, the proposal would repeal estate and gift taxes.",
"Although the Affordable Care Act (ACA) taxes are not repealed in the Better Way tax reform proposal, ACA taxes are repealed in the Healthcare Task Force proposals.",
"One objective of tax reform is to increase output and efficiency.",
"However, the plan's estimated output effects appear to be limited in size and possibly negative.",
"The direct effect of lower marginal tax rates on labor supply is limited because the reduction in marginal tax rates is small and largely offset by an increased base that increases effective marginal rates.",
"Capital income effects are also somewhat limited even with the movement to a cash-flow tax (that generally imposes a zero rate) because the current effective tax rate is low, due to current accelerated depreciation and the negative tax rate on debt financed investment.",
"Growth effects are also limited because most empirical evidence does not support large savings and labor supply responses.",
"As currently proposed, the plan loses significant revenue which, according to some estimates, could more than offset the supply responses and eventually lead to a contraction in output.",
"Although claims have been made that the border adjustment would penalize imports and favor exports, a true border-adjusted tax has no effect on imports and exports due to the dollar's appreciation.",
"There may be transitory effects, and for the blueprint, the export exemption may not be received by all exporters, which could cause the plan to act in part as a tariff.",
"There are, however, a number of methods that might be used to obtain the benefits of the export exemption."
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CRS_R41616
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{
"title": [
"",
"Introduction",
"Housing Finance and Homeownership",
"Government Sponsored Enterprises (GSEs)",
"Foreclosure Mitigation",
"Mortgage Origination Standards",
"Mortgage Documentation Issues",
"First-Time Homebuyer Tax Credits",
"Federal Housing Administration (FHA) Reform",
"Housing for Low-Income Individuals and Families",
"Appropriations for the Department of Housing and Urban Development",
"Section 8 Housing Choice Voucher Program Reform",
"Public Housing Reform",
"Homelessness Assistance and Prevention",
"Housing for the Elderly",
"Housing for Persons with Disabilities",
"Funding for the National Housing Trust Fund",
"Affordable Housing Preservation",
"Low-Income Housing Tax Credit (LIHTC) Prices",
"Other Issues",
"The American Recovery and Reinvestment Act (ARRA)",
"Neighborhood Stabilization Program (NSP)",
"Disaster Housing",
"Appendix. Housing Legislation in the 111th Congress"
],
"paragraphs": [
"",
"During the first session of the 111 th Congress, the economy officially exited its recent recession. However, the economy and housing markets across the country continued to feel the effects of an economic downturn that featured the largest decline in output, consumption, and investment and the largest increase in unemployment of any post-World War II recession. The downturn was, in part, both a cause and a result of issues in the housing finance system and troubles in housing markets. During the downturn, home prices declined rapidly and home foreclosures reached record-high levels. Given the prominent role housing played in this economic crisis, housing policy issues were active during the 111 th Congress, as they had been in the 110 th Congress.\nIn response to concerns about the magnitude of the economic downturn, the 110 th Congress had enacted a sweeping economic stabilization program ( P.L. 110-343 ), including the $700 billion Troubled Asset Relief Program (TARP) that gave the government the authority to purchase or insure troubled assets owned by financial firms. Some TARP funds were used for programs designed to reduce the number of home foreclosures, an issue that continued to be active during the 111 th Congress. The 110 th Congress had also enacted a major housing law, the Housing and Economic Recovery Act ( P.L. 110-289 ), which included the authority for the federal government to place the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, into conservatorship (authority that the government promptly exercised).\nGiven the landscape of a troubled financial system and troubled housing markets, the 111 th Congress pursued an agenda of reforms to the U.S. financial system, including the housing finance system. The agenda also included legislation to support fragile housing markets and troubled homeowners. At the same time, the 111 th Congress faced perennial questions about how best to meet the affordable housing needs of low-income and vulnerable populations and whether to make changes to the programs that comprise today's federal affordable housing system, particularly in light of rising budget deficits. In pursuing this agenda, the 111 th Congress enacted a number of laws, ranging from reforming the mortgage origination process to reauthorizing federal homelessness assistance. In other areas, ranging from GSE reform to Section 8 voucher program reform, legislation was considered but not enacted before the end of the 111 th Congress.\nThis report provides a brief summary of major housing issues that were considered in the 111 th Congress. It does not provide comprehensive coverage of the issues or closely track active legislation, but it includes references to related CRS products that offer more detailed information and analysis.",
"",
"Government Sponsored Enterprises (GSEs) are congressionally chartered financial institutions that are provided with special privileges to carry out narrow missions of critical public policy importance. In September 2008, the federal government placed two housing GSEs, Fannie Mae and Freddie Mac, in conservatorship and assumed management of them. This step was taken out of concern about their safety and soundness (including capitalization), housing market conditions at the time, the financial performance and condition of each company, the inability of the companies to fund themselves according to normal practices and prices, and the importance of the companies in supporting the residential mortgage market. The housing GSEs have played a major role in U.S. housing markets. They have facilitated a secondary market for mortgage loans by buying home mortgages from the original lenders, repackaging them as mortgage-backed securities (MBSs), and either selling them or holding them in their own investment portfolios. In 2008, when they were placed in conservatorship, Fannie and Freddie had purchased about 80% of all new home mortgages in the United States.\nAt the time they were placed in conservatorship, the Department of the Treasury (Treasury) signed separate contracts with Fannie Mae and Freddie Mac to purchase new issues of senior preferred stock as needed to keep each GSE solvent. Since then, Treasury has purchased more than $150 billion in preferred stock, and separately, the Federal Reserve has purchased more than $1 trillion in GSE-issued mortgage-backed securities. These actions and the risk to the economy represented by the more than $5 trillion in combined mortgage guarantees of the three housing GSEs (the Federal Home Loan Bank System being the third) have meant increased congressional focus on how the GSEs are regulated and how they are operating.\nThe Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act, P.L. 111-203 ) required the Secretary of the Treasury to present recommendations for ending the conservatorship of Fannie Mae and Freddie Mac by January 31, 2011.\nFor additional information, see CRS Report R40800, GSEs and the Government's Role in Housing Finance: Issues for the 112 th Congress , by [author name scrubbed]; CRS Report RL34661, Fannie Mae's and Freddie Mac's Financial Problems , by [author name scrubbed]; and CRS Report R41432, Mortgage Markets in Selected Developed Countries , by [author name scrubbed].",
"Residential mortgage foreclosure rates in the U.S. began to rise sharply around the middle of 2006 and have remained high ever since. Widespread foreclosures are thought to have a number of negative consequences for individual homeowners, communities, and the economy as a whole. Given these negative effects, Congress has taken a number of steps to attempt to encourage mortgage holders and servicers to do more to prevent foreclosures or to facilitate foreclosure avoidance strategies over the past several years. However, there is an ongoing debate over how involved the government should be in preventing foreclosures or mitigating their impacts, particularly given that federal foreclosure mitigation initiatives may be costly to taxpayers and may lead to moral hazard problems or raise concerns about the fairness of using taxpayer dollars to help one set of homeowners over others.\nThe 111 th Congress enacted a number of laws that included provisions related to foreclosure mitigation. Some of these provisions amended existing foreclosure prevention programs, provided additional funding to such programs, or created new programs, while other provisions attempted to make it easier to modify mortgages or to address the effects of foreclosure. For example, the 111 th Congress enacted the Helping Families Save Their Homes Act ( P.L. 111-22 ), which, among other things, established protections for renters living in foreclosed properties, established a safe harbor for mortgage servicers that perform mortgage modifications that meet certain specifications, and made changes to the Hope for Homeowners program, which had been established by the 110 th Congress. The 111 th Congress also enacted a number of foreclosure-related provisions in the Dodd-Frank Act ( P.L. 111-203 ). These included establishing a program to help homeowners who are having trouble paying their mortgages due to unemployment, and making changes to the Home Affordable Modification Program (HAMP), which was created by the Obama Administration using authority granted in the Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ). Dodd-Frank also authorized funding for legal assistance for people facing foreclosure, but no funding had been appropriated for this purpose by the end of the 111 th Congress.\nThe 111 th Congress also provided additional funding for two other programs that had been established during the 110 th Congress: the National Foreclosure Mitigation Counseling Program (NFMCP), which received appropriations in both the FY2009 and FY2010 Housing and Urban Development (HUD) appropriations acts, and the Neighborhood Stabilization Program (NSP), which received additional funding in both the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) and the Dodd-Frank Act, both of which also included certain requirements for how the additional NSP funding could be used. (The NSP is discussed in further detail later in this report.) In addition, the 111 th Congress considered a number of foreclosure-related initiatives that it did not enact, such as proposals to reform the bankruptcy code to allow judges to write down principal balances on primary residences.\nFor additional information, see CRS Report R40210, Preserving Homeownership: Foreclosure Prevention Initiatives , by [author name scrubbed]; CRS Report RL34301, The Primary Residence Exception: Legislative Proposals in the 111 th Congress to Amend the Bankruptcy Code to Allow the Strip Down of Certain Home Mortgages , by [author name scrubbed]; and CRS Report RS22919, Community Development Block Grants: Neighborhood Stabilization Program; Assistance to Communities Affected by Foreclosures , by [author name scrubbed].",
"All kinds of mortgages have exhibited increased default and foreclosure rates in recent years. However, many poorly performing mortgages exhibited increasingly complex or poorly understood features, including adjustable interest rates, interest-only periods, or negative amortization. While such features may be appropriate for some borrowers in some circumstances, many were made available more widely than was originally intended. In addition, many mortgages included features that some observers considered to be predatory, such as high prepayment penalties. While not all troubled mortgages exhibited these features, and not all mortgages with such features became troubled, some observers have pointed to some of these mortgage features as exacerbating the housing \"bubble\" and its subsequent collapse. As a result, some have called for standards related to mortgage origination, both to protect consumers and to help prevent future major losses to the financial system related to troubled mortgages.\nThe 111 th Congress included a number of changes to mortgage origination standards and practices in its comprehensive financial reform legislation, the Dodd-Frank Act ( P.L. 111-203 ). Among other actions, Dodd-Frank amended the Truth in Lending Act to set minimum standards for certain residential mortgages, restricted the use of prepayment penalties, imposed certain requirements and limitations on high-cost mortgages, and directed the Federal Reserve to issue regulations prohibiting mortgage originators from \"steering\" consumers to certain types of mortgages and prohibiting any practices related to residential mortgage lending that it deems to be \"abusive, unfair, deceptive, [or] predatory.\" The legislation also placed some limits on the ways in which mortgage originators may be compensated and required increased disclosures to consumers on a range of topics.\nFor additional information, see CRS Report R41350, The Dodd-Frank Wall Street Reform and Consumer Protection Act: Issues and Summary , coordinated by [author name scrubbed].",
"Over the course of 2010, several employees and individuals with power-of-attorney signing authority for major mortgage servicers, including GMAC Mortgage, J.P. Morgan Chase, and Wells Fargo, were deposed as part of foreclosure contests. These depositions raised concerns about what has been characterized as \"robo-signing\"—the practice of having a small number of individuals sign a large number of affidavits and other legal documents submitted to courts and other public authorities by mortgage companies to execute foreclosures. As a result of these depositions, many have questioned whether individuals who claimed in sworn affidavits to have personal knowledge of facts necessary to legally foreclose on a property actually had that knowledge; whether assignments and sales of interests in mortgages were properly executed; whether legal documents were properly notarized in accordance with state law; and, as a result, whether mortgage companies had met the necessary requisites to legally foreclose on certain properties.\nThese procedural defects have the potential to undermine the legitimacy of the foreclosure process and could result in judicial sanctions, civil penalties, and even criminal prosecutions. The servicers in question do not believe they have wrongfully foreclosed or evicted anyone, but rather that some of the paperwork that must be filed to complete a foreclosure in certain states may not have been properly reviewed or notarized by their employees. Whether or not homes have been wrongfully foreclosed was unknown as of the date of this report. It was also unclear whether the procedural problems masked substantive problems, such as a failure to properly transfer interests in a mortgage, thus calling into question true ownership of mortgages in certain instances. Even if substantive problems exist, it may be possible to rectify deficiencies in many, if not the vast majority of, cases to allow for the completion of foreclosures. Correcting these problems would come at a cost by potentially causing significant delays in the completion of the foreclosure process.\nMany of the same documentation and proper transfer of ownership problems that may affect homeowners directly through the foreclosure process have the potential to cause even more significant legal and economic problems for the financial institutions involved. These problems include violations of securities laws for failing to accurately describe the mortgages underlying mortgage-backed securities (MBS) and violations of representations and warranties (e.g., regarding the quality of underwriting standards and other mortgage characteristics) provided for in the contracts that executed the sale of mortgage interests in the secondary market. These problems have the potential to cost financial institutions billions of dollars in legal claims while also increasing market uncertainty, which comes with its own costs.\nThese issues were the focus of several hearings in the 111 th Congress, during which several Members of Congress expressed concern that legal challenges to foreclosures and unresolved legal disputes regarding mortgages among financial institutions could delay recovery in the housing market and may create systemic risk to the financial system. However, the 111 th Congress did not enact legislation addressing these potential risks.\nFor additional information, see CRS Report R41491, \"Robo-Signing\" and Other Alleged Documentation Problems in Judicial and Nonjudicial Foreclosure Processes , by [author name scrubbed].",
"In the face of falling home prices and an increasing inventory of unsold homes on the market, the 110 th Congress enacted a tax credit for first-time homebuyers in the summer of 2008. Originally set to expire on July 1, 2009, the tax credit was for $7,500 and was required to be repaid over a 15-year period. In the 111 th Congress, the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) increased the tax credit to $8,000, removed the repayment requirement, and extended its expiration date to December 1, 2009. The Worker, Homeownership, and Business Assistance Act of 2009 (WHBAA, P.L. 111-92 ) further extended the tax credit to July 1, 2010, and expanded it to repeat homebuyers. Most recently, the Homebuyer Assistance and Improvement Act of 2010 ( P.L. 111-198 ) gave homebuyers additional time to close and still be eligible for the credit. The tax credit was no longer available by the end of the 111 th Congress.\nFor more information on the homebuyer tax credit, see CRS Report R40955, An Economic Analysis of the Homebuyer Tax Credit , by [author name scrubbed].",
"The Federal Housing Administration (FHA) insures mortgages made by private lenders that meet certain underwriting criteria, broadening the availability of mortgage credit to certain groups to whom it might not otherwise be available. Furthermore, FHA-insured mortgages generally require smaller downpayments than mortgages that are not federally insured or guaranteed. The relatively low downpayment feature makes it easier for certain populations, such as lower-income families and first-time homebuyers, to purchase homes.\nIn the housing boom of the mid-2000s, FHA's share of the mortgage market fell to under 2% of mortgage originations (as measured by dollar volume) at the end of 2006. After housing prices began to decline, however, FHA began playing a larger role in the mortgage market as lenders tightened their underwriting criteria and FHA-insured loans became the mortgage of choice for an increasing number of homebuyers. During FY2010, FHA guaranteed nearly 40% of home-purchase mortgages made during the year and served more than 1.1 million homebuyers. This was the second time that FHA has assisted more than 1 million homebuyers in a single year (the first was 1987).\nAt the same time that FHA's market share has been increasing, FHA has been facing increased mortgage defaults in recent years along with most other mortgage market participants. FHA therefore faces an increased tension between supporting the mortgage market by insuring new home loans and ensuring that it protects the stability of its insurance fund, the Mutual Mortgage Insurance Fund (MMIF). One indicator of the financial health of the MMIF, the capital reserve ratio, fell to 0.53% in FY2009, which is below a required level of 2% mandated in statute. (The capital ratio measures the amount of capital that FHA has on hand as a percentage of its insurance obligations, above and beyond the amount of capital set aside to cover expected losses on its current mortgage portfolio.) The capital reserve ratio increased modestly, to 0.59%, in FY2010, but remains below the mandated level of 2%. Furthermore, these levels do not include the Home Equity Conversion Mortgages (HECMs), which were added to the MMIF in FY2009. The FY2010 capital ratio for HECMs is -0.98%, and it brings the capital ratio for the MMIF to 0.50%.\nOne option for bringing more income to the MMIF and helping to raise the capital ratio would be to raise the upfront and annual insurance premiums that borrowers pay when obtaining FHA-insured loans. FHA announced that it intended to administratively raise the upfront premiums it charges, which were set below the maximum level allowed by statute, but because it had already been charging the maximum annual mortgage insurance premium allowed by law, it could not raise these annual premiums without congressional action. The 111 th Congress enacted P.L. 111-229 , which raised the maximum annual insurance premium and gave FHA the flexibility to increase these premiums along with the upfront premiums. The 111 th Congress also considered broader FHA reforms, and one bill, the FHA Reform Act of 2010 ( H.R. 5072 ), passed the House but was not considered on the floor of the Senate.\nSince 2008, the maximum mortgage amounts that FHA can insure have been at temporarily increased levels. Some have argued that these limits should be decreased in order to limit FHA's involvement in the mortgage market to smaller-sized loans, but others have argued that reducing the limits before the market stabilizes could lead to a further softening in the market by reducing the amount of available credit. The 111 th Congress acted to keep the maximum mortgage limits at their increased levels through FY2011.\nFor additional information, see CRS Report RS20530, FHA-Insured Home Loans: An Overview , by [author name scrubbed] and CRS Report R40937, The Federal Housing Administration (FHA) and Risky Lending , by [author name scrubbed].",
"",
"The majority of housing assistance programs for low-income individuals and families are funded through discretionary appropriations provided to HUD's budget in the annual appropriations process. In recent years, the cost of maintaining the Section 8 Housing Choice Voucher program, the largest program in HUD's budget, has been growing. This growth is due in part to increases in the cost of the rental vouchers themselves, which is driven by changes in private market rents and the incomes of the low-income families who participate in the program. The growth is also due, in part, to the cost of additional vouchers created by Congress to serve additional families over the past several years. At the same time that the cost of maintaining the voucher program has been growing, the amount of funding offsets available within HUD's budget—primarily from recaptures of old funding in the Section 8 account and excess receipts from the Federal Housing Administration's insurance fund—has declined. These two dynamics—increased funding needs for Section 8 vouchers and decreases in offsetting receipts—have led to pressure to either increase the overall funding for HUD or make cuts to Section 8 vouchers or other programs. In the past several years, Congress has increased total funding for HUD, which has included increases for the Section 8 voucher program as well as other HUD programs.\nThe 111 th Congress also enacted the American Recovery and Reinvestment Act ( P.L. 111-5 ), aimed at stimulating the economy. This legislation included additional appropriations for a number of HUD programs, and is described in more detail in the \" The American Recovery and Reinvestment Act (ARRA) \" section of this report.\nFor additional information, see CRS Report R41233, The Department of Housing and Urban Development (HUD): FY2011 Appropriations , coordinated by [author name scrubbed].",
"For each of the past several years, Congress has considered reforms to the Section 8 Housing Choice Voucher program that are primarily aimed at streamlining the administration of the program. The Section 8 voucher program is HUD's largest direct housing assistance program for low-income families, both in terms of the number of families it serves (over 2 million) and the amount of money it costs (roughly $18 billion in FY2010, nearly half of HUD's total appropriation). The program is administered at the local level, by public housing authorities (PHAs), and provides vouchers—portable rental subsidies—to very low-income families, which they can use to reduce their rents in the private market units of their choice (subject to certain cost limits). The program has been criticized for, among other issues, its administrative complexity and growing cost.\nRecent reform bills have proposed changes to the income eligibility and rent determination process, designed to make it less complicated, and changes to the physical inspection process to give PHAs more options for reducing the frequency of inspections and increasing sanctions for failed inspections. Proposed legislation has also included changes to the formula by which voucher funding is allocated to PHAs. In recent years, annual appropriations laws have specified different formulas for allocating voucher funding; voucher reform legislation has sought to codify a permanent formula (although, even if enacted it could still be overridden in the appropriations acts). Finally, recent Section 8 voucher reform proposals have included modifications to and expansions of the Moving to Work demonstration, which permits a selected group of PHAs to seek waivers of most federal rules and regulations governing the Section 8 voucher program and the public housing program. The most recent voucher reform bill, the Section 8 Voucher Reform Act of 2009 ( H.R. 3045 ), was reported out of the House Financial Services Committee, but was not considered on the House floor before the end of the 111 th Congress.\nFor additional information, see CRS Report RL34002, Section 8 Housing Choice Voucher Program: Issues and Reform Proposals , by [author name scrubbed]; and CRS Report RL32284, An Overview of the Section 8 Housing Programs: Housing Choice Vouchers and Project-Based Rental Assistance , by [author name scrubbed].",
"There are over 1 million units of public housing, owned by local public housing authorities, which receive annual operating and capital funding from Congress through HUD. Much of that housing stock is old and in need of capital repairs. While the results of an updated study have not yet been released, the last time the physical needs were assessed in the late 1990s, they were estimated at $18 billion-$20 billion. The amount Congress typically provides in annual appropriations for capital needs has not been sufficient to address that backlog. In response, PHAs have increasingly been utilizing other sources of financing, particularly private market loans, to meet the capital needs of their housing stock. However, there are limits on the extent to which PHAs can borrow funds; most notably, they are generally restricted by federal rules from mortgaging their public housing properties.\nThe Obama Administration's first budget requested funding and authority for a Transforming Rental Assistance initiative. Draft legislation to enact the initiative, called Preserving, Enhancing, and Transforming Rental Assistance (PETRA), was also released by the Administration. PETRA would have created a new form of rental assistance and allowed PHAs to convert their public housing contracts to these new rental assistance contracts. The rental assistance contracts would, presumably, pay higher subsidies than the PHA was receiving from its public housing operating funding. Further, by negating the old public housing contracts, the former public housing properties would no longer be encumbered by rules prohibiting them from being mortgaged.\nWhile some aspects of the PETRA proposal were supported by PHA industry representatives, the proposal met with resistance from low-income housing advocates, who argued that it could result in the privatization of public housing, particularly if PHAs defaulted on the loans secured by their public housing properties.\nThe House Financial Services Committee reported a different public housing reform bill: H.R. 5814 , the Public Housing Reinvestment and Tenant Protection Act of 2010. Rather than converting public housing to a new form of assistance, the bill would have authorized the Secretary of HUD to guarantee notes or other obligations issued by public housing agencies to finance the rehabilitation of public housing units. The bill was not enacted before the end of the 111 th Congress.",
"Government assistance for housing for homeless individuals and families is provided primarily through the HUD Homeless Assistance Grants. In the 111 th Congress, the law governing the Homeless Assistance Grants, Title IV of the McKinney-Vento Homeless Assistance Act, was amended in such a way that local communities will have more flexibility in administering the grants and in prioritizing who is served. The Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Act was enacted as part of the Helping Families Save Their Homes Act of 2009 ( P.L. 111-22 ) on May 20, 2010. The law took effect on November 20, 2010.\nThe issue of veterans experiencing homelessness has gained prominence in recent years. While little legislation to assist homeless veterans was enacted during the 111 th Congress, a number of bills were introduced and considered. Congress also continued to support housing for homeless veterans by allocating $75 million per year from FY2008 through FY2010 for Section 8 vouchers for homeless veterans. In addition, the Department of Veterans Affairs (VA) announced a plan to end veteran homelessness, resulting in additional funds being devoted to VA programs.\nFor additional information, see CRS Report RL30442, Homelessness: Targeted Federal Programs and Recent Legislation , coordinated by [author name scrubbed]; and CRS Report RL34024, Veterans and Homelessness , by [author name scrubbed].",
"The Section 202 Supportive Housing for the Elderly Program finances housing for households with a member age 62 or older. The program has been in existence since 1959, and many of the older housing developments may be in need of repair and modernization. Properties funded through approximately 1990 received direct government loans to develop the property. As a result, one way in which property owners may obtain funds for improving their properties is by paying off the original Section 202 loan and refinancing.\nIn the 111 th Congress, the Section 202 Supportive Housing for the Elderly Act ( P.L. 111-372 ) removed one of the impediments to the ability of owners of older Section 202 developments to refinance and make improvements to their properties. Under previous law, owners could only refinance into loans with lower interest rates and reduced debt service—the oldest Section 202 developments (those funded prior to 1974) were financed with low interest rate loans (approximately 3%), and it was difficult, if not impossible, to enter into a new loan with a lower interest rate and reduced debt service. These owners can now refinance as long as they address the physical needs of the property. In addition to P.L. 111-372 's refinancing provisions, the new law authorized \"Senior Preservation Rental Assistance\" for use in cases of refinancing and established a new category of housing with services within the Assisted Living Conversion Program called \"Service Enriched Housing.\"\nFor additional information, see CRS Report RL33508, Section 202 and Other HUD Rental Housing Programs for Low-Income Elderly Residents , by [author name scrubbed].",
"The Section 811 Supportive Housing for Persons with Disabilities Act provides capital grants and rental assistance to nonprofit organizations to develop housing for persons with disabilities. Eligible housing includes units in multifamily housing developments and condominiums as well as group homes and independent living facilities. Criticisms of Section 811 housing include charges that the developments isolate individuals with disabilities away from housing for all members of the community, and that the Section 811 capital grants are insufficient to support entire developments without other streams of funding. In the 111 th Congress, the Frank Melville Supportive Housing Investment Act ( P.L. 111-374 ) contained provisions that attempted to address some of these criticisms.\nAmong the changes that P.L. 111-374 instituted are converting the source of funding for Section 811 tenant-based rental assistance to the Section 8 program; allowing Section 811 rental assistance to be used in conjunction with sources of financing other than Section 811 capital grants, including funds through the LIHTC and HOME program; decreasing the concentration of housing units for persons with disabilities by limiting the units in multifamily housing dedicated to persons with disabilities to 25% of the total (due to the need to finance the remaining 75% of units, this limitation could also encourage developers to use other funding sources to supplement the Section 811 funding); and delegating the processing of mixed finance developments to state housing finance agencies.\nFor additional information, see CRS Report RL34728, Section 811 and Other HUD Housing Programs for Persons with Disabilities , by [author name scrubbed].",
"For several years, affordable housing advocates sought a national Affordable Housing Trust Fund that would provide a funding source specifically for housing for low-income households and that would not be subject to the annual appropriations process. A national Housing Trust Fund was created during the 110 th Congress in the Housing and Economic Recovery Act of 2008 ( P.L. 110-289 ). The Housing Trust Fund would provide annual grants to states primarily for funding activities related to providing rental housing to extremely low-income households. P.L. 110-289 funded the Housing Trust Fund through annual contributions from Fannie Mae and Freddie Mac, but when those entities were placed in government conservatorship in September 2008, the contributions to the Housing Trust Fund were suspended indefinitely, and the Housing Trust Fund was left without a source of funding.\nThe 111 th Congress considered several bills that would have provided an initial amount of funding to capitalize the Housing Trust Fund; however, none of these bills included an ongoing, dedicated funding source. Most of the bills considered by the 111 th Congress that would have provided an initial capitalization of the Housing Trust Fund would have appropriated an initial amount of $1 billion, and some would have provided an additional $65 million for rental assistance to be used in conjunction with Housing Trust Fund units. Two bills with initial funding for the Housing Trust Fund ( H.R. 4213 and one version of H.R. 2847 ) were passed by the House. However, in both cases the funding for the Housing Trust Fund was not included in the enacted legislation. No funding for the Housing Trust Fund was provided by the end of the 111 th Congress.\nFor additional information, see CRS Report R40781, The Housing Trust Fund: Background and Issues , by [author name scrubbed].",
"The term \"affordable housing preservation\" refers to public policy efforts to maintain the affordability of rental properties financed or subsidized by HUD, the USDA Rural Housing Service (RHS), and/or Low Income Housing Tax Credits, but owned by private for-profit or nonprofit organizations. Beginning in the 1960s, owners entered into contracts with HUD (or RHS) to provide affordable housing for a particular period of time. In these transactions, the government provided mortgage financing assistance, rental assistance, or both forms of assistance to property owners in exchange for the owners' agreement to maintain affordability.\nA variety of circumstances may lead owners to stop participating in subsidized housing programs. In high-rent areas, owners may decide to pay off their assisted mortgages or choose not to renew affordability restrictions when mortgages mature or Section 8 rental-assistance contracts expire in order to convert a property to market-rate housing or sell the building at a profit. In cases where a property has been allowed to deteriorate significantly or the owner has violated federal program rules in other ways, HUD or the RHS may choose to end a contract with an owner. When the restrictions on these properties end, there is a risk that they will become unaffordable to low- and moderate-income tenants, and that those tenants will be displaced.\nIn the 111 th Congress, the Housing Preservation and Tenant Protection Act ( H.R. 4868 ), which was approved by the House Financial Services Committee, attempted to address some of the issues involved in preserving HUD-subsidized housing. For properties with maturing mortgages, the bill would have made grants or loans available to rehabilitate properties if owners so chose, and it would have extended enhanced voucher protections to unassisted tenants upon mortgage maturation. The bill would also have created a \"Preservation Exchange Program,\" through which HUD would have facilitated the transfer of a property with a maturing mortgage to a purchaser who would maintain the affordability. In addition, H.R. 4868 would have established a form of right of first refusal/right of first purchase for HUD (or its assignee) whereby HUD could match the offer of a third party and purchase a property in order to maintain its affordability. The bill also included provisions regarding the refinancing of Section 202 loans similar to those that were enacted in The Section 202 Supportive Housing for the Elderly Act ( P.L. 111-372 ), described in the \" Housing for the Elderly \" section of this report. H.R. 4868 was not enacted before the end of the 111 th Congress.\nFor additional information, see CRS Report R41182, Preservation of HUD-Assisted Housing , by [author name scrubbed] and [author name scrubbed].",
"The financial crisis and economic downturn adversely affected the Low-Income Housing Tax Credit (LIHTC) program. The program is one of the federal government's primary policy tools for encouraging the development and rehabilitation of affordable rental housing. LIHTCs are nonrefundable tax credits, which are allocated to developers who typically sell them to private tax credit investors to raise capital (or equity) for real estate projects. After the economic downturn, large corporate LIHTC investors such as Fannie Mae, Freddie Mac, and Citibank reduced their demand for tax credits in the face of the low profit environment. The reduced demand led to a fall in the market value of the credits and forced LIHTC developers to secure additional sources of financing if they wished to undertake LIHTC projects. Some developers were unable to secure such financing, leading to concern over the ability of the LIHTC program to provide affordable rental housing.\nTo address the disruptions in the LIHTC market, the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) created two programs: the Tax Credit Assistance Program (TCAP) and a temporary LIHTC-grant exchange program. Under the TCAP program, $2 billion in grants were provided for tax credit developments that were underway but were facing financial shortfalls because of low LIHTC prices. The exchange program, commonly referred to as the Section 1602 LIHTC-grant exchange program (after Section 1602 of ARRA), allowed states to exchange portions of their 2008 and 2009 LIHTC allocations for grants. The grants were then to be given to developers to ensure construction of affordable rental housing. In the 111 th Congress, several pieces of legislation that were at some point used as vehicles to extend expiring tax provisions contained a proposed one-year extension of the exchange. The grant exchange program, however, was not extended before the end of the 111 th Congress.\nFor additional information, see CRS Report RS22389, An Introduction to the Design of the Low-Income Housing Tax Credit , by [author name scrubbed]; and CRS Report RS22917, The Low-Income Housing Tax Credit Program: The Fixed Subsidy and Variable Rate , by [author name scrubbed].",
"",
"In response to the severe economic recession, one of the first actions of the 111 th Congress was enactment of an economic stimulus law, the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). It provided almost $800 billion through discretionary spending, mandatory spending, and revenue provisions designed to preserve and create jobs, assist those most affected by the recession, make investments in technology and infrastructure, and stabilize state and local budgets.\nARRA included several housing-related provisions. It provided just under $13.7 billion in discretionary appropriations for HUD, some through existing HUD accounts or programs and some for new programs. For example, ARRA provided $4 billion for public housing capital repairs, nearly double the amount the account had typically received in annual appropriations. It also provided $1.5 billion for a new Homelessness Prevention and Rapid Rehousing Program, which allocated funds to states and local communities to be used for activities to prevent homelessness or to quickly find housing for those who have become homeless. This was the first time that significant HUD funding was devoted to preventing homelessness.\nFor more information about ARRA, see CRS Report R40537, American Recovery and Reinvestment Act of 2009 (P.L. 111-5): Summary and Legislative History , by [author name scrubbed] et al. For more information about the specific HUD funding provisions, see CRS Report RL34504, The Department of Housing and Urban Development: FY2009 Appropriations , by [author name scrubbed] et al.",
"Since FY2008, Congress appropriated $7 billion in Neighborhood Stabilization Program (NSP) funds to help state and local governments acquire, rehabilitate, and resell the growing inventory of abandoned and foreclosed homes precipitated by the home mortgage crisis.\nThe NSP was first authorized with the passage of the Housing and Economic Recovery Act of 2008 ( P.L. 110-289 ). Using the framework of the Community Development Block Grant (CDBG) program, Congress appropriated $3.92 billion to help 307 selected state and local governments acquire, rehabilitate, and resell abandoned and foreclosed properties. In 2009, Congress appropriated an additional $2 billion for NSP-2 activities when ARRA ( P.L. 111-5 ) was enacted. ARRA revised key elements of the program as a result of a number of issues raised during the early implementation of NSP-1. Funds appropriated under ARRA for NSP-2 were awarded competitively and included nonprofit and for-profit entities as direct recipients of funds when teamed with a state or local government. In 2010, Congress appropriated an additional $1 billion for NSP-3 under the Dodd-Frank Act ( P.L. 111-203 ). Each of the NSP rounds had specific deadlines that had to be met with respect to the obligation and expenditure of funds. Under NSP-1, grantees had 18 months from the date HUD signed their grant agreements to obligate these funds and four years to expend allocations. Under NSP-2, recipients were required to spend at least half of the funds within two years and 100% within three years of their allocation date. Finally, no obligation deadline was established in legislation for NSP-3; however, 50% of funds must be expended within two years and 100% within three years.\nFor additional information, see CRS Report RS22919, Community Development Block Grants: Neighborhood Stabilization Program; Assistance to Communities Affected by Foreclosures , by [author name scrubbed].",
"The Federal Emergency Management Agency (FEMA) provides temporary housing assistance to disaster victims following an event declared a major disaster by the President. FEMA's authority to assist families in need of housing is derived from Section 408 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288 ). This assistance can take several forms: repairs to make a home habitable, rental assistance, or direct housing (trailers or mobile homes). Assistance is generally provided for an 18-month period in accordance with the Stafford Act.\nThe unprecedented experience of addressing hundreds of thousands of disaster victims following Hurricanes Katrina and Rita and subsequent Gulf Coast storms challenged the traditional administration of the program and provoked interest in new partnerships and approaches in administering the various forms of disaster-related housing assistance. A prominent change was FEMA's effort in developing a partnership with HUD to provide longer-term housing for displaced families. Using HUD's expertise and the resources provided by the President's Disaster Relief Fund (DRF), disaster victims have received housing and case management services for an extended period after disasters. As a result of its experience with Katrina, FEMA has limited its use of manufactured housing and created safety standards for those that are purchased for use, and, as of the end of the 111 th Congress, was reviewing (in partnership with HUD) a pilot program for safer and more affordable temporary housing units. The review is expected to be completed in 2011.\nFor more information, see CRS Report R40810, FEMA Disaster Housing: From Sheltering to Permanent Housing , by [author name scrubbed].",
"The following list presents legislation relating to housing and community development considered by the 111 th Congress. The list is limited to legislation that was enacted into public law or passed by the House of Representatives or the Senate. Legislation focuses primarily on the programs of the Department of Housing and Urban Development, the Rural Housing Service of the Department of Agriculture, and issues relating to housing finance and tax. The list does not include legislation related to military housing or housing assistance for disabled veterans provided through the Department of Veterans Affairs.\nPublic Laws\nAmerican Recovery and Reinvestment Act of 2009 ( H.R. 1 , P.L. 111-5 , February 17, 2009)\nOmnibus Appropriations Act, 2009 ( H.R. 1105 , P.L. 111-8 , March 11, 2009)\nFraud Enforcement and Recovery Act of 2009 ( S. 386 , P.L. 111-21 , May 20, 2009)\nHelping Families Save Their Homes Act of 2009 ( S. 896 , P.L. 111-22 , May 20, 2009)\nLegislative Branch Appropriations Act, 2010 ( H.R. 2918 , P.L. 111-68 , October 1, 2009)\nAgriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2010 ( H.R. 2997 , P.L. 111-80 , October 21, 2009)\nWorker, Homeownership, and Business Assistance Act of 2009 ( H.R. 3548 , P.L. 111-92 , November 6, 2009)\nConsolidated Appropriations Act, 2010 ( H.R. 3288 , P.L. 111-117 , December 16, 2009)\nHomebuyer Assistance and Improvement Act of 2010 ( H.R. 5623 , P.L. 111-198 , July 2, 2010)\nCaregivers and Veterans Omnibus Health Services Act of 2010 ( S. 1963 , P.L. 111-163 , May 5, 2010)\nDodd-Frank Wall Street Reform and Consumer Protection Act ( H.R. 4173 , P.L. 111-203 , July 21, 2010)\nGeneral and Special Risk Insurance Funds Availability Act of 2010 ( H.R. 5872 , P.L. 111-228 , August 11, 2010)\nTo increase the flexibility of the Secretary of Housing and Urban Development with respect to the amount of premiums charged for FHA single family housing mortgage insurance, and for other purposes ( H.R. 5981 , P.L. 111-229 , August 11, 2010)\nContinuing Appropriations Act, 2011 ( H.R. 3081 , P.L. 111-242 , September 30, 2010)\nIndian Veterans Housing Opportunity Act of 2010 ( H.R. 3553 , P.L. 111-269 , October 12, 2010)\nVeterans' Benefits Act of 2010 ( H.R. 3219 , P.L. 111-275 , October 13, 2010)\nHelping Heroes Keep Their Homes Act of 2010 ( S. 4058 , P.L. 111-346 , December 29, 2011)\nSection 202 Supportive Housing for the Elderly Act of 2009 ( S. 118 , P.L. 111-372 , January 4, 2011)\nFrank Melville Supportive Housing Investment Act of 2009 ( S. 1481 , P.L. 111-374 , January 4, 2011)\nBills Passed by Only One Chamber\nHouse-Passed Bills\nFamily Self-Sufficiency Act of 2009 ( H.R. 46 )\nCJ's Home Protection Act of 2009 ( H.R. 320 )\nTARP Reform and Accountability Act of 2009 ( H.R. 384 )\nHomes for Heroes Act of 2009 ( H.R. 403 )\nHelping Families Save Their Homes Act of 2009 ( H.R. 1106 )\nHomeless Veterans Reintegration Program Reauthorization Act of 2009 ( H.R. 1171 )\nFrank Melville Supportive Housing Investment Act of 2009 ( H.R. 1675 )\nMortgage Reform and Anti-Predatory Lending Act ( H.R. 1728 )\nRural Homeowners Protection Act of 2009 ( H.R. 2034 )\nAmerican Clean Energy and Security Act of 2009 ( H.R. 2454 )\nNeighborhood Preservation Act ( H.R. 2529 )\n21 st Century FHA Housing Act of 2009 ( H.R. 3146 )\nFHA Multifamily Loan Limit Adjustment Act of 2009 ( H.R. 3527 )\nHelping Heroes Keep Their Homes Act of 2010 ( H.R. 3976 )\nEnd Veteran Homelessness Act of 2010 ( H.R. 4810 )\nRural Housing Preservation and Stabilization Act of 2010 ( H.R. 5017 )\nFHA Reform Act of 2010 ( H.R. 5072 )\nFlood Insurance Reform Priorities Act of 2010 ( H.R. 5114 )\nHELP Veterans Act of 2010 ( H.R. 5360 )\nTransportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2011 ( H.R. 5850 )\nWounded Warrior and Military Survivor Housing Assistance Act of 2010 ( H.R. 6058 )\nSenate-Passed Bills\nFEMA Accountability Act of 2009 ( S. 713 )"
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"question": [
"What issues were prominent in the 111th Congress?",
"What were some of the causes and results of the recent recession?",
"What questions about low-income housing and vulnerable populations were asked in the 111th Congress?",
"What happened to the housing markets, even after the recession officially ended?",
"What did the 111th Congress consider in order to shore up housing markets?",
"What realm is impacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act?",
"What did the Dodd-Frank Act include regarding foreclosure prevention-related provisions and changes to mortgage origination standards and practices?",
"What elements were absent from the Dodd-Frank Act?",
"What was the purpose of the tax provisions?",
"What other issues were considered by the 111th Congress?",
"What did Congress do to provide housing assistance to low-income individuals and families?",
"What do the The Homeless Assistance Grants do for communities?",
"How were the programs that fund housing for low-income seniors and individuals with disabilities changed?",
"What other legislation related to housing assistance programs did the 111th Congress consider?"
],
"summary": [
"Housing issues related to the recent turmoil in U.S. housing markets, as well as perennial issues related to the housing needs of low-income individuals and families, were prominent in the 111th Congress.",
"The recent recession that was, in part, both a cause and a result of issues in the housing finance system put legislation designed to address current foreclosures and prevent a future crisis on the congressional agenda.",
"At the same time, the 111th Congress faced questions about how best to meet the affordable housing needs of low-income and vulnerable populations, particularly as unemployment climbed and the economy worsened.",
"While the recession officially ended during the first session of the 111th Congress, housing markets in many parts of the country continued to experience the effects of an economic downturn.",
"The 111th Congress considered a number of measures to shore up housing markets and to address issues related to both housing finance and housing assistance for low-income populations. While a number of measures were enacted, other issues were left unresolved at the end of the 111th Congress.",
"Within the realm of housing finance and homeownership, the 111th Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act, P.L. 111-203).",
"While not exclusively focused on housing, the Dodd-Frank Act did include foreclosure prevention-related provisions and changes to mortgage origination standards and practices.",
"Notably absent from the Dodd-Frank Act were changes to the way in which the Government Sponsored Enterprises (GSEs)—Fannie Mae and Freddie Mac—are structured and their role in the mortgage market, although the 111th Congress did feature discussions regarding reform of the GSEs.",
"The 111th Congress also enacted tax provisions meant to bolster housing markets by providing a tax credit for first-time homebuyers.",
"Foreclosure issues and FHA reform were other issues considered by the 111th Congress.",
"Congress also enacted laws that made changes to existing programs that provide housing assistance to low-income individuals and families.",
"The Homeless Assistance Grants, administered by the Department of Housing and Urban Development (HUD) were amended to give communities greater flexibility in providing housing and services to homeless individuals (P.L. 111-22).",
"The programs that fund housing for low-income seniors and individuals with disabilities (Section 202 and Section 811, respectively) also were changed to allow greater integration of funding from non-HUD sources in housing developments (P.L. 111-372 and P.L. 111-374).",
"The 111th Congress also considered legislation related to housing assistance programs that was not ultimately enacted, including reform to HUD's largest assistance programs: public housing and the Section 8 Housing Choice Voucher program."
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GAO_GAO-13-683
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{
"title": [
"Background",
"Process for Gaining Admission to the United States",
"Federal Agencies’ Roles and Responsibilities Related to Overstay Identification and Enforcement",
"Comprehensive Biometric Entry and Exit System",
"DHS Continually Reviews Records of Potential Overstays, but a Significant Number of Unmatched Arrival Records Remain",
"DHS Reviewed a Backlog of 1.6 Million Records of Potential Overstays in 2011",
"DHS Has More than 1 Million Unmatched Arrival Records That Do Not Meet Enforcement Priorities",
"DHS Has Actions Completed and Under Way to Improve Data to Identify Potential Overstays, but the Effect of These Improvements Is Not Yet Known",
"DHS Has Begun Collecting Additional Data and Improved Sharing of Data among Its Databases to Help Identify Potential Overstays",
"DHS Continues to Face Limitations in Reporting Reliable Overstay Rates and Has Not Assessed and Documented Improvements in Reliability",
"DHS Faces Long- standing Challenges and Uncertain Time Frames in Planning for a Biometric Exit System at Airports",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: U.S. Immigration and Customs Enforcement’s Overstay Enforcement Actions",
"Appendix II: Timeline of Events Related to Biometric Entry and Exit System",
"Appendix III: Comments from the Department of Homeland Security",
"Appendix IV: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"",
"Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK® Guide), Fifth Edition, (Newton Square, PA: 2013).\nUnited States. Second, those not eligible for the Visa Waiver Program and not otherwise exempt from the visa requirement must obtain a visa from a U.S. consular office overseas. Upon arriving at a port of entry, nonimmigrants must undergo inspection by CBP officers, who determine whether or not they may be admitted into the United States. If CBP determines a nonimmigrant is admissible, he or she is granted an authorized period of admission. This period may be for a specific length of time, which CBP designates by assigning a specific “admit until” date, or for as long as the nonimmigrant maintains a particular status. For example, in general, foreign students are eligible to remain in the United States for “duration of status,” meaning as long as they are enrolled in and attending a qualified education program or engaging in authorized practical training following completion of studies.\nAn overstay is a nonimmigrant who is legally admitted to the United States for an authorized period but remains in the country illegally after that period expired without obtaining an extension of stay or a change of status or meeting other specific conditions, such as claiming asylum. This includes a nonimmigrant admitted for duration of status who fails to maintain that status, such as a student who is no longer pursuing a full course of study at an approved educational institution or engaging in authorized practical training following completion of studies. In-country overstays refer to nonimmigrants who have exceeded their authorized periods of admission and remain in the United States without lawful status, while out-of-country overstays refer to individuals who have departed the United States but who, on the basis of arrival and departure information, stayed beyond their authorized periods of admission. Federal law establishes consequences for foreign nationals who overstay their authorized periods of admission.",
"Three DHS components and offices—CBP, ICE, and OBIM—are primarily responsible for taking action to identify and address overstays, as shown in table 1. In addition, the Department of State is responsible for ensuring that individuals who have previously overstayed and are ineligible for a visa do not receive one when applying for a visa to the United States at consular offices overseas.\nFederal agencies use various databases to determine whether nonimmigrants have potentially overstayed their authorized periods of admission to the United States. As shown in table 2, several databases, in particular, provide key information on foreign nationals’ arrival in and departure from the United States, foreign nationals’ applications to change status once in the United States, and the status of foreign students.\nICE primarily analyzes biographic entry and exit data collected at land, air, and sea ports of entry to identify potential overstays. ICE identifies both in-country and out-of-country overstays by analyzing and comparing biographic data maintained in ADIS against information in other databases to find matches that demonstrate that a nonimmigrant may have, for instance, departed the country or filed an application to change status and thus is not an overstay. In particular, ICE analysts use ADIS to identify arrival records for which the subject’s admit until date has passed and for whom DHS does not have a corresponding departure record (unmatched arrival records), which may indicate that the subject of the record is an in-country overstay. For these records of potential overstays, ICE analysts conduct automated searches, such as searching for immigration benefit application information through U.S. Citizenship and Immigration Services. ICE analysts also determine whether the subject of the record meets ICE’s overstay enforcement priorities based on national security and public safety criteria. ICE prioritizes investigation of overstay leads based on the perceived risk each lead is likely to pose to national security and public safety as determined by threat analysis. In order to prioritize investigation of overstay leads, ICE uses an automated system to assign each overstay lead a priority ranking based on threat intelligence information. For the records that meet ICE’s overstay enforcement priorities, ICE analysts then conduct manual searches of other databases to determine, for example, if the individual applied for refugee or asylum status. For these priority records, if ICE analysts are unable to identify evidence of a departure or a change in status, they search for the nonimmigrant’s current U.S. address, and if they are able to identify an address, they send the lead to the relevant ICE HSI field office for investigation.\nFor cases in which ICE’s analysis shows that a nonimmigrant visa holder departed the United States after the admit until date—an out-of-country overstay—and the departure was more than 90 days after the nonimmigrant’s authorized period of admission expired, ICE creates a lookout that CBP officers at ports of entry and State Department officials at overseas consulates can access to determine whether that nonimmigrant is eligible for readmission at ports of entry or can receive a new visa upon application at a U.S. consulate.",
"Beginning in 1996, federal law has required the implementation of an integrated entry and exit data system for foreign nationals. Additionally, the Immigration and Naturalization Service Data Management Improvement Act of 2000 required implementation of an integrated entry and exit data system for foreign nationals that would provide access to and integrate foreign national arrival and departure data that are authorized or required to be created or collected under law and are in an electronic format in certain databases, such as those used at ports of entry and consular offices.\nIn 2003, DHS initiated the US-VISIT program to develop a comprehensive entry and exit system to collect biometric data from aliens traveling through United States ports of entry. In 2004, US-VISIT initiated the first step of this program by collecting biometric data on aliens entering the United States at 115 airports and 14 sea ports. The Intelligence Reform and Terrorism Prevention Act of 2004 required the Secretary of Homeland Security to develop a plan to accelerate full implementation of an automated biometric entry and exit data system that matches available information provided by foreign nationals upon their arrival in and departure from the United States.\nSince 2004, we have issued a number of reports on DHS’s efforts to implement a biometric entry and exit system. For example, in February and August 2007, we found that DHS had not adequately defined and justified its proposed expenditures for exit pilots and demonstration projects and that it had not developed a complete schedule for biometric In September 2008, we further reported that DHS exit implementation. was unlikely to meet its timeline for implementing an air exit system with biometric indicators, such as fingerprints, by July 1, 2009, because of several unresolved issues, such as opposition to the department’s published plan by the airline industry. In November 2009, we found that DHS had not adopted an integrated approach to scheduling, executing, and tracking the work that needed to be accomplished to deliver a In our prior reports, we have made comprehensive exit solution.recommendations intended to help ensure that biometric exit was planned, designed, developed, and implemented in an effective and efficient manner. DHS generally agreed with our recommendations. DHS has implemented or taken actions to implement some of these recommendations; however, DHS has not addressed others. For example, in March 2012, DHS reported that the US-VISIT office was adopting procedures to comply with the nine scheduling practices we recommended in our November 2009 report and has conducted training on our scheduling methodology. However, DHS did not implement our February 2007 recommendations to (1) report to Congress on US-VISIT program risks associated with not fully satisfying legislative conditions, such as compliance with Office of Management and Budget capital planning and investment control guidance, and (2) limit planned expenditures for program management-related activities until such investments are economically justified and have well-defined plans.",
"",
"DHS reviewed a backlog of records of potential overstays that we DHS uses ADIS to match departure previously identified in April 2011.records to arrival records and subsequently close records for individuals with matching arrival and departure records because either (1) the individual departed prior to the end of his or her authorized period of admission and is therefore not an overstay, or (2) the individual departed after the end of his or her authorized period of admission and is therefore an out-of-country overstay. Unmatched arrival records—those records in ADIS that do not have corresponding departure records—remain open and indicate that those individuals are potential in-country overstays. In April 2011, we reported that, as of January 2011, ADIS contained a backlog of 1.6 million unmatched arrival records that DHS had not reviewed through automated or manual processes. This backlog included prior nonpriority overstay leads that had not been reviewed, nonpriority leads that continued to accrue on a daily basis, and leads generated in error as a result of CBP system changes. DHS officials attributed this backlog to resource constraints and US-VISIT’s focus on reviewing leads that met ICE’s priorities.\nIn the summer of 2011, DHS completed a review of these 1.6 million records against various national security and law enforcement databases to determine if the subjects of these records had already left the United States and to help identify if the subjects posed any potential national security or public safety threats. As a result, DHS closed approximately 863,000 records for individuals who had departed, were in status, or had adjusted status, and removed them from the backlog by conducting additional automated checks. Second, DHS reviewed the remaining 757,000 records against national security and law enforcement databases to identify potential national security or public safety threats. As part of this national security and public safety review, DHS also reviewed approximately 82,000 additional records identified by CTCEU that were unresolved or had not yet undergone full review because they did not meet ICE’s enforcement priorities (a total of approximately 839,000 combined records). As a result of these reviews, DHS reprioritized 1,901 of the 839,000 records because the subjects of the records could pose national security or public safety concerns and provided them to CTCEU for further review and consideration for enforcement action. Table 3 describes how CTCEU resolved these leads.\nAccording to our analysis of DHS documentation, since completing this review of the backlog of records of potential overstays in the summer of 2011, as new records have accrued, DHS has continued to review all records of potential overstays through national security and law enforcement databases to identify potential threats, regardless of whether the subjects of the records meet ICE’s priorities for enforcement action. DHS also regularly rereviews these records using various national security and law enforcement databases to identify new information on individuals who were not previously identified as threats.\nICE’s continual review of records of potential overstays enables it to prioritize and investigate individuals who pose a potential national security or public safety threat; however, most records of potential overstays do not result in enforcement action because they do not meet HSI’s overstay enforcement priorities. CTCEU provides those records that do not meet HSI’s overstay enforcement priorities for possible investigation to ICE’s ERO for review to determine if the subjects of these records could be within the scope of one of ERO’s programs. For example, ERO oversees the Criminal Alien Program, which seeks to identify, arrest, and remove priority aliens who are incarcerated within federal, state, and local prisons and jails. According to ERO officials, upon receiving records from CTCEU, ERO may also determine through this program that the subject of the record has committed a crime and is incarcerated or at large. In fiscal years 2011 and 2012, the number of nonpriority records of potential overstays sent to ERO (more than 420,000) was almost three times the number of priority records that CTCEU reviewed for potential homeland security investigations (about 147,000) (see app. I for additional data on ICE’s enforcement actions). According to ERO officials, ERO does not initiate investigations of records of potential overstays it receives unless there is evidence at the time ERO receives the record that the subject meets ERO’s priorities. ERO officials stated that few records of potential overstays have met ERO’s priorities.\nIn April 2011, we found that ICE was assessing funding and resources needed to shift more overstay enforcement responsibilities to ERO, but ICE had not established a time frame for completing that assessment. We recommended that ICE establish a target time frame for completing the assessment and use the results to inform its decision on whether to assign ERO additional responsibility for overstay enforcement. DHS concurred with our recommendation and took action to address it. In June 2011, ICE conducted a pilot study and completed its assessment later that year in which it concluded that significant resources would be required to establish ERO teams dedicated to enforcement against overstays. As a result, ICE did not change ERO’s overstay enforcement responsibilities.",
"Since DHS conducted its review of the previous backlog in 2011, additional unmatched arrival records have accrued, and as of June 2013, DHS has more than 1 million unmatched arrival records in ADIS (that is, arrival records for which ADIS does not have a record of departure or status change), which do not meet ICE’s enforcement priorities. Some of these individuals are overstays, while others have either departed or changed immigration status without an ADIS record of their departure or status change. For example, the individual may have departed via a land port of entry without providing a record of departure or the individual may have applied for immigration benefits using a different name that does not match the ADIS arrival record. DHS conducts ongoing automated reviews of these records to rule out potential national security or public safety threats should updated information become available. In certain circumstances, such as when a record of a potential overstay meets one of ICE’s enforcement priorities, DHS also manually searches additional databases to locate evidence of a departure or change of status. However, DHS’s automated reviews have not produced evidence that the subjects of these 1 million unmatched arrival records meet its enforcement priorities. Thus, DHS has not manually reviewed them and does not plan to take enforcement action against these individuals. Until such evidence becomes available, DHS will continue to maintain this set of unmatched records.\nIn November 2012, DHS’s set of unmatched arrival records not manually reviewed totaled approximately 1.2 million records, and we analyzed data on these records to assess trends by admission class (e.g., tourist or temporary agricultural worker), mode of travel (i.e., air, land, or sea), and time elapsed since the travelers were expected to leave the country. Our analysis of the records by admission class shows that 44 percent of the unmatched arrival records were nonimmigrants who traveled to the United States on a tourist visa, while 43 percent were tourists admitted to the country under the Visa Waiver Program. Figure 1 presents our analysis of unmatched arrival records by admission class.\nWith regard to mode of travel, our analysis of the 1.2 million unmatched arrival records from November 2012 indicates that most of the records were for air arrivals (64 percent), and roughly one-third were for land arrivals (32 percent). The remaining 4 percent of the records were for arrivals by sea. Figure 2 presents the results of this analysis. DHS has reported a similar distribution for modes of travel for nonimmigrants arriving in fiscal years 2010 and 2011—roughly one-third by land and two- thirds by other modes, which would include air and sea arrivals.\nWe also analyzed the records to assess the amount of time that has elapsed since travelers were expected to depart the country, based on travelers’ admit until date. Figure 3 presents our analysis of the amount of time elapsed, as of November 2012, since the admit until date. The average amount of time elapsed for the unmatched arrival records we analyzed was 2.7 years. Our analysis indicates that the majority of unmatched arrival records correspond to travelers who were expected to depart within the past 2 years. According to DHS officials, this may reflect that overstays are more likely to depart the United States as time proceeds. For example, the overstays may choose to return to their countries of origin.",
"",
"Since April 2011, DHS has taken various actions to improve its data on potential overstays. In April 2011, we found that DHS’s efforts to identify and report on overstays were hindered by unreliable data, and we identified various challenges to DHS’s efforts to identify potential overstays, including the incomplete collection of departure data from nonimmigrants at ports of entry, particularly land ports of entry, and the lack of mechanisms for assessing the quality of leads sent to HSI field offices for investigation. Since that time, DHS has taken action to strengthen its processes for reviewing records to identify potential overstays, including (1) streamlining connections among DHS databases used to identify potential overstays and (2) collecting information from the Canadian government about those exiting the United States and entering Canada through northern land ports of entry.\nFirst, DHS has taken steps to improve connections among its component agencies’ databases used to identify potential overstays and reduce the need for manual exchanges of data. For example: In August 2012, DHS enhanced data sharing between ADIS and a U.S. Citizenship and Immigration Services database, the Computer- Linked Application Information Management System 3 (CLAIMS), to enable automatic transfers of immigration status or benefits information from CLAIMS to ADIS. For example, this enhancement has enabled CLAIMS to automatically provide data to ADIS when an individual files a work authorization application form with U.S. Citizenship and Immigration Services, and CLAIMS also provides data to ADIS daily on whether an application is pending, approved, or denied. In August 2012, DHS enhanced data sharing between ADIS and IDENT. This improved connection provides additional data to ADIS to improve the matching process based on fingerprint identification. For example, when an individual provides a fingerprint as part of an application for immigration benefits from U.S. Citizenship and Immigration Services or a visa from the State Department, or when apprehended by law enforcement, IDENT now sends identity information, including a fingerprint identification number, for that individual to ADIS. This additional source of data is intended to help allow ADIS to more effectively match the individual’s entry record with a change of status, thereby closing out more unmatched arrival records.\nBeginning in April 2013, ICE’s Student and Exchange Visitor Information System (SEVIS) began automatically sending data to ADIS on a daily basis, allowing ADIS to review SEVIS records against departure records and determine whether student visa holders who have ended their course of study departed in accordance with the terms of their stay. Prior to this date, DHS manually transferred data from SEVIS to ADIS on a weekly basis. According to DHS officials, these exchanges were unreliable because they did not consistently include all SEVIS data—particularly data on “no show” students who failed to begin their approved course of study within 30 days of being admitted into the United States.\nAlso in April 2013, DHS automated the exchange of records of potential overstays between ADIS and CBP’s Automated Targeting System (ATS), a CBP system used to improve the collection, use, analysis, and dissemination of information on terrorism and other violations of United States laws. This exchange is intended to allow DHS to more efficiently (1) transfer data between the systems for the purpose of identifying national security and public safety concerns, and (2) use matching algorithms in ATS that differ from those in ADIS to close additional records for individuals who departed.\nSecond, DHS is implementing the Beyond the Border initiative to collect additional data to strengthen the identification of potential overstays. In October 2012, DHS and the Canada Border Services Agency began exchanging entry data on travelers crossing the border at selected land ports of entry. Because an entry into Canada constitutes a departure from the United States, DHS will be able to use Canadian entry data as proxies for U.S. departure records. We found in April 2011 that DHS faced challenges in its ability to identify overstays because of unreliable collection of departure data at land ports of entry. The Beyond the Border Initiative would help address those challenges by providing a new source of data on travelers departing the United States at land ports on the northern border. In the pilot phase, DHS exchanged data with the Canada Border Services Agency on third-country nationals at four of the five largest ports of entry on the northern border.entries from September 30, 2012, through January 15, 2013. DHS’s analysis of the 413,222 records received through the pilot showed that DHS was able to match 97.4 percent of Canadian entry records to a U.S. entry record in ADIS. DHS was able to use Canadian entry records to verify the departure of approximately 11,400 subjects prior to the end of their authorized period of admission who would otherwise have been thought to be potential overstays. DHS determined that roughly 4,300 subjects with indeterminate status (meaning that DHS lacked exit records for those individuals) had left the United States after their authorized period of admission, meaning that they had overstayed while in the United States and are now considered out-of-country overstays.\nDHS plans to expand this effort to collect data from additional ports of entry and to share data on additional types of travelers. Specifically, according to DHS officials, as of June 30, 2013, DHS began exchanging data for third-country nationals at all automated ports of entry along the northern border. During this phase of the initiative, in accordance with the agreement between the United States and Canada, DHS also plans to begin using these data for operational purposes (e.g., taking enforcement action against overstays, such as working with the State Department to have their visas revoked or imposing bars on readmission to the country based on the length of time they remained in the country unlawfully).travelers, including U.S. and Canadian citizens, at all automated ports of entry along the northern border. Both DHS and Canadian officials with whom we spoke stated that the initiative is proceeding on schedule.\nAfter June 30, 2014, DHS plans to exchange data on all The Beyond the Border initiative provides DHS with additional data that should enable it to close out potential overstay leads for individuals who depart across the northern border; however, according to DHS and CBP officials, the southern land border poses unique challenges that make an approach similar to Beyond the Border difficult to implement there. Mexican entry procedures differ from those in Canada. For example, according to DHS officials, at some border crossings, Mexican officials may not collect entry data until travelers reach a station located miles past the border. Therefore, Mexican border authorities may not collect information on every traveler entering Mexico. In addition, according to DHS officials, Mexican information technology systems may be less compatible with U.S. systems than are the Canadian systems. DHS is conducting informal outreach to the Mexican government regarding the potential to share entry data in the future, but according to DHS officials, such a program would be years away.",
"Since 1994, neither DHS nor its predecessor has regularly reported annual overstay rates to Congress because of concerns about the reliability of the department’s overstay data. According to statute, DHS is to submit an annual report to Congress providing numerical estimates of the number of aliens from each country in each nonimmigrant classification who overstayed an authorized period of admission that expired during the fiscal year prior to the year for which the report is made. Overstay rates are among the statutory criteria that determine a participant’s termination from the Visa Waiver Program. Therefore, we have previously concluded that reliable and valid estimates of the number of overstays are important to manage the program. In April 2011, we reported that DHS officials stated that the department had not reported overstay estimates because it had not had sufficient confidence in the quality of its overstay data. DHS officials stated at the time that, as a result, the department could not reliably report overstay estimates in accordance with the statute.\nSee testimony of Janet Napolitano, Secretary, Department of Homeland Security, before the Committee on the Judiciary, United States Senate, Washington, D.C.: February 13, 2013.\n2012 and the first half of fiscal year 2013 for all travelers and classes of admission at all air, land and sea ports of entry. DHS has also calculated overstay rates by country for these time periods by determining the number of overstays (in-country plus out-of-country) divided by the total number of confirmed nonimmigrants arrivals (who were expected to depart during the identified period). However, the department is still in the process of determining what methodology it will use to generate the data it plans to report by the end of the year. In addition, DHS officials stated that the department has not yet determined whether to report data from fiscal year 2012 or fiscal year 2013, and whether to report certain overstay data publicly.\nMoreover, DHS continues to face challenges in ensuring the reliability of its overstay data. In September 2008, we reported on limitations in overstay data that affect the reliability of overstay rates, such as weaknesses in departure data. We recommended that the Secretary of Homeland Security explore cost-effective actions necessary to further improve, validate, and test the reliability of overstay data. DHS concurred with this recommendation and has explored actions to improve overstay data, as discussed above, but has not yet validated or tested their reliability. According to DHS Office of Policy officials, the department is better positioned than in the past to describe the limitations in the overstay data. However, challenges to reporting reliable overstay estimates remain. Although DHS has improved connections among its various databases used to help identify potential overstays, these improvements do not address some of the underlying data quality and reliability issues we previously identified. For example, in April 2011, we found that DHS faced challenges in collecting accurate and complete information from nonimmigrants departing the United States through land ports of entry. The Beyond the Border initiative is intended to help address this issue by collecting proxy data on individuals exiting from the United States at northern border ports of entry; however, DHS has not yet identified mechanisms for collecting data on individuals exiting through southern border ports of entry.\nFurther, inaccuracies in passenger data provided by air carriers may lead to incorrect records of potential overstays if passengers’ departures are not accurately recorded. For example, according to CBP officials, CBP learned in early 2011 that some carriers were inadvertently transmitting passenger data without properly recording the passengers’ departure after DHS noticed an increase in the number of potential overstays. According to these officials, the issue was resolved in April 2011, but because of the errors in the data, an unknown number of those passengers were incorrectly identified as potential overstays. Moreover, DHS Office of Policy and ICE officials stated that, prior to the April 2013 improvements between ADIS and SEVIS, ADIS was receiving limited information on foreign students; therefore, the overstay estimates prior to April 2013 do not fully account for the extent to which foreign students in the United States were in legal status in the country. These limitations in overstay data may affect DHS’s ability to report reliable overstay estimates unless resolved. Estimates of in-country overstays are based on ADIS’s identification of unmatched arrival records for individuals who were expected to depart during a given year. As discussed earlier in this report, DHS does not manually review all unmatched arrival records in ADIS because many do not meet ICE’s enforcement priorities. Therefore, the reliability of data in ADIS may affect the accuracy of year-end overstay statistics.\nDHS has documented the results of receiving new departure data in the pilot phase of the Beyond the Border initiative to demonstrate how DHS may be able to close out more records of potential overstays in the future. However, DHS has not assessed and documented how its changes to database connections have improved the reliability of its data for the purposes of reporting overstay rate calculations and has not analyzed the incremental improvements that database changes have made in data quality. According to DHS Office of Policy and ICE officials, DHS has not conducted such an analysis because it is difficult to pull such data from ADIS. DHS has not maintained a separate, mirrored system of ADIS and must therefore pull data directly from the live ADIS system—a resource- intensive process that can take several months. However, there may be other cost-effective ways to assess data improvements, such as conducting quantitative analyses of the number of records closed as a result of the improvements in connections among databases.\nStandards for Internal Control in the Federal Government states that program managers need operational data to determine whether they are meeting their goals for accountability for effective and efficient use of resources. The standards also require that all transactions be clearly documented in a manner that is complete and accurate in order to be useful for managers and others involved in evaluating operations. Additionally, GAO’s methodology transfer paper on the logic of program evaluation designs, which describes key issues in evaluating federal programs, states that the basic components of an evaluation design include identifying information sources and measures, data collection methods, and an assessment of study limitations, among other things. Moreover, GAO’s standards for assessing computer-processed data, which can provide a framework for assessing DHS’s computer-processed overstay data, states that care should be taken to ensure that collected data are sufficient and appropriate. Data may not be sufficiently reliable if (1) significant errors or incompleteness exists in some of or all the key data elements, and (2) using the data would probably lead to an incorrect or unintentional message. Without an assessment and documentation of improvements in the reliability of the data used to develop overstay estimates and any remaining limitations in how the data can be used, decision makers will not have the information needed to use these data for policy-making purposes.",
"DHS has not yet fulfilled the 2004 statutory requirement to implement a biometric exit capability, but has planning efforts under way to report to Congress in time for the fiscal year 2016 budget cycle on the costs and benefits of such a capability at airports and seaports. In 2004, the Intelligence Reform and Terrorism Prevention Act required DHS to develop a plan to accelerate full implementation of an automated biometric entry and exit system at air, sea, and land ports of entry. However, development and implementation of a biometric exit capability has been a long-standing challenge for DHS. With regard to an exit capability at airports, in an October 2010 memo, DHS identified three primary reasons why it has been unable to determine how and when to implement a biometric solution: (1) the methods of collecting biometric data could disrupt the flow of travelers through air terminals; (2) air carriers and airport authorities had not allowed DHS to examine mechanisms through which DHS could incorporate biometric data collection into passenger processing at the departure gate; and (3) challenges existed in capturing biometric data at the point of departure, including determining what personnel should be responsible for the capture of biometric information at airports. With regard to an exit capability at land ports of entry, in 2006, we reported that according to DHS officials, for various reasons, a biometric exit capability could not be implemented without incurring a major impact on land facilities. As a result, as of April 2013, according to DHS officials, the department’s planning efforts focus on developing a biometric exit capability for airports, with the potential for a similar solution to be implemented at seaports, and DHS’s planning documents, as of June 2013, do not address plans for a biometric exit capability at land ports of entry.\nAccording to DHS officials, the challenges DHS identified in October 2010 continue to affect the department’s ability to implement a biometric air exit system. For example, in 2009, DHS conducted pilot programs for biometric air exit capabilities in airport scenarios. In August 2010, we found that there were limitations with the pilot programs—for example, the pilot programs did not operationally test about 30 percent of the air exit requirements identified in the evaluation plan for the pilot programs—that hindered DHS’s ability to inform decision making for a long-term air exit solution and pointed to the need for additional sources of information on air exit’s operational impacts. According to DHS officials, the department’s approach to planning for biometric air exit since that time has been partly in response to our recommendation that DHS identify additional sources for the operational impacts of air exit not addressed in the pilot programs’ evaluation and to incorporate these sources into its air exit decision making and planning. Figure 4 depicts a timeline of DHS’s efforts to develop a biometric exit capability and key findings from our prior reports.\nMove mouse over the blue shaded text boxes to get more information on GAO’s findings and recommendation, click on text box to open the referenced GAO report. For an accessible and printable version of this graphic please see appendix II.\nApril 2003 The Department of Homeland Security (DHS) initiated the United States Visitor and Immigrant Status Indicator Technology (US-VISIT) program to develop a comprehensive biometric entry and exit system.\nJanuary 2004 US-VISIT began collecting biometric data on aliens entering the United States at 115 air and 14 sea ports of entry.\nOctober 2005 US-VISIT began collecting biometric data on aliens entering the United States at all ports of entry.\nDHS directed its Science and Technology Directorate (S&T), in coordination with other DHS component agencies, to research long-term options for biometric exit.\nMay 2012 DHS reported internally on the results of S&T’s analysis and made recommendations to support the planning and development of a biometric air exit capability.\nDecember 2004 The Intelligence Reform and Terrorism Prevention Act of 2004 required a plan to accelerate full implementation of an automated biometric entry and exit system.\nDHS operated two biometric air exit pilots from May 2009 until July 2009, and DHS submitted its evaluation report for these pilots to Congress in October 2009.\nJune 2003 GAO issued a report entitled Information Technology: Homeland Security Needs to Improve Entry Exit System Expenditure Planning.\nFebruary 2005 GAO issued a report entitled Homeland Security: Some Progress Made, but Many Challenges Remain on U.S. Visitor and Immigrant Status Indicator Technology Program.\nAugust 2007 GAO issued a report entitled Homeland Security: U.S. Visitor and Immigrant Status Program's Long- standing Lack of Strategic Direction and Management Controls Need to Be Addressed.\nNovember 2009 GAO issued a report entitled Homeland Security: Key US- VISIT Components at Varying Stages of Completion, but Integrated and Reliable Schedule Needed.\nAugust 2010 GAO issued a report entitled Homeland Security: US-VISIT Pilot Evaluations Offer Limited Understanding of Air Exit Options.\nIn 2011, DHS directed S&T, in coordination with other DHS component agencies, to research long-term options for biometric air exit. In May 2012, DHS reported internally on the results of S&T’s analysis of previous air exit pilot programs and assessment of available technologies, and the report made recommendations to support the planning and development In that report, DHS concluded that the of a biometric air exit capability.building blocks to implement an effective biometric air exit system were available. In addition, DHS’s report stated that new traveler facilitation tools and technologies—for example, online check-in, self-service, and paperless technology—could support more cost-effective ways to screen travelers, and that these improvements should be leveraged when developing plans for biometric air exit. However, DHS officials stated that there may be challenges to leveraging new technologies to the extent that U.S. airports and airlines rely on older, proprietary systems that may be difficult to update to incorporate new technologies. Furthermore, DHS reported in May 2012 that significant questions remained regarding (1) the effectiveness of current biographic air exit processes and the error rates in collecting or matching data, (2) methods of cost-effectively integrating biometrics into the air departure processes (e.g., collecting biometric scans as passengers enter the jetway to board a plane), (3) the additional value biometric air exit would provide compared with the current biographic air exit process, and (4) the overall value and cost of a biometric air exit capability. The report included nine recommendations to help inform DHS’s planning for biometric air exit, such as directing DHS to develop explicit goals and objectives for biometric air exit and an evaluation framework that would, among other things, assess the value of collecting biometric data in addition to biographic data and determine whether biometric air exit is economically justified.\nDHS reported in May 2012 that it planned to take steps to address these recommendations by May 2014; however, according to DHS Office of Policy and S&T officials, the department does not expect to fully address these recommendations by then. In particular, DHS officials stated that it has been difficult coordinating with airlines and airports, which have expressed reluctance about biometric air exit because of concerns over its effect on operations and potential costs. To address these concerns, DHS is conducting outreach and soliciting information from airlines and airports regarding their operations. In addition, DHS officials stated that the department’s efforts to date have been hindered by insufficient funding. However, in fiscal year 2012, DHS requested that Congress release funds allocated to the biometric exit program and funds being withheld pending the full implementation of a biometric exit system so that these funds could be applied to DHS’s efforts to enhance the biographic exit system. In its fiscal year 2014 budget request for S&T, DHS requested funding for a joint S&T-CBP Air Entry/Exit Re-Engineering Apex project. Apex projects are crosscutting, multidisciplinary efforts requested by DHS components that are high-priority projects intended to solve problems of strategic operational importance. According to DHS’s fiscal year 2014 budget justification, the Air Entry/Exit Re-Engineering Apex project will develop tools to model and simulate air entry and exit operational processes. Using these tools, DHS intends to develop, test, pilot, and evaluate candidate solutions. As of April 2013, DHS Policy and S&T officials stated that they expect to finalize goals and objectives for a biometric air exit system in the near future and are making plans for future scenario-based testing.\nAlthough DHS’s May 2012 report stated that DHS would take steps to address the report’s recommendations by May 2014, DHS officials told us that the department’s current goal is to develop information about options for biometric air exit and to report to Congress in time for the fiscal year 2016 budget cycle regarding (1) the additional benefits that a biometric air exit system provides beyond an enhanced biographic exit system and (2) costs associated with biometric air exit. However, DHS has not yet developed an evaluation framework, as recommended in its May 2012 report, to determine how the department will evaluate the benefits and costs of a biometric air exit system and compare it with a biographic exit system. According to DHS officials, the department needs to finalize goals and objectives for biometric air exit before it can develop such a framework, and in April 2013 these officials told us that the department plans to finalize these elements in the near future. However, DHS does not have time frames for when it will subsequently be able to develop and implement an evaluation framework to support the assessment it plans to provide to Congress.\nAccording to A Guide to the Project Management Body of Knowledge, which provides standards for project managers, specific goals and objectives should be conceptualized, defined, and documented in the planning process, along with the appropriate steps, time frames, and milestones needed to achieve those results. In fall 2012, DHS developed a high-level plan for its biometric air exit efforts, which it updated in May 2013, but this plan does not clearly identify the tasks needed to develop and implement an evaluation framework. For example, the plan does not include a step for developing the methodology for comparing the costs and benefits of biometric data against those for collecting biographic data, as recommended in DHS’s May 2012 report. Furthermore, the time frames in this plan are not accurate as of June 2013 because DHS is behind schedule on some of the tasks and has not updated the time frames in the plan accordingly. For example, DHS had planned to begin scenario-based testing for biometric air exit options in August 2013; however, according to DHS officials, the department now plans to begin such testing in early 2014. A senior official from DHS’s Office of Policy told us that DHS has not kept the plan up to date because of the transition of responsibilities within DHS; specifically, in March 2013, pursuant to the explanatory statement for DHS’s 2013 appropriation, DHS established an office within CBP that is responsible for coordinating DHS’s entry and exit policies and operations. This transition was in process as of June 2013, and CBP plans to establish an integrated project team in July 2013 that will be responsible for more detailed planning for the department’s biometric air exit efforts. Without robust planning that includes up-to-date time frames and milestones to develop and implement an evaluation framework for its assessment of biometric air exit benefits and costs, DHS does not have reasonable assurance that it will be able to provide this assessment to Congress as planned for the fiscal year 2016 budget cycle.\nDHS Policy and S&T officials agreed that setting time frames and milestones is important to ensure timely development and implementation of the evaluation framework in accordance with DHS’s May 2012 recommendations. According to DHS officials, implementation of a biometric air exit system will depend on the results of discussions between the department and Congress after the department provides this assessment of options for biometric air exit. Any delays in providing the assessment to Congress could further affect implementation of a biometric air exit system, and without reasonable assurance when DHS will be able to provide this assessment to Congress, it remains unclear when DHS will make progress toward addressing the statutory requirements for a biometric exit system.",
"Addressing the large number of foreign visitors who have entered the United States legally but then overstayed has been a long-standing challenge. Given the government’s finite resources for addressing overstays, and competing priorities, reliable data and analysis are of particular importance to both DHS and Congress. Without clear assessment and reporting of the extent to which the reliability of the data used to develop overstay estimates has improved and any remaining limitations in how the data can be used, decision makers may not have complete information needed to use these data for policy-making purposes. Furthermore, DHS has faced long-standing challenges in making progress toward meeting the statutory requirement for biometric exit capabilities since 2004. DHS plans to provide Congress with an assessment of the benefits and costs of various options for pursuing a biometric exit system at airports, but without robust planning that includes time frames and milestones to develop and implement an evaluation framework for this assessment, DHS lacks reasonable assurance that it will be able to provide this assessment to Congress for the fiscal year 2016 budget cycle as planned. Furthermore, any delays in providing this information to Congress could further affect possible implementation of a biometric exit system to address statutory requirements.",
"To help improve confidence in the quality of overstay data that DHS plans to report in December 2013 in accordance with statutory reporting requirements, we recommend that the Secretary of Homeland Security direct relevant DHS components to assess and document the extent to which the reliability of the data used to develop any overstay estimates has improved and any remaining limitations in how the data can be used.\nTo provide reasonable assurance of when DHS will be able provide an assessment of the benefits and costs of biometric air exit options to Congress, we recommend that the Secretary of Homeland Security establish time frames and milestones for developing and implementing an evaluation framework to be used in conducting the department’s assessment of biometric air exit options.",
"We provided a draft of this report to DHS and the Department of State for their review and comment. DHS provided written comments, which are summarized below and reproduced in full in appendix III. DHS concurred with our two recommendations and described actions under way or planned to address them. Regarding our first recommendation, that DHS assess and document the extent to which the reliability of the data used to develop any overstay estimates has improved and any remaining limitations in how the data can be used, DHS indicated that it is establishing a working group that will include representation from DHS component agencies with responsibility for collecting, recording, and analyzing entry and exit data and that this working group will be functional by January 31, 2014. According to DHS, the component agencies that oversee information systems used to identify overstays will be responsible for the data captured in their respective systems, and the working group will be responsible for aggregating information across components regarding the validity of the data and defining any limitations to the use of the data. DHS estimated that completion of an initial evaluation of the data would occur by July 31, 2014. To fully address our recommendation, DHS should assess the reliability of, and document any remaining limitations in, any overstay data that the department may report. Regarding our second recommendation, that DHS establish time frames and milestones for developing and implementing an evaluation framework to be used in conducting the department’s assessment of biometric air exit options, DHS indicated that CBP and S&T will finalize the goals and objectives for biometric air exit by January 31, 2014, and that these goals and objectives will be used in the development of an evaluation framework that DHS expects to have completed by June 30, 2014. These actions, when fully implemented, should help address the intent of our recommendations. DHS also provided technical comments, which we incorporated as appropriate.\nThe Department of State did not have formal comments on our draft report, but provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the Secretary of Homeland Security, the Secretary of State, appropriate congressional committees, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have questions on matters discussed in this report, please contact me at (202) 512-8777 or gamblerr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made major contributions to this report are listed in appendix IV.",
"In April 2011, we reported that U.S. Immigration and Customs Enforcement (ICE), a component within the Department of Homeland Security (DHS), takes actions to address a small portion of the estimated overstay population because of, among other things, competing priorities. In particular, ICE’s Counterterrorism and Criminal Exploitation Unit (CTCEU), within the Homeland Security Investigations (HSI) directorate, prioritizes in-country overstay leads based on various factors that consider the potential risks overstays may pose to national security and public safety, and HSI field offices investigate those leads that CTCEU identifies as priorities.\nAs it reviews leads for potential overstays, CTCEU closes records for nonimmigrants that have either left the country or changed their status, identifies nonpriority records for processing by ICE Enforcement and Removal Operations, and sends records that do not have a viable address to contractors to continually monitor for new address information. CTCEU assigns valid, high-priority overstay leads to HSI field office agents within their respective geographical areas of responsibility for mandatory investigation. From fiscal years 2004 through 2012, CTCEU processed over 2.2 million records of potential overstays and sent about 44,500 leads to HSI field offices for investigation. Table 4 provides information related to the records of potential overstays that CTCEU has processed from fiscal years 2004 through 2012 (our April 2011 report included the data from fiscal years 2004 through 2010). Out of the approximately 44,500 leads sent to HSI field offices over this period of time, approximately 9,000 (about 20 percent) resulted in arrests.\nIn April 2011, we reported that overstay investigations that do not lead to an arrest result in one of three outcomes: (1) evidence is uncovered indicating that the suspected overstay departed the United States, (2) evidence is uncovered indicating that the subject of the investigation is in-status (e.g., the subject filed a timely application with DHS’s U.S. Citizenship and Immigration Services to change his or her status or extend his or her authorized period of admission in the United States), or (3) investigators exhaust all investigative leads and cannot locate the suspected overstay. If the evidence of departure shows that the individual departed after his or her authorized admit until date (i.e., the individual is an out-of-country overstay), the individual could be subject to administrative enforcement actions including restrictions on readmission to the United States. Figure 5 shows the outcomes of CTCEU investigations from fiscal years 2004 through 2012 that did not result in arrest (our April 2011 report included the data from fiscal years 2004 through 2010).\nAs we reported in April 2011, ICE has reported allocating a small percentage of its resources in terms of investigative work hours to overstay investigations. For this report, we found that, from fiscal years 2005 through 2012, ICE reported devoting from 1.8 to 3.4 percent of its total HSI field office investigative hours to CTCEU overstay investigations, as shown in figure 6 (our April 2011 report included the data from fiscal years 2006 through 2010).",
"Table 5 lists events in DHS’s efforts to develop a biometric exit capability and key findings from our prior reports (see interactive fig. 4) and includes the figure’s rollover information.",
"",
"",
"Rebecca Gambler, (202) 512-8777 or gamblerr@gao.gov.",
"In addition to the contact named above, Kathryn Bernet (Assistant Director), Susan Baker, Frances A. Cook, Alana Finley, Eric Hauswirth, Richard Hung, Lara Miklozek, Amanda Miller, Anthony Moran, Karl Seifert, and Ashley D. Vaughan made significant contributions to this report."
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"question": [
"What is the current status of the DHS’s improvement efforts?",
"How has the DHS attempted to get over challenges in reporting reliable overstay rates?",
"What is missing from these connections?",
"Why has the DHS not reported overstay rates in April 2011?",
"What else has the DHS failed to conduct?",
"Why are documented improvements necessary?",
"What has been a long-standing challenge for DHS?",
"What is the department's goal to combat such challenges?",
"How have the recommendations internally reported by DHS panned out?",
"Why is it hard for time frames to be properly implemented?",
"How do improper time frames affect DHS?",
"How can visitors move to the U.S. legally?",
"What are overstays?",
"What is the DHS's relationship with overstays?",
"What has the GAO reported on to better help DHS?",
"What was DHS's response to GAO's report?",
"What was addressed in GAO's report on DHS's progress?",
"How was this report created?"
],
"summary": [
"DHS has actions completed and under way to improve data on potential overstays and report overstay rates, but the effect of these improvements is not yet known.",
"DHS has streamlined connections among databases used to identify potential overstays.",
"However, these improvements do not address some underlying data quality issues, such as missing land departure data.",
"In April 2011, GAO reported that DHS officials said that they have not reported overstay rates because DHS has not had sufficient confidence in the quality of its overstay data.",
"However, DHS has not assessed or documented improvements in the reliability of data used to develop overstay estimates, in accordance with federal internal control standards.",
"Without such a documented assessment to ensure the reliability of these data, decision makers would not have the information needed to use these data for policy-making purposes.",
"Developing and implementing a biometric exit capability to collect biometric data, such as fingerprints, which is required by federal law, has been a long-standing challenge for DHS.",
"DHS officials stated that the department's goal is to develop information and report to Congress about the benefits and costs of biometric air exit options before the fiscal year 2016 budget cycle.",
"In May 2012, DHS internally reported recommendations to support the planning for a biometric exit capability at airports--DHS's priority for biometric exit capabilities--that could also be implemented at seaports in the future; however, as of June 2013, DHS's planning did not address a biometric exit capability at land ports of entry.",
"Standard practices for project management state that time frames should be documented as part of the planning process; however, DHS has a high-level plan for a biometric air exit capability, and it does not clearly define the steps, time frames, and milestones needed to develop and implement an evaluation framework, as recommended in DHS's May 2012 report.",
"Without robust planning that includes time frames and milestones, DHS does not have reasonable assurance that it will meet its time frame for developing and implementing an evaluation framework.",
"Each year, millions of visitors come to the United States legally on a temporary basis either with or without a visa.",
"Overstays are individuals who were admitted legally on a temporary basis but then overstayed their authorized periods of admission.",
"DHS has primary responsibility for identifying and taking enforcement action to address overstays.",
"In April 2011, GAO reported on DHS's actions to identify and address overstays and made recommendations to strengthen these processes.",
"DHS concurred and has taken or is taking steps to address them.",
"This report addresses (1) DHS's efforts to review its records to identify potential overstays, (2) the extent to which DHS's changes in its systems or processes have improved data on potential overstays and DHS's ability to report overstay rates, and (3) the extent to which DHS has made progress toward establishing a biometric exit system.",
"GAO analyzed DHS overstay data and documents-- such as those related to the overstay identification processes and biometric exit plans--and interviewed relevant DHS officials."
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CRS_R40601
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{
"title": [
"",
"Introduction",
"Private Long-Term Care Insurance",
"Current Financing of Long-Term Services and Supports",
"Long-Term Care Insurance Industry Trends",
"Hybrid Long-Term Care Insurance Products",
"Factors Affecting the Demand for Private Long-Term Care Insurance",
"Cost and Complexity of Long-Term Care Insurance",
"Type of Coverage",
"Dollar Amount of Coverage and Annual Inflation Adjustments",
"Duration of the Benefit",
"Elimination Period",
"Adequacy of Consumer Protections For Long-Term Care Insurance Policyholders",
"State Oversight",
"Federal Oversight",
"Premium Instability",
"Inappropriate Sales Practices",
"Inappropriate Denial of Claims",
"Solvency of Long-Term Care Insurance Companies",
"Efforts to Expand Participation in the Long-Term Care Insurance Market",
"Expand Tax Incentives to Improve Affordability",
"Current Tax Treatment",
"Legislative Proposals To Expand Tax Incentives",
"Include in Cafeteria and Flexible Spending Accounts",
"Above-the-Line Deduction",
"Tax Credit",
"Other Provisions",
"Improve Consumer Protections",
"Expand Consumer Education"
],
"paragraphs": [
"",
"As the 80 million baby boomers approach retirement, many are concerned they will not have sufficient savings to sustain their standard of living throughout retirement. Few, however, have focused on another risk to their retirement security—the potential cost of financing often expensive long-term care services. The cost of long-term services and supports (LTSS) for the majority of older Americans may far exceed their financial resources in the future. Private long-term care insurance (LTCI) is available to provide some financial protection for persons against the risk of the potentially high cost of LTSS. To date, however, only about 1 in 10 individuals aged 55 and older own a LTCI policy.\nThis report discusses\nthe role of LTCI in financing LTSS and current trends in the LTCI industry; factors affecting the demand for LTCI, including cost and complexity of the product and adequacy of consumer protections; and legislative options available to improve affordability, strengthen consumer protections, and expand consumer education.",
"Services provided by a LTCI policy may include a broad range of services and supports to help people with a limited capacity for self-care due to a physical, cognitive (such as Alzheimer's disease), or mental disability or condition. Health care and LTSS are different. Health care services typically treat specific acute and chronic medical conditions in a medical setting by a medical professional. LTSS, on the other hand, include a wide range of health and health-related support services provided on an informal or formal basis to people who have functional disabilities or cognitive impairments over an extended period of time with the goal of maximizing their independence. Unlike medical treatments, LTSS primarily assist individuals in their day-to-day activities. These \"activities of daily living\" (ADLs) include bathing, dressing, eating, toileting, and transferring (from a bed to a chair or vice-versa). Generally, LTCI policyholders are eligible to begin to receive benefits if they have at least two of the ADL limitations.\nLTCI policies may be sold to an individual directly or to a group as part of an employer-sponsored policy. The premiums charged for LTCI vary by age of purchase, with higher premiums charged to those purchasing at older ages. This age differential reflects the higher risk of needing LTSS at advanced ages. One study has estimated that over two-thirds of individuals who turn 65 years old will require LTSS at some point before they die.",
"Although private LTCI is available to finance LTSS costs, only about 6% of LTSS spending was paid by LTCI in 2010. Nearly half of LTSS spending (nearly 43%) was financed by the Medicaid program, which is funded jointly by the federal government and states. Medicaid is intended to provide a safety net and is not available to everyone. To be eligible, individuals must meet certain functional criteria as well as state-specified income and asset thresholds. Medicare (which currently provides health care to older Americans and certain disabled individuals) financed about 22% of LTSS, but these funds were predominantly for post-acute care for short-stays in a skilled nursing home following hospitalization or for skilled home health care.\nIndividuals who seek paid LTSS but do not qualify for public funding or do not have private LTCI must pay for these services directly out-of-pocket. In 2010, about 16% of LTSS spending was paid out-of-pocket. The magnitude of out-of-pocket costs will depend on the setting, intensity (including the skill level of the provider), and the duration of LTSS. For example, the setting of care can include care provided in one's own home, in a community-residential care setting such as an assisted living facility, or in an institutional setting such as a nursing home. For those receiving care at home, in 2012, the average cost of personal unskilled care (such as bathing, dressing, and transferring) was $19 an hour. Studies have found that individuals use on average about 18.4 hours a week of informal care, which would result in an annual cost of about $18,179 a year in 2012. The annual cost of care will also vary by intensity and duration of care, with individuals receiving care in an institutional setting paying more than those staying at home. For example, assisted living facilities that provide hands-on personal care for those who are not able to live by themselves (but do not yet require constant care provided by a nursing home) cost on average $39,600 annually in 2012. Nursing home care, on the other hand, generally costs more in that it provides LTSS assistance 24 hours a day. In 2012, the annual cost of a nursing home stay was $73,000 for a semi-private room and $81,030 for a private room. These estimates are national figures and can vary widely by geographic region.",
"The private LTCI market has undergone significant changes in the past three decades. The employer-sponsored market has grown as a share of total LTCI sales and the overall market has become more concentrated in terms of the number of companies selling the product. Further, a number of newer product lines have been introduced that combine LTCI with other retirement and life-insurance products. The following discussion provides greater details on these trends.\nThere are currently between 7 million to 9 million Americans with an active LTCI policy (often called \"in-force\"). The growth in the number of LTCI policies in both the individual and group markets increased at double-digit rates from 1995 to 2002 before slowing in more recent years (see Figure 1 ). The composition of the market has also changed as employer-sponsored LTCI has grown as a share of the total LTCI market. In 2011, employer-sponsored LTCI represented about one-third of all active policies, compared with less than 3% in the mid-1990s. Employer-sponsored LTCI is distinct from employer-sponsored health insurance in that employers typically do not contribute to LTCI premiums. Rather employer-sponsored LTCI provides the advantage of a larger risk pool and generally lower premiums than if LTCI is purchased in the individual market. Among employers offering LTCI, the federal government is the largest employer offering group LTCI.\nOver the past decade, the number of companies selling LTCI has declined significantly. Between 1987 and 2002, more than 100 companies were selling LTCI. A downturn in sales beginning in 2003 prompted many insurers to exit the market or merge with other firms. As a result, the LTCI market has become much more concentrated, with the top 10 LTCI companies producing 88% of new sales in 2010. This number has fallen further in recent years. Since 2010, a number of well-known companies have exited the LTCI market. MetLife has announced that it has discontinued new sales of LTCI effective December 30, 2010. MetLife assured existing policyholders that their coverage will continue without any interruptions or changes. In February of 2011, Unum Group announced it will no longer sell group policies. In March of 2011, Prudential announced it will no longer sell LTCI policies to individuals and will instead focus on the group market. The consolidation of the LTCI industry reflects several factors, including high administrative expenses for policies relative to premiums, lower than expected terminations (i.e., lapse rates) that increased the number of people likely to submit claims, low interest rates that reduced the expected return on investments, and new government regulations limiting direct marketing by telephone.",
"A number of legislative changes have enabled insurers to begin to develop hybrid products that combine LTCI with either an annuity or a life insurance product. The Pension Protection Act of 2006 ( P.L. 109-280 ) simplified tax rules regarding combination products (effective in 2010) and added a tax provision specifying that proceeds from an annuity can be used tax-free to purchase an LTCI policy. LTCI policies can also be combined with a life insurance policy through an accelerated death benefit rider. Circumstances that trigger these accelerated benefits include diagnosis of a terminal illness or a medical condition that would drastically shorten the policyholder's life span, the need for LTSS, or permanent confinement to a nursing home. Because these newer hybrid policies are just entering the market, it is too early to tell their impact on demand for LTCI in the future.\nIn addition to the above-mentioned hybrid LTCI policies, there is also a LTCI product that is linked to Medicaid eligibility. The Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) established the Medicaid Partnership Long-Term Care Insurance Partnership Program (hereinafter referred to as the Partnership Program). Individuals who purchase certain LTCI policies may qualify for Medicaid without the same means-testing requirements that other applicants must meet. Generally, Partnership Program purchasers would seek Medicaid for extended coverage of LTSS after their LTCI benefits have been exhausted. For these individuals, Medicaid means-testing requirements are relaxed at (1) the time of application to Medicaid, and (2) the time of the beneficiary's death when Medicaid estate recovery is generally applied. ,\nThe original Partnership Program was established in four states: California, Connecticut, Indiana, and New York in the early 1990s. The Omnibus Budget Reconciliation Act of 1993 (OBRA 93, P.L. 103-66 ) prohibited other states from implementing the program. However, the Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) lifted this prohibition and allowed any state with a Secretary-approved Medicaid state plan amendment to operate a Partnership program. As of July 2011, 40 states, including the 4 original partnership states, elected to adopt a LTCI Partnership program. Ten states have yet to adopt a LTCI Partnership Program. There are about 641,000 Partnership Program policies in force, accounting for 9% of all LTCI policies in force.",
"After 15 years of strong growth, demand for private LTCI has slowed considerably since 2004. In 2008, the latest year in which demographic data are available, about 11% of the population aged 55 and older and 12% of the population aged 65 and older owned a LTCI policy. Low demand for this product has occurred despite enhanced tax incentives (mainly at the state level), increased emphasis on consumer protections, and the enactment of a private LTCI program for federal employees.\nThe factors affecting the demand for LTCI can be viewed by comparing two key cohorts: those under the age of 65 and those aged 65 and older. For those under the age of 65, annual LTCI premiums are generally lower. However, this cohort also faces competing demands of the cost of raising families and saving for retirement. Many do not fully understand their future risks or coverage options for LTSS. According to a survey by America's Health Insurance Plans, 28% of non-buyers believe Medicare will cover their LTSS needs, and another 22% do not know who would pay. Although Medicare does cover up to 100 days of care in a skilled nursing facility, and limited home health care, it does not cover longer stays in a nursing home or personal home care.\nBy the time individuals reach the age of 65 or so, if they have not sufficiently planned for their LTSS needs, the cost and complexity of the LTCI policies become a major barrier to purchase. In addition, increased concerns have arisen about the adequacy of consumer protections for LTCI as a result of inconsistencies in LTCI laws and regulations across the states. More recently, adverse publicity about potential problems with premium stability, claims denials by LTCI companies, and heightened concerns about the future solvency of LTCI companies in the current economic environment have further dampened demand. The following section discusses these issues in greater detail.",
"The cost of LTCI has been cited as a major deterrent to purchasing the product. Among potential buyers of LTCI who choose not to purchase a policy, 87% cite cost as a \"very important\" or \"important\" reason for their decision. Over the past decade, LTCI premiums have increased significantly above the overall rate of inflation.\nAs shown in Table 1 , between 1995 and 2010, average age-adjusted premiums have increased 71% (above the overall rate of inflation) for individuals aged 55 to 64 and by 64% for those aged 65 to 69, growing at an annual average rate of 3.7% and 2.8% (respectively) over and above the general rate of inflation. Higher average premiums reflect increased demand for more comprehensive benefit packages (including inflation protection) and higher daily benefit amounts. In addition, low rates of return on investments and under estimates of lapse (termination) rates have prompted insurers to raise premiums for both current and new policyholders.\nAlthough more comprehensive policies have raised annual premiums, they have also increased the complexity of the purchase decision. According to the America's Health Insurance Plans (AHIP) survey, 49% of those who did not buy an LTCI policy when given the opportunity stated that the policy options were \"too confusing.\" Potential buyers must evaluate the many different possible combinations of product features available.\nPotential policyholders must decide\nthe type of coverage, the dollar amount of coverage and annual inflation adjustments, the length or duration of coverage, and the waiting period (which is often referred to as the elimination period).",
"Individuals must choose the type of services to be covered by a LTCI policy. Services covered under a LTCI policy may include care in a variety of settings, such as a nursing home or assisted living facility, or the individual's own home through home health services. Policies may cover respite care for caregivers, homemaker and chore services and medical equipment. Policies purchased in 2010 tend to be more comprehensive in terms of services covered and are most likely to cover both nursing home and home care services. According to AHIP, 95% of policies purchased in 2010 covered both nursing home and home care as compared with 61% of policies purchased in 1995 (see Table 2 ).",
"Another factor affecting the cost and complexity of a policy is how much coverage should be purchased in terms of a daily benefit amount and whether to purchase inflation protection. The dollar amount of the daily benefit is often initially chosen based on the current cost of services. But the decision about how much this daily benefit should be adjusted over time to reflect inflation is a more complicated one.\nInflation adjustments (often called inflation protection) are important because a LTCI policy is often purchased 20 to 30 years before services are needed. Thus, a policy purchased today that pays a $150 a day benefit may not be sufficient given growth in the cost of future LTSS. To ensure that policies cover an adequate amount of services, most companies now offer inflation protection and most public awareness campaigns have urged individuals to purchase inflation protection. As a result of these efforts, policies purchased in 2010 are more likely to include inflation protection (see Table 2 ) as compared with those purchased in 1995.\nIn terms of the type of inflation protection, companies offer both simple and compound inflation adjustments. Although both methods increase the daily benefit by a fixed percentage, they vary on which year the percentage is applied. Simple inflation adjustments increase annually based on a fixed percentage of the daily benefit amount calculated from the first year the policy is purchased , so annual adjustments are a fixed dollar amount. Whereas compound inflation adjustments increase the daily benefit amount annually based on a fixed percentage calculated from each previous year's daily benefit amount (see Figure 2 ), so the annual adjustments of the daily benefit amount increase over time.\nOnce the policyholder chooses the type of inflation protection, he or she then must decide how much inflation-protection to purchase annually. In making this decision, one approach would be to rely on historical data. For example, since 2000, the price of nursing home care increased at an annual average rate of 4.3%. However, it is unknown whether these trends will continue in the future. Potential policyholders must decide whether they should choose inflation protection based on historical trends or choose a higher or lower rate based on expectations about the future. This decision affects both the complexity and the cost of the policy.",
"The length of coverage (in years) of a LTCI policy is called the duration of the benefit . Deciding how much coverage to purchase further complicates the decision process. LTCI policies can cover two to five years of services and some policies can provide lifetime benefits. Although potential policyholders want to purchase a policy that may sufficiently cover future risks, most do not know what that risk may be because it varies widely across the older population. For example, researchers have estimated that, of those who turned 65 years old in 2005, approximately one-third will not require any LTSS over their remaining lifetime. At the same time, one in five will require LTSS for more than five years. The longer the duration of coverage, the higher the premiums.",
"LTCI policies often have a waiting or elimination period that is the length of time between the onset of qualifying impairments and commencement of payment for LTSS. The elimination period is selected by the policyholder when he or she purchases the policy. This elimination period is conceptually similar to a deductible in a health care plan—the longer the elimination period the lower the cost of the policy, all other things equal. Policies purchased in 2010 tend to have a longer waiting (\"elimination\") period, as compared with 15 years earlier (see Table 2 ). Unlike other policy design features, a longer elimination period (holding other design features constant) can reduce premiums.",
"In addition to the cost and complexity of products, there has been a growing concern that many LTCI policies do not have sufficient consumer protections. These consumer protections are important given that a LTCI policy is often purchased 20 years or longer before the actual benefit is used. This long-time horizon introduces a great deal of uncertainty regarding the nature of future benefits, long-run affordability of premiums for purchasers, and the financial stability of insurers. Many of the laws and regulations that have been established by federal and state governments attempt to address these issues. However, each state has its own set of laws and regulations and there is wide variation across states.",
"State governments have primary jurisdiction for regulating the LTCI market. To do this, states have established laws and regulations for LTCI carriers and the products they sell and play an active role in verifying carriers' and products' compliance with these requirements. To help guide states in their LTCI oversight efforts, the National Association of Insurance Commissioners (NAIC) has developed a number of \"Model Laws\" and \"Model Regulations\" (hereinafter referred to as Model provisions), which provide recommended guidelines for state lawmakers and regulators to adopt. These Model provisions are updated periodically by the state insurance commissioners. Because each state ultimately establishes its own LTCI laws and regulations, state oversight requirements are not consistent across states, leaving gaps in consumer protections. According to the NAIC, all states, with the exception of Alaska, have adopted some components of the NAIC Model provisions, but there is wide variability in which provisions were adopted.",
"Since 1996, the federal government has attempted to standardize these regulations at a national level for certain LTCI products. Federal law has included provisions for federal tax benefits and minimum consumer protection standards for purchasers of \"tax-qualified\" LTCI policies as authorized by the Health Insurance Portability and Accountability Act of 1996 (HIPAA, P.L. 104-191 ). HIPAA tax-qualified products must conform to most of the provisions in the 1993 NAIC Model Law and Regulations. These products are also required to offer (but not mandate) inflation protection.\nThe Medicaid Partnership Program established under DRA (see discussion earlier about hybrid LTCI products) includes minimum consumer protection requirements for the LTCI plans sold under the Partnership Program as specified in the 2000 NAIC Model Provisions (see Table 3 ). In contrast to the HIPAA voluntary 5% compound inflation-protection requirement, the DRA provisions include a mandatory inflation-protection provision for certain age groups for the Partnership Program. DRA, however, does not specify the amount of inflation-protection that is required and instead leaves this decision up to the individual states.\nHowever, federal laws standardizing LTCI regulations have become outdated and do not include all of the relevant provisions of a specific NAIC Model. For example, neither the HIPAA tax-qualified policies or the Medicaid Partnership Program were ever updated to include the rate stability provisions in the NAIC 2000 Model. These federal laws also do not address recent concerns about the misrepresentation of LTCI by unqualified sales agents nor inappropriate denial of claims. The following section provides more detail about each of these issues.",
"Generally, premiums for LTCI are lower when policies are purchased at younger ages. Yet, younger purchasers will also be paying premiums over a longer period of time and long-run stability of premiums is important to ensure their affordability in the future. Although insurers are prohibited from increasing an individual's premium based on a change in the policyholder's circumstances (i.e., increased age or onset of disability), insurers, however, are still able to request permission from a state insurance commissioner to increase premiums for a class of insured.\nComprehensive data on the extent of premium increases across all LTCI companies are not available. However, press reports suggest that major LTCI carriers have applied for or received approval for premium increases between 10% and 40% in one or more states. In addition, the Office of Personnel Management (OPM) announced that premium rates for current federal workers enrolled in the federal LTCI program who had purchased automatic compound inflation protection would increase 25% for most policyholders. These rate increases were a result of a new negotiated LTCI contract for federal workers that included a new benefit option with increased home health care reimbursements, new benefit periods, and higher daily benefit amounts. However, current enrollees who did experience premium increases were provided the opportunity to keep their current premiums substantially the same by making changes to their benefit package.\nPremium increases can be necessitated by inadequate medical underwriting, premiums that were initially set too low, or insufficient growth in reserves to cover future claims. Thus, premium or rate stability depends largely on the ability of insurers to adequately predict future claims. In addition, lower than predicted voluntary termination (lapse) rates and lower than predicted rates of return on investments have been cited as a key reason for the most recent round of increases.\nInitially, in 2000, the NAIC revised its model provisions to require companies to provide actuarial information to certify the adequacy of all proposed rates and to show that the vast majority of premium increases are devoted to paying claims. In addition, when premiums are increased, 85% of the increased portion of the premium must be available to cover claims. Further, the 2000 NAIC Model Act requires reimbursement of unnecessary rate increases to policyholders. Policyholders are also provided the option to escape the effect of rising rate spirals by being guaranteed the right to switch to another lower premium policy. Finally, the 2000 NAIC Model provisions authorized the commissioner to ban from the market place for five years companies that persist in filing inadequate initial premiums. But most states have not adopted the full NAIC Model language for premium stability.\nTo address these concerns, the NAIC is currently re-evaluating its rate stability model language. Under the current model regulation an actuarial certification is required when companies submit a premium increase. Specifically, the NAIC model provision states that:\n\"The initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated.\"\nThe NAIC has recognized that there are potential problems with the \"moderately adverse\" language because there is no explicit definition of what this means. As a result, the interpretation relies on the judgment of the pricing actuary which makes it difficult to regulate, even for states with an actuary on staff. Regulators are poorly equipped to judge the reasonableness of the company's assumptions. To address these concerns, the NAIC is currently exploring various options to strengthen its rate stability standards including the development of a more concrete definition of \"moderately adverse events.\"",
"Following the 1993 NAIC Model Act, there had been a concern that some private sector insurers and agents were inappropriately selling products to persons with low income and assets who may otherwise be eligible for public assistance under Medicaid. In other words, these LTCI policies would not be suitable for certain individuals given their circumstances. There was also a concern that individuals may not fully understand the future value of the benefits they purchase. To address these issues, the 2000 NAIC Model required insurers to develop and use suitability standards, and to train agents with respect to the standards. Both insurers and agents must ascertain an applicant's ability to pay and his or her goals and needs through the use of a personal worksheet. There are a number of disclosure requirements related to suitability, including the requirement that the agent and insurer must distribute to the potential policyholder a brochure on the \"Things to Know Before You Buy.\" Since then, the 2006 NAIC Model added provisions concerning training of insurance agents to address concerns about suitability. The 2006 Model also includes a new section on producer (insurance agent) training, which requires producers to complete a one-time eight-hour training course before selling LTCI. According to the NAIC, as of November 2008, 27 states have some form of agent's licensing requirements in their state legislation, but not all of them comply fully with the 2006 NAIC Model Act language.",
"There has been anecdotal evidence that some LTCI policyholders are having difficulty in accessing their benefits once a claim is filed. Recent actions by the NAIC against a large LTCI company have heightened these concerns. National level data from the NAIC have also shown that the number of complaints regarding LTCI has increased between 2004 and 2006. One of the key areas for complaints is the denial of claims. Although the number of claims denials has increased, the increase is not as large when adjusted by the number of claims submitted. The total percentage of claims denied for all policies increased since 2004 from 3.2% to 3.9% in 2006. The percentage of claims denied for comprehensive policies increased from 4.1% to 4.9% over the same period. This data reflects activity from 2004 to 2006 and does not provide any information on more recent years.\nDenial of claims can occur for a number of reasons. For example, a number of issues within the reimbursement process could lead to a delay in payment. The first relates to the eligibility for payments from the insurer. The policyholder (or his/her guardian) must notify the insurer and document that the policy has been \"triggered.\" For example, for non-cognitive impairments this means the policyholder meets the requirement of needing assistance with two or more activities of daily living (ADLs). Documentation can include a written statement from the policyholder's physician verifying this information or the insurer may require an assigned care manager to assess eligibility. Thus, a claim can be denied if the insurer does not receive supporting documentation regarding eligibility for payment in a timely manner.\nAnother reason for denying a claim is that the policyholder has not yet reached the end of the policy's elimination period. Between 2004 and 2006, denied claims for home care only policies because the elimination period had not been met increased 16.3%, for comprehensive policies they increased 37.5%. Finally, denied claims for nursing home benefits where the elimination period had not been met increased 17.7% over the same period.\nAlthough anecdotal evidence raised concerns among policymakers that some insurers are further delaying claims on purpose, national level data from the NAIC do not validate these concerns. According to the NAIC, denial of payments beyond 60 days was not a major issue between 2004 and 2006. Other survey data support the fact that relatively few claims are denied. According to a Lifeplans Survey of 1,500 policyholders over a 2½-year period, 96% of claims were approved and 4% were denied. Those who conducted the survey suggest this indicates an industry-wide initial claims denial rate of 4%. The same survey reported that the vast majority (93%) of denied claims had a decision rendered within a two-month period and the remaining 7% within another two months.\nAlthough problems in the delay of claims processing are not evident in the NAIC data collected between 2004 and 2006, there is evidence that the problem may be isolated for policies issued by one large insurer. The recent settlement against Conseco, Inc. highlights the use of improper processing practices by the company. In May 2008, state insurance regulators and the NAIC brought a regulatory settlement against Conseco, Inc. for mishandling of LTCI claims. Specifically, claims were not handled in a timely manner and claims files were not documented or maintained. The Conseco investigation found that the primary problem in most cases was a delay in payment of the claim, rather than a denial.\nGiven these concerns the NAIC adopted in 2009 language to the NAIC Model Act that provides for external independent review of benefit trigger denials. The NAIC also created a subgroup to review existing methods by which companies report claims denials. The subgroup recommended and the NAIC adopted changes to the reporting form so that it is clear which method is being used (per claimant, or per transaction).",
"Following the recent economic downturn, concerns about the long-run solvency of LTCI companies may adversely affect the demand for the product. Amidst this uncertainty, potential LTCI policyholders may decide to wait until the economic situation improves before contemplating a purchase of LTCI. In addition, there are concerns about the guarantee of benefits for current policyholders.\nThe insurance industry does provide a number of safeguards to protect LTCI policyholders from an insolvent insurer. The current system of protection for LTCI policyholders is called insurance guaranty funds. This interdependent system is a cooperative effort among regulators and insurers in the states where the insolvent insurer operated. It is administered state-by-state and funded by assessments on insurers. When an insurer's financial condition deteriorates to the point where it may have trouble meeting its obligations, it is placed into receivership. In effect, the company and its policies are taken over by the insurance commissioner of the state where the insurer is domiciled. In the absence of bankruptcy, the commissioner may need to establish a plan to ensure policyholders receive coverage or benefits. For example, the insurance commissioner may allow other insurers to purchase parts of the troubled insurer's business. If, however, the company is liquidated, a state guaranty association may need to assume or reinsure policies of the failed insurer.\nState law requires insurers to become members of the guaranty associations in each state in which they are licensed to do business. For health and LTCI, the average coverage is about $100,000. One concern about guaranty funds is that the amount of coverage per policy may not be sufficient to insure future potential losses due to insolvency. This does raise the possibility that the guaranty funds would have to raise premium rates and potentially reduce benefits for current policyholders in the future if even a few insurers become insolvent.",
"If participation rates increase in the private LTCI market, most actuaries agree that the overall costs of policies may be further reduced because the available risk-pool would be larger. Specifically, one of the key premises of insurance is to spread risk across as large a population as possible. Adverse selection occurs when individuals who expect to have a higher risk of needing LTSS in the future (e.g., family history of Alzheimer's) are more likely to purchase a policy than those who do not. In a voluntary program, low participation may limit an insurer's ability to spread risk adequately resulting in adverse selection. When adverse selection is present in a voluntary system, insurers must charge higher premiums to cover the higher risk of the insured group. Thus, the greater the participation among the general population, the lower the effects of adverse selection.\nMany of the concerns about adverse selection were raised when the CLASS Program under the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 , as amended) was enacted, which was intended to be a voluntary, federally administered LTCI program. According to the American Academy of Actuaries, design features of the program, such as guaranteed issue (e.g., no pre-existing condition exclusions), and the voluntary nature of the program may lead to those most likely needing the benefit to opt-in and healthy individuals, who may not need the benefit, to opt-out. It was anticipated that adverse selection would likely lead to higher than average premiums and further reduce demand for the CLASS program among young and healthy individuals. In fact, after examining the actuarial, marketing, and legal issues for a financially solvent program over the next 75 years, HHS sent a letter to Congress, stating that the Administration does not see a viable path forward for implementation of the CLASS program at this time. On January 2, 2013, The American Taxpayers Relief Act of 2012 ( P.L. 112-240 ), among other things, repealed the CLASS program.\nLegislative proposals intended to increase the demand for private LTCI policies, and overall participation rates, may include proposals to\nincrease tax incentives to lower the after-tax cost of policies, improve consumer protections and increase consumer confidence in the product, and expand consumer education.\nThe following describes these proposals in greater detail.",
"Under current law, premiums paid by employees may be subject to a premium conversion arrangement under a cafeteria plan (flexible spending type account) and deductible from their taxable income. There are also other tax credits available to certain individuals who purchase health care insurance in the individual market. However, LTCI premiums currently do not have as generous tax incentives as health insurance. But a recent survey by AHIP suggests that increased tax incentives may increase the demand for LTCI. Specifically, according to the AHIP survey, 87% of respondents who chose not to purchase LTCI said they would be \"much more interested\" or \"more interested\" if they could deduct premiums from their taxable income.\nThis section will first discuss the current tax treatment of LTCI and then detail potential legislative proposals and their implications for after-tax LTCI premiums.",
"Under current law, there are some tax advantages provided to some aspects of private LTCI. Benefits from a \"qualified\" LTCI policy are excluded from the gross income of the taxpayer (i.e., they are exempt from taxation). In addition, premiums for LTCI are allowed as itemized deductions to the extent they and other unreimbursed medical expenses exceed 10% of adjusted gross income (AGI) for those under age 65 and 7.5% of AGI for those 65 and older. LTCI premium deductions, however, are subject to age-adjusted limits. In 2013, these limits range annually from $360 for persons aged 40 or younger up to $4,550 for persons over the age of 70. In addition, under current law, employer contributions toward the cost of tax-qualified LTCI policies are excluded from the gross income of the employee. Self-employed individuals are allowed to include LTCI premiums in calculating their deductions for health insurance expenses. Only amounts less than or equal to the age-adjusted limits can be deducted or excluded from taxable income.\nIn addition, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ( P.L. 108-173 ) authorized Health Savings Accounts (HSAs), which allow individuals to pay for LTCI premiums on a tax-advantaged basis. Individuals are eligible to establish and contribute to an HSA if they have a qualifying high deductible health plan (HDHP). Individuals enrolled in Medicare are excluded. Withdrawals from HSAs are exempt from federal income taxes if used for purchase of LTCI.\nAs noted earlier, a number of legislative changes to the tax code have enabled insurers to develop hybrid products that combine LTCI with either an annuity or a life insurance product. The Pension Protection Act (PPA) of 2006 simplified tax rules regarding combination products (effective in 2010) and added a tax provision specifying that proceeds from an annuity can be used tax-free to purchase a tax-qualified LTCI policy (under Section 7702B(b) of the Internal Revenue Code (IRC)). PPA also allows individuals to use the cash surrender value of a life insurance policy as payment for a tax-qualified LTCI policy and exclude these payments from taxable income. Finally, PPA revised Section 1035 of the IRC to allow for tax-free exchanges of certain insurance contracts. Under this provision, no gain or loss is recognized on the exchange of a life insurance contract, an endowment contract, an annuity contract for a qualified LTCI contract or the exchange of one qualified LTCI contract for another.",
"Expanding tax incentives for long-term care insurance may improve the affordability of policies by reducing the after-tax cost of policies and increasing the demand for LTCI. To do this, LTCI premiums could be included in one or more of the following options:\nan employer-sponsored cafeteria or flexible spending account plan, which would exclude them from gross income; as an \"above-the-line\" tax deduction to arrive at AGI; or as a credit against tax liability (\"tax credit\").\nTable 4 summarizes the advantages and disadvantages of each option.",
"Cafeteria plans are employer-established benefit plans under which employees may choose between receiving cash (typically additional taxable take-home pay) and certain non-taxable benefits. Under this option, LTCI would be an eligible benefit within the plan and the employee would not be taxed on the value of the benefit. This arrangement reduces both income and employment taxes (i.e., Social Security and Medicare payroll taxes). Under some of the current legislative proposals, LTCI could also be an eligible expense in a flexible spending account (FSA). FSAs and cafeteria plans are closely related, but not all cafeteria plans have FSAs and not all FSAs are part of cafeteria plans. Reimbursements through an FSA are also exempt from income and employment taxes. Including LTCI in a cafeteria plan or FSA would also reduce adjusted gross income for purposes of other tax provisions. Cafeteria plans and FSAs only benefit individuals whose employer has established such plans. For an individual filer with $55,000 in gross income and in the 25% tax bracket, this option would reduce the effective cost of the premiums by 32.65% (this includes a reduction in employment taxes of 7.65% as well).",
"Under this option, LTCI premiums would be deducted from a taxpayer's gross income. An above-the-line deduction also reduces adjusted gross income for other tax provisions. The key difference from a cafeteria plan is that the provision is available to everyone and not limited to those employers who offer a plan. In addition, under this option, LTCI premiums (even if deducted from gross income) would still be subject to employment taxes if the individual were employed. For an individual filer with $55,000 in income and in the 25% tax bracket, this option would reduce after-tax LTCI premiums by 25%.",
"A tax credit is applied directly against a taxpayer's tax liability. The key distinction in a tax credit is whether it is refundable or nonrefundable. A fully refundable tax credit is paid to the taxpayer even if the amount of the credit exceeds the taxpayer's tax liability. Under a nonrefundable credit, if the tax liability is less than the credit amount of all refundable credits available, then the taxpayer would not benefit from the full credit. Under this option, after tax premiums for the individual filer with $55,000 in gross income would decline dollar for dollar by the amount of the tax credit if the individual's tax liability was equal to or exceeded the amount of all available tax credits.",
"Although the discussion above provides a brief overview of the impact of the different options, actual tax savings will vary depending on the specific details of each of the proposals. To minimize the cost to the federal government, many of the current legislative proposals would not allow the full deduction or credit of premiums initially. Instead these proposals would\nphase-in the deduction or credit over time; base the percentage of LTCI premiums that is deductible or creditable on the number of years a policy is held; or limit the income from which a deduction can be taken, allowing only a deduction from gross income for distributions from a 401(k) or IRA.",
"As the market for LTCI expands, there is a growing concern that current regulations may not be sufficient to protect consumers from potential abuses in claims administration and processing and future rate stability. To address these issues, legislative proposals that are introduced to expand tax incentives for LTCI may also require these tax-qualified policies to meet specific NAIC Model Regulations and Laws. (See Table 3 for a summary of different versions of the NAIC Model provisions with respect to consumer protections.)",
"The Long-Term Care Awareness Campaign is a joint federal-state initiative to increase awareness among the American public about the importance of planning for future LTC needs. The Own Your Future Campaign is a collaboration of the Centers for Medicare & Medicaid Services (see http://www.cms.hhs.gov ), the Office of the Assistant Secretary for Planning & Evaluation (see http://www.aspe.hhs.gov ), and the Administration on Aging (see http://www.aoa.gov ), and it has support from the National Governors Association (see http://www.nga.org ). The program was started in January 2005. The project's core activities are state-based direct mail campaigns supported by each participating state's governor, and targeted to households with members between the ages of 45 to 70. Campaign materials include a Long-Term Care Planning Kit and state specific information and resources in both print and on the internet. As of January 2010, 25 states have participated in the Long-term Care Campaign to increase awareness of the need to plan for future LTSS.\nThe response from consumers to the first two phases of the Own Your Future Campaign exceeded expectations, both in terms of consumer interest and in initiating LTSS planning actions. Research following a five-state phase of the campaign indicated that individuals who received the planning kit were twice as likely to take some type of LTSS planning action as compared to those who did not receive the kit. Based on these successes, Congress provided additional support for these education initiatives by establishing the National Clearinghouse for Long-Term Care Information under the Deficit Reduction Act of 2005. Under Section 6021(d) of the act, Congress appropriated $15 million in funding for the National Clearinghouse over five years (2006 to 2010). While ACA had extended funding for the Clearinghouse to 2015 in enacting the CLASS program, the recently enacted American Taxpayers Relief Act of 2012, in repealing the CLASS program, also rescinds the unobligated balance of ACA's funds for the National Clearinghouse.\nLegislative proposals in the 113 th Congress may expand or extend further into the future funding for the National Clearinghouse."
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"question": [
"Why are many concerned about the baby boomers approaching retirement?",
"What are other risks with relation to retirement security?",
"What is the purpose of LTSS?",
"Why is this a financial concern for older Americans?",
"What percent of the population aged 55 and older was covered by a policy?",
"Why was this percentage so low?",
"How might LTCI policies face adversity?",
"What types of concerns have been increasing regarding LTCI policies?",
"What has caused negative publicity for LCTI insurers?"
],
"summary": [
"As the 80 million baby boomers approach retirement, many are concerned they will not have sufficient savings to sustain their standard of living in retirement.",
"Few, however, may be focused on another risk to their retirement security—the potential cost of financing often expensive long-term care services and supports (LTSS).",
"LTSS include help with either functional or cognitive impairment and generally include assistance with activities such as bathing, eating, and dressing.",
"For the majority of older Americans, the cost of obtaining paid help for these services may far exceed their financial resources in the future.",
"In 2010, between 7 million to 9 million Americans owned a private LTCI policy, with about 11% of the population aged 55 and older covered by a policy.",
"A number of factors have adversely affected the demand for LTCI.",
"The cost and complexity of LTCI policies have been cited as major deterrents to purchasing LTCI.",
"In addition, increased concerns have arisen about the adequacy of consumer protections for LTCI as a result of inconsistencies in LTCI laws and regulations across the states.",
"More recently, adverse publicity about premium increases and heightened concerns about the future solvency of LTCI insurers in the current economic environment have further dampened demand, prompting state regulators to re-evaluate current regulations and laws governing LTCI."
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GAO_GAO-16-511
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{
"title": [
"Background",
"GAO Has Reported on Efforts Related to Application Rationalization",
"Most Agencies Fully Met at Least Three of the Four Practices for Establishing Complete Application Inventories",
"U.S. Agency for International Development",
"Agencies Rationalize Some, but Not All Applications through Existing Investment Management Processes",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: GAO’s Evaluation of Agencies’ Application Inventories",
"Appendix III: Comments from the Department of Commerce",
"Appendix IV: Comments from the Department of Defense",
"Appendix V: Comments from the Department of Education",
"Appendix VI: Comments from the Department of Energy",
"Appendix VII: Comments from the Department of Health and Human Services",
"Appendix VIII: Comments from the Department of Homeland Security",
"Appendix IX: Comments from the Department of Housing and Urban Development",
"Appendix X: Comments from the Department of the Interior",
"Appendix XI: Department of Justice",
"Appendix XII: Comments from the Department of Labor",
"Appendix XIII: Comments from the Department of State",
"Appendix XIV: Comments from the Department of Veterans Affairs",
"Appendix XV: Comments from the Environmental Protection Agency",
"Appendix XVI: Comments from the National Aeronautics and Space Administration",
"Appendix XVII: Nuclear Regulatory Commission",
"Appendix XVIII: Comments from the Office of Personnel Management",
"Appendix XIX: Comments from the Social Security Administration",
"Appendix XX: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"In March 2012, OMB launched the PortfolioStat initiative which required agencies to conduct an annual review of their commodity IT portfolio to, among other things, achieve savings by identifying opportunities to consolidate investments or move to shared services. For PortfolioStat, OMB defined broad categories of commodity IT: enterprise IT systems, which include e-mail, identity and access management, IT security, web infrastructure, and collaboration tools; business systems, which include finance, human resources, and other IT infrastructure, which includes data centers, networks, desktop computers, and mobile devices.\nOf those categories, the first two include software applications, which are software components and supporting software hosted on an operating system that create, use, modify, share, or store data in order to enable a business or mission function to be performed. This includes custom, commercial off-the-shelf, government off-the-shelf, or open-sourced software. The memorandum establishing the PortfolioStat initiative also required agencies to develop a commodity IT baseline including the number, types, and costs of investments for all commodity IT categories.\nIn a subsequent memorandum, OMB advocated the use of application rationalization to inform data center optimization efforts. Application rationalization is the process of streamlining the portfolio to improve efficiency, reduce complexity and redundancy, and lower the cost of ownership. It can be done by retiring aging and low-value applications, modernizing aging and high-value applications, eliminating redundant applications, standardizing on common technology platform and version (as is the case for moving to shared services), or consolidating applications. OMB stated in its memorandum that application rationalization would be a focus of PortfolioStat sessions and required agencies to describe their approach to maturing the IT portfolio, including rationalizing applications, in the information resource management plans and enterprise roadmaps that are required to be updated annually.\nIn December 2014, the law commonly referred to as the Federal Information Technology Acquisition Reform Act (FITARA) was enacted and required covered executive branch agencies (except for DOD) to ensure that Chief Information Officers (CIO) have a significant role in the decision making process for IT budgeting, as well as the management, governance, and oversight processes related to IT. The act also required that CIOs (in each covered agency except DOD) review and approve (1) all contracts for IT services prior to their execution and (2) the appointment of any other employee with the title of CIO, or who functions in the capacity of a CIO, for any component organization within the agency. OMB issued guidance in June 2015 that reinforces the importance of agency CIOs and describes how agencies are to implement the law.\nIn that same memorandum, OMB changed PortfolioStat from being an annual review session to quarterly reviews including a discussion of portfolio optimization efforts and focus on commodity IT. Specifically, the memorandum stated that agencies are to discuss how they use category management to consolidate commodity IT assets; eliminate duplication between assets; and improve procurement and management of hardware, software, network, and telecom services during the sessions. Furthermore, agencies are to share lessons-learned related to commodity IT procurement policies and efforts to establish enterprise-wide inventories of related information. The memorandum also specified key responsibilities for CIOs—including having increased visibility into all IT resources—and required agencies to develop plans to implement these responsibilities by December 2015.\nFurther, during the course of our review, in January 2016, OMB updated guidance to agencies requiring that they provide information regarding their IT asset inventories when making integrated data collection submissions. The guidance required agencies to provide a preliminary inventory by the end of February 2016 and a complete IT asset inventory, including information on systems, sub-systems, and applications by the end of May 2016 to OMB.\nFinally, federal law and guidance specify requirements for protecting federal information and systems. Specifically, the Federal Information Security Management Act (FISMA) of 2002, among other things, requires agencies to maintain and update an inventory of major information systems at least annually, and the National Institute of Standards and Technology specifies that this should include an accurate inventory of software components, including the software applications which are the subject of our review. OMB plays a key role in monitoring and overseeing agencies’ security activities and their FISMA implementation. This includes tracking how well agencies are managing their inventories of hardware and software assets and protecting them.",
"In November 2013, we reported that agency commodity IT baselines were not all complete and recommended that 12 agencies complete their commodity IT baselines. As of March 2016, 6 of the 12 agencies—the Departments of Agriculture, Commerce, Housing and Urban Development, and Labor; the Social Security Administration; and the U.S. Agency for International Development—reported that they had completed their commodity IT baseline. The remaining 6 agencies reported making progress towards completion.\nIn May 2014, in a review examining federal agencies’ management of software licenses (which are types of enterprise IT applications), we determined, among other things, that only 2 of the 24 CFO Act agencies—the Department of Housing and Urban Development and the National Science Foundation—had comprehensive software license inventories. Twenty had partially complete inventories and two did not have any inventory. We recommended that agencies complete their inventories. We also recommended that OMB issue a directive to help guide agencies in managing licenses and that the 24 agencies improve their policies and practices for managing licenses. In June 2016, OMB issued a memorandum that is intended to improve agencies’ acquisition and management of enterprise software, consistent with our May 2014 recommendation. The memorandum contains elements related to having a comprehensive policy, such as developing and implementing a plan for centralizing the management of software licenses.",
"We identified four practices to determine whether agencies had a complete software application inventory. To do so, we primarily relied on best practices used in our recent report on federal software licenses which determined, among other things, whether agencies had a comprehensive software license inventory, and our guide for assessing the reliability of computer-processed data. We determined that to be considered complete agencies’ inventories should: include business systems and enterprise IT systems, as defined by OMB; include these systems from all organizational components; specify basic attributes, namely application name, description, owner, and function supported; and be regularly updated with quality controls in place to ensure the reliability of the information collected.\nMost of the agencies fully met at least three of the four practices. Specifically,\n4 agencies fully met all four practices;\n9 agencies fully met three practices and 8 of these partially met the\n6 agencies fully met two practices and 5 of these partially met the\n2 agencies fully met one practice and partially met the three others,\n3 agencies did not fully meet any practice.",
"The following are examples of how we assessed agencies against our practices. See appendix II for a detailed assessment of all the agencies.\nThe Environmental Protection Agency fully met three practices and partially met one. The agency fully met the first practice because its inventory includes enterprise IT and business systems, with the exception of very small systems. In addition, it included applications from all offices and regions in the organization. The agency partially met the practice for including application attributes in the inventory because, although it identifies the application name, and description, component managing the applications, and the business function associated with its applications, it does not identify the business function for every application. Officials stated that they are working to have this information populated for all applications. Lastly, the agency fully met the fourth practice of regularly updating the inventory because it has processes to update its inventory through the agency’s software life cycle management procedure and provided evidence of the annual data call issued by the CIO to ensure that the inventory is current.\nThe U.S. Agency for International Development fully met two practices and partially met two. Specifically, the agency’s inventory includes business and enterprise IT systems and the inventory includes basic application attributes. However, the agency’s inventory does not include systems from all organizational components because officials stated that coordination and communication in the geographically-widespread agency is difficult. In addition, the agency has processes for updating its inventory; however, it relies on manual processes to maintain it.\nThe Department of Transportation partially met all four practices.\nWhile the department’s inventory for the common operating environment includes all business and enterprise IT systems and its inventory of applications includes business systems, the inventory of applications does not include all enterprise IT systems. Furthermore, both of its inventories do not include applications used by all of its components. Specifically, the inventory does not include applications used by the Federal Highway, Federal Railroad, and Federal Transit Administrations, among others, and the inventory for its common operating environment does not include applications used by the Federal Aviation Administration. The department also partially met the practice of including basic application attributes because, although the department’s inventory includes these attributes, its common operating environment does not provide the business function that the applications support. Further, while the Department of Transportation has a process for its partners to provide information on its individual inventories in order to update the inventory of applications, it does not have processes in place to ensure the reliability and accuracy of the reported information, and thus partially met this practice.\nRegarding the four practices, the majority of the agencies fully met the practices of including business systems and enterprise IT system; including these systems from all organizational components; and specifying the application name, description, owner, and business function supported. Only five agencies fully met the practice of regularly updating the inventory and implementing quality controls for ensuring the reliability of the inventory data because they provided evidence of performing both of these activities. Table 3 shows the number of agencies who fully met, partially met, and did not meet the practices.\nOMB’s requirement for agencies to complete an IT asset inventory by the end of May 2016 greatly contributed to most of the agencies including business systems and enterprise IT systems for all of their organizational components and specifying key attributes for them. Those agencies that did not fully address these practices provided various reasons for not doing so. For example, one agency stated that it has not made its software application inventory a priority because it has been focusing on major and high risk investments, while delegating applications to the component level. Others noted that the lack of automated processes make collecting complete inventory information difficult. Further, others noted that it is challenging to capture applications acquired by components in the department-wide inventory.\nWhile it is reasonable to expect that priority be given to major and high risk investments, applications are nevertheless part of the portfolio and should be accounted for as such. Not accounting for them may result in missed opportunities to identify savings and efficiencies. It is also inconsistent with OMB guidance for implementing FITARA which requires that CIOs have increased visibility into all IT resources.\nIn addition, the lack of a comprehensive inventory presents a security risk. If agencies are not aware of all of their assets, they cannot secure them, resulting in a vulnerable posture. Given the importance of securing federal systems and data to ensuring public confidence and the nation’s safety, prosperity, and well-being, we designated federal information security as a government-wide high-risk area in 1997. In 2003, we expanded this area to include computerized systems supporting the nation’s critical infrastructure. In our high risk update in February 2015, we further expanded this area to include protecting the privacy of personal information that is collected, maintained, and shared by both federal and nonfederal entities.",
"As previously noted, application rationalization is the process of streamlining the portfolio to improve efficiency, reduce complexity and redundancy, and lower the cost of ownership. It can be done in many ways, including retiring aging and low-value applications, modernizing aging and high-value applications, eliminating redundant applications, standardizing on common technology platform and version (as is the case for moving to shared services), or consolidating applications. Based on common practices identified in technical papers from industry experts, to effectively perform rationalization, an agency should first establish a complete inventory of applications. It should then collect and review cost, technical, and business value information for each application, and use that information to make rationalization decisions. These practices are consistent with those used to manage investment portfolios. Therefore an agency can achieve application rationalization through established practices related to investment management, including budget formulation, security, or enterprise architecture.\nEach of the six selected agencies relied on their investment management processes and, in some cases, supplemental processes to rationalize their applications to varying degrees. However, five of the six agencies acknowledged that their processes did not always allow for collecting or reviewing the information needed to effectively rationalize all their applications. The sixth agency, NSF, stated its processes allow it to effectively rationalize its applications, but we found supporting documentation to be incomplete. Only one agency, NASA, had plans to address shortcomings. The following describes the six selected agencies’ processes for rationalizing their applications, provides rationalization examples, identifies weaknesses and challenges, and addresses plans, if any, the agencies have for addressing them.\nDOD: The department uses its investment management process for defense business systems to annually review its applications. Officials noted that the department’s enterprise architecture is also used to identify duplication and overlap among these applications. In addition, the department has identified eight enterprise common services for collaboration, content discovery, and content delivery it is requiring its components to use to, among other things, improve warfighting efficiency and reduce costs.\nOne example of rationalization that DOD provided resulting from its efforts with Executive Business Information System that was replaced by the Navy Enterprise Resource Planning system in a full migration in 2014. Estimated cost savings or avoidances were estimated at $268,000 in fiscal year 2012 and almost $200,000 per year in fiscal years 2013 through 2015. In addition, in an effort to improve its financial management systems, the department has efforts underway to reduce the number of financial management systems from 327 to 120 by fiscal year 2019.\nHowever, officials acknowledged that its processes do not address all applications. Specifically, according to information provided by the department, about 1,200 enterprise IT and business systems which are associated with the Enterprise Information Environment Mission Area are not reviewed by the department—though they are reviewed by components—because they do not meet the definition of a defense business system.\nOfficials cited several challenges with implementing systematic rationalization efforts, including the department’s organizational structure and contractual agreements. As an example, they noted that the Navy’s Next Generation e-mail system is being procured through a contract with a particular vendor and as such would be difficult to consolidate with other department e-mail systems. They also noted that the cost of collecting additional cost, technical, and business value information, along with maintaining even more data at greater granularity, may outweigh the benefits.\nThe department does not have plans at this time to further enhance its processes to rationalize its applications. While we recognize the challenges and costs that may be associated with systematic rationalization efforts, the Enterprise Information Environment Mission Area could be considered as a near-term target for rationalization given the large number of enterprise IT and business systems associated with it. Modifying existing processes to allow for the collection, review, and evaluation of cost, technical, and business information of these systems at the department level could help identify opportunities for savings and efficiencies.\nDHS: DHS has several processes for rationalizing applications. For example, through its investment management process, portfolios are regularly assessed against criteria which help identify duplication. In addition, the department uses its DHS Collaborative Architecture Methodology in conjunction with its segment architectures to help identify duplication and fragmentation, at different levels, including at the application level. The DHS IT Duplication Reduction Act of 2015 mandated the department to report on a strategy for reducing duplicative IT systems and the department used the DHS Collaborative Architecture Methodology process to address this mandate, including about 700 commodity IT and back-office applications in the scope of the effort.\nFurther, the department recently established an Application Services Council, chaired by its Enterprise Business Management Office. According to its charter, the council is a cross-component and cross- disciplined leadership team responsible for developing, maintaining, and overseeing the Enterprise Information Technology Services Portfolio, Lifecycle Governance Model, and Roadmap. It is expected to take a strategic approach to evaluating existing and future IT service offerings—including software, platform, and infrastructure services—and provide a forum to identify strategies, best practices, processes, and approaches for enterprise IT services, cloud computing, and shared service challenges. For example, officials reported the council is currently developing a standard service level agreement template and guidance, as well as a cloud adoption strategy. The department also reported other mechanisms related to rationalization include its Joint Requirements Council, strategic sourcing initiatives, IT acquisition reviews, and executive-level portfolio reviews.\nIn addition, it reported that it uses its DHS Enterprise Architecture Information Repository Technical Reference Model to track application products and software versions—mainly consisting of commercial off-the-shelf software. The product information is gathered through the use of continuous network discovery scans.\nExamples of rationalization include the consolidation of learning management systems and the consolidation of site services, including help desk operations. The consolidation of learning management systems was identified through the segment architecture process and is expected to result in projected savings of 10 to 20 percent in fiscal year 2016 after transition costs are addressed. The modernization of the department’s help desk and on-site operations resulted in savings that cumulatively accrued to $202 million by fiscal year 2015 due to similar efforts among all department components.\nHowever, DHS’s processes do not address all applications because, while the components may carry out their own rationalization efforts, the department does not always collect the application-level cost, technical, or business information for applications used by its components. Specifically, officials reported challenges tracking product level information for deployed applications and difficulty gaining visibility into all the supporting application products for large systems. Officials particularly noted they have been challenged to collect such information and cited a general lack of visibility into the components’ budget and their spending. They also noted it was not clear whether there was a good return on investment for the resources needed to collect additional technical, cost, and business value data for systematic application rationalization efforts. Officials reported the department had a financial systems modernization effort underway which would provide greater visibility into components’ spending but they did not have a plan to address the collection and review of technical and business value information.\nWhile we recognize that collecting additional details on all applications may not be cost-beneficial, the department could consider taking a segmented approach and initially identify one high-cost function it is currently not collecting or reviewing detailed cost, technical, and business information for across the department. It could then modify existing processes to collect and review this information. These actions would assist the CIO in gaining visibility into all IT resources as specified in the OMB implementation guidance for FITARA and also help identify additional opportunities for savings and efficiencies.\nNASA: NASA uses its current investment management process—the Capital Planning and Investment Control process—and its configuration management tools—to review its applications.\nNASA reported examples of rationalization resulting in significant savings according to NASA officials. These included the NASA.gov Portal Cloud Transition which resulted in estimated savings of $4 million and the Enterprise Business Portal Transition/Consolidation which resulted in estimated savings of about $184,000 per year.\nHowever, NASA officials acknowledged that their current processes do not provide the level of detail needed to effectively rationalize the agency’s applications.\nIn terms of challenges to rationalizing applications, officials stated that it is difficult to obtain transparency on all applications since each of the agency’s centers runs independently. In addition, officials stated that determining application business value is currently subjective to users because the agency’s process for obtaining this information is to ask the application owner the impact on the agency if the application did not exist, whereas application technical health information is more concrete. Furthermore, NASA officials stated that there is no systematic process to review applications facing end-of-life issues due to flat budgets and budget cuts.\nNASA has developed a plan for a supplemental process (the annual capital investment review process) that is to allow the agency to, among other things, collect detailed data about its applications. The agency has begun to implement the plan and has completed the first milestone of the process, which included conducting a data call to gather and validate application information provided by the various centers and agency stakeholders. At the time of our review, NASA had also performed an initial review and analysis of the information collected and identified optimization opportunities, including developing a plan to consolidate, decommission, or invest to achieve maximum cost efficiencies and process effectiveness across the application program. Fully implementing the annual capital investment review process could better position the agency to identify additional opportunities for savings and efficiencies.\nInterior: As part of its budget formulation process, Interior performs rationalization through annual reviews of its portfolio of investments (and supporting applications) against criteria which measure business value and technical fit.\nReported examples of application rationalization include Interior’s cloud e-mail and collaboration services initiative, which consolidated 14 disparate systems into a single enterprise system and achieved a cost savings/avoidance of $13.56 million, and the consolidation of the Enterprise eArchive System with the eMail Electronic Records and Document Management System which resulted in cost savings/avoidance of $6.1 million.\nHowever, the department reported that its portfolio review process is not standardized because it has not been fully defined or established in policy. In addition, it has only been used at the department level, not at the bureaus or offices, and there is a lack of confidence in the data that is collected to support the analyses. In comments on a draft of this report, the department noted that it has also yet to document a plan to implement policy associated with these efforts which they believe would establish a standard analytical technique for rationalizing the investment portfolio. Such a plan would also help secure the commitment needed to carry out planned efforts.\nThe department reported several challenges to rationalizing its applications, including (1) ensuring the quality and accuracy of data collected since it relies largely on manual processes for collecting information and (2) the lack of standard portfolio evaluation techniques to support information resource management decision- making across the department.\nThe department has efforts underway which should help address these challenges. Specifically, it is making changes to its information resource management governance. According to the department, these changes, combined with efforts to implement the CIO responsibilities specified in FITARA, should help to address the challenges to rationalizing its applications and allow for rationalization of all applications. However, while the department has defined and begun to implement criteria to assess whether or not an investment and its underlying applications are wasteful, low-value, or duplicative, it has not documented its plan for improving its governance—which, according the department, would support application rationalization. Such a plan would help secure the commitment needed to carry out planned efforts.\nLabor: Similar to the other agencies, the department uses its investment management process to review the majority of its business and enterprise IT applications. In addition, officials stated that the department initiated an enterprise-wide budget formulation and Information Technology Acquisition Review Board approval function beginning in fiscal year 2013 which has helped with rationalization.\nOfficials stated that their efforts have resulted in rationalization of commodity applications and on a case-by-case basis the rationalization of other applications, such as for a case management platform and an acquisition management system. Additional examples of application rationalization include the deployment of a web-based conferencing and collaboration shared service to employees which resulted in cost avoidance of travel costs of about $2.3 million. The department also noted benefits of moving to a cloud e-mail solution, such as saved time and increased user satisfaction.\nHowever, officials identified weaknesses and challenges with rationalizing their applications. Specifically, they reported that, in most cases, IT investments are associated with a group of IT assets, including applications, and individual application information is therefore not reviewed, making it difficult to effectively rationalize. In addition, officials stated that the fact that each bureau-level agency has had authority and responsibility for managing its own applications and that the department has over 600 locations present challenges. Further, though senior officials including the CIO, agreed with the benefits of rationalization, they did not have any plans to rationalize. They questioned the value of developing such plans stating that (1) maintaining mission critical applications and the department’s aging infrastructure are current priorities and (2) funding may not be available to implement rationalization plans. While we agree that mission critical applications should be given priority, rationalizing mission support applications, including enterprise IT and business systems, could result in solutions which allow agencies to focus more on mission capabilities and at the same time generate savings which could be reinvested. As we noted for DHS, the department could consider taking a segmented approach to further rationalize and identify a function for which it could modify existing processes to collect and review detailed application cost, technical, and business value information.\nNSF: NSF also uses its investment management processes and supporting budget formulation process—with key stakeholders such as the Executive IT Resources Board, Capital Planning and Investment Control Working Group, and Enterprise Architecture Working Group—to collect and review information for its investments. In addition, NSF’s Enterprise Modernization Roadmap—which is updated annually—identifies applications along with their associated business segment and modernization status and plans.\nNSF identified its e-mail migration to a new platform, which was completed in July 2013, as an example of an application rationalization effort with the highest savings. According to the agency’s November 2015 integrated data collection submission to OMB, the migration effort resulted in cost avoidances of $60,000 in 2014. Other examples of application rationalization include modernization and consolidation of NSF’s grant systems, the 2014 retirement of the financial functions of a legacy system, and the implementation of its financial system modernization initiative.\nHowever, while officials told us that evaluations for all applications meeting the scope of our review would be included in the roadmap, we only identified half of the applications (9 out of 18). In addition, cost information was only provided in the roadmap for three individual applications.\nNSF officials told us that because they are a relatively small agency with a single mission in a single location, many of their processes are handled informally and not thoroughly documented but they are able to discuss all the applications with each other on a regular basis and as a result there is no duplication. Nevertheless, consistently documenting the evaluations and costs for all applications in the roadmap would improve transparency.",
"While it is encouraging that 13 of the 24 CFO Act agencies fully met at least three of the four practices for establishing a complete software application inventory, most could improve their software applications inventories—albeit to varying degrees—by taking steps to fully meet the practices we identified as being either partially met or not met. Doing so would better position them to identify opportunities to rationalize their applications, which could lead to savings and efficiencies. In addition, they would be better positioned to comply with OMB issued implementation guidance for the recent IT acquisition reform law which requires that CIOs have increased visibility into all IT resources and ensure they are effectively securing their IT assets.\nSix selected agencies used their investment management processes and sometimes supplemental processes to rationalize their applications. Of the six agencies, one—NSF—had processes that allowed it to rationalize all applications, though the supporting documentation was not always complete. In addition, while the remaining five agencies’ processes did not allow for rationalizing all applications, only one—NASA—had plans to address identified weaknesses. While these agencies all had examples of rationalization resulting in savings and efficiencies, modifying their existing processes to more completely address their applications would help identify additional opportunities to achieve such savings and efficiencies, which even small, would add up across agencies and over time.",
"To improve federal agencies’ efforts to rationalize their portfolio of applications, we are recommending that: the heads of the Departments of Agriculture, Commerce, Education, Energy, Health and Human Services, Housing and Urban Development, the Interior, Labor, State, Transportation, the Treasury, and Veterans Affairs; and heads of the Environmental Protection Agency; National Aeronautics and Space Administration; National Science Foundation; Nuclear Regulatory Commission; Office of Personnel Management; Small Business Administration; Social Security Administration; and U.S. Agency for International Development direct their CIOs and other responsible officials to improve their inventories by taking steps to fully address the practices we identified as being partially met or not met; and the Secretaries of Defense, Homeland Security, the Interior, and Labor; and the Director of the National Science Foundation to direct the CIOs and other responsible officials to modify existing investment management processes to address applications more completely. Specifically, the Secretary of Defense should direct the responsible official to modify the department’s existing processes to collect and review cost, technical, and business information for the enterprise and business IT systems within the Enterprise Information Environment Mission Area applications which are currently not reviewed as part of the department’s process for business systems; the Secretary of Homeland Security should direct the department’s CIO to identify one high-cost function it could collect detailed cost, technical, and business information for and modify existing processes to collect and review this information; the Secretary of the Interior should direct the department’s CIO to document and implement a plan for establishing policy that would define a standard analytical technique for rationalizing the investment portfolio; the Secretary of Labor should direct the department’s CIO to consider a segmented approach to further rationalize and identify a function for which it would modify existing processes to collect and review application-specific cost, technical, and business value information; and the Director of the National Science Foundation should direct the CIO to consistently document evaluations for all applications and report cost information for them in the roadmap or other documentation.",
"We provided a draft of this report to the 24 CFO Act agencies in our review for comment and received responses from all 24. Of the 24, 17 agreed with the recommendations directed to them; one (the Department of Defense) disagreed with the recommendations directed to it; five (the Department of the Treasury, the National Science Foundation, the Nuclear Regulatory Commission, the Small Business Administration, and the and U.S. Agency for International Development) stated that they had no comments; and one (the Department of Justice) agreed with the assessment and conclusion for three of the four practices associated with establishing a complete software application inventory and provided clarifying information on the two other practices. Several agencies also provided technical comments, which we incorporated as appropriate. The agencies’ comments and our responses are summarized below.\nIn e-mail comments, the Department of Agriculture’s Senior Advisor for Oversight and Compliance Enterprise Management stated that the department concurred with our recommendation. The department also provided technical comments which we incorporated as appropriate. As a result of these comments and additional documentation provided, we changed our evaluation of the practice associated with updating the software application inventory from not met to partially met.\nIn written comments, the Department of Commerce concurred with our recommendation and stated that the department is committed to implementing a more efficient process by regularly updating its application inventory to ensure the reliability of the data collected. The department also specified actions it plans to take to provide regular updates of its inventory. The department’s comments are reprinted in appendix III.\nIn written comments, the Department of Defense disagreed with both of our recommendations to the department. For the first recommendation, the department provided evidence showing that it updated its inventory subsequent to us sending the report for comment. As a result, we changed the rating for the related practice from partially met to fully met and removed the associated recommendation.\nFor the second recommendation, the department stated that 53 percent of the inventory records for the Enterprise Information Environment Mission Area we focused on were IT infrastructure assets (specifically network enclaves or circuits) and not applications subject to rationalization. The mission area nevertheless includes enterprise and business IT applications which could benefit from rationalization, as evidenced by the example of e-mail system consolidation provided in the comments. Given the number of systems involved (at least 1,200), collecting and reviewing cost, technical, and business information for them would help identify additional rationalization opportunities which could yield savings and efficiencies. We therefore believe a recommendation to address these systems is still warranted.\nThe department also stated that our draft implied that major IT infrastructure modernization efforts, many of which involve the Enterprise Information Environment Mission Area, were not reviewed or properly managed by the department. However, as noted in our report, we did not include IT infrastructure assets in the scope of our review and therefore made no comment on how these assets are being managed. We have restated our emphasis on enterprise and business IT systems as it relates to the mission area where appropriate.\nFinally, in its comments the department stated that our report ignored significant Enterprise Information Environment Mission Area application rationalization efforts, such as the Pentagon IT consolidation under the Joint Service Provider, the Business Process and System Review, and ongoing efforts concerning public-facing websites and associated systems. While we were not informed of these efforts during our review, our intent was to highlight additional opportunities for rationalization, not discount any that might have already been implemented. The department also provided technical comments, which we incorporated into the report as appropriate. The department’s comments are reprinted in appendix IV.\nIn written comments, the Department of Education concurred with our recommendation and described actions it plans to take to address it. The department’s comments are reprinted in appendix V.\nIn written comments, the Department of Energy concurred with our recommendation. In addition, the department stated that it partially met the four practices associated with establishing a complete software application inventory and provided the IT Asset Inventory it submitted to OMB in May 2016 and other documentation supporting this claim. Our review of the documentation found that the inventory includes business and enterprise IT systems; however, it does not include those systems from all organizational components and it is missing the business function code for a large number of systems. Furthermore, while the department is updating the IT Asset inventory in response to OMB guidance for the fiscal year 2016 integrated data collection submission process, it has not implemented quality control processes to ensure the reliability of the data within the inventory. As a result, we changed the department’s rating for the practice associated with including business and enterprise IT systems from not met to fully met and from not met to partially met for the remaining three practices. We modified sections of the report specific to the department accordingly. The department’s comments are reprinted in appendix VI.\nIn written comments, the Department of Health and Human Services concurred with our recommendation and stated that that it would review the feasibility of fully addressing the practices it partially met. The department’s comments are reprinted in appendix VII.\nIn written comments, the Department of Homeland Security concurred with our recommendation and described actions it plans to take to implement it. The department’s comments are reprinted in appendix VIII.\nIn written comments, the Department of Housing and Urban Development concurred with our recommendation and stated that more definitive information with timelines will be provided once the final report has been issued. The department’s comments are reprinted in appendix IX.\nIn written comments, the Department of the Interior stated that it would agree with the recommendations if we made its requested changes. However, we disagreed with the request to change the rating for the practice associated with regularly updating the inventory from not met to partially met because, while the department provided evidence supporting its claim that it recently updated its inventory, the evidence was not sufficient. Specifically, the department provided an e-mail requesting the bureaus and offices to complete an inventory survey. However, the department did not show how the survey resulted in updates to the inventory. We incorporated the remaining requested changes in the report as appropriate. The department’s comments are reprinted in appendix X.\nIn written comments, the Department of Justice stated that it concurred with our assessment and conclusions. The department also provided clarifying information regarding its procedures to ensure application inventory accuracy and provided documentation showing that it updates the inventory and implements quality controls to ensure its reliability. As a result, we changed the rating for the related practice from partially met to fully met and removed the recommendation made to the department. The department’s comments are reprinted in appendix XI.\nIn written comments, the Department of Labor concurred with our recommendations to the department and stated that it would take the necessary steps to address the recommendations. The department’s comments are reprinted in appendix XII.\nIn written comments, the Department of State concurred with our recommendation to the department, and described current and planned actions to fully address it. The department’s comments are reprinted in appendix XIII.\nIn e-mail comments, the Department of Transportation’s Audit Liaison stated that the department concurred with our findings and recommendation.\nIn e-mail comments, the Department of the Treasury’s Audit Liaison stated that the department did not have any comments.\nIn written comments, the Department of Veterans Affairs concurred with our conclusions and recommendation. The department also provided information on the actions it plans to take to address the recommendation. The department’s comments are reprinted in appendix XIV.\nIn written comments, the Environmental Protection Agency generally agreed with our recommendation. The agency also asked that we include some of the language from the detailed evaluation in appendix II of the report to the example we have in the body to provide the full context of its practices. We added the language as requested. The agency’s comments are reprinted in appendix XV.\nIn e-mail comments, the General Services Administration’s Associate CIO of Enterprise Planning and Governance concurred with the report. The agency also provided evidence of its processes to update the inventory and ensure the reliability of the data in the inventory, including the coordination between its Enterprise Architecture Team and subject matter experts. As a result, we changed the agency’s rating for the related practice from partially met to fully met and removed our recommendation to the agency.\nIn written comments, the National Aeronautics and Space Administration concurred with our recommendation and stated that it would utilize the capital investment review process it is currently implementing to improve its inventory. The agency’s comments are reprinted in appendix XVI.\nIn e-mail comments, the National Science Foundation Office of Integrated Activities’ Program Analyst stated that it had no comments on the draft report.\nIn written comments, the Nuclear Regulatory Commission stated that it is in general agreement with the report. The agency’s comments are reprinted in appendix XVII.\nIn written comments, the Office of Personnel Management concurred with our recommendation and described plans to fully address it. The agency’s comments are reprinted in appendix XVIII.\nIn e-mail comments, the Small Business Administration Office of Congressional and Legislative Affairs’ Program Manager stated that the Office of the Chief Information Officer believes the report captures its current posture.\nIn written comments, the Social Security Administration agreed with our recommendation to the agency, but disagreed with the partially met rating for regularly updating the inventory, including implementing quality controls, stating that it had provided evidence supporting its implementation of the practice. However, as noted in the report, the Social Security Administration reported that its systems development lifecycle contains steps for maintaining the inventory but did not provide evidence showing that it is using this process to regularly update the inventory. Therefore we did not change our rating. The agency’s comments are reprinted in appendix XIX.\nIn an e-mail, the U.S. Agency for International Development Audit, Performance and Compliance Division’s Management Analyst stated that the agency did not have any comments.\nWe are sending copies of this report to interested congressional committees; the heads of the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, the Interior, Justice, Labor, State, Transportation, the Treasury, and Veterans Affairs; the Environmental Protection Agency; the General Services Administration; the National Aeronautics and Space Administration; the National Science Foundation; the Nuclear Regulatory Commission; the Office of Personnel Management; the Small Business Administration; the Social Security Administration; the U.S. Agency for International Development; the Director of the Office of Management and Budget; and other interested parties. This report will also be available at no charge on our website at http://www.gao.gov.\nIf you or your staff have any questions on matters discussed in this report, please contact me at (202) 512-9286 or pownerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.",
"Our objectives were to determine (1) whether agencies have established complete application inventories and (2) to what extent selected agencies have developed and implemented processes for rationalizing their portfolio of applications.\nFor the first objective, we reviewed the 24 major agencies covered by the Chief Financial Officers (CFO) Act of 1990. To ensure consistency, we decided to focus on the software applications associated with the business and enterprise information technology (IT) commodity IT categories defined in the Office of Management and Budget (OMB) guidance since they would be familiar to the agencies in our scope. OMB defines enterprise IT systems as e-mail, identity and access management, IT security, web infrastructure, and collaboration tools; and business systems as finance, human resources, and other administrative functions.\nWe then identified practices to assess whether agencies had a complete software application inventory. To identify these practices, we primarily relied on our guide for assessing the reliability of computer-processed data which addresses questions about the currency of the data and how often it is updated, procedures for ensuring the completeness of the data, and quality control processes in place to ensure the accuracy of the data; and on criteria used in our recent report on federal software licenses which determined whether agencies had a comprehensive software license inventory, among other things. To be considered complete, we determined an inventory should: include business systems and enterprise IT systems, as defined by OMB; include these systems from all organizational components; specify basic attributes, namely, application name, description, owner, and function supported; and be regularly updated with quality controls in place to ensure the reliability of the information collected.\nFollowing the identification of these four practices, we asked the 24 CFO Act agencies for their software application inventories. We used a set of structured questions to determine whether the agencies implemented the practices and identify lessons learned and challenges faced in establishing a complete software application inventory. We analyzed supporting documentation, such as agency and departmental guidance, policies, and procedures for updating the inventories, and interviewed relevant agency officials, as needed. We compared the information received to the four practices. We determined a practice to be fully met if agencies provided evidence that they fully or largely implemented the practice for establishing a complete application inventory; partially met if agencies provided evidence that they addressed some, but not all, of the practice for establishing a complete application inventory; and not met if the agencies did not provide any evidence that they implemented the practice for establishing a complete application inventory.\nTo verify the inclusion of business and enterprise IT systems, we analyzed agencies’ inventories and looked for examples of each type of system identified by OMB in the business and enterprise IT commodity categories. We followed up with agencies when we were not able to identify a type of system to determine the reason for the omission. We considered the practice to be fully met if agencies’ inventories included all of the business and enterprise IT system types or if agencies provided valid reasons for excluding them. We considered the practice to be partially met if agencies acknowledged they were missing applications or if we determined system types to be missing and agencies did not provide a valid reason for this. Although we followed up with agencies to determine whether they maintained separate inventories of software licenses when they were not included in the inventories provided, we did not consider the inclusion of these applications in determining our rating because software licenses are expected to be tracked separately by OMB.\nTo verify the inclusion of systems from all organizational components, we analyzed agencies’ inventories against the list of organizational components to determine whether they were included. We followed up with agency officials to determine causes, if any, for missing components. We considered the practice to be fully met if inventories included applications from all organizational components or if agencies provided valid reasons for excluding them. We considered the practice to be partially met if agencies acknowledged they were missing organizational components or if we determined several components to be missing and agencies did not provide a valid reason for this.\nRegarding application attributes, we determined that, at a minimum, agencies should have a name, a description, an owner, and function supported for each application. We considered the practice to be fully met if inventories included these attributes for all or most applications or the agencies provided evidence that attributes not included in the inventory provided were being tracked separately. We determined the practice to be partially met if agencies acknowledged that they were missing any of the attributes or if we determined them to be missing from the inventory and agencies did not provide alternate sources for them.\nFor the last practice, we determined whether agencies (1) used relevant methods to update and maintain the application inventory and (2) implemented controls to ensure the reliability of the information collected. Regarding these controls, we looked for the use of automated tools to collect and track information as their use increases reliability. We determined the practice to be fully met if agencies provided evidence that they regularly updated the inventory and had controls for ensuring the reliability of information collected, including the use of automated tools, or if agencies had mitigating factors when these processes were not in place. We determined the practice to be partially implemented when agencies provided policies and procedures but no evidence of actual inventory updates or quality controls. We also determined the practice to be partially implemented if agencies provided evidence of either regular updates or controls for ensuring reliability but not both or did not make use of automated tools for collecting or maintaining information and had no mitigation factors. Finally, we also determined the practice to be partially implemented if agencies provided draft policy and guidance of their processes.\nFor our second objective, we selected 6 of the 24 CFO Act agencies—the Departments of Defense, Homeland Security, the Interior, and Labor; and the National Aeronautics and Space Administration and National Science Foundation—to assess their application rationalization plans and efforts to implement them. We selected the agencies based on three factors: whether they had an application rationalization process; in our initial set of structured questions to agencies, we asked whether they had a plan or process for rationalizing applications and selected those that reported having one; the size of the agency based on fiscal year 2015 IT spending; we selected two large agencies (i.e., with spending equal to or greater than $3 billion), two medium agencies (i.e., with spending between $1 billion and $3 billion), and two small agencies (i.e., with spending of less than $1 billion) for a full range of IT spending; and if they were known for effectively rationalizing their applications based on OMB observations and our research on IT acquisition reform recognizing agencies for their application rationalization efforts.\nWe identified key practices for effectively rationalizing applications. To do so, we reviewed OMB guidance on federal IT management. We also reviewed technical reports on application rationalization from industry experts. We synthesized the information collected, looked for themes, and determined that, to effectively rationalize applications, agencies should have a process addressing the following four key practices: establish an application inventory; collect information on each application, such as total cost, technical details, and business value; evaluate the portfolio and make application rationalization decisions based on a review of collected information and determine what applications to retain, retire, replace, eliminate, modernize, or consolidate/move to shared services; and execute and manage the process by implementing decisions from the evaluation and evaluate process outcomes against defined metrics and adjust, as needed.\nWhile our research identified specific processes for rationalizing applications, the principles of collecting application information and reviewing it to inform decision making are consistent with those used to manage investment portfolios. Therefore we considered established practices related to investment management, budget formulation, security, or enterprise architecture.\nSince the first key practice was addressed in our first objective, we focused on the last three practices. To do so, we interviewed relevant officials using a structured set of questions that were developed in conjunction with internal experts. We also reviewed documentation to determine the extent to which agencies had processes addressing these practices. We also asked agencies to provide their two best examples of application rationalization in terms of savings or cost avoidance—to illustrate the results of rationalization. When agencies did not provide two examples meeting these conditions—the case for DOD, DHS, and NSF— we drew examples from other documentation they had provided.\nFinally, we interviewed staff from OMB’s Office of the Federal Chief Information Officer to determine whether and how the office monitors agencies’ efforts to rationalize their portfolio of applications as recommended in OMB guidance. We also interviewed the staff to determine the impetus for the IT asset data inventory guidance and the planned used for the information collected.\nWe conducted this performance audit from May 2015 to September 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"The following tables provide our evaluation of the 24 agencies’ application inventories.",
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"In addition to the individual named above, the following staff made key contributions to this report: Sabine Paul (Assistant Director), Chris Businsky, Rebecca Eyler, Dan Gordon, James MacAulay, Lori Martinez, Paul Middleton, and Di’Mond Spencer."
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"question": [
"How many practices were met by most of the 24 CFO Act of 1990 agencies?",
"What was included in the criteria to be considered as complete?",
"What were the specific statuses of the 24 agencies in terms of meeting practices?",
"What did the OMB requirement contribute towards?",
"What is the reasoning behind the agencies who did not address their practices fully?",
"What may be a consequence of not accounting for all applications?",
"How are these applications inconsistent with OMB guidance?",
"Why is it dangerous to not account for all applications?",
"What does each of the six agencies rely on?",
"What did five of the six agencies acknowledge regarding collecting information?",
"What does the sixth agency focus on in terms of their processes?",
"What is unique about NASA?",
"Why would taking action to address weaknesses be beneficial?",
"How much is the federal government expected to spend on IT?",
"What is included in this budget?",
"What does the OMB advocate for?",
"What does it mean to rationalize application?",
"Why is GAO recommending 20 agencies to improve their inventories?",
"How did the Department of Defense respond to these recommendations?",
"How has this changed GAO's initial recommendation?",
"How have other agencies responded?"
],
"summary": [
"Most of the 24 Chief Financial Officers (CFO) Act of 1990 agencies in the review fully met at least three of the four practices GAO identified to determine if agencies had complete software application inventories.",
"To be considered complete, an inventory should (1) include business and enterprise information technology (IT) systems as defined by the Office of Management and Budget (OMB); (2) include these systems from all organizational components; (3) specify application name, description, owner, and function supported; and (4) be regularly updated.",
"Of the 24 agencies, 4 (the Departments of Defense, Homeland Security, and Justice, and the General Services Administration) fully met all four practices, 9 fully met three practices, 6 fully met two practices, 2 fully met one practice, and 3 did not fully meet any practice (see figure).",
"A January 2016 OMB requirement to complete an IT asset inventory by the end of May 2016 contributed to most of the agencies fully meeting the first three practices.",
"Agencies that did not fully address these practices stated, among other things, their focus on major and high risk investments as a reason for not having complete inventories.",
"However, not accounting for all applications may result in missed opportunities to identify savings and efficiencies.",
"It is also inconsistent with OMB guidance regarding implementation of IT acquisition reform law, referred to as the Federal Information Technology Acquisition Reform Act, which requires that Chief Information Officers at covered agencies have increased visibility into all IT resources.",
"Not accounting for all applications also presents a security risk since agencies can only secure assets if they are aware of them.",
"Each of the six selected agencies relied on their investment management processes and, in some cases, supplemental processes to rationalize their applications to varying degrees.",
"However, five of the six agencies acknowledged that their processes did not always allow for collecting or reviewing the information needed to effectively rationalize all their applications.",
"The sixth agency, the National Science Foundation (NSF), stated its processes allow it to effectively rationalize its applications, but agency documentation supporting this assertion was incomplete.",
"Only one agency—the National Aeronautics and Space Administration (NASA)—had plans to address shortcomings.",
"Taking action to address identified weaknesses with agencies' existing processes for rationalizing applications would assist with identifying additional opportunities to reduce duplication and achieve savings.",
"The federal government is expected to spend more than $90 billion on IT in fiscal year 2017.",
"This includes a variety of software applications supporting agencies' enterprise needs.",
"Since 2013, OMB has advocated the use of application rationalization.",
"This is a process by which an agency streamlines its portfolio of software applications with the goal of improving efficiency, reducing complexity and redundancy, and lowering the cost of ownership.",
"GAO is recommending that 20 agencies improve their inventories and five of the selected agencies take actions to improve their processes to rationalize their applications more completely.",
"The Department of Defense disagreed with both recommendations made to it.",
"After reviewing additional evidence, GAO removed the recommendation associated with improving the inventory but maintained the other.",
"The other agencies agreed to or had no comments on the draft report."
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CRS_R43447
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{
"title": [
"",
"Basic Legal Principles",
"Equal Protection",
"Preemption",
"State Restrictions on Access",
"Public Higher Education",
"In-State Tuition",
"Financial Aid",
"State Measures Granting Access",
"Public Higher Education",
"In-State Tuition",
"Financial Aid",
"Conclusion"
],
"paragraphs": [
"T he existence of a sizable population of \"DREAMers\" in the United States has prompted questions about unauthorized aliens' eligibility for admission to public institutions of higher education, in-state tuition, and financial aid. The term DREAMer is widely used to describe aliens who were brought to the United States as children and raised here but lack legal immigration status. As children, DREAMers are entitled to public elementary and secondary education as a result of the Supreme Court's 1982 decision in Plyler v. Doe . There, the Court struck down a Texas statute that prohibited the use of state funds to provide elementary and secondary education to children who were not \"legally admitted\" to the United States because the state distinguished between these children and other children without a \"substantial\" goal, in violation of the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution. The Plyler Court did not, however, purport to address unauthorized aliens' access to higher education, and several states subsequently adopted laws or practices barring their enrollment at public institutions of higher education. Congress has also restricted unauthorized aliens' eligibility for \"public benefits,\" a term which has generally been construed to include in-state tuition and financial aid.\nEmphasizing DREAMers' ties to the United States, including their attendance at public elementary and secondary schools, some would permit them to remain in the United States legally, or expand their access to higher education. For example, in every Congress from the 109 th to 113 th , Members have introduced, either as separate bills or parts of other measures, versions of the Development, Relief, and Education for Alien Minors (DREAM) Act—from which DREAMers take their name—that would create a pathway to citizenship for them, as well as remove certain restrictions on states' ability to grant in-state tuition to unauthorized aliens. No such legislation has been enacted by Congress to date. However, several states have passed their own DREAM Acts, which permit some DREAMers to receive in-state tuition or, less commonly, state financial aid (but cannot provide a pathway to citizenship because Congress has exclusive power over naturalization). The Obama Administration also began granting deferred action—a type of relief from removal—to qualifying DREAMers in 2012. Because aliens granted deferred action are generally viewed as \"lawfully present\" for purposes of federal immigration law, they could potentially be deemed eligible for certain educational benefits that are denied to aliens who are \"unlawfully present.\" However, not all aliens commonly known as DREAMers have been granted deferred action, and even those who have been granted deferred action are considered to be lawfully present only while they are in deferred action or other similar status.\nOthers, however, emphasize DREAMers' presence in the United States in violation of federal immigration law, and seek to ensure that public benefits are made available only to U.S. citizens, lawful permanent residents (LPRs), and nonimmigrants with legal status. Several states have, for example, adopted measures barring unauthorized aliens from attending public institutions of higher education. Certain states have also reiterated, or sought to expand upon, existing federal restrictions upon unauthorized aliens' receipt of public benefits in order to ensure that they do not receive in-state tuition or state financial aid.\nThis report surveys key legal issues pertaining to unauthorized alien students' access to higher education, in-state tuition, and financial aid.",
"State measures that would deny or provide access to public institutions of higher education, in-state tuition, and financial aid to unauthorized aliens have been challenged on various grounds. While these grounds can vary depending upon the specific statute or practice in question, the grounds most commonly asserted appear to be violations of the Equal Protection and Supremacy Clauses of the U.S. Constitution. Thus, these provisions are the focus of discussion in this report, and the following paragraphs provide an overview of the basic principles implicated in discussions of equal protection and preemption.",
"The Equal Protection Clause of the Fourteenth Amendment bars states from \"deny[ing] to any person within [their] jurisdiction the equal protection of the laws.\" Aliens have been found to be encompassed by the Fourteenth Amendment's usage of \"person.\" As a result, measures that would treat aliens differently than citizens may be subject to challenge on equal protection grounds. The level of scrutiny applied by the courts in reviewing such measures frequently determines whether the measure is upheld or struck down. With \"rational basis review,\" the challenged measure will generally be upheld if it is a rational means of promoting a legitimate government objective. The measure is \"presumed constitutional,\" and those challenging the law have the burden of negating all possible rational justifications for the classification. In contrast, with \"strict scrutiny,\" the challenged measure will be upheld only if the government can demonstrate that the measure is necessary to achieve a compelling interest and is narrowly tailored for that purpose. Courts have also applied other tests, falling between rational basis review and strict scrutiny, in some cases due to the persons or rights affected by the measure.\nThe level of scrutiny applied to measures that classify on the basis of alienage depends, in part, on whether the measure is federal, or state or local. Because Congress's plenary power over immigration permits it to enact measures as to aliens that would be unconstitutional if applied to citizens, federal classifications based on alienage are subject to rational basis review, and have generally been upheld. For example, in its 1976 decision in Mathews v. Diaz , the Supreme Court upheld a federal law that barred LPRs who had not resided in the United States for five years from enrolling in Medicare Part B, because it viewed the measure as a valid exercise of the federal government's authority to regulate the entry and residence of aliens, not as \"irrational.\" State and local measures, in contrast, have generally been subject to strict scrutiny, unless (1) the restrictions involve \"political and governmental functions,\" or (2) Congress has \"by uniform rule prescribed what it believes to be appropriate standards for the treatment of an alien subclass.\" However, it is important to note that the Supreme Court decisions applying strict scrutiny to state or local measures that treated aliens differently than citizens all involved lawful permanent resident aliens (LPRs), and the Court in Plyler expressly declined to apply strict scrutiny to the Texas statute because \"undocumented status is not irrelevant to any proper legislative goal.\" Instead, the Plyler Court applied a level of scrutiny that has since come to be characterized as \"intermediate scrutiny,\" requiring the state to show that the challenged measure furthered a \"substantial\" goal. Some have suggested, however, that the heightened level of scrutiny given to the Texas measure in Plyler reflects the facts and circumstances of the case—which involved a law that a majority of the Court viewed as depriving \"minor children\" of a \"basic education\"—and is not generally applicable to classifications involving unauthorized aliens.\nNeither education, nor receipt of public benefits, has been recognized as a fundamental right for purposes of equal protection, such that its denial would result in the application of strict scrutiny. The Plyler Court subjected the denial of access to public elementary and secondary education to intermediate scrutiny. However, as previously noted, this degree of scrutiny may reflect the facts and circumstances of the case. Similarly, receipt of public benefits has generally been seen to fall within the \"area of economics and social welfare,\" and classifications affecting such interests, standing alone (i.e., not involving a suspect classification of persons), are generally subject to rational basis review.",
"The doctrine of preemption, in turn, derives from the Supremacy Clause of the U.S. Constitution, which establishes that federal law, treaties, and the Constitution itself are \"the supreme Law of the Land, ... any Thing in the Constitution or Laws of any state to the Contrary notwithstanding.\" Thus, one essential aspect of the federal structure of government is that states can be precluded from taking actions that would otherwise be within their authority if federal law would be thwarted thereby.\nBecause the Constitution entrusts Congress with the power to regulate immigration, state or local measures that purport to regulate immigration—by determining which aliens may enter or remain in the United States, or the terms of their continued presence—are, per se, preempted, regardless of whether Congress has legislated on the matter. Other measures, which affect aliens, but do not constitute regulation of immigration, could also be found to be preempted, depending upon the scope of any congressional enactments. Specifically, federal statutes may preempt state and local measures in one of three ways:\n1. the statute expressly indicates its preemptive intent ( express preemption ); 2. a court concludes that Congress intended to occupy the regulatory field, thereby implicitly precluding state or local action in that area ( field preemption ); or 3. state or local action directly conflicts with or otherwise frustrates the purpose of the federal scheme ( conflict preemption ).\nState actions in fields that have traditionally been subject to state regulation are sometimes said to be accorded a presumption against preemption whenever Congress legislates in the field. Education has historically been seen as a local, not a federal, matter. However, a presumption against preemption does not appear to have been applied, to date, in any case involving unauthorized aliens' access to higher education, in-state tuition, or financial aid. To the contrary, at least one court has questioned whether a presumption against preemption continues to apply in the immigration context.\nTwo federal statutes are generally noted in discussions of whether state measures regarding unauthorized aliens' access to public higher education, in-state tuition, and state financial aid are preempted. The first of these, the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), enacted in August 1996, defines state public benefit to mean\n(A) any grant, contract, loan, professional license, or commercial license provided by an agency of a State ... or by appropriated funds of a State ...; and (B) any retirement, welfare, health, disability, public or assisted housing, postsecondary education, food assistance, unemployment benefit, or any other similar benefit for which payments or assistance are provided to an individual, household, or family eligibility unit by an agency of a State ... or by appropriated funds of a State,\nand generally bars states from providing such benefits to aliens who are \"not lawfully present in the United States\" unless they enact legislation that \"affirmatively provides\" for such aliens' eligibility. PRWORA also generally bars U.S. government agencies from providing federal public benefits —which are defined in the same way as state public benefits —to unauthorized and other aliens who are not \"qualified aliens\" for purposes of PRWORA. The second statute, the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) of 1996, enacted a little over a month after PRWORA, bars states from providing \"postsecondary education benefits\" to aliens who are not \"lawfully present\" based on their residence in the state unless other U.S. citizens or nationals are eligible for such benefits, regardless of their state of residence, but does not define benefit . IIRIRA has been described as \"narrowing\" states' authority under PRWORA, but this early characterization of IIRIRA may have been undermined by subsequent interpretations of IIRIRA, discussed below.",
"State measures that would deny unauthorized aliens access to public institutions of higher education and in-state tuition have been challenged by plaintiffs and commentators on the grounds that they violate the Equal Protection or Supremacy Clauses. However, the limited case law to date suggests that restrictions on access to higher education do not, as a general matter, deprive unauthorized aliens of equal protection. Such restrictions have also not been seen as preempted by PRWORA as a general matter, although specific measures could potentially be found to be preempted, or otherwise impermissible, on other grounds. Restrictions on access to in-state tuition have also been seen as permissible. In-state tuition has generally been considered a public benefit, and PRWORA and IIRIRA restrict the circumstances in which states may provide public benefits to unauthorized aliens. PRWORA has also been construed to restrict unauthorized aliens' access to federal and state financial aid.",
"To date, it does not appear that any state measure barring unauthorized aliens from public institutions of higher education has been found to be impermissible on equal protection grounds. The Supreme Court's 1982 decision in Plyler v. Doe has generally been taken to mean that the Equal Protection Clause precludes states from denying unauthorized alien children access to public elementary and secondary schools. However, Plyler did not purport to address access to higher education, and several aspects of the Court's 5-4 decision in Plyler suggest that its applicability in the context of higher education may be limited. In particular, the Court noted both the young age—and the lack of culpability —of those whom Texas would have deprived of the \"basic education\" needed for democratic self-governance and economic self-sufficiency in determining that the Texas measure warranted heightened scrutiny. This heightened scrutiny, in turn, resulted in the measure being invalidated because none of the goals proffered by the state—which included protecting itself from an \"influx of illegal immigrants\" and preserving state funds for use in educating students who are likely to remain within the state—was \"substantial.\" Some commentators have suggested that state laws barring unauthorized aliens from public institutions of higher education should be subject to a similar level of scrutiny because higher education currently plays the same socioeconomic role that primary and secondary education played in the 1970s and 1980s. However, no court appears to have adopted this view, and contrary arguments could be made. For example, one could argue that college students are adults, who have the ability to conform their conduct to \"societal norms,\" and that lack of access to higher education does not result in the \"enduring disability\" of illiteracy noted by the Plyler Court. Perhaps because of this uncertainty as to the standard of scrutiny that would be applied, post- Plyler challenges to state measures denying unauthorized aliens access to public institutions of higher education have generally been brought on grounds other than equal protection, usually preemption, as discussed below.\nFederal district courts have found preemption in three cases, although none of these cases should be construed to mean that state restrictions on access to public institutions of higher education are preempted as a general matter. To the contrary, as explained below, two cases found preemption based on the language of the specific state statute at issue, while the court in the third relied upon an interpretation of PRWORA that has not been widely adopted. In the first case, Hispanic Interest Coalition of Alabama v. Bentley , a federal district court found that provisions of Alabama's H.B. 56 that bar \"any alien who is not lawfully present in the United States\" from enrolling in or attending \"any public postsecondary education institution in this state\" were per se preempted because the state attempted to regulate immigration by relying upon its own definition of who is lawfully present, instead of the federal one. However, an appellate court subsequently vacated the injunction barring enforcement of these provisions after they were amended to remove the language the district court had found imposed the state's definition, rather than the federal definition, of who is lawfully present. Similarly, in the second case, Montana Immigrant Justice Alliance v. Bullock , a state court found that a Montana law which, among other things, barred \"illegal alien[s]\" from receiving \"state services,\" including qualification as a student at state institutions of higher education, was preempted because it relied upon classifications of aliens not used in federal law and upon state officials' determinations of aliens' status.\nIn the third case, League of United Latin American Citizens [LULAC] v. Wilson , a federal district court found that the provisions of California's Proposition 187 barring persons who are \"not authorized under federal law to be present in the United States\" from admission to public institutions of higher education were preempted because \"Congress ... occupied the field of regulation of public postsecondary education benefits to aliens\" when it enacted PRWORA. The LULAC court offered no rationale for this conclusion, however, and its interpretation of PRWORA has been expressly rejected by another federal district court. The LULAC court's interpretation also arguably does not reflect the prevailing interpretation of PRWORA. In other cases, dealing with benefits unrelated to higher education, courts have found that PRWORA does not preempt the field of aliens' access to benefits because it expressly permits states to provide public benefits to aliens who are not \"qualified aliens\" in specified circumstances.\nChallenges on other grounds, not involving equal protection or preemption, may also be possible depending upon the facts and circumstances surrounding particular state measures. For example, in 2013, beneficiaries of the Deferred Action for Childhood Arrivals (DACA) initiative challenged their exclusion from Virginia community colleges on the grounds that the state's determination that they are ineligible to establish Virginia domicile was \"contrary to Virginia law.\" This suit was reportedly withdrawn after the state adopted a policy of providing in-state tuition to DACA beneficiaries.",
"State measures that would deny unauthorized aliens in-state tuition would also appear to be permissible as a general matter. At least one commentator has suggested that the holding of Plyler should be extended not just to access to higher education, but also to eligibility for in-state tuition. However, no court appears to have adopted this view, and it would seem difficult to maintain given that in-state tuition is generally seen as a public benefit, as discussed below, and federal law restricts unauthorized aliens' receipt of public benefits. PRWORA, in particular, establishes a \"default rule\" that unauthorized aliens are ineligible for public benefits unless a state enacts legislation that \"affirmatively provides\" for their eligibility. Thus, state measures that essentially reflect PRWORA's default rule—that unauthorized aliens are ineligible—seem unlikely to be found to be preempted by federal law. Such measures also seem unlikely to be found to violate the Equal Protection Clause because Congress established the default rule that unauthorized aliens are generally ineligible for public benefits, and its plenary power over immigration extends to restricting aliens' eligibility for public benefits. As previously noted, federal measures limiting aliens' eligibility for public benefits are subject to more deferential review than state measures, and will generally be upheld so long as there is a reasonable basis for the limitation. Further, the Supreme Court has indicated that states may impose restrictions upon aliens' receipt of public benefits that would otherwise be impermissible if Congress has \"by uniform rule prescribed what it believes to be appropriate standards for the treatment of an alien subclass.\" Thus, while two pre-PRWORA Supreme Court cases invalidated state measures that barred certain aliens from receiving in-state tuition and state financial aid, these cases should not necessarily be construed to mean that similar measures would necessarily be invalid post-PRWORA, particularly insofar as the measures affect unauthorized aliens.\nAt least one commentator, apparently concerned about PRWORA's restrictions on the provision of public benefits to unauthorized aliens, has also suggested that in-state tuition should not be viewed as a public benefit because it does not involve \"direct financial assistance,\" or payments of money, to students. However, the only court that appears to have addressed the issue held otherwise, finding that a California law—which permits unauthorized aliens who complete at least three years of secondary school within the state and meet other criteria to receive in-state tuition—provides a public benefit for purposes of PRWORA because in-state tuition involves a calculable amount. This decision was subsequently overturned on other grounds, but the view that in-state tuition constitutes a public benefit has been espoused by another court and the Colorado Attorney General. The view that in-state tuition constitutes a public benefit would also appear to be supported by cases addressing whether other government services and assistance constitute public benefits for purposes of PRWORA. These cases have generally found that a public benefit is something that \"assist[s] people with economic hardship,\" and could \"create [an] incentive for illegal immigration.\" An argument could be made that in-state tuition is a public benefit in light of these decisions on the ground that it makes college more affordable for needy students. Some have also suggested that eligibility for in-state tuition is an incentive for illegal immigration.\nIt is, however, important to note that, insofar as it is a public benefit, in-state tuition is a benefit for the student, not the student's household, and PRWORA neither authorizes nor requires states to restrict the eligibility for in-state tuition of U.S. citizen students whose parents are unauthorized aliens. Some states have previously sought to classify U.S. citizen students who reside within the state as \"out of state\" residents because their parents—who also reside within the state—are unauthorized aliens. These states have sometimes argued that they \"are merely complying with federal law\" in adopting such measures. However, courts have uniformly rejected this view as \"fundamentally misconstru[ing]\" PRWORA, which does not purport to restrict the provision of public benefits to U.S. citizens, and as impermissibly distinguishing between similarly situated U.S. citizens based on their parentage. One court, in particular, emphasized that these measures would \"classify U.S. citizens as aliens, and in doing so, create a second-tier of U.S. citizenship that depreciates the historic values of Plaintiffs' citizenship by affording Plaintiffs some of the benefits that other similarly situated U.S. citizens enjoy but not all of the benefits.\"",
"Neither courts nor commentators appear to have raised any significant questions about the permissibility of state measures denying state financial aid (i.e., financial aid provided using only state funds) to unauthorized aliens post-PRWORA, perhaps because financial aid has been widely recognized as a public benefit for purposes of PRWORA and IIRIRA. This means that any state that would provide state financial aid to unauthorized aliens must enact legislation that affirmatively provides for their eligibility, as required by PRWORA. Also, depending upon the interpretation of IIRIRA that is adopted, the state may need to avoid conditioning eligibility upon residence when enacting such legislation. See \"State Measures Granting Access: In-State Tuition ,\" below.\nPRWORA has also apparently been construed to bar unauthorized aliens from receiving federal financial aid. Amendments made to the Higher Education Act in 1986 permit those \"in the United States for other than a temporary purpose\" who can provide evidence from immigration officials of their intent to become permanent residents to qualify for federal financial aid. These amendments could, on their face, potentially be read as permitting at least some unauthorized aliens to receive federal financial aid. However, consistent with the view that PRWORA \"invalidated all existing\" federal, state, or local measures regarding noncitizens' eligibility for public benefits to the degree that these measures conflict with PRWORA, the Department of Education has determined that only those aliens who fall within PRWORA's definition of qualified alien are eligible for federal financial aid. This definition includes LPRs; aliens granted asylum; refugees; aliens paroled into the United States for a period of at least one year; aliens whose deportation is being withheld; aliens granted conditional entry; and Cuban and Haitian entrants. All other aliens excluded from PRWORA's definition of \"qualified alien,\" although certain aliens (e.g., those who have been subject to domestic violence) are treated as if they were qualified aliens for purposes of PRWORA.",
"State measures that would grant unauthorized aliens access to public institutions of higher education, in-state tuition, and financial aid would also appear to be generally permissible. Because access to public institutions of higher education has not been viewed as a public benefit for purposes of PRWORA, states may generally provide for unauthorized aliens' access without enacting legislation to this effect. In-state tuition and financial aid, in contrast, have generally been viewed as public benefits. This means that states must enact legislation that affirmatively provides for unauthorized aliens' eligibility for such benefits. Also, depending upon how IIRIRA is interpreted, states may need to base unauthorized aliens' eligibility on factors other than their residence in the state (e.g., high school attendance and graduation in the state).",
"Under current law, states would not appear to be barred from granting unauthorized aliens access to public institutions of higher education. They would also not appear to be required to enact legislation that \"affirmatively provides\" for unauthorized aliens' eligibility on the ground that access to higher education has generally not been viewed as a public benefit for purposes of PRWORA. Some commentators have suggested that it should be viewed as such because institutions of higher education rely upon federal and state funds in educating students, and the LULAC court characterized access to higher education as a public benefit in a decision issued shortly after PRWORA's enactment. However, the LULAC court did not articulate any rationale for viewing access to higher education as a public benefit, and another district court subsequently adopted the opposite view based on the definition of public benefit given in federal law. This definition encompasses \"postsecondary education ... or other similar benefit[s] for which payments or assistance are provided to an individual, household, or family eligibility unit by [a government] agency ... or by appropriated funds.\" In particular, the latter court noted that admission does not involve \"payments\" to students or their households. Admission could arguably also be said not to constitute \"assistance\" if this term is interpreted in light of its \"plain meaning\" as \"aid\" or \"help.\" The case law generally construing the meaning of public benefit for purposes of PRWORA also suggests that access to public higher education is unlikely to be viewed as a public benefit. These cases have generally taken the term public benefits to refer to resources that \"assist people with economic hardship,\" and could \"create [an] incentive for illegal immigration.\" An argument could be made that eligibility to enroll at a public institution of higher education does neither of these things. Eligibility to enroll, if acted upon, creates an obligation for the alien to pay, rather than provides for payment to the alien. Also, the availability of nonimmigrant visas for foreign students arguably lessens the need to enter or remain in the United States unlawfully in order to attend public institutions of higher education.",
"States would also not appear to be barred from providing in-state tuition to unauthorized aliens so long as the state complies with PRWORA and, potentially, IIRIRA in doing so. PRWORA generally prohibits states from providing public benefits to unauthorized aliens unless they enact legislation that \"affirmatively provides\" for unauthorized aliens' eligibility, and in-state tuition has generally been viewed as a public benefit for purposes of PRWORA. Some state statutes providing public benefits, such as in-state tuition, have been challenged on the grounds that the statute is barred by PRWORA because it does not expressly reference PRWORA, or clearly specify that \"illegal aliens\" are eligible, so as to \"put the public on notice.\" This view appears to be based on the conference report accompanying PRWORA, which states that \"[o]nly the affirmative enactment of a law by a ... legislature and signed by the Governor after the date of enactment of this Act, that references this provision, will meet the requirements of this section.\" However, as enacted, PRWORA does not require that states refer either to PRWORA, or to an enactment benefitting \"illegal aliens,\" and reviewing courts have found that there are no such requirements. In reaching this conclusion, the courts have noted that Congress has elsewhere required states to reference specific provisions of federal law when enacting particular measures, and PRWORA does not do so. Thus, they concluded, Congress is presumed not to have intended to impose such a requirement with PRWORA. Courts have also found that nothing in PRWORA requires states to include in any enactments making unauthorized aliens eligible for public benefits language that \"clearly put[s] the public on notice that tax dollars are being used to benefit illegal aliens,\" although one court did suggest that a state could not be said to have \"affirmatively provided\" for unauthorized aliens' eligibility if it were to \"confer[] a benefit generally without specifying that its beneficiaries may include undocumented aliens.\" At least one court has also found that state legislatures may delegate to administrative agencies or local governments the authority to determine whether unauthorized aliens are eligible for particular benefits. However, the significance of these decisions in the higher education context may be limited by state statutes which require that new tuition classifications be created and/or approved by the legislature.\nWhat, if any, limits IIRIRA may impose upon states enacting legislation that would provide for unauthorized aliens' eligibility for in-state tuition is less clear because the courts have taken different approaches in the two challenges decided, to date, to state laws permitting unauthorized aliens to receive in-state tuition based on high school attendance in the state. Some have suggested that these measures run afoul of IIRIRA insofar as they do not provide for all U.S. citizens and nationals to receive in-state tuition. However, in the most recent of these two cases, Martinez v. Regents of the University of California , the California Supreme Court upheld a California statute which provided that all students (other than nonimmigrant aliens) are exempt from paying nonresident tuition at public institutions of higher education if they attended high school in California for three or more years, graduate from a California high school or attain the equivalent thereof, and meet other criteria. A state appeals court had found that this statute ran afoul of IIRIRA because it effectively provided in-state tuition to unauthorized aliens based on their residence in the state, without also providing it to U.S. citizens and nationals residing in other states. The California Supreme Court reversed, however, because the statute specifically conditioned eligibility for in-state tuition upon high school attendance and graduation within the state. Thus, the high court found that the measure did not conflict with IIRIRA since IIRIRA refers to in-state tuition based on residence, not based on high school attendance and graduation. Further, because the high court viewed the statute as unambiguously providing for in-state tuition based on high school attendance and graduation, not residence, it declined to consider the legislative history materials that the appellate court had viewed as evidencing an intent to benefit unauthorized aliens. However, the high court also expressed the view that, even if the legislative history were to reflect such an intent, there is \"nothing ... legally wrong with the Legislature's attempt to avoid [IIRIRA] ... mere desire to avoid the restrictions provides no basis to overturn the [California statute].\"\nPreviously, however, in Day v. Sebelius , the federal district court in Kansas dismissed a suit filed by out-of-state students alleging that a Kansas statute like the California one was barred by IIRIRA, on the grounds the students lacked standing and had no right to sue to enforce IIRIRA. Specifically, as to standing, the court found that the plaintiffs could not demonstrate that they were injured in fact by the Kansas statute, given that the statute did not apply to them, and they paid out-of-state tuition both before and after its enactment. Similarly, the court found that IIRIRA did not create a private right of action, which means that individuals cannot sue to enforce it. The court's decision was subsequently affirmed by a federal appeals court, and the Supreme Court declined to grant certiorari.\nFollowing the Day decision, the Washington Legal Foundation (WLF) filed several complaints with the Department of Homeland Security (DHS) alleging that certain in-state tuition laws violated IIRIRA. The WLF specifically called on DHS to enforce IIRIRA against states that offer in-state tuition to unauthorized aliens based on high school attendance in the state on the grounds that the Day court had found that private individuals cannot do so. DHS does not appear to have responded publicly to these complaints, although it elsewhere expressed the view that states may decide whether to provide in-state tuition to unauthorized aliens. However, recent litigation in state court has raised the possibility that private individuals could potentially bring suits challenging at least some state practices in providing in-state tuition to unauthorized aliens based on standing as state taxpayers.",
"Fewer states provide state financial aid to unauthorized aliens than provide in-state tuition, and neither plaintiffs nor commentators appear to have raised significant issues regarding states providing for unauthorized aliens' eligibility for state financial aid, separate and apart from their eligibility for in-state tuition. However, in the event of such a challenge, it seems likely that state financial aid would be found to constitute a public benefit for purposes of PRWORA and IIRIRA for reasons previously discussed. Thus, state measures that would provide for unauthorized aliens' eligibility would generally be seen as permissible so long as the state enacts legislation that makes clear that unauthorized aliens are eligible. The state may also need to provide for unauthorized aliens' eligibility upon some basis other than residence in the state, at least given one of the two interpretations of IIRIRA to date.",
"Further developments in this area seem likely, particularly in terms of federal and state legislative proposals and enactments. The enactment of laws permitting unauthorized aliens to receive in-state tuition was cited in 2014 as a \"trend\" in state immigration legislation. The courts, in contrast, may be unlikely to reconsider existing precedents as to the right to higher education, or whether in-state tuition and financial aid constitute public benefits for purposes of PRWORA and IIRIRA. There could, however, potentially be developments in the state courts based on litigation asserting state taxpayer standing to challenge alleged violations of IIRIRA, or challenging state measures' conformity with provisions of state law."
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"question": [
"What has prompted questions about unauthorized aliens' eligibility to be admitted to higher education public institutions?",
"How is the DREAMer term used?",
"What are DREAMers entitled to, so far?",
"How did the Court's decision affect access to public elementary and secondary education?",
"How have state measures to deny public higher education been challenged in the recent years?",
"How does denying access to higher education violate the U.S. Constitution?",
"What is detailed in the case law?",
"How does this compare to unlawfully present aliens?",
"What have generally been viewed as public benefits for PRWORA?",
"How does this viewpoint compare the courts' viewpoints?",
"What else has been stated by the courts?",
"Why did the court reach the conclusion that IIRIRA does not bar states from providing in-state tuitions to unauthorized aliens?",
"What did the IIRIRA fail to do, according to the court?"
],
"summary": [
"The existence of a sizable population of \"DREAMers\" in the United States has prompted questions about unauthorized aliens' eligibility for admission to public institutions of higher education, in-state tuition, and financial aid.",
"The term DREAMer is widely used to describe aliens who were brought to the United States as children and raised here but lack legal immigration status.",
"As children, DREAMers are entitled to public elementary and secondary education as a result of the Supreme Court's 1982 decision in Plyler v. Doe.",
"There, the Court struck down a Texas statute that prohibited the use of state funds to provide elementary and secondary education to children who were not \"legally admitted\" to the United States because the state distinguished between these children and other children without a \"substantial\" goal, in violation of the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution.",
"State measures that variously deny or grant access to public higher education, in-state tuition, or financial aid have been challenged on the grounds that they violate the Equal Protection Clause, like the Texas measure at issue in Plyler.",
"They have also been alleged to violate the Supremacy Clause of the U.S. Constitution, which establishes that federal law is \"the supreme Law of the Land\" and may preempt any incompatible provisions of state law.",
"Based on the case law to date, it would appear that states do not, as a general matter, violate the Equal Protection or Supremacy Clauses by excluding unauthorized aliens from public institutions of higher education.",
"On the other hand, access to public higher education has generally not been construed as a public benefit for purposes of PRWORA, such that it may only be provided to \"unlawfully present\" aliens if a state enacts legislation that affirmatively provides for their eligibility.",
"In-state tuition and financial aid have generally been seen as public benefits for purposes of PRWORA.",
"However, courts have rejected the view that state statutes providing in-state tuition to unauthorized aliens are preempted unless they expressly refer to PRWORA, or to unauthorized aliens being eligible.",
"Courts have also found that IIRIRA does not bar states from providing in-state tuition to unauthorized aliens who complete a certain number of years of high school in the state and satisfy other criteria.",
"In one case, the court reached this conclusion because it construed IIRIRA as barring only the provision of in-state tuition based on residence in the state, not based on other factors.",
"In another case, the court found that IIRIRA did not create a private right of action such that individuals may sue to enforce alleged violations."
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GAO_GAO-12-925
|
{
"title": [
"Background",
"NRC Requirements and Implementation by Licensees Do Not Ensure the Security of High-Risk Radiological Sources",
"NRC’s Security Requirements Governing Radioactive Material Are Non prescriptive",
"Some Medical Facilities Licensed by NRC Are More Vulnerable Than Others to Potential Sabotage and Theft Because of Security Weaknesses",
"Some NRC and Agreement State Inspectors and Hospital and Medical Facilities Lack Training and Resources to Enforce NRC Requirements",
"Some Agreement States Do Not Have Sufficient Staffing and Resources to Enforce Security Controls",
"NNSA Completed Security Upgrades in More Than 300 Medical Facilities, but Some Hospitals Do Not Participate in the Voluntary Program",
"NNSA Has Made Progress in Securing Radioactive Sources, but Does Not Expect to Complete All 1,500 Medical Buildings Until 2025",
"NNSA Generally Targets Security Upgrades to States with Significant Amounts of High-Risk Radiological Material",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Scope and Methodology",
"Appendix II: NRC Security Controls and Selected Pending Part 37 Regulations Changes (10 C.F.R. Part 37)",
"Appendix IV: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Acknowledgments"
],
"paragraphs": [
"Radiological sources are used throughout the world for peaceful purposes. Until the 1950s, only naturally occurring radioactive materials, such as radium-226, were available to be used in radiological sources. Since then, sources containing radiological material produced artificially in nuclear reactors and accelerators have become widely available, including cesium-137, cobalt-60, iridium-192, and strontium-90, which are used to treat cancer through radiotherapy and cesium-137, which is also used to treat blood. See figure 2, which shows an example of an americium-241 sealed radiological source. Sealed sources vary in size from the size of a pencil eraser to rods up to several inches in length.\nRadiological material can be found in various forms, such as metals or powders, and is measured by its level of activity. The greater the activity level—measured in curies—the more radiation emitted, which increases the potential risk to public health and safety if improperly used or controlled. The intensity of radiological materials decays over time at various rates. The term “half-life” is used to indicate the period during which the radioactivity decreases by half as a result of decay. In general, the shorter the half-life and the larger the mass, the more radiation will be emitted within a particular period.\nAccording to the International Atomic Energy Agency (IAEA),of protection provided by users of the radiological material should be commensurate with the safety and security risks that it presents if improperly used. For example, radiological materials used for certain diagnostic purposes, such as diagnostic imaging, have low levels of activity and do not present a significant safety or security risk. However, high-risk sealed radiological sources that contain cobalt-60, cesium-137 or iridium-192, could pose a greater threat to the public and the environment and could also pose a potentially more significant security risk, particularly if acquired by terrorists to produce a dirty bomb.\nTwo types of licenses are associated with the use of radioactive materials—general licenses and specific licenses. General licenses are associated with products that contain some radioactive material, such as fixed gauges or exit signs, and the owners of these products do not have to apply to NRC or an Agreement State for a license. A company seeking radiological material for uses that do not qualify for a general license must apply to NRC or, if it conducts business in an Agreement State, to the appropriate state office for a specific license. Specific licenses include those of “limited scope,” in which radioactive materials will be used by a defined number of authorized users, and those of “broad scope,” for facilities that have experience successfully operating under a specific license of limited scope.\nOfficer (RSO), to oversee compliance with applicable NRC and Agreement State regulations, including security controls.\nNRC has stated that nuclear and radiological materials are critical and beneficial components of global medical, industrial, and academic efforts. However, the possibility that these materials could be used by terrorists is a national security concern. As a result, NRC tracks the number of hospital and medical facility licensees with radionuclides of concern through its National Source Tracking System. This database provides a “cradle-to-grave” account of the origins of each radiological source (manufacture, remanufacturing, or import) and records who used it and eventually disposed of, or exported it. NNSA coordinates with NRC to receive these updated data and has further enhanced the data for its purposes, including identifying which radioactive materials are associated with which licenses and what sources are located in which facilities.",
"At the 26 selected hospitals and medical facilities we visited, NRC’s requirements did not consistently ensure the security of high-risk radiological sources. One reason for this is that the requirements, which are contained in NRC security controls (i.e., the two security orders and implementation guidance) are broadly written and do not prescribe specific measures that licensees must take to secure their equipment containing high-risk radiological sources. Some of the NRC-licensed hospitals and medical facilities we visited are more at risk than others to sabotage and theft because some hospitals developed better security for protecting their radiological sources than others. Licensees have implemented these broad requirements in various ways, leaving some hospitals’ radiological sources more vulnerable than others. In addition, some inspectors said that the NRC-required training is not sufficient, and personnel at hospital and medical facilities are not required to have security training, although they implement NRC requirements at their sites. NRC reviews of Agreement States also found that some Agreement States do not have sufficient staffing and resources to enforce NRC security controls.",
"NRC’s requirements direct licensees possessing high-risk radiological material contained in medical equipment to implement increased security measures. However, these requirements are broadly written and do not prescribe the specific steps hospitals and medical facilities must take to secure the material. Rather, the security controls and their requirements provide a general framework for what constitutes adequate security practices. The officials said that the key elements of the framework include: (1) limiting access to only approved individuals through the use of background checks that include fingerprinting; (2) enhancing physical barriers and intrusion detection systems; (3) coordinating with local law enforcement to respond to an actual or attempted theft, sabotage, or diversion of radiological material; (4) promptly notifying authorities of incidents; and (5) monitoring shipments of radiological material during transit. According to NRC officials, the intent of the security controls is to develop a combination of people, procedures, and equipment that will delay and detect an intruder and initiate a response to the intrusion—not to provide absolute security from theft or unauthorized access. The security controls provide minimum requirements that must be met to ensure adequate security, and licensees may go beyond the minimum requirements.\nNRC officials told us that they have adopted a risk-based approach to security, in which the level of security should be commensurate with the type and amount of sources they are attempting to protect. In addition, NRC officials said that they take facility costs into consideration when issuing new security requirements. The risk-based approach reflects the agency’s concerns regarding the potential adverse financial effect that additional security measures could have on private medical facilities throughout the United States. As a result, the security controls issued by NRC are intentionally broad to allow licensees flexibility when implementing security upgrades. However, according to NRC officials, NRC requirements relating to the adequate protection of public health and safety do not consider costs. The officials state that this approach aligns with Executive Order 12866, which directs Executive Branch agencies to tailor their regulations to impose the least burden on society, including individuals, businesses of differing sizes, and other entities (including small communities and governmental entities), consistent with obtaining the regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations. However, the Executive Order requirements in pertinent part do not apply to the NRC, but NRC follows many of the provisions voluntarily. In late April 2012, NRC released a document that stated, among other things, that its security program is a multilayered, non prescriptive framework that allows licensees to develop security programs specifically tailored to their facilities. NRC officials told us that due to diverse economic conditions, facility type, layout, and operations of hospital and medical facilities, a “one size fits all” approach to radiological source security is neither practical nor desirable. The officials said that the ability to tailor security to a facility’s needs and resources is particularly important for commercial facilities with limited resources. For example, personnel from one smaller medical facility we visited told us that implementing specific security requirements—such as cameras and other surveillance equipment— could jeopardize their continued operations because of the costs associated with the installation and maintenance of this equipment.\nNRC’s implementation guidance, which supplements the security orders, provides examples of how hospitals and medical facilities can secure their high-risk radiological material and meet security requirements. In their implementation guidance, NRC provides that facilities may meet the security requirements by, for example, limiting the distribution of keys, key cards, or combinations to doors and gates to approved individuals; activating locked doors and gates by using remote surveillance; using a card reader and electronic locking devices at control points; and having a person approved for unescorted access conduct constant surveillance of the devices containing the radiological material.\nHowever, ultimate responsibility for implementing NRC’s security controls is left to the discretion of the hospital and medical facility personnel that possess the materials. The controls do not prescribe the specific measures that licensees must take to secure their sources, such as the use of cameras, alarms, and other physical security measures. The licensee determines, for example, if security cameras are necessary or what types of locks or alarms, if any, are needed to secure doors or windows. For some locations we visited that are staffed 24 hours a day, 7 days a week, such as blood banks, requirements for access control can be met when the room where the medical device containing radiological material is located is continuously staffed by an individual or individuals who are determined to be trustworthy and reliable. As long as the room is staffed at all times, the facility is not required to have any additional physical security, such as cameras or motion detection equipment.\nNRC’s security controls require hospital and medical facility personnel to conduct background checks to determine the trustworthiness and reliability of individuals requesting unescorted access to radiological material. NRC officials told us that background checks are important for protecting against an “insider threat,” in which someone with access to the radiological material might try to remove, tamper with, or sabotage the source. NRC’s implementation guidance states that the commission’s requirements are not intended to stop determined adversaries intent on malevolent action from gaining access to the radioactive material. Rather, these requirements are designed to provide reasonable assurance that individuals with unescorted access to the radioactive material are trustworthy and reliable and that facilities have a reliable means to rapidly identify events that are potentially malevolent and have a process for prompt police response. Furthermore, hospital and medical facility officials are responsible for appointing a trustworthiness and reliability official (T&R official), who is to determine which employees will be granted unescorted access to the device containing radioactive material. The T&R officials at the 26 hospitals and medical facilities we visited were typically RSOs, security officials, or officials from the human resources department. When granting unescorted access for individuals employed less than 3 years, NRC also requires hospitals and medical facilities to, at a minimum, verify employment history, education, and personal references. For individuals employed for longer than 3 years, facilities are to determine trustworthiness and reliability, at a minimum, by reviewing the employee’s employment history with the facility.\nOfficials at 5 of the 26 hospitals and medical facilities we visited told us they face challenges in determining which individuals are suitable for a trustworthiness and reliability certification. For example, two of these five officials said that the current background examination process places too much emphasis on the judgment of hospital personnel. Performing background checks on foreign nationals is also particularly challenging. Officials at 6 of the 26 hospitals and medical facilities we visited agreed, citing, for example, the difficulty in acquiring relevant background information from different countries, the inability to corroborate written documentation, and language barriers. Administrators at 2 of these 6 hospitals also told us that a more centralized background examination process with uniform criteria and standards should replace the current system, which varies from facility to facility.",
"The 26 hospitals and medical facilities we visited in seven states and Washington, D.C., have implemented NRC’s security controls in a variety of ways that could leave some facilities’ radiological sources more vulnerable than others to possible tampering, sabotage, or outright theft because, on their own initiative, some facilities have decided to implement more stringent security measures than others.\nLaw enforcement personnel from states with significant amounts of high- risk radioactive material told us that NRC’s security controls have an inherent weakness: they do not specify what the facility is protecting against and are not linked to a design basis threat. According to IAEA, a design basis threat includes the attributes and characteristics of a potential insider and/or external adversaries, who might attempt unauthorized removal or sabotage, against which a physical protection system is designed and evaluated. NRC officials noted that, according to IAEA’s Nuclear Security Series Implementation Guide No. 11, “Security of Radioactive Sources,” the design and evaluation of a security system should take into account the current national threat assessment and may include the development and application of a design basis threat, although it is not required.\nTypically, a design basis threat characterizes the elements of a potential attack, including the number of attackers, their training, and the weapons and tactics they are capable of employing. Instead, NRC relies solely on the amount of curies under the control of a hospital or medical facility when determining if the facility is subject to increased security controls. According to NRC, it would not be feasible to require a design basis threat analysis for U.S. hospitals and medical facilities because of the varied nature of the facilities and the additional resources required to conduct an analysis for individual facilities. NNSA also does not use a design basis threat for its security assessments of hospitals and medical facilities but does employ a threat scenario (known as potential adversary capability) as the basis for its recommendations for security enhancements. NNSA defines Potential Adversary Capabilities as the method for documenting a realistic threat level that the security upgrades must enhance protection against. At VA, which is overseen by NRC under a Master Materials License (MML),radiological security told us that VA initially developed a generic threat scenario for use at its facilities with high-risk radiological materials because NRC did not provide a design basis threat as part of its security controls. Later, VA coordinated closely with NNSA to complete security assessments and install security upgrades at the VA facilities with high risk sources. The assessments were completed from 2009 through 2011, with installation of the agreed upon security upgrades currently ongoing. VA facilities have also participated in the NNSA Alarm Response training program.\nAll of the 26 medical facilities we visited have implemented NRC’s security controls and undergone inspections by either NRC or Agreement State inspectors. At some facilities, the implementation of the controls resulted in significant security upgrades, such as the addition of surveillance cameras, upgrades to locks on doors, and alarms. NRC stated that, although hospitals are open to the public, the specific location housing a radiological source generally is not. These sources are shielded inside medical devices that can weigh thousands of pounds, which make it difficult to remove or tamper with the radiological material, according to NRC.\nNotwithstanding NRC’s views, we observed potential security weaknesses in several facilities we visited, such as the following:\nAt a hospital in one state, two cesium-137 research irradiators (i.e., used for medical or biological research), that contain approximately 2,000 curies and 6,000 curies, respectively, are housed in the basement of a building that is open to the public. The hallway leading to the irradiator room has a camera, but it is pointed away from the room. The door to the room is opened by a swipe card lock, and there are no cameras or other security measures inside the room. We observed that one of the irradiators was sitting on a wheeled pallet. When we asked the RSO if he had considered removing the wheels, he said no. Furthermore, we observed that the irradiator room is located in close proximity to an external loading dock and that the cameras along the corridor to the loading dock are displayed on a single monitor, making it difficult for someone monitoring the corridor to interpret what activity is occurring. This facility had passed its most recent NRC security inspection, according to a hospital official, because access to the room where the irradiators were located was restricted through use of a swipe card. However, this facility could be vulnerable because of the limited security we observed and the mobility of one of the irradiators.\nAt a hospital in a major U.S. city, we observed that the interior door to the hospital blood bank, which had a cesium-137 blood irradiator of approximately 1,500 curies, had the combination to the lock written on the door frame. The door is in a busy hallway with heavy traffic, and the security administrator for the hospital said that he often walks around erasing door combinations that are written next to the locks. According to NRC officials, a single lock is not necessarily a security weakness; however, failure to control the combination and restrict access to only trustworthy and reliable individuals is a clear violation of NRC requirements. Figure 3 shows the combination written on the door frame to the blood bank.\nAt a blood center in a third state we visited, we observed a cesium- 137 blood irradiator of approximately 1,400 curies in a room that was secured by a conventional key lock. The irradiator was located in the middle of the room and not secured to the floor. The room had an exterior wall with a bank of unalarmed and unsecured windows that looked out onto a publically accessible loading dock. The blood center officials said that, while they met NRC’s security controls, they acknowledged that the center is highly vulnerable to theft or sabotage of their radiological sources. According to NRC officials, an irradiator sitting in the middle of the floor that is not bolted down is not necessarily vulnerable. Figure 4 shows the irradiator that is not bolted to the floor and the bank of unsecured windows looking out onto the loading dock.\nThe RSO at a large university hospital told us that he did not know the exact number of people with unescorted access to the hospital’s radiological sources, although he said that there were at least 500. The hospital’s current data system does not allow for entering records for more than 500 individuals. In the past, he said, the hospital had as many as 800 people with unescorted access to sources. In contrast, at a major medical research facility on a military installation we visited, access was limited to 4 safety and security personnel.",
"NRC and Agreement State inspectors and hospital and medical facility personnel we interviewed said that the NRC training has not prepared them to adequately enforce NRC requirements. Furthermore, personnel at the facilities said that they may not have the resources they need to implement the security controls.\nSome inspectors from NRC and Agreement States said that they have not received adequate training from NRC on securing high-risk material at hospitals and medical facilities. NRC requires that NRC and Agreement State inspectors take training for implementing the security controls. NRC has developed and provides a 5-day security training course for NRC and Agreement State inspectors on how to implement the security controls. The course takes place at DOE national laboratories, with recent training occurring at Sandia National Laboratory in New Mexico. It includes 17 modules providing information on how to protect against malicious uses of radioactive materials, such as the introduction to physical protection, target identification, intrusion detection, security lighting, access control systems, barriers, locking systems, and response forces. The course also covers NRC security controls associated with the increased security measures. However, even with this training, 6 of the 48 inspectors we spoke with who cover both NRC regions and Agreement States told us that they do not feel comfortable conducting security inspections at hospitals and medical facilities. According to the inspectors, NRC’s training course provides an introduction to security practices for those with limited security experience and trains inspectors generally in how to conduct security inspections. The inspectors typically have educational backgrounds in radiation safety or health physics rather than security. The inspectors said that not having security experience has made it difficult for them to transition to conducting security inspections. Examples are as follows:\nAn Agreement State inspector told us that he attended NRC’s training program, but he did not believe that it sufficiently prepared him to be a security expert and make the kinds of judgments required to determine whether licensees have adequate security.\nInspectors from another Agreement State told us that the course did not cover certain topics that they thought were essential to radiological security, such as the use of radiation detectors. They also said that they were placed in the awkward situation of having to enforce NRC’s security orders, which they did not believe they were fully qualified to interpret.\nAnother Agreement State inspector from a third state we visited told us that he was not qualified to do security inspections. However, he said that he was doing the best he could to interpret the NRC security controls and help the licensees implement the requirements.\nAn NRC inspector also said that security inspections were particularly difficult for him because he is trained as a physicist. He said that the security controls were confusing and that he did not understand the nuances of security.\nNRC’s security controls require hospitals and medical facilities to develop a program for assessing and responding to unauthorized access, including detecting an unauthorized intrusion, assessing the situation, and calling for a response from the local law enforcement agency of an actual or attempted theft of the high-risk radiological materials or the device itself. However, none of the personnel who are responsible for implementing the security controls for high-risk radiological sources at the 26 hospital and medical facilities we visited has been trained in how to implement NRC’s security controls. In addition, 15 officials at the 26 hospitals and medical facilities told us that they have backgrounds in radiological safety and facilities management and have limited security experience, making them responsible for security with limited previous experience to draw from. We found the following examples:\nAt one hospital, the RSO said that when the security controls were instituted in 2005, his new responsibilities included ensuring the security of a cobalt-60 gamma knife of approximately 2,600 curies, which is used to treat cancer patients, and a cesium-137 blood irradiator of about 2,400 curies. He told us that he was not comfortable with his security role because he was trained as a health physicist.\nOne facility manager who oversees the security for an approximately 1,700 curie cesium-137 blood irradiator at a blood bank told us that he has a background in construction, not security. He said that it would have been helpful if NRC’s controls were more prescriptive, including better guidance, so that he would be in a better position to determine what security would be most effective.\nNRC requires medical facility officials to demonstrate radiation safety expertise through a combination of education and work experience to be eligible to become an RSO. However, the security controls do not require that RSOs or other designated security officials have security experience or that they take NRC security training. For example, NRC regulations state that individuals may meet the eligibility requirements for becoming an RSO by completing a master’s degree or doctoral degree in health physics or a related field, combined with 2 years of full-time experience under the supervision of a board-certified medical physicist. In addition, NRC’s new regulations, when finalized, will require that officials at hospitals and medical facilities provide training on their security program and procedures to personnel involved in securing high-risk radiological material. However, the regulations do not require that the RSO, who is typically responsible for providing the training, has any formal security education or work experience, although the RSO is responsible for the security of radiological sources. Without training and adequate guidance, medical facility officials, including RSOs, who may be responsible for implementing NRC’s security controls, may not have adequate knowledge of securing equipment containing high-risk radiological sources.",
"NRC’s recent reviews of Agreement States’ inspection programs showed a lack of adequate staff, resources, and security training in two states. In its review of one of the state’s inspection programs, NRC reported that the program experienced significant turnover and that inspectors did not have an adequate understanding of the security controls. According to an official in this state, high staff turnover and the resulting lack of security experience affected the quality of the state’s oversight. In addition, staff turnover issues have kept inspectors from receiving needed on-the-job training or mentoring from experienced inspectors. As a result, inspectors have difficulty assessing whether licensees comply with NRC security controls. According to NRC’s review of the state program, the state inspectors took steps to incorporate interviews with appropriate personnel and performance observations into their inspection activities. However, inspectors often did not adequately follow up on potential items of non compliance that were observed during the performance reviews. NRC’s review noted that the state inspectors did not have sufficient familiarity with NRC’s security controls and therefore had difficulty assessing licensee compliance with the requirements. In one case, the inspector did not identify or understand the security significance of an item of noncompliance. In addition, during a final meeting with the facility personnel responsible for managing the license, the inspector could not clearly articulate the applicable requirements and was unable to explain to the licensee what actions could be taken to correct the identified deficiencies.\nNRC reported that Agreement State inspectors completed some level of preparation, such as reviewing NRC’s security controls, prior to their inspections but, in some cases, their preparation was inadequate. In addition, NRC officials stated that, in accompanying Agreement State inspectors, they identified problems with the completeness of their reviews, technical quality, consistency, and attention to health and safety/security. NRC noted that the deficiencies were indicative of a programmatic and chronic problem rather than an isolated occurrence or a periodic decline in performance.\nIn its review of another Agreement State’s program, NRC stated that new inspectors would have benefitted from additional training on NRC’s security controls. An Agreement State inspector told NRC’s review team that he did not understand the meaning of some of the documents he was reviewing. Another Agreement State inspector stated that he was authorized to inspect a radiological device independently—without being accompanied by a more experienced inspector—before he was ready to do so. In addition, some Agreement State inspectors told NRC’s review team that they sometimes performed inspections without the added benefit of having attended a training class for the type of inspection being performed, primarily because they were unable to get into the classes. One state program manager, who acts as the primary trainer for a state inspection program, acknowledged to the NRC review team that because of her workload she often has to limit the number of training classes offered.",
"As of April 2012, NNSA had completed security upgrades at 321, or one- fifth, of the 1,503 U.S. hospital and medical facilities it had identified as having high-risk radiological material but does not expect to complete all such upgrades until 2025. In addition, the program’s impact is constrained because: (1) it is voluntary, (2) hospitals and medical facilities will have to maintain the upgrades beyond NNSA’s 3- to 5-year warranty period, and (3) the program does not require facilities to sustain the upgrades.",
"NNSA’s Domestic Material Protection program is designed to raise the security at U.S. facilities with high-risk radiological material, including hospitals and medical facilities, to a level that is above NRC and the Agreement State’s regulatory requirements. NNSA’s voluntary program provides these U.S. hospitals and medical facilities with security assessments, but the agency does not share these assessments with NRC and Agreement State inspectors. According to NNSA officials, the agency does not share the assessments because of its concern that hospitals and medical facilities, which are voluntarily cooperating with NNSA, would not provide complete and candid information to NNSA if it shared the assessments with NRC and Agreement State’s regulatory inspection agencies. After completing the assessments, NNSA installs security upgrades, such as remote monitoring systems, biometric access controls, and security cameras, to secure the devices and facilities that contain high-risk radiological sources. NNSA pays the cost for all security upgrades, but hospitals and medical facilities are responsible for maintaining the security systems after a 3- to-5-year warranty period expires. According to NNSA officials, during the warranty period, sustainability costs for the upgrades at each hospital average $40,000 per facility per year, including equipment warranty and maintenance costs, as well as the costs associated with labor and site visits to ensure that the hospitals are properly operating the NNSA upgrades. The NNSA officials estimate that when the hospitals are ready to assume full responsibility for the security upgrades at their facilities, the sustainability costs assumed by the hospitals are approximately $10,000 per facility per year.\nOf the 1,502 U.S. medical facilities NNSA has identified that contain high- risk radiological sources, the agency has provided security upgrades to 321, or about 21 percent of them. The 1,502 facilities cumulatively contain about 28 million curies of radioactive material, according to NNSA’s estimate. According to NNSA officials, as of March 2012, the Domestic Material Protection program had spent approximately $105 million to provide security upgrades to radiological sources at the 321 facilities. NNSA plans to complete security upgrades at all 1,502 medical facilities it has identified as high risk by 2025, at a projected cost of $608 million. NNSA officials also told us that they estimate the average cost to upgrade a medical facility has been $317,800.goal is universal participation in their program by all licensees holding high-risk radiological sources.\nNNSA officials told us that their NNSA provided a further breakdown of the approximately $105 million that was spent as of March 1, 2012. As table 1 shows, the majority of program expenditures were to complete security assessments and equipment upgrades—such as cameras, motion detection devices, and alarms—at U.S. hospitals and medical facilities. NNSA spent approximately $99 million, or 95 percent of its total program costs, on equipment, labor, and travel costs associated with the security assessments and upgrades—primarily carried out by personnel from Sandia National Laboratory, Pacific Northwest National Laboratory, and private-sector security vendors. The program spent an additional $975,800, or 1 percent of its total costs, on designing and testing equipment used for security upgrades. The remaining $4.3 million, or 4.1 percent of NNSA’s total costs, was spent on laboratory overhead charges and contract fees.\nOf the 26 hospitals and medical facilities that we visited in seven states and the District of Columbia, 13 had received NNSA upgrades, and 3 were in the process of receiving upgrades. Officials from 11 of the 16 hospitals and medical facilities told us that the NNSA program enhanced the security of their facilities. We observed a number of security upgrades at these facilities, including remote monitoring systems, surveillance cameras, enhanced security doors, iris scanners, motion detectors, and tamper alarms. In addition, NNSA officials told us that as part of the program they fund the installation of in-device delay kits. These kits are installed in the interior of medical equipment to make it more difficult to remove or tamper with radiological material contained within the equipment. NNSA officials told us that they currently contract with three companies to install the kits in irradiators and have partnered with another company to upgrade the security of new gamma knives. Figures 5, 6, 7, and 8 provide examples of the different NNSA upgrades.\nThe voluntary nature of the NNSA program allows hospitals and medical facilities to decline the upgrades, even though NNSA assumes all up-front capital costs. Most hospitals and medical facilities we visited were amenable to participating in the program, but NNSA officials told us that, as of July 2012, 14 facilities have declined to participate in the voluntary security upgrade program. These 14 facilities contain over 41,000 curies of high-risk radiological material. According to NNSA officials, 9 of these facilities declined to participate because facility management decided not to accept any NNSA assistance; 3 were unwilling to accept the full suite of NNSA security upgrades; and 2 were either facing bankruptcy or were planning to have their radiological sources removed. Four of the 14 facilities are located in large urban areas that NNSA officials consider high risk.\nWe met with officials from one hospital and one medical facility that declined the NNSA upgrades. Both facilities were located in densely populated urban areas. Specifically, we found the following:\nAccording to police department officials in a major U.S. city, one hospital with a blood irradiator of approximately 1,700 curies has declined the NNSA upgrades, even though the police department considers it to be a high-risk facility. The hospital officials told us that they decided not to implement the NNSA upgrades because of concerns about maintenance costs associated with the security equipment after the 3- to 5-year NNSA-funded warranty period expired. The RSO said that the security that the hospital has in place is adequate. Furthermore, the RSO told us that the hospital is under serious budget pressure that makes it difficult to justify spending more money to sustain equipment for protecting their radiological sources.\nStaff at a blood bank with a cesium-137 blood irradiator of approximately 1,400 curies told us that NNSA was prepared to upgrade the facility’s security but that the blood bank decided not to participate. The blood bank officials said that senior management wanted to wait until the blood bank moved to a new location, which it planned to do within the next 3 years. However, we observed that the blood irradiator was vulnerable to theft or tampering and discussed these vulnerabilities with the blood bank officials, who agreed that their device was vulnerable. In February 2012, we contacted NNSA officials about this matter. As a result, the facility decided to volunteer for the NNSA program, and NNSA and national laboratory officials met with facility personnel and developed a plan to increase the security of the irradiator by October 2012.\nNNSA requires that hospitals and medical facilities sign a sustainability statement, outlining responsibility for the security of high-risk radiological material and stating that they will assume full responsibility for the operation, testing, and maintenance of the security system after the NNSA-funded warranty period expires. However, the agency does not require that hospitals and medical facilities maintain the installed security upgrades beyond the 3- to 5-year warranty period. Nine hospital and law enforcement officials in three states we visited told us that not having such a requirement to sustain NNSA’s upgrades limits the program’s impact. NNSA officials told us that before they agree to implement the security upgrades, they attempt to determine if a site is committed to sustaining them. NNSA requires that hospital and medical facility officials sign the sustainability statement after completion of the design, but prior to the installation of the security upgrades. However, the NNSA officials told us that the sustainability statement is not legally binding.",
"According to our review of NNSA documents and interviews with NNSA officials, NNSA is, for the most part, funding security upgrades in states that have the most high-risk radiological material at hospitals and medical facilities. NNSA has developed a prioritization methodology that ranks different facilities and is designed to assign resources according to the relative risk of the radiological material and the expected risk reduction resulting from the planned security activity. NNSA’s prioritization criteria include four factors: (1) attractiveness level of the radiological material, (2) site security conditions, (3) threat environment, and (4) location or proximity to a target. In addition, NNSA officials told us that when ranking facilities for upgrades, they consider whether the facility has requested or volunteered for a security assessment under the program, if there are multiple high-risk sources in the same facility, and if NNSA can gain access to a number of sites through a partnership with other federal agencies and organizations such as the Department of Agriculture, the National Institutes of Health, and the American Red Cross.\nOur analysis of NNSA data shows that NNSA is focusing the majority of the program’s resources on states with high curie amounts and large numbers of hospitals and medical buildings with high-risk radiological sources. As of March 1, 2012, NNSA had spent $53 million—or 51 percent of total expenditures for the Domestic Material Protection program—in Massachusetts, New York, Texas, Pennsylvania, and California. These five states contain 37 percent of all hospitals and medical facilities with high-risk radiological sources, and 39 percent of all curies in hospitals in the United States.\nHowever, as table 2 shows, some states with large numbers of hospitals and medical facilities—Florida, Indiana, New Jersey, Ohio, and Tennessee—have not received as many upgrades from NNSA. These states received $13 million, or 12 percent of all NNSA expenditures since the program began in 2008. Furthermore, other states with large numbers of medical facilities, such as Alabama, Michigan, and Wisconsin, have received no assessments or upgrades. In addition, some states with relatively few hospitals and medical facilities and a small amount of curies have each received more than $1 million from NNSA to upgrade their facilities. These states were Hawaii and Rhode Island. In the case of Hawaii, NNSA officials told us that the state has over 50,000 curies of non-medical cesium-137, which made doing medical upgrades at the same time cost effective. In addition, NNSA said that Hawaii served as a model for how a network of facilities could be integrated into a centralized security network. As NNSA moves forward with the program, these officials said that they hope to replicate this model in some large cities and additional small states.\nNNSA officials told us that both the cost efficiencies and the voluntary nature of the Domestic Material Protection program require that they target sites based on their selection criteria and look for opportunities to provide upgrades when hospitals and medical facilities volunteer for assessments and upgrades. These officials stated that budgetary uncertainty makes it necessary to identify states where they can maximize their resources by upgrading a number of facilities in close proximity to each other. In addition, NNSA conducts outreach efforts in partnership with NRC and Agreement States to educate licensees about its program and find hospitals and medical facilities that want to participate. NNSA officials told us their outreach and promotional efforts are constrained because they do not want to enlist more facilities in the program than can be funded in a reasonable period of time. Additionally, NRC has supported NNSA’s program by making licensees aware of the program in a January 2010 NRC Regulatory Issue Summary. In the issue summary, NRC officials encouraged licensees to work cooperatively with manufacturers; regulators; and other federal, state, and local authorities to look for opportunities to further enhance the security of their sources and devices and incorporate best practices, where appropriate. The NRC officials also stated that NNSA staff and contractors have valuable perspectives and experience on best practices from visiting multiple licensees and operations. According to an NNSA official, increased collaboration with NRC and Agreement States to promote the program would be beneficial.\nHowever, some Agreement States are more proactive than others in helping NNSA find such hospitals and medical facilities. For example, NNSA has not completed upgrades in some states with a large number of radiological sources, like Michigan and Wisconsin. The opposite is true in some states with fewer sources, such as Hawaii and Rhode Island, where NNSA found enough facilities to participate to make the upgrades cost effective.",
"A dirty bomb attack in the United States would have serious economic and psychological consequences. It is therefore in the interest of the federal government to ensure that all high-risk radiological materials in U.S. hospitals and medical facilities are secured as quickly as possible from potential theft or sabotage. However, NNSA does not expect to complete security upgrades at all hospitals and medical facilities in the United States until 2025; one-fifth of the upgrades are completed to date. In addition, the voluntary nature of NNSA’s security upgrade program allows hospitals and medical facilities that contain high-risk radiological materials to refuse security upgrades, even though they are initially paid for by NNSA. As a result, 14 hospitals and medical facilities, with a combined 41,000 curies of high-risk radiological material, have declined to participate in the program, and several of these facilities are located in or in close proximity to populated urban areas. NNSA has taken steps to promote the program both by speaking at conferences and through other outreach efforts. In addition, NRC and Agreement States have provided support through promotion activities, such as NRC issuing a Regulatory Issue Summary in 2010 that described the NNSA program. These are positive steps, but there are still many hospitals that are not participating in this important program. While we understand that some hospitals and medical facilities may not participate in the program due to cost concerns, the longer the security upgrades remain unimplemented, the greater the risk that potentially dangerous radiological materials from these facilities could be used as a terrorist weapon.\nNRC has taken a risk-based approach to improve the security of radiological sources at U.S. hospitals and medical facilities, but this approach is not based on facility specific security risks and results in a wide variety of security measures implemented by the medical facilities we visited. The risk-based requirements do not go far enough as several of the medical facilities we visited did not have adequate security measures in place. NRC’s security controls are designed to improve security but do not prescribe the specific measures that licensees should take to secure their sources, such as specific direction on the use of cameras, alarms, and other physical security measures. As a result, these security controls, and the manner in which they are implemented, have left some hospitals and medical facilities we visited vulnerable to possible theft or sabotage of potentially dangerous radiological sources. Furthermore, NRC’s pending regulations will require that licensees choose security measures to implement from a menu of options based on NRC’s earlier implementation guidance. Similar to the current security requirements, the pending regulations do not specify which measures best address the risks posed by hospital radiological sources, allowing medical facilities to potentially choose the least disruptive option for their operations or the most economical option regardless of the risk.\nThe limitations in NRC’s security controls are exacerbated because NRC and Agreement State inspectors may not receive adequate training from the agency on the security of high-risk radiological material at hospitals and medical facilities. According to the views of several inspectors we interviewed—the 5 days of training provided by NRC is not sufficient for inspectors who typically have a health and safety background and limited security experience. According to NRC, the training is one component for qualification to perform independent security inspections. Other components include: 1) qualification as a NRC health and safety inspector, 2) observation of security inspections conducted by other experienced security inspectors, and 3) conducting an inspection under the direct oversight of a qualified security inspector. Nevertheless, the inspectors may not be in the best position to make the most informed decisions and judgments about the security of licensees’ radiological materials. For example, we were told that an irradiator stored on a wheeled pallet located down the hall from a loading dock had not raised inspectors’ concerns during the facility’s most recent NRC security inspection. Moreover, some hospital officials, including RSOs, rely on inspectors for advice on how to implement NRC’s security controls. However, these inspectors have minimal security training, and hospital officials receive limited security guidance from NRC in how to implement the security controls. Additional vulnerabilities are created because NRC security controls do not require that medical facility officials and RSOs have security experience. Without adequate security guidance, medical facility officials, including RSOs, who may be responsible for implementing NRC’s security controls may not have adequate knowledge of securing equipment containing high-risk radiological sources. Finally, ensuring that hospitals only grant unescorted access to trustworthy individuals is critical to strengthening security, especially for securing against an insider threat. However, the current background examination process relies upon the judgment of hospital personnel, who may not have adequate experience to make that determination. For this reason, some hospital administrators told us that NRC should provide them with additional support for conducting background checks and making trustworthiness and reliability determinations as to which employees would have unescorted access to equipment containing high-risk radiological sources.",
"GAO is making four recommendations.\nBecause the security of radiological sources in hospitals and medical facilities has national security implications, and many potentially vulnerable medical facilities with high-risk sources have not received security upgrades, we recommend that the Administrator of NNSA, in consultation with the Chairman of NRC and Agreement State officials, take the following action: Increase outreach efforts to promote awareness of and participation in NNSA’s security upgrade program. Special attention should be given to medical facilities in urban areas or in close proximity to urban areas that contain medical equipment with high-risk radiological sources.\nIn addition, to help address the security vulnerabilities at U.S. hospitals and medical facilities that contain high-risk radiological materials, we recommend that the Chairman of the Nuclear Regulatory Commission take the following three actions:\nStrengthen NRC security requirements by providing hospitals and medical facilities with specific measures they must take to develop and sustain a more effective security program, including specific direction on the use of cameras, alarms, and other relevant physical security measures.\nEnsure that NRC and Agreement State inspectors receive more comprehensive training to improve their security awareness and ability to conduct related security inspections.\nSupplement existing guidance for facility officials, including RSOs, who may be responsible for implementing NRC’s security controls, in how to adequately secure equipment containing high-risk radiological sources and conduct trustworthiness and reliability determinations.",
"We provided a draft of this report to the Chairman of NRC, the Administrator of NNSA, the Secretary of Defense, and the Secretary of Veterans Affairs. NRC provided written comments on the draft report, which are presented in appendix III. In addition, NRC provided technical comments, which we incorporated as appropriate. NNSA and VA did not provide written comments but provided technical comments which we incorporated as appropriate. DOD did not provide comments.\nIn its comments, NRC agreed with one of our four recommendations and neither agreed nor disagreed with the three other recommendations. Specifically, NRC agreed that the Administrator of NNSA, in consultation with NRC and Agreement state officials, increase outreach efforts to promote awareness of NNSA’s security upgrade program, with special attention given to medical facilities in urban areas or in close proximity to urban areas that contain medical equipment with high-risk radiological sources.\nNRC neither agreed nor disagreed with our other recommendations that it (1) strengthen its security requirements by providing hospital and medical facilities with specific measures they must take to develop and sustain a more effective security program; (2) ensure that NRC and Agreement State inspectors receive more comprehensive training to improve their security awareness and ability to conduct related security inspections; and (3) train facility officials who may be responsible for implementing NRC security controls in how to adequately secure equipment and conduct trustworthiness and reliability determinations. In its comments, NRC provided additional information regarding each of these three recommendations as follows: Strengthening NRC security requirements. NRC stated that per its policy it uses a multilayered risk informed performance-based approach for the security of radioactive materials in the United States. It also stated in its comments that the requirements were developed in consultation with the Agreement States, in consideration of available intelligence reporting and security assessments performed by experts inside and outside the NRC, and are consistent with IAEA security guidelines and Executive Order 12866. We do not take issue with NRC’s statement that its performance- based approach is consistent with IAEA security guidelines and Executive Order 12866. However, we note that a more prescriptive approach for the security of radioactive materials, such as that we are recommending, is also consistent with IAEA security guidelines. In fact, the guidelines point out that a performance-based approach functions most effectively where there are professional advisors with expertise to design and implement the necessary security measures, a situation we found not to exist in many of the medical facilities we visited. With respect to Executive Order 12866, we would also note that NRC states that the requirements of the order do not apply to it. However, even if the order did apply to NRC, the order itself provides only that “to the extent feasible” agencies should adopt a performance-based approach. The order further directs agencies to which the order applies to tailor their regulations to impose the least burden possible “consistent with obtaining regulatory objectives.” We found that NRC’s current performance-based approach does not consistently ensure that NRC is meeting its objective of securing high-risk radiological sources at the 26 selected hospitals and medical facilities we visited.\nNRC also stated that in its view, our recommendation is based on four security issues identified in the report, two of which they identified as violations of the existing requirements. NRC states that the failure of a licensee to properly implement security controls established under a performance based regulatory requirement is a compliance issue, and does not mean that the intended control itself is inadequate. We recognize in our draft report that NRC has adopted a risk-based approach to radiological security and state that NRC’s security requirements are non-prescriptive, which allows licensees to develop security programs specifically tailored to their facilities. However, as we also noted in our draft report, this risk-based approach is not based on security risks specific to hospitals and medical facilities and results in a wide variety of security measures implemented by the medical facilities we visited during the course of our audit work. Consequently, we found that some of the medical equipment in the facilities we visited was more vulnerable to potential tampering or theft than that of other facilities, even though all the facilities we visited had implemented NRC’s security controls and undergone inspections by either NRC or Agreement State inspectors. Furthermore, we are not basing our recommendation, as NRC states, solely on our observations at 26 medical facilities. Rather, we are also relying on the views of law enforcement personnel from states with significant amounts of high-risk radiological material, who told us that NRC’s security controls have an inherent weakness: the security controls do not specify what the facility is protecting against and are not linked to a design basis threat. In addition, NNSA has developed a specific program to upgrade the physical security at hospitals and medical facilities in the United States, which already meet NRC’s security controls. In our view, it stands to reason that if NNSA has identified security vulnerabilities at 321 hospitals and medical facilities in the United Sates, and taken actions to address them, then NRC’s existing security controls need to be strengthened. This is not merely an issue of how licensees comply with existing security regulations but involves both the security requirements and their implementation. For these reasons, we continue to believe our recommendation that NRC strengthen its security requirements is appropriate.\nAdditional training for inspectors. NRC stated that its training course provides instruction on a performance based methodology to evaluate and assess the adequacy of a physical protection system to protect against theft or sabotage of materials identified in NRC’s security controls. NRC also stated that its one 5-day training course, in combination with on the job training and other requirements, prepares NRC and Agreement State inspectors to complete their required duties. NRC stated that it will evaluate whether any additional training enhancements are needed to its inspector qualification program based on our recommendation, and it plans to review and revise the training associated with the inspector qualification program in conjunction with pending security regulation. We are encouraged that NRC will evaluate whether any additional enhancements are needed to its inspector qualification program in response to our recommendation. We believe that NRC’s review of its training is necessary and should be completed as quickly as possible, with an eye toward adopting a more comprehensive inspector training program, as envisioned in our recommendation.\nTraining for hospital personnel. NRC recognizes our concern that there is a need to improve the licensee’s knowledge of acceptable security practices. According to NRC, as a regulator, it must maintain independent, objective oversight of licensees and may not operate in a consultative role. Therefore, NRC stated that it does not provide training to licensees but provides regulatory guidance documents to aid facility officials as they establish programs and specific controls to meet security requirements, including implementing guidance and over 200 questions and answers for the existing security requirements on its public website. However, as we stated in the draft report, even with this guidance, facility officials at 15 of the 26 hospitals and medical facilities we visited told us that they have limited security experience and no training from NRC on how to implement the security controls. In addition, the current background examination process (trustworthiness and reliability) relies on the judgment of hospital personnel, who may not have adequate experience to make that determination. Therefore, we continue to believe that medical facility officials would benefit from additional support from NRC when implementing the security controls at their facilities. Because NRC believes it cannot provide training to its licensees given its independent role as a regulator, we are modifying the recommendation to encourage NRC to supplement existing guidance and ensure that it is widely disseminated, rather than provide specific training to facility officials.\nWe are sending copies of this report to the Secretaries of the Departments of Defense, Energy, and Veterans Affairs; as well as the Administrator of the National Nuclear Security Administration; the Chairman of the Nuclear Regulatory Commission; the appropriate congressional committees; and other interested parties. In addition, the report is available at no charge on the GAO website at http://gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or gaffiganm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.",
"We focused our review primarily on the Nuclear Regulatory Commission (NRC) and the Department of Energy’s National Nuclear Security Administration (NNSA) because they are the principal federal agencies with responsibility for securing radiological material at hospitals and medical facilities in the United States. We also performed work at the Departments of Defense (DOD), Homeland Security (DHS), Justice (DOJ), and Veterans Affairs (VA) because they are also involved in securing radiological material. In addition, we interviewed experts in the field of nuclear security, representatives from state government, and safety and security personnel at hospitals and medical facilities to discuss their views on how radiological material is secured at U.S. hospitals and medical facilities. In August 2011, we attended the Organization of Agreement States (OAS) annual meeting in Richmond, Virginia, where we spoke to Agreement State representatives and attended sessions on how states oversee the security of radiological material.\nWe visited hospitals and medical facilities in California, Maryland, New York, Pennsylvania, Tennessee, Texas, Virginia, and Washington, D.C. We selected these states and Washington D.C., on the basis of geographic dispersion, curies of radiological sources, number of buildings with high-risk radiological sources in the state, and number of sites with NNSA security upgrades completed or in progress. Overall, these seven states and Washington, D.C., contain over 12 million curies, or 43 percent of all curies in U.S. hospitals and medical facilities. In addition, the seven states and Washington, D.C., have 625 hospitals and medical buildings with high-risk radiological sources, or 42 percent of all medical sites with high-risk radiological material in the United States. As of March 1, 2012, NNSA spent almost $56 million in the seven states and Washington, D.C., on assessing sites and completing upgrades, or 53 percent of the program’s total expenditure. During our review, we observed physical security upgrades at 26 hospitals and medical facilities. These sites included university and private hospitals, medical research facilities, blood banks, and cancer treatment facilities. The 26 sites we visited are a non generalizable sample, selected on the basis of the number of radiological devices in the state and the total number of cumulative curies contained in these devices in each state. In addition, we considered if the site had undergone security upgrades funded by NNSA, and whether the site is located in a large urban area. At each location, we interviewed facility staff responsible for implementing procedures to secure radiological sources. We also met with security personnel at each site, when available, and spoke to officials with local law enforcement agencies responsible for responding to security breaches. We also met with local law enforcement personnel in Los Angeles County, New York City, and Washington, D.C., to discuss coordination of security across large urban areas.\nWe received electronic data from NNSA’s G-2 database, which aggregates data from NRC’s National Source Tracking System (NSTS). To determine the reliability of these data, we conducted electronic testing and interviewed staff at NNSA and NRC about the reliability of these data. We tested these data to ensure both their completeness and accuracy, and determined that these data were sufficiently reliable to use in selecting locations to visit and summarizing by state the total number of buildings, number of buildings with completed security upgrades, and total number of curies.\nTo examine how NRC’s regulations direct the security of high-risk radiological material at U.S. hospitals and medical facilities, we reviewed information and interviewed officials responsible for overseeing and securing sources at NRC, NNSA, VA, DOD, DHS, and DOJ. We also reviewed information from Agreement States and NRC regions and interviewed officials at 20 of the 37 Agreement States and the three NRC regional offices with responsibility for overseeing high-risk radiological material. We spoke with officials about how Agreement States implement the NRC security controls from the following 20 of the 37 Agreement States: Alabama, Arizona, Arkansas, California, Colorado, Florida, Kentucky, Maryland, Massachusetts, Mississippi, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, Tennessee, Texas, Virginia, Washington, and Wisconsin. We also spoke with officials in NRC Regions I, III, and IV. We selected the Agreement State and NRC Regional Office officials based on their experience with inspecting for the security of high- risk radiological sources across the United States.\nTo learn how NRC security requirement are implemented at the facilities, we visited hospitals, medical facilities, and local law enforcement agencies in the seven states and Washington, D.C., and interviewed officials about NRC’s security requirements. To assess NRC’s new rule, approved by the NRC on March 16, 2012, we reviewed the proposed regulation and spoke with NRC officials about its implementation. To determine the extent to which NRC and Agreement State inspectors receive security training, we discussed training procedures with NRC headquarters staff, reviewed training materials, and interviewed inspectors in NRC regional offices and Agreement States about the effectiveness of the training. To determine the sufficiency of staffing and resources in the 37 Agreement States, we reviewed 40 Integrated Materials Performance Evaluation Program (IMPEP) reports conducted by NRC in 40 state programs or NRC regions from 2006 to 2011. We analyzed the IMPEP reports to assess how Agreement States are implementing NRC’s security controls.\nTo evaluate the extent to which NNSA has enhanced the security of high- risk radiological sources at U.S. hospitals and medical facilities and the challenges they face, we analyzed information and interviewed NNSA officials about the Domestic Material Protection program, which provides voluntary upgrades to facilities with high-risk radiological material. We analyzed NNSA data outlining the number of facilities that have received upgrades or are in the process of receiving upgrades and visited facilities that have received NNSA upgrades and security assessments in California, New York, Pennsylvania, Tennessee, Texas, Virginia, and Washington, D.C. To assess the voluntary nature of the program and sustainability of the upgrades, we spoke with hospital and medical facility officials about the program. To assess NNSA’s prioritization criteria and determine how much money the agency has spent on security enhancements, we gathered cost data from NNSA and contacted the agency officials who oversee the program. We also analyzed NNSA expenditure data to determine in which states NNSA has spent money on upgrades and assessments since the program began. We conducted electronic testing and discussed the reliability of these data with NNSA officials, and we determined that they were sufficiently reliable to summarize the total cost of the upgrades by state.\nWe conducted this performance audit from April 2011 to September 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"Appendix II: NRC Security Controls and Selected Pending Part 37 Regulations Changes (10 C.F.R. Part 37)\nRelevant Increased Controls and Fingerprint Order Access controls (IC 1) Licensees shall control access to radioactive material at all times and limit access only to trustworthy and reliable individuals, approved by the licensee, who require access to perform their duties.\nThe licensee shall allow only trustworthy and reliable individuals, approved in writing by the licensee, to have unescorted access to radioactive material quantities of concern and devices. The licensee shall approve for unescorted access only those individuals with job duties that require access to such radioactive material and devices. For individuals employed by the licensee for 3 years or less, trustworthiness and reliability shall be determined, at a minimum, by verifying employment history, education, and personal references. The licensee shall also, to the extent possible, obtain independent information to corroborate that provided by the employee (i.e., seeking references not supplied by the individual). For individuals employed by the licensee for longer than 3 years, trustworthiness and reliability shall be determined, at a minimum, by a review of the employees’ employment history with the licensee. In the case of a service provider’s employee, the licensee shall obtain from the service provider written verification attesting to or certifying the employee’s trustworthiness and reliability from an NRC-required background check before granting unescorted access. undergo or have undergone an FBI criminal history check. Individuals who have been determined to be trustworthy and reliable must undergo training in the licensee’s security program and procedures. The background check must cover the past 7 years (or since 18th birthday if shorter) for all employees, whether the individual is a long-time employee or a new hire. Individuals must be reinvestigated every 10 years. Part 37 provides relief from record checks and background investigations for certain categories of service provider employees (emergency response personnel, commercial vehicle drivers, and package handlers at transportation facilities).\nMonitor and Response (IC 2) Licensees shall have a documented program to monitor and immediately detect, assess, and respond to unauthorized access to radiological sources.\nA written security plan, rather than a documented program is required.\nThe licensee shall respond immediately to any actual or attempted theft, sabotage, or diversion of such radioactive material or of the devices, including requesting assistance from local law enforcement. The licensee shall have a prearranged plan with their Local Law Enforcement Agency for assistance in response to an actual or attempted theft, sabotage, or diversion of such radioactive material or of the devices consistent with scope and timing with a potential vulnerability. The licensee shall have a dependable means to transmit information between, and among, the various components used to detect and identify an unauthorized intrusion, to inform the assessor, and to summon the appropriate responder. After initiating appropriate response to any actual or attempted theft, sabotage, or diversion of radioactive material or of the devices, the licensee shall, as promptly as possible, notify NRC Operations Center. (i) A monitored intrusion detection system that is linked to an on- site or off-site central monitoring facility; or (ii) Electronic devices for intrusion detection alarms that will alert nearby facility personnel; or (iii) A monitored video surveillance system; or (iv) Direct visual surveillance by approved individuals located within the security zone; or (v) Direct visual surveillance by a licensee designated individual located outside the security zone. Licensees must assess any suspicious activity related to possible theft, sabotage, or diversion of radioactive material and notify NRC and local law enforcement as appropriate. Licensees must implement a maintenance and testing program to ensure that monitoring and detection equipment is functioning properly. Licensees are required to periodically (at least annually) review the security program to ensure its continuing effectiveness. Licensees must have a means to detect unauthorized removal of the radioactive material from the security zone.\nIndividuals with unescorted access must be fingerprinted and undergo a Federal Bureau of Investigations (FBI) criminal history check. The official responsible for determining whether individuals are trustworthy and reliable must also undergo a trustworthiness and reliability determination.",
"",
"",
"In addition to the contact name above, Gene Aloise (Director); Glen Levis (Assistant Director); Jeffrey Barron; Alysia Davis; Will Horton; Karen Keegan; Cheryl Peterson; Rebecca Shea; and Carol Hernstadt Shulman made key contributions to this report."
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{
"question": [
"What do the NRC requirements fail to complete?",
"Why do the requirements fail to ensure security?",
"What else is insufficient in terms of the NRC requirements?",
"What do the requirements provide?",
"Why were some of the medical equipment more vulnerable to potential tampering?",
"What are some examples of equipment being tampered due to low security?",
"How did NNSA allocate their money, as of March 2012?",
"What security upgrades were given to hospitals that volunteered to take part?",
"What is the proposed trajectory of surveilling these hospitals and upgrades?",
"Why may the program's impact be restricted?",
"Why might hospitals decline NNSA upgrades?",
"Why should radiological material not fall into the wrong hands?",
"What is radiological material typically used for?",
"What is NRC's duty in terms of regulating such material?",
"What aspects of the security upgrades were under review by the GAO?",
"How did GAO conduct their report?",
"What is recommended by GAO?",
"How did the NRC respond to GAO's recommendation?",
"How does NRC's response affect GAO's initial statement?"
],
"summary": [
"The Nuclear Regulatory Commission's (NRC) requirements do not consistently ensure the security of high-risk radiological sources at the 26 selected hospitals and medical facilities GAO visited.",
"One reason for this is that the requirements are broadly written and do not prescribe specific measures that hospitals and medical facilities must take to secure medical equipment containing sealed sources, such as the use of cameras or alarms.",
"In addition, some NRC and Agreement State inspectors said the training NRC requires is not sufficient.",
"Rather, the requirements provide a general framework for what constitutes adequate security practices, which is implemented in various ways at different hospitals.",
"Some of the medical equipment in the facilities visited was more vulnerable to potential tampering or theft than that of other facilities because some hospitals developed better security controls than others.",
"Some examples of poor security GAO observed included: an irradiator, used for medical research and containing almost 2,000 curies of cesium-137, was stored on a wheeled pallet down the hall from, and accessible to, a loading dock at one facility; at a second facility, the combination to a locked door, which housed an irradiator containing 1,500 curies of cesium- 137, was clearly written on the door frame; and at a third facility, an official told GAO that the number of people with unescorted access to the facility's radiological sources was estimated to be at least 500.",
"As of March 2012, the National Nuclear Security Administration (NNSA) had spent $105 million to complete security upgrades at 321 of the 1,503 U.S. hospitals and medical facilities it identified as having high-risk radiological sources.",
"Of the 26 hospitals and medical facilities that GAO visited, 13 had volunteered for the NNSA security upgrades and had received security upgrades, such as remote monitoring systems, surveillance cameras, enhanced security doors, iris scanners, motion detectors, and tamper alarms; three others were in the process of receiving upgrades.",
"However, NNSA does not anticipate completing all such security upgrades until 2025, leaving a number of facilities potentially vulnerable.",
"In addition, the program's impact is limited because, among other things, it is voluntary, and facilities can decline to participate.",
"According to police department officials in a major city, one hospital with a blood irradiator of approximately 1,700 curies has declined the NNSA upgrades due in part to cost concerns, even though the police department considers it to be a high-risk facility.",
"In the hands of terrorists, radiological material, such as cesium-137, could be used to construct a \"dirty bomb.\"",
"Such material--encapsulated in steel or titanium and called a sealed source--is commonly found in equipment used by U.S. medical facilities to treat, among other things, cancer patients.",
"NRC is responsible for regulating the commercial use of sealed sources and has relinquished its regulatory authority to 37 states, known as Agreement States.",
"GAO was asked to determine (1) the extent to which NRC's requirements ensure the security of radiological sources at U.S. medical facilities and (2) the status of NNSA's efforts to improve the security of sources at these facilities.",
"GAO reviewed relevant laws, regulations, and guidance; interviewed federal agency and state officials; and visited 26 hospitals and medical facilities in 7 states and Washington, D.C.",
"GAO recommends, among other things, that NRC strengthen its security requirements by providing medical facilities with specific measures they must take to develop and sustain a more effective security program.",
"NRC neither agreed nor disagreed with this recommendation and stated that its existing security requirements are adequate.",
"GAO continues to believe that implementing its recommendation would contribute to increased security at U.S. hospitals and medical facilities."
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CRS_R41934
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{
"title": [
"",
"Introduction",
"Background",
"Legislative History of the Ticket to Work Program",
"Ticket to Work and Self-Sufficiency Program",
"Definition of a \"Ticket\"",
"Eligibility Requirements for a Ticket",
"Employment Networks",
"Program Manager",
"Employment Network Payment Systems",
"Milestone-Outcome EN Payment System",
"Outcome-Only EN Payment System",
"State VR Agencies and ENs Serving the Same Ticket Holder (Partnership Plus)",
"Ticket Ending Period",
"Other Provisions of Ticket to Work Legislation",
"Expedited Reinstatement",
"Work Incentives Planning and Assistance",
"Protection and Advocacy for Beneficiaries of Social Security",
"SSA Demonstration Projects",
"Benefit Offset National Demonstration",
"Analysis of the Ticket to Work Program",
"Low Participation Among Social Security Beneficiaries",
"Confusion on How Work Affects Benefits",
"Employment Network Screening of Beneficiaries",
"Return-to-Work Rates Among Beneficiaries and Ticket Holders",
"SSA Measurement of Return-to-Work Rates",
"Ticket Participation and Return-to-Work Rates Vary by Demographic Group",
"Most Tickets Are Assigned to State VR Agencies",
"GAO Assessment of the Ticket to Work Program",
"Lack of Employment Network Oversight",
"SSA Temporarily Suspended Timely Progress Reviews",
"Impact of July 2008 Regulatory Changes",
"EN Participation",
"Employment Outcomes",
"Issues for Congress",
"Expand Early Intervention Services for Disabling Conditions",
"Increase Management and Oversight of ENs",
"Develop Longitudinal Measures of Return-To-Work"
],
"paragraphs": [
"",
"Title I of the Ticket to Work and Work Incentives Improvement Act of 1999 ( P.L. 106-170 ) established the Ticket to Work and Self-Sufficiency program (hereinafter referred to as the Ticket to Work or Ticket program), which is administered by the Social Security Administration (SSA). The purpose of this program is to enhance work incentives for Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) beneficiaries . The legislation created a \"ticket\" system to expand choices in the numbers and types of providers that SSDI and SSI beneficiaries may choose to assist them in receiving employment services. The legislation also expanded Medicare and Medicaid coverage for individuals with a disability who are working or could work. Most notably, the Ticket to Work program created a market for public and private providers of support services known as employment networks (ENs) to which Social Security disability beneficiaries can voluntarily assign their tickets in exchange for a range of employment support services. The goal of the Ticket program is to reduce dependence on disability benefits and help Social Security disability beneficiaries enter or reenter the workforce. ENs would then be eligible to receive payments from SSA based on ticket holders achieving employment \"milestones\" or outcomes.\nThis report provides an overview of how the Ticket to Work program operates and addresses several issues related to the Ticket program. First, it provides a brief background on the SSDI and SSI programs and a legislative history on how the Ticket program evolved. Second, this report provides an in-depth explanation on the various components and regulations of the Ticket to Work program in its current form and prior to major regulatory changes in July 2008. Third, it examines other work incentive programs created by Ticket to Work legislation and concludes with a discussion on the issues surrounding implementation of the Ticket program.",
"SSA administers two disability programs, SSDI and SSI, Titles II and XVI of the Social Security Act respectively. SSDI is an insurance program for workers and their dependents for which benefits are paid to individuals who have a disability and have worked and made contributions to the U.S. Social Security system. Individuals who collect SSDI also become entitled to coverage under the Medicare health insurance program (Title XVIII of the Social Security Act) after a 24-month waiting period.\nSSI is a means-tested disability program for low-income individuals who are aged, blind, or disabled and have limited resources. In general, individuals are eligible for SSI if their countable income falls below the federal benefit rate (FBR) and they have countable resources of less than $2,000 for an individual. In most states, beneficiaries who collect SSI are automatically entitled to coverage under the federal-state Medicaid health insurance program (Title XIX of the Social Security Act).\nIndividuals are considered to have a disability if they meet the definition established under the Social Security Act. Disability is defined as the inability to engage in any \"substantial gainful activity\" (SGA) due to a medically determinable physical or mental impairment that is expected to last for at least 12 months or result in death. SGA is defined in federal regulations as paid work involving significant and productive physical or mental duties. For 2014, the monthly SGA thresholds are $1,800 for individuals who are blind and $1,070 for individuals with other disabilities. SGA limits are adjusted annually to reflect growth in average wages.\nIn 2013, approximately 12.2 million beneficiaries collected monthly SSDI or SSI benefits. Together these two programs represent the largest disability benefit system in the nation, with combined federal expenditures of approximately $146.8 billion in 2013. Although both SSDI and SSI include a number of work incentives and offer rehabilitation services to individuals with a disability, the number of people who leave the benefit rolls to work (i.e., engage in SGA) is very small. In 2012, 0.4% of SSDI beneficiaries actually left the disability rolls because of work.\nThe small incidence of return-to-work has been partially attributed to the built-in disincentives of the SSDI and SSI programs. Because eligibility depends upon proving an inability to work, recipients risk losing both cash benefits and health insurance coverage if they successfully attempt to work.",
"Prior to the passage of Ticket to Work legislation, policy makers and advocates for individuals with disabilities had long argued that work incentives under the law were complex and difficult to understand. Some contended that several reasons for the high rate of unemployment among beneficiaries included confusing rules, arcane procedures, and disincentives built into the Social Security disability programs. Advocates noted surveys showed that most working-age people with disabilities want to work and maintained that the numerous federal regulations and program rules have the effect of discouraging otherwise qualified and eager job seekers with disabilities from seeking employment. Return-to-work legislation subsequently became the subject of several legislative proposals, congressional hearings, and a major component of the Clinton Administration's comprehensive strategy to increase employment among individuals with disabilities.\nOn March 18, 1998, President William J. Clinton established the Presidential Task Force on the Employment of Adults with Disabilities (PTFEAD). This Cabinet-level task force was charged with conducting an extensive public policy review with the goal of increasing the employment of individuals with disabilities and addressing other barriers to work among adults and young people with disabilities. PTFEAD produced a series of reports that analyzed existing federal programs and policies to determine and track changes that would be necessary to remove barriers to work, address issues surrounding health insurance coverage, and analyze employment outcomes of programs focused on youths with disabilities. Ultimately, PTFEAD's recommendations prompted the Clinton Administration to seek full funding in the FY2000 budget request for Ticket to Work programs.\nAlong with several initial cosponsors in the 106 th Congress, Senator James M. Jeffords introduced the Work Incentives Improvement Act of 1999 ( S. 331 ) on January 18, 1999, and on March 18, 1999, Representative Rick Lazio introduced the Ticket to Work and Work Incentives Improvement Act of 1999 ( H.R. 1180 ). Ticket to Work legislation garnered broad bipartisan and bicameral support. A conference report incorporating both bills into H.R. 1180 was passed by the House on October 19, 1999, by a vote of 418 to 2 and by the Senate on November 19, 1999, on a 99 to 1 vote. President Clinton signed H.R. 1180 into law on December 17, 1999, which became P.L. 106-170 .\nSpecifically, the legislation authorized (1) \"tickets\" or vouchers to beneficiaries to give them increased choice of rehabilitation providers and access to services needed to obtain and retain employment, (2) payments to employment service providers based on ticket holder achieving certain employment \"milestones\" or outcomes, (3) SSA demonstrations to test different approaches to removing barriers to employment for Title II (SSDI) beneficiaries, and (4) options for states to adopt a Medicaid \"buy-in\" program to allow beneficiaries to maintain health coverage after returning to work and a continuation of Medicare coverage to certain beneficiaries who are working.\nOn December 13, 1999, the Congressional Budget Office (CBO) produced final scoring on the budgetary effects of H.R. 1180 as passed by the House and Senate. CBO estimated modest gains in Social Security beneficiaries' future participation in the proposed expanded network of employment support services, beyond the services that were primarily offered by state VR agencies. Overall, by FY2009, CBO projected that the Ticket to Work program (Title I of H.R. 1180 ) would reduce direct spending by $53 million and $32 million for the SSDI and SSI programs, respectively, through the combination of payments to ENs and the avoidance of payments to beneficiaries whose benefits would be suspended or terminated due to earnings from work.",
"The Ticket to Work and Self-Sufficiency program was designed to address several barriers to work for individuals with disabilities through greater access to healthcare and a broader pool of employment service providers or ENs. Under the program, SSA provides eligible SSDI and SSI beneficiaries with a \"ticket\" that can be used as a voucher to obtain VR, employment and other support services from an approved EN or state VR agency. ENs are responsible for assisting ticket recipients with entering or re-entering the workforce. The program is currently administered by two contracted program managers (PMs) who report to SSA administrators.\nInitial regulations for the implementation of the Ticket program were published in the Federal Register on December 28, 2001, and the program was phased in nationally over a three-year period beginning in 2002. The program was initially available for eligible beneficiaries in 13 states and was extended to all states by September 2004.\nIn an effort to provide greater financial incentives to ENs and expand Ticket eligibility to a greater number of beneficiaries, the Ticket program underwent a number of regulatory adjustments in July 2008. Among other changes, the new rules modified the payment schedule for ENs and allowed disability beneficiaries with medical conditions that were expected to improve to also participate in the Ticket program. These beneficiaries had been previously excluded. Table A -1 in Appendix A shows a side-by-side comparison of the key components of the Ticket to Work program that were subject to the July 2008 regulatory changes and new provisions that were implemented.",
"According to SSA regulations, a \"ticket\" is a document that is issued to an eligible beneficiary that authorizes payment by SSA to an EN or state VR agency that provides employment services, vocational rehabilitation, and other support services to the beneficiary. Participation in the program is voluntary and the beneficiary chooses when and whether to assign his or her ticket to an EN. An example of a ticket is shown in Figure 1 .",
"All individuals with disabilities who are between the ages of 18 and 64 are considered eligible for a ticket if they are receiving federal SSDI or SSI cash benefits and are in current pay status. SSA is prohibited from initiating a continuing disability review (CDR) during any period for which an individual is participating in the Ticket program. Eligibility for a ticket terminates when entitlement to SSDI or SSI terminates for reasons other than work activity or earnings.",
"ENs may include any public or private entity that can provide directly, or arrange for other organizations or entities to provide employment services, VR services, or other support services. This may include state VR agencies, one-stop delivery systems under the Workforce Investment Act (WIA) of 1998, public or private schools, or employers that conduct job training programs and other employment support services. An entity applies to become an EN contractor by completing a Request for Quotation (RFQ) to SSA's Employment Networks Contract Team.\nENs assume responsibility for the coordination and delivery of services to individuals who have assigned tickets to them. SSA selects and enters into agreements with these employment networks. ENs and beneficiaries together develop an individual work plan (IWP) that provides for informed choice for each beneficiary in selecting an employment goal and specific services needed to achieve that goal. ENs have been selected to conduct vocational rehabilitation and other services for ticket holders in all 50 states and the District of Columbia. A listing of approved ENs is available by state and service-type on the Ticket to Work website or by contacting the program manager Maximus' toll-free line.",
"Ticket to Work legislation requires SSA to contract with one or more Program Managers (PMs) through a competitive bidding process to assist SSA in administering the program. SSA contracted with the Federal Services division of Maximus, a consulting and program management firm, on September 29, 2000, to assume the responsibility of PM for the Ticket program. On September 30, 2008, SSA awarded an additional contract to Maximus to serve as the Ticket Program Data Operations Center Manager (TPDOCM), responsible for maintaining electronic systems that support daily ticket operations and provide system support services and management to SSA.\nA PM can be one or more organizations in the private or public sector with expertise and experience in the field of VR or employment services. The PM is responsible for providing information to beneficiaries and the general public about the program, recruiting and recommending ENs to SSA, ensuring adequate availability of, and access to, services to beneficiaries, and providing assurance that ENs are complying with the terms of their agreements. A PM is excluded from directly providing employment services to participating individuals.\nSSA reassigned certain PM duties from Maximus, Inc. through a separate PM contract with Booz Allen Hamilton, a strategy and technology-consulting firm. On September 29, 2010, Booz Allen Hamilton was awarded a five-year PM contract to serve as Beneficiary Access and Support Services (BASS) manager with responsibility for designing, implementing, and supporting the marketing of the Ticket program as well as administering the program's call centers, website, and electronic mail. On September 29, 2010, Maximus was also awarded a five-year PM contract to serve as the Operations Support Manager (OSM), handling all activities related to ENs, including recruitment, training, and payments, in addition to managing data and other information related to the Ticket program.",
"P.L. 106-170 authorizes two payment options to ENs and state VR agencies acting as ENs for achieving an employment outcome: a Milestone-Outcome payment system and an Outcome-only payment system. Each EN or VR agency elects the payment system under which it will be paid for each individual client.\nENs use the ticket to claim payment from SSA for services they provide to ticket holders. They are paid for each month, based on either payment option limits, in which a ticket holder is not receiving benefits because the individual is working and has earnings above certain thresholds (see Figure 2 ). ENs are prohibited from seeking additional compensation from ticket holders; however, as a result of July 2008 regulatory changes, ENs are allowed to formally supplement a client's earnings through direct payments to the ticket holder.",
"As illustrated in Figure 2 , the Milestone-Outcome system provides payments to ENs of $1,357 for 2014 based on the completion of up to four Phase 1 milestones in which a ticket holder has earnings from work above the trial work period (TWP) level ($770/month for 2014). In addition, an EN can also receive up to 11 Phase 2 milestone payments for SSDI or concurrent ticket holders or up to 18 Phase 2 milestones for SSI ticket holders for months in which the beneficiary has earnings above the SGA level ($1,070 for non-blind and $1,800 for the blind for 2014). Finally, ENs can receive up to 60 outcome payments for SSI ticket holders ($234/month for 2014) and 36 payments for SSDI or concurrent ticket holders ($407/month for 2014) for months in which the ticket holder has earnings from work sufficient for zero cash benefits. For 2014, ENs can receive up to $23,680 in total payments for SSI ticket holders and up to $24,557 in total payments for SSDI ticket holders for the completion of all Milestone-Outcome phases.",
"Under the Outcome-only payment system, ENs can receive payment only for ticket holders that have earnings sufficient for a zero cash benefit status. For 2014, ENs can receive up to 36 payments at $758 a month ($27,288 in total payments) for SSDI ticket holders and up to 60 payments at $436 a month ($26,160 in total payments) for SSI ticket holders (see Figure 2 ).",
"Under prior rules, a state VR agency could elect to be paid under traditional cost-reimbursement rules, but a ticket holder would have to assign their ticket exclusively to the VR agency. In this instance, VR agencies could not elect to be paid under either EN payment system. The July 2008 regulatory changes established the Partnership Plus program, which encouraged partnerships between state VR agencies and ENs and enables a ticket holder to use the services of both entities.\nUnder Partnership Plus, SSA will compensate both state VR agencies and ENs sequentially for achieving successful employment outcomes for the same ticket holder. Following service delivery to a ticket holder and the closing of a case, a state VR agency can be reimbursed by SSA under the traditional cost-reimbursement system. Through a referral agreement, an EN can then provide additional ongoing job retention and other employment supports that may be needed by the ticket holder. The EN would then be eligible to receive Phase 2 Milestone-Outcome or Outcome-only payments based on ticket holder earnings (see Table A -1 ).",
"Under SSA regulations, a ticket period ends when (1) entitlement to SSDI benefits ends or eligibility for SSI disability benefits terminates for reasons other than work activity or earnings, (2) after a state VR agency or EN has exhausted outcome payments based on that ticket, (3) the beneficiary is no longer making timely progress toward self-supporting employment according to SSA guidelines, or (4) the beneficiary withdraws from an EN and fails to re-assign his or her ticket, within a three-month period.\nTicket holders are considered to be making timely progress toward self-supporting employment when they show an increasing ability to work at levels that will reduce dependence on benefits or by making progress toward the completion of a degree program. During the period in which a ticket is active, SSA is prohibited from conducting CDRs; however, regulations set forth guidelines for SSA to perform timely progress reviews (TPRs) to assess whether individuals are making progress toward self-supporting employment or degree completion.\nBeneficiaries are allowed up to a 12-month period to prepare for employment or school after the ticket has been issued and must be actively participating in their employment or educational plans during this period. After 12 months, beneficiaries need to show that they are progressing toward self-sufficiency by demonstrating increasing levels of earnings or college credit completion, in order to continue using the ticket. The regulations indicate measures to assess beneficiaries' progress through SSA's performance of TPRs at\n12 months in which the ticket holder is required to have worked 3 months above the TWP level or completed 60% of full-time college credits, 24 months in which the ticket holder is required to have worked 6 months above the TWP level or completed 75% of full-time college credits, 36 months in which the ticket holder is required to have worked 9 months at the SGA level or completed a 2-year program or an additional 1 year of full-time college credit, 48 months in which the ticket holder is required to have worked 9 months at the SGA level or completed an additional 1 year of full-time college credit, 60 months in which the ticket holder is required to have earnings for 6 months that are sufficient for a zero cash benefit or completed an additional 1 year of full-time college credit, 72 months in which the ticket holder is required to have earnings for 6 months that are sufficient for a zero cash benefit or completed a 4-year degree program, and successive 12-month periods in which the ticket holder is required to have earnings for 6 months that are sufficient for a zero cash benefit status.\nOnce a ticket has been assigned, ticket holders also have the option of placing their ticket in an inactive status during the initial 24-month period if they believe they will be unable to participate in the program for a prolonged period of time. This inactive period would not count against their time limitations for making progress, however, the individual would not be protected against CDRs during this period. Prior SSA rules for timely progress required ticket holders to meet similar monthly earnings thresholds at the higher SGA level (see Table A -1 ).",
"P.L. 106-170 contained several other provisions to enhance the work opportunities for individuals with disabilities. It lessened work disincentives under the Social Security statute, established SSA demonstrations, and created an advisory panel. The legislation also established two grant programs for the purpose of disseminating accurate information to beneficiaries with disabilities on work incentive programs.",
"Section 112 of P.L. 106-170 extended the time period that a SSDI, SSI, or concurrent beneficiary who returned to work may request reinstatement of benefits. If a beneficiary loses eligibility for SSDI or SSI benefits and payments due to earnings from work and his or her income falls below SGA within five years, SSA may be able to restart benefits without requiring the individual to file a completely new application. Although SSA requires individuals under this provision to apply for benefit continuation, they may receive up to six months of provisional benefits while their application is being reviewed.",
"P.L. 106-170 also authorized SSA to award one or more cooperative agreements with qualified organizations to provide benefit planning, assistance, and outreach. These Work Incentives Planning and Assistance (WIPA) programs are community-based organizations that receive grants from SSA to provide services to Social Security disability beneficiaries with free access to long-term employment planning support. At its height, the WIPA program included 102 projects nationwide. Each WIPA project has counselors called Community Work Incentives Coordinators who\nrefer beneficiaries to ENs or VR agencies, conduct outreach efforts to those beneficiaries (and their families) who are potentially eligible to participate in federal or state employment support programs, and work in cooperation with federal, state, and private agencies and nonprofit organizations that serve beneficiaries with disabilities.\nThe Benefits Planning Assistance and Outreach (BPAO) program, the predecessor to WIPA, had a much narrower focus in assisting beneficiaries to make informed choices about work options. Authorization for WIPA expired at the end of FY2011 and funding for the program lapsed on June 30, 2012; however, the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), appropriated money for WIPA in FY2013. The disbursement period for FY2013 WIPA funds is August 1, 2013, through July 31, 2014.",
"P.L. 106-170 also authorized SSA to award grants to state protection and advocacy systems authorized by the Developmental Disabilities Assistance and Bill of Rights Act under the program. Awarded under the Protection and Advocacy for Beneficiaries of Social Security (PABSS) program, these grants are in addition to the current Developmental Disability program grants. The purpose of the grants is to provide information and advice about how to obtain vocational rehabilitation, employment, advocacy, or other services that SSDI or SSI beneficiaries may need to secure or regain gainful employment.\nTicket to Work legislation stipulates that states receive funds at a level that is at least the greater of $100,000 or one-third of 1% of the amount appropriated and that grants to certain territories must be at least $50,000. The minimum payments may be increased to reflect an inflation adjustment in certain circumstances. Each protection and advocacy system that receives a grant has to submit an annual report to SSA and the Ticket to Work and Work Incentives Advisory Panel on the services provided to individuals. SSA awards grants to protection and advocacy systems in each of the 50 states and the District of Columbia, as well as Puerto Rico, Guam, American Samoa, the United States Virgin Islands, the Commonwealth of the Northern Mariana Islands, and the protection and advocacy system for Native Americans. Like WIPA, authorization for PABSS expired at the end of FY2011 and funding for the program lapsed on September 30, 2012; however, the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ) appropriated money for PABSS in FY2013.",
"SSA conducts numerous research projects to better understand how to deliver effective services to Social Security beneficiaries. The results of these projects can potentially lead to legislation or rules changes to allow for better coordination between SSA and the states or identify ways to serve beneficiaries more efficiently. Title III of P.L. 106-170 reinstated the Commissioner of SSA's authority to waive provisions of Title II of the Social Security Act for the purpose of conducting demonstrations relating to alternative methods of treating the work activity of individuals entitled to disability insurance benefits. SSA's authority to initiate new SSDI projects expired on December 18, 2005.",
"P.L. 106-170 required SSA to conduct demonstration projects under which disability benefits payable under SSDI are reduced gradually; $1 for every $2 of the beneficiary's earnings above SGA. This Benefit Offset Pilot Demonstration (BOPD) was initiated in August 2005 in four states to adequately evaluate the appropriateness of a national implementation of such a program. Under current law, individuals receiving disability benefits under SSDI who return to work have their benefits eliminated entirely after working above the SGA level, following a nine-month TWP and three-month grace period. The BOPD was expected to reduce barriers to work and allow beneficiaries to attain employment, increase earnings, and eventually become financially self-sufficient. Participants also maintain eligibility for health care benefits and other SSDI employment supports. The results of the four-state demonstration project helped to inform the development and implementation of the Benefit Offset National Demonstration (BOND) project at 10 sites across the country. The start-up tasks for the BOND project were completed in 2010 and a three-month pilot commenced in January 2011. Full project implementation began in late April 2011 and enrollment ended in September 2012. A final synthesis report on the BOND is expected in 2017.",
"According to publicly available data on the SSA website, 13.6 million active tickets have been issued to eligible beneficiaries as of December 31, 2013 (see Table 1 ). At the inception of the program, tickets were issued to beneficiaries as the Ticket to Work program rolled out in phases. Since the initial roll out, a letter and paper ticket explaining the program are automatically mailed to eligible beneficiaries. Of the 13.6 million tickets issued, 319,972 (approximately 2.4%) have been activated (i.e., the ticket has been assigned to an EN or state VR agency). Of all tickets that are in use, nearly 9 out of 10 have been assigned to state VR agencies rather than ENs. Assignment of tickets does not necessarily mean that the client is actively receiving services from an EN or state VR agency, only that the beneficiary has notified the PM that an agency or EN has been designated to provide services to them.\nIn addition, there are currently 666 ENs under contract to provide employment support services to ticket recipients as of December 31, 2013. Of the ENs under contract, 594 (89.2%) have had tickets assigned to them and 181 (27.2%) have received some type of payment from SSA for achieving a designated payment milestone for months that a ticket-holder was working while assigned to the EN. As of December 31, 2013, approximately $138.1 million in total payments have been made to ENs.\nSince the inception of the Ticket to Work program, a number of studies and evaluations have been conducted through the Advisory Panel, GAO, and the academic community. Based on a review of these various reports, the following sections provide a discussion of the key issues facing the Ticket program and matters that may be of concern to Congress.",
"The Ticket to Work program has come under increased scrutiny and criticism by policy makers for low participation rates among eligible SSDI and SSI recipients. As shown in Table 2 , only 4.1% of all beneficiaries receiving SSDI or SSI participated in the Ticket to Work program in 2010. Ticket to Work is a voluntary program, so there is no obligation upon the ticket holder to activate the ticket. Researchers and disability advocates have identified several possible contributing factors to the low participation rates.",
"First, beneficiaries that have just begun receiving cash payments from SSA may be reluctant to participate in the Ticket to Work program for fear of losing benefits. Past research has also shown that few beneficiaries were aware of SSA's work incentives programs and, among those who were aware, many were not persuaded to return to work because of them.\nTo address some of the barriers to employment that many beneficiaries face, Ticket to Work legislation specifically authorized the WIPA program to counsel beneficiaries on how work will affect their benefits. A recent evaluation revealed, among other findings, that although WIPA organizations provide support to beneficiaries who are enrolled in their services, many other Social Security disability beneficiaries do not receive the ongoing assistance that the program was intended to provide.",
"Second, ENs are only compensated by SSA when a ticket holder has an employment outcome either at the TWP or SGA levels depending on the type of payment system or—for the Milestone-Outcome system—the phase that a ticket holder has progressed through. Further, ENs are given autonomy to determine who they will accept as a client and many implement a screening process that identifies the likelihood that a ticket holder will return to work. Therefore, there is a disincentive for ENs to accept ticket holders who, in their view, may be unemployable without the use of costly services. Some ENs face significant up-front costs associated with providing employment services to ticket holders before receiving payments from SSA. ENs may focus on those individuals that require the least amount of assistance, while individuals with the most severe disabilities may be denied services by ENs.",
"SSA annually reports the percentage of beneficiaries whose benefits were terminated in the current year due to work. However, returning to work for an individual with a disability can be a complex process that may not be captured in annual statistics.",
"Researchers who have explored return-to-work rates among Social Security disability beneficiaries observe that return-to-work rates—while low by many standards—are higher when examining an individual's progress toward gainful employment over several years (or longitudinally), as opposed to the monthly or annual statistics that SSA generally reports, also known as a cross-sectional statistic.\nFor example, in any given year approximately one-half of 1% of SSDI beneficiaries leave the disability rolls (or have their benefits terminated) because of work. Yet, this statistic includes a large and entrenched group of beneficiaries who are added to, and remain on the disability rolls from year to year with no prospects of employment. However, a longitudinal study of benefit termination that followed a cohort of SSDI beneficiaries for 10 years from the time that they first entered the disability rolls found that 3.7% (or more than 7 times the published SSA statistic) of beneficiaries left the disability rolls within that time period. In addition, Ticket to Work participants were more than two-and-a-half times more likely to leave the disability rolls for the first time than non-participants.",
"Some research has shown that return-to-work rates vary significantly depending on the age or impairment of the ticket holder. Younger beneficiaries that may have many more working years ahead of them and individuals with more recent work experience are more likely to return to work. Conversely, individuals that are older and closer to retirement age or have experienced a long-term separation from the workforce are the least likely to return to work.\nIn addition, individuals with sensory impairments including the deaf and blind are more likely to attain gainful employment than individuals with more severe physical or neurological impairments. Indeed, some research has found that individuals who are blind or have low vision were more likely to assign their tickets than individuals with other disabilities.",
"One of the major purposes of Ticket to Work legislation was to expand the number of providers of public and private employment services to provide choices for whom a ticket holder could seek support. However, nearly 9 out of 10 tickets that are in use are assigned to state VR agencies. In addition, GAO found that 20 ENs in 2010 (or less than 2% of all ENs) received the majority of payments for assisting clients in achieving work goals. Ticket holders' preference for assigning their tickets to the state VR agencies may reduce the incentive for new ENs to enter the market to compete for clientele.\nPrior to implementation of the Ticket to Work program, state VR agencies managed all employment support services for SSDI and SSI beneficiaries. Following Ticket to Work legislation, ticket holders could choose to either seek services from ENs or state VR agencies, yet the vast majority of tickets were continually assigned to the state VR agencies. The July 2008 regulatory changes introduced Partnership Plus, allowing ticket holders to seek assistance from state VR agencies (which tend to be more adept at providing intensive vocational rehabilitation services), and subsequently assign their tickets to ENs for additional employment services. Growth in the number of ENs and the number of ticket holders assigning tickets to ENs has been observed, but ticket holders continue to have a clear preference for working with state VR agencies.",
"In May 2011, GAO completed their latest audit of the Ticket to Work program. Although the Ticket program has experienced growth among active ticket holders and ENs since inception, GAO identified several deficiencies that could also be contributing factors to the underperformance of the Ticket program. GAO specifically cited a need for increased managerial oversight of ENs and a lack of TPRs performed by SSA on ticket holders.",
"GAO found that between FY2007 and July 2010, the number of ENs providing employment support services to ticket holders and SSA payments to ENs increased dramatically, likely a result of the July 2008 regulatory changes that offered additional financial incentives to ENs to participate in the Ticket program. However, as mentioned earlier in this report, SSA payments were concentrated among a small minority of ENs.\nIn addition, GAO cited issues related to \"shared payments\" between ENs and their working Ticket to Work clients. Although EN payments to ticket beneficiaries had been deemed acceptable by SSA as a way for ENs to supplement the earnings of their ticket clients for various work-related purposes, this process was formalized by SSA in a new July 2008 regulatory provision. GAO found that certain ENs were marketing these shared payments to potential ticket clients as \"work-support\" payments that they would pass-on to the clients through an agreement. Additionally, these ENs would specifically target ticket holders that were either already working or ready to work, eliminating the need for the EN to provide any significant employment services. According to a disability rights advocate interviewed by GAO, these ENs essentially served as \"middlemen\" for SSA payments to ticket holders, dividing the payments between themselves and their clients.\nGAO also found deficiencies in (1) PMs' ability to maintain up-to-date listings of ENs that were still in business, (2) SSA accounting of services provided by each EN, and (3) an EN application process that did not sufficiently vet unqualified ENs from being included in the network.",
"SSA performs timely progress reviews (TPRs) to ensure that ticket-holders are making progress toward attaining gainful employment that would eventually lead to reduced reliance or cessation of disability benefits. However, at the behest of ENs, SSA temporarily suspended TPRs in 2009. During this time period, ticket holders were not subject to any oversight of their progress toward self-supporting employment as SSA is prohibited from performing CDRs (as per Ticket regulations).\nGAO found evidence that this exemption was abused by some ticket holders that would activate their tickets with an EN or state VR agency, but would not follow-through with seeking employment support from the assigned organization or agency. Without the prospect of being subject to a TPR, this strategy would protect ticket holders from any oversight, allowing beneficiaries to continue receiving payments from SSA with little accountability. A TPR could have served to identify these individuals, but SSA's suspension of TPRs allowed this to go unnoticed. Although SSA has since reinstated TPRs, GAO asserts that the resulting backlog will be too overwhelming for SSA to effectively handle.",
"As noted earlier, SSA rolled out the Ticket to Work program in three phases from February 2002 to September 2004. Between August 2004 and January 2005, GAO conducted an audit of the Ticket to Work program. In its March 2005 report, GAO noted less than 1% of the 9.5 million beneficiaries who received a ticket assigned their ticket to an EN or state VR agency. In addition, GAO found that just 386 of the 1,164-contracted ENs were accepting tickets. Although the number of contracted ENs accepting tickets increased to 752 out of 1,514 in FY2007, beneficiaries continued to assign their tickets primarily to state VR agencies.\nIn a bid to attract more providers to the Ticket to Work program, SSA made substantial changes to the EN payment system in July 2008. Specifically, SSA\nincreased the number of Milestone-Outcome payments, lowered the ticket holder earnings threshold required to trigger a payment, permitted ENs to serve a ticket holder who received services from a state VR agency (Partnership Plus), shortened the earnings period required to trigger a Milestone-Outcome payment, increased the maximum payable Milestone-Outcome amount, and increased the payment amounts for SSI-only ticket holders (see Table A-1 ).\nSSA believed that by increasing the financial incentives for ENs to participate in the Ticket to Work program, the agency could \"significantly enhance beneficiary choice and improve the likelihood that beneficiaries would receive the most effective support.\"",
"Following the July 2008 regulatory changes, the number of ENs with at least one assigned ticket during the calendar year nearly doubled, from 818 in 2007 to 1,600 in 2011 ( Table 3 ). Note that the metric \"number of ENs with at least one assigned ticket during the calendar year\" is different from the point in time metric \"number of ENs with assigned tickets\" in Table 1 . The percentage of ENs receiving at least one payment also increased, from 23.0% in 2008 to 34.6% in 2011. Furthermore, the share of ENs that reported accepting ticket assignments increased from 51% in July 2008 to 60% in December 2011.\nThe July 2008 regulatory changes also contributed to an increase in the number of new tickets assigned under the EN payment system. As shown in Figure 3 , the number of new tickets assigned under the traditional state VR cost-reimbursement system increased only 19.4% between 2007 and 2010 (from 62,000 to 74,000), whereas the number of new tickets assigned under the EN payment system increased 566.7% during the same period (from 3,000 to 20,000).\nMost of the growth in in new tickets assigned under the EN payment system is the result of an increase in tickets assigned under the Milestone-Outcome payment system. As Figure 4 illustrates, the number of new tickets assigned under the Milestone-Outcome payment system increased 472.5% following the 2008 regulatory changes (from 3,417 in 2007 to 19,564 in 2010), whereas the number of new tickets assigned under the Outcome-Only payment system decreased 53.5% (from 751 in 2007 to 349 in 2010). The increased use of the Milestone-Outcome payment system may stem from the 2008 regulatory changes that increased the number and maximum payable amount under the Milestone-Outcome payment system. The reduction in the earnings period required to trigger a Milestone-Outcome payment may have also played a role in increasing the number of new tickets assigned under the Milestone-Outcome payment system.",
"The impact of the 2008 regulatory changes on employment outcomes remains inconclusive, due in part to the economic recession of 2007-2009. The weak labor market during this period may have made it more difficult for ticket holders to obtain employment. According to a 2013 Ticket to Work evaluation report from Mathematica, \"it is not possible to disentangle the impacts of the regulatory changes from the impacts of the recession and other external factors.\"\nAs shown in Table 4 , post-2008 change participants worked an average of 18.7 fewer hours per month than pre-change participants did. The likelihood of being employed, however, did not significantly differ between pre and post-change participants. Post-change participants with a ticket assigned to an EN were employed an average of 9.2 months longer than pre-change participants under the EN payment system.",
"The Ticket to Work program introduced a new dynamic in the way SSA interacts with Social Security disability beneficiaries. Rather than simply making determinations of disability, ensuring that beneficiaries receive benefits, and recertifying eligibility, Ticket to Work further tasks SSA with facilitating a voluntary return-to-work program for the very same individuals who have been deemed unable to work.\nSince inception, SSA has faced several challenges in implementing the Ticket to Work program, including creating a way to increase participation rates and expand the number and quality of ENs that serve individuals with disabilities who are seeking to reenter the workforce. SSA has sought to address many of these challenges by implementing changes to various program components based on periodic assessments and recommendations. However, others have asserted that creating a more effective system to address the employment challenges of individuals with disabilities requires greater integration of existing disability systems, tailoring rehabilitation programs to the needs of each individual, and increasing the return-to-work incentives for people who want to rejoin or remain in the workforce, but would find it difficult without ongoing supports.",
"Some research suggests that Social Security disability programs have been slowly reactive, that is, providing benefits after a disability has become long-term and more difficult to rehabilitate. Some evidence supports the notion that supplying an individual with the necessary medical and rehabilitative support as soon as possible after the onset of a disability may help prevent the condition from worsening over time and enable that individual to return to work sooner or avoid leaving the workforce altogether.\nRecent attachment to the workforce is a significant factor in a disabled individuals' ability to return to employment following a disabling condition. In other words, the longer disabled individuals are separated from the workforce, the less likely they will be able to return to gainful employment due to factors that may include outdated skills, inadequate accommodations, or a lack of motivation. These challenges are exacerbated by a recent economic downturn that has resulted in higher unemployment rates for both the disabled and nondisabled alike.\nYet, for individuals with disabilities to receive the health insurance coverage, rehabilitative services and employment supports available through the Ticket to Work program, they must first go through the often protracted process of applying for benefits and demonstrating to SSA that they are unable to work due to a long-lasting impairment. Additionally, if a claim is denied and an individual files for a reconsideration or appeal, the application process can be further extended by months or years in some cases. The timeline can be even longer for most SSDI claimants who must sustain a five-month wait from disability-onset before they even become eligible to apply for benefits.\nCongress may move to consider authorizing SSA to expand non-monetary benefits, including medical and rehabilitative services to SSDI and SSI applicants who have not yet been approved for full benefits. The lengthy application process for benefit payments may be hindering their ability to take full advantage of the services that will enable them to eventually leave the benefit rolls due to work. The cumulative passage of time that occurs from disability-onset, the benefits application period and—for SSDI applicants—the additional five-month wait for eligibility, disengages individuals from work, may increase the severity of any untreated medical conditions, and will likely entrench their reliance on cash payments if and when a claim is eventually approved. An early intervention process that focuses on providing targeted support soon after the onset of a disability for an individual who has recently left the workforce, or is still on the job, may allow that person to continue working or quickly return to work following a brief absence. A successful early intervention effort could allow a claimant to continue working in at least a part-time capacity and receive reduced benefits or preclude the need for SSA to ever provide full disability benefits.",
"As mentioned earlier, nearly 9 out of 10 ticket holders assign their tickets to state VR agencies as opposed to ENs. This may be a relic of the pre-Ticket to Work era when state VR agencies served all SSDI and SSI beneficiaries. VR agencies are in the advantageous position of being well established in the disability community and being authorized to offer any necessary services to beneficiaries for which the agencies are reimbursed based on appropriated funds. In addition, VR agencies currently have a performance measurement process in place that identifies the outcomes of their services to clients. Ticket to Work legislation also gives VR agencies the added option of \"acting as ENs\" through electing to be paid under a Ticket to Work payment system.\nHowever, the services offered by ENs vary and according to GAO, Ticket to Work PMs do not keep an accurate, up-to-date listing of which services are offered by which EN. ENs also have the option of selecting which ticket holder they will serve, and are more likely to accept tickets from individuals that are either working or ready to work, as opposed to state VR agencies which are required to prioritize individuals with the most severe disabilities. This has possibly led to service approaches by ENs in which the Ticket to Work revenue sharing provisions have become out of line with the general goals of the Ticket program. In addition, SSA does not currently have a system in place to measure EN performance as required by law.\nIn line with GAO recommendations for the Ticket to Work program, Congress may consider authorizing SSA to\ndevelop a system to ensure that ticket holders are provided with accurate information on the services that each EN provides so they can make informed choices when seeking services; determine whether EN incentives, especially the Ticket program revenue sharing provisions, are consistent with the goals of the Ticket to Work program; and develop performance measures to identify employment outcomes of ticket holders served by ENs.",
"Consideration may also want to be given for how SSA measures return-to-work rates. The current \"snapshot\" measurement of beneficiaries whose benefits are terminated due to work is important to identify due to annual appropriations decisions. However, this cross-sectional statistic includes a large group of beneficiaries who are added to and remain on the disability rolls every year, but will never work. Supplementing cross-sectional data with a longitudinal measurement of return-to-work rates of annual SSDI and SSI cohorts could help to provide a more accurate picture of how SSA's work incentives are enabling individuals with disabilities to return to the workforce.\nAppendix A. Compilation of Key Ticket to Work July 2008 Regulatory Changes\nAppendix B. Description of Employment Network Payment Systems\nMilestone-Outcome EN Payment System\nFour Phase 1 Milestones\nFour Phase 1 milestones are available to compensate ENs for initial efforts that a beneficiary makes toward self-supporting employment. Milestone completion is based on earnings that a beneficiary makes above the TWP threshold. All Phase 1 payments to ENs are equal to 120% of the national average disability payment under SSDI (referred to as the \"payment calculation base\" or PCB) for ticket holders with earnings from work based on the following schedule:\nMilestone 1 : A beneficiary has worked for one calendar month and has gross earnings from employment for each of those months that are above the TWP threshold. Milestone 2 : A beneficiary has worked for three calendar months within a six-month period and has gross earnings from employment for each of those months that are above the TWP threshold. The month used to meet the first milestone can be included in the three months used to meet the second milestone. Milestone 3 : A beneficiary has worked for 6 calendar months within a 12-month period and has gross earnings from employment for each of those months that are above the TWP threshold. Any of the months used to meet the first and second milestones can be included in the 6 months used to meet the third milestone. Milestone 4 : A beneficiary has worked for 9 calendar months within an 18-month period and has gross earnings from employment for each of those months that are above the TWP threshold. Any of the months used to meet the first 3 milestones can be included in the 12 months used to meet the fourth milestone.\nPhase 2 Milestones\nFollowing the successful completion of Phase 1 milestones and as a ticket holder's earnings progress toward self-sufficiency, ENs can become eligible to receive a series of Phase 2 milestone payments. The earnings standard is increased to the SGA threshold for Phase 2 milestones ($1,070/month or $1,800/month if blind for 2014) as opposed to the lower TWP threshold ($770/month for 2014) under Phase 1 milestones. Monthly payments to ENs are equal to 36% of the respective PCB for SSDI ($1,130.89 for 2014) or SSI ($650.44 for 2014) for each month that a ticket holder's gross earnings from work are above SGA based on the following schedule:\nup to 11 payments for SSDI ticket holders ($471 for 2014), or up to 18 payments for SSI ticket holders ($234 for 2014).\nOutcome Phase\nIf a ticket holder's work activity satisfies the requirements for both Phase 1 and Phase 2 milestones under the Milestone-Outcome payment system, ENs can potentially collect additional monthly payments in an \"outcome\" phase for ticket holders that have earnings sufficient for a zero cash benefit status. That is, the ticket holder has sustained earnings long enough at the SGA level that they are no longer receiving any cash payments from SSA. For ticket holders that qualify for the outcome phase, ENs can receive additional payments that are also equal to 36% of the respective PCB based on the following schedule:\nup to 36 payments for SSDI ticket holders ($407 for 2014), or up to 60 payments for SSI ticket holders ($234 for 2014).\nOutcome-Only EN Payment System\nUnder the Outcome-only payment system, ENs can receive payment for ticket holders that have earnings sufficient for a zero cash benefit status. Payments for SSDI ticket holders can be made for up to 36 months and up to 60 months for SSI ticket holders. Payments to ENs are equal to 67% of the PCB for SSDI ($758 for 2014) and SSI ($436 for 2014).\nAppendix C. SSDI and SSI Employment Supports\nAppendix D. Acronyms"
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"question": [
"What was the purpose of the Title I of the Ticket to Work and Work Incentives Improvement Act of 1999?",
"What was Congress's goal in terms of the legislation?",
"What does the Ticket to Work do?",
"What types of services are provided?",
"How was the Ticket to Work program phased?",
"How does SSA relate to the program?",
"How specifically has SSA contributed to the program?",
"How many tickets are \"in-use\" and what does that entail?",
"What is the purpose of P.L. 106-170?",
"Why was the WIPA program created?",
"Why did SSA establish cooperative agreements with community-based organizations?",
"What else was established by SSA, and what was its purpose of doing so?",
"How did the Ticket to Work program change over time?",
"Why has the program been facing a lot of scrutiny?",
"What was reported by GAO in terms of the program?"
],
"summary": [
"Title I of the Ticket to Work and Work Incentives Improvement Act of 1999 (P.L. 106-170) was signed into law on December 17, 1999, and created a Ticket to Work and Self-Sufficiency program, administered by the Social Security Administration (SSA).",
"Through the Ticket to Work legislation, Congress sought to address several major work disincentives for individuals with disabilities.",
"Ticket to Work provides a \"ticket\" or voucher to working-aged Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) beneficiaries to obtain employment and other support services.",
"Services are furnished through the current system of state vocational rehabilitation (VR) agencies or a ticket holder's choice of an approved public or private sector, program-specific employment network (EN) to assist them in entering or re-entering the workforce.",
"The Ticket to Work program was phased in nationally in three stages, which began in February 2002 and concluded in September 2004.",
"By statute, SSA contracts with program managers (PMs) to administer program aspects related to ENs and ticket holders.",
"As of December 31, 2013, SSA has 666 ENs certified to provide employment support services for ticket holders in all 50 states and the District of Columbia.",
"Of the approximately 13.6 million \"active\" tickets that have been issued by SSA, 319,972 (approximately 2.4%) are \"in-use,\" that is, a disability beneficiary has assigned his or her ticket to an EN or state VR agency.",
"P.L. 106-170 also directed SSA to establish supplementary work incentive programs designed to reduce dependence on disability benefits and encourage workforce participation.",
"The Work Incentives Planning and Assistance (WIPA) program was created to disseminate accurate information to Social Security disability beneficiaries on work incentive projects.",
"SSA established cooperative agreements with community-based organizations to provide benefits planning, assistance, and outreach services to beneficiaries.",
"In addition, SSA established the Protection and Advocacy for Beneficiaries of Social Security (PABSS) program with the aim of providing information and advice about how to obtain vocational rehabilitation, employment, advocacy, or other services that SSDI or SSI beneficiaries may need to secure or regain gainful employment.",
"The Ticket to Work program underwent major regulatory changes in July 2008, which, among other adjustments, increased financial incentives for ENs and expanded the eligibility criteria for Social Security disability beneficiaries to participate.",
"The program has come under increased scrutiny by policy makers due to low SSDI and SSI beneficiary participation and lower than expected return-to-work rates among ticket holders.",
"In addition, a May 2011 Government Accountability Office (GAO) assessment reported a lack of oversight of the program that has led to service approaches among some ENs that are out of line with the general goal of the Ticket program, which is to reduce beneficiaries' dependence on benefits through earnings from work."
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CRS_RL33085
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{
"title": [
"",
"The Significance of Services",
"The GATS: The International Rules of Trade",
"The Four Modes of Delivery",
"The Structure of the GATS",
"Post-Uruguay Round Negotiations and Agreements",
"Schedule of Commitments",
"The Negotiations",
"The Evolution of the Negotiations",
"The Structure of the Negotiations",
"The Status of the DDA Negotiations and Major Issues",
"U.S. Goals17",
"Quality of Commitments",
"Regulatory Transparency",
"Commercial Presence (Mode-3)",
"Financial Services",
"Telecommunications Services",
"Express Delivery Services",
"Energy Services",
"Environmental Services",
"Distribution Services",
"Education and Training Services (ETS)",
"Professional Services",
"Other services",
"U.S. Offers",
"Major Issues in the Negotiations",
"Negotiating Format",
"Mode-4",
"Negotiations on Rules",
"Status and Prospects"
],
"paragraphs": [
"The United States and the other 153 members of the World Trade Organization (WTO) have been engaged in a set or \"round\" of negotiations called the Doha Development Agenda (DDA) since December 2001. The DDA's main objective is to refine and expand the rules by which WTO members conduct foreign trade with one another. A critical element of the DDA round is the negotiations pertaining to foreign trade in services. Trade in services has been covered under multilateral rules only since 1995 with the entry into force of the General Agreement on Trade in Services (GATS) and the Uruguay Round Agreements creating the WTO.\nThe U.S. services sector is among the world's most advanced, efficient and open, especially in such areas as financial services and telecommunication services. Services are a significant part of the U.S. economy and the source of most U.S. employment. Such is the case also with many other economically advanced countries. For many years, many in Congress and successive administrations have been pressing to make trade liberalization in services a priority in multilateral trade negotiations and a priority in the current round. In so doing, the United States has sought trade opportunities especially in developing countries for a competitive sector of the U.S. economy.\nThe U.S. business community considers the DDA negotiations in services critical to providing predictability in global markets for services. Furthermore, the outcome of the services negotiations likely will have a significant impact on the credibility of the GATS, which remains a fledgling system of rules. If the negotiations fail, it would be considered by many observers a setback for U.S. trade policy.\nCongress would have to pass implementing legislation in order for any agreement on services (or for any agreement reached during the DDA) to become part of U.S. obligations under the WTO. However, before the agreement stage, Congress plays a consultative role during the negotiations as required by the legislation granting the President the fast track trade negotiating authority. Under this authority, the President can negotiate trade agreements that would be handled under expedited congressional procedures (limited debate and no amendments). Through consultation, Members can try to ensure that the Administration fulfills negotiating objectives as set out in trade law and is otherwise protecting U.S. economic interests as the Congress perceives them. The current trade promotion expired on July 1, 2007, and will have to be renewed before any DDA agreement would receive expedited congressional consideration.\nMany Members of Congress consider the services negotiations to be a critical part, if not the most critical part of the DDA round. These Members require strong commitments from U.S. trading partners to remove barriers in trade in services as part of an overall trade agreement they could support. This report is designed to assist the 112 th Congress to understand and monitor progress of the negotiations and the major issues that the negotiators are addressing. The report provides a brief background section on the significance of services to the U.S. economy. It then explains briefly the General Agreement on Trade in Services (GATS) and the structure and agenda of the services negotiations in the DDA round, including U.S. objectives in the negotiations. The report concludes with a status report on the negotiations and an examination of potential results.",
"\"Services\" encompass an ever-widening range of economic activities. According to one definition, services are\na diverse group of economic activities not directly associated with the manufacture of goods, mining or agriculture. They typically involve the provision of human value-added in the form of labor, advice, managerial skill, entertainment, training, intermediation, and the like.\nServices differ from manufactured goods in that they are intangible, cannot be stored and must be consumed at the point of production (trips to the doctor, enjoying a meal at the restaurant). However, rapid changes in technology are reducing even these restrictions on services (computer software that can be stored online, on disks, tape, etc.; accounting services that are provided via the internet). Illustrative examples of services include wholesale and retail trade; transportation and warehousing; information; banking and insurance; professional, scientific, and technical services; education; arts and entertainment; health care and social assistance; food and accommodation services; construction; communication; and public administration.\nServices are an increasingly significant sector of the U.S. economy. In 2010, the service sector accounted for 83% of U.S. nonagricultural payroll jobs, for 65% of U.S. GDP (up from 55% in 1976). Many services have not only intrinsic value but are also critical to running other parts of large economies. For example, financial services (banking, investment, insurance) are the means by which capital flows throughout an economy from those who have it (savers, investors) to those who need it (borrowers). Financial services are often called the lifeblood of an economy. Delivery services are critical to ensuring that intermediate production goods and final end-user goods are available when needed. Distribution services (retail and wholesale services) provide the means by which goods are made available to consumers. Inefficiencies in any of these industries could have adverse consequences for the whole economy.\nU.S. trade in services, as customarily measured, plays an important role in overall U.S. trade, albeit, a much smaller role than trade in goods. In 2010 services accounted for 30% of total U.S. exports of goods and services and 17% of total U.S. imports of goods and services.\nBecause most services require direct contact between supplier and consumer, many service providers prefer to establish or must establish a presence in the country of the consumer. For example, hotel and restaurant services require a presence in the country of the consumer. Providers of legal, accounting, and construction services prefer a direct presence because they need access to expert knowledge of the laws and regulations of the country in which they are doing business and they require proximity to clients. Thus, cross-border services trade data do not capture all of the trade in services.\nData on sales of services by foreign affiliates of U.S.-owned companies and by U.S. affiliates of foreign-owned firms help to provide a more accurate, albeit still incomplete, measurement of trade in services. In 2008 (the latest year for which published data are available), U.S. firms sold $1,137 billion in services to foreigners through their majority-owned foreign affiliates (compared to $518 billion in U.S. cross-border exports). Foreign firms sold U.S. residents $727 billion in services through their majority-owned foreign affiliates located in the United States (compared to $366 billion in cross-border imports). Even these two sets of figures do not capture the total value of trade in services. Two other modes of services delivery are through the temporary movement of consumers to the location of the provider and the temporary movement of the provider to the location of the consumer. U.S. data on the sales of services via these two modes of delivery are not readily available.",
"The seeds for multilateral negotiations in services trade were planted more than a quarter century ago. In the Trade Act of 1974, the Congress instructed the Administration to promote an agreement on trade in services under the General Agreement on Tariffs and Trade (GATT) during the Tokyo Round negotiations. The Tokyo Round concluded in 1979 without a services agreement, but the industrialized countries, led by the United States, continued to press for its inclusion in later negotiations. By contrast, developing countries, whose service sectors are less advanced than those of the industrialized countries, were reluctant to have services covered by international trade rules. Eventually services were included as part of the Uruguay Round negotiations launched in 1986. During the Uruguay Round, GATT members agreed to a new set of rules for services, the General Agreement on Trade in Services (GATS), and a new agency, the World Trade Organization (WTO), to administer the GATS, the GATT, and the other Uruguay Round Agreements, known as the Marrakesh Agreement.\nTrade scholar Geza Feketekuty identifies three main challenges to constructing rules for international trade in services: (1) to target the rules at domestic regulations that are the primary sources of barriers to trade in services; (2) to distinguish the legitimate use of regulations to protect the health and safety of residents from the use of regulations to protect domestic service providers from competition; and (3) to take into account that most services transactions take place behind customs borders rather than at customs border (as in the case of like goods trade). In addition to these, one might identify a fourth challenge: technology advances, such as the introduction of the internet, make once non-tradable services, for example consulting, tradable and also have led to the rapid introduction of services products that can be \"outsourced\" across borders. All of these challenges suggest a set of rules sufficiently flexible to meet them yet sufficiently rigid to provide meaningful discipline to WTO members' activities.",
"An important element to the structure of the GATS and the negotiations to expand the coverage of the GATS has been the recognition that most services transactions are conducted inside borders and that barriers to trade in services occur inside customs barriers. Effective trade rules would have to take into account the various modes of delivery in order to discern the barriers that foreign providers of services encounter when trying to sell in a trade-partner's market. The GATS divides the modes of delivery of services into four categories. As will be discussed later, the concessions that a member country makes in opening up its services market are largely mode-dependent. The four modes of delivery are:\\\nCross-border supply (mode 1) —the service is supplied from one country to another. The supplier and consumer remain in their respective countries, while the service crosses the border. For example, a U.S. architectural firm based in Chicago is hired by a client in Mexico to design a building. The U.S. firm does the design in Chicago and sends the blueprints to its client in Mexico. Consumption abroad (mode 2) —The consumer physically travels to another country to obtain the service. A Mexican client travels to the United States to obtain the services of a U.S. architectural firm. Commercial presence (mode 3) —The supplier of a service establishes a branch, agency, or wholly owned subsidiary in another country and supplies services to the local market. A U.S. architectural firm establishes a subsidiary in Mexico to sell services to local clients. Presence of natural persons (mode 4) —Individual supplier travels temporarily to the country of the consumer. A U.S. architect travels to Mexico to provide design services to her Mexican client.",
"The GATS is an agreement among the 153 WTO members representing many levels of economic development. It provides the only multilateral framework of principles and rules for government policies and regulations affecting trade in services. The GATS remains a work in progress.\nThe preamble to the GATS sets out its overall purposes and principles:\ntrade expansion to promote economic development; progressive trade liberalization; preservation of member governments' right to regulate services sectors to meet national policy objectives; and facilitation of participation of developing countries and recognition of special circumstances of least developed countries (LDCs).\nThe GATS is divided into six parts. Part I (Article I ) defines the scope of the GATS and provides that its provisions apply\nto all services, except those supplied in the routine exercise of government authority; to all government barriers to trade in services at all levels of government—national, regional, and local; and to all four modes of delivery of services.\nPart II (Articles II-XV) presents the \" principles and obligations. \" These principles and obligations apply to all services sectors whether or not the sectors are specifically listed in a member's schedule of commitments—the list of service sectors that are to be covered by the GATS. They include\nunconditional most-favored-nation (MFN) non-discriminatory treatment— services imported from one member country cannot be treated any less favorably than the services imported from another member country; transparency— governments must publish rules and regulations to ensure that foreign providers have access to those rules and regulations; reasonable, impartial and objective administration of government rules and regulations that apply to services; and monopoly suppliers must act consistently with obligations under the GATS.\nPart II also lays out some exceptions:\na member incurring balance of payments difficulties may temporarily restrict trade in services covered by the agreement; and a member may circumvent GATS obligations for national security purposes .\nPart III (Articles XVI-XVIII) of the GATS establishes market access and national treatment obligations for members. The GATS\nbinds each member to its commitments once it has made them—a member may not impose less favorable treatment than what it has committed to; prohibits member-country governments from placing limits on suppliers of services from other member countries regarding—the number of foreign service suppliers, the total value of service transactions or assets, the number of transactions or value of output, the type of legal entity or joint venture through which services may be supplied, and the share of foreign capital or total value of foreign direct investment; requires that member governments accord service suppliers from other member countries national treatment —a WTO member service provider may not be treated any less favorably than a domestic provider of a like service; and allows members to negotiate further reductions in barriers to trade in services.\nImportantly, unlike MFN treatment and the other principles listed in Part II, which apply to all service providers more or less unconditionally, the national treatment and market access obligations under Part III are restricted. They apply only to those services and the four modes of delivery listed in each member's schedule of commitments. National treatment and market access obligations do not apply to services sectors outside the schedule of commitments. (The \" Schedule of Commitments \" is described in detail below.) This is often referred to as the positive list approach to trade commitments. (The negative list would include all services sectors unless specifically excluded.) Each member country's schedule of commitments is contained in an annex to the GATS.\nParts IV-VI (Articles XIX-XXIX) are technical but important elements of the agreement. Among other things, they require that, no later than five years after the GATS went into force, WTO members start new negotiations (which they have done) to expand coverage of the agreement, and they require that conflicts between members involving implementation of the GATS be handled in the WTO's dispute settlement mechanism .\nThe GATS also has annexes. They include annexes on MFN exemptions; financial services that allows governments to take \"prudent\" actions to protect investors or otherwise maintain the integrity of the national financial system; transportation services; telecommunication services; maritime services; and mode-4 delivery. The schedule of commitments from each WTO member are also included as an annex.",
"Signatories to the GATS determined negotiations had not been completed, but they did not want to delay the completion of the rest of the Uruguay Round agreements. The GATS stipulated that negotiations were to continue on financial services, telecommunication services, maritime services, and mode-4 delivery. The agreements reached would be included as part of the GATS when they entered into force. Agreements were concluded on basic telecommunications in February 1997 and financial services on December 1997. Negotiations on mode-4 (movement of natural persons) ended on July 28, 1995, with few results, and negotiations on maritime services ended in June 1996 without conclusion and were to resume in the current round.",
"The commitments that WTO members make regarding national treatment and market access in specific service sectors or subsectors constitute a major portion of a member's obligations under the GATS and a significant element of the negotiations during the Doha Development Agenda round. Therefore, a general explanation of what comprises a member's schedule of commitments (SC) is in order.\nEach WTO member was required to submit a SC during the negotiations of the GATS. Each new member is required to submit a schedule of commitments when it accedes to the WTO. Each of the national schedules is a part of the GATS. The SC has been compared to the tariff schedules of each WTO member; however, the schedules of commitments on services are more complex than the tariff schedules.\nThe schedule is divided into four columns. The first column lists the sector or subsector for which commitments are made. The second column lists for that sector or subsector the restrictions on market access that are to be applied for each of the four modes of delivery. The third column lists the restrictions on national treatment that are to be applied for each of the four modes of delivery. The fourth column lists any additional commitments the member has made for the sector or subsector. The schedule is also divided into two parts. In the first part, the member country identifies its horizontal commitments, that is, commitments on trade liberalization that apply to all services sectors and subsectors listed in the schedule. The second part lists the sector-specific commitments. The SCs tend to be long documents because the WTO member must identify each service sector and subsector for which it is making a trade liberalization commitment, and the member must identify the exceptions on market access and national treatment for each of the four modes of delivery for each sector and subsector.",
"The negotiations on services in the DDA have two fundamental objectives. One objective is to reform the current GATS rules and principles. The second objective is for each member country to refine and expand its schedule of commitments to increase the number of service sectors to be covered and to reduce the limitations on national treatment and market access.\nThis section examines the evolution of the current negotiations, their structure, and their status. It also discusses U.S. goals and those of other major trading partners and groups of members.",
"At the end of the Uruguay Round, the negotiators acknowledged that they needed to maintain the momentum of the service negotiations even if a comprehensive new round of negotiations was not to be launched. Thus, Article XIX of the GATS required WTO members to begin a new set of negotiations on services no later than five years after the GATS entered into force (that is, 2000) as part of the so-called WTO \"built-in agenda.\" Article XIX stipulates that participants work to resolve some conceptual and procedural issues, for example, how to provide special treatment to least developed countries.\nThe GATS also mandates that the negotiations address the issue of government subsidies in trade in services and possible countervailing actions (Article XV), emergency safeguard measures, that is, measures to counter surges in imports that cause or threaten to cause injury to a domestic industry (Article X), and government procurement in services trade (Article XIII).\nThe new services negotiations began in 2000 but progressed slowly in part because of the adverse political climate caused by the failure of the 1999 WTO Ministerial in Seattle. In March 2001, the WTO's Council for Trade in Services, the body that administers the GATS and oversees negotiations on services, approved the guidelines that shape the current set of negotiations. The guidelines incorporate the mandates and procedures rooted in the GATS. The guidelines stipulate:\nObjectives and Principles: The main objective is progressive liberalization of trade in services as a means to promote economic growth and development while recognizing the sovereign right of members to regulate services sector and introduce new regulations. Scope: All service sectors and subsectors and all modes of delivery are subject to negotiations. Negotiations on safeguards measures, were to be completed by March 2002. (That deadline was extended eventually to the end of the DDA.) Modalities and Procedures: The negotiations are to be conducted in special sessions of the Council for Trade in Services and open to all WTO members and acceding countries. The starting point of the negotiations would be the scheduled commitments at the time. The \"request-offer\" format (discussed below) is to be used for negotiating new commitments. In addition, special attention is to be given to the special needs of developing countries in requesting commitments from them and making commitments to them. (Modalities were adopted on September 3, 2003.) Furthermore, the members are to negotiate modalities on how to give negotiating credit for autonomous liberalization—reduction in trade barriers on services undertaken outside of negotiations. (On March 6, 2003, members agreed to a modality on the treatment of autonomous liberalizations.) Modalities are methods or measures, such as formulas, to negotiate trade liberalization.\nAfter the false start in Seattle, the WTO members successfully launched DDA in November 2001. The Ministerial Declaration that announced the mandates for the round folded the services negotiation into the agenda of the DDA round. The Declaration reaffirms the March 2001 guidelines but included deadlines to spur the negotiators: participants were to submit their initial requests for market access and national treatment commitments from each member by June 30, 2002, and their initial offers of commitments they would be willing to make by March 31, 2003.\nThe services negotiations floundered as deadlines passed. The rest of the DDA negotiations were on the verge of collapse after the member countries could not agree at the September 2003 Ministerial in Cancun on modalities for the agriculture negotiations and non-agricultural market access. After much consternation and discussion, WTO members forged a negotiating framework or \"package\" of objectives to put the round back on track in July 2004.\nThe framework reaffirms the mandates contained in the Doha Ministerial Declaration. The July 2004 framework specifically charged the negotiators to complete and submit their initial offers as soon as possible, to submit revised offers by May 2005 and to ensure that the offers are of \"high quality.\" These pronouncements were in response to complaints from WTO officials that only a few of the participants had met the deadlines for initial offers and the quality of those offers left much to be desired.\nAlthough the July framework mentioned services only briefly, the fact that it was mentioned at all is considered important to the U.S. business community. In so doing, the DDA negotiators placed services on par with the negotiations on agriculture and on market access for non-agricultural goods.",
"The negotiations on rules are conducted by working groups of representatives of interested members. The negotiations on national treatment and market access commitments are addressed by all members using the request-offer format.\nIn the initial phase of the negotiations, each WTO member submits its \"wish-list\" or \"request\" of what commitments it would like other members to \"offer\" to make. The negotiations then continue with each member responding to the requests with its initial \"offer\" of the commitments it would be willing to make. The process continues with more negotiations and revised offers until the parties have reached a consensus that the commitment offers of each member are acceptable. Unlike the negotiations on goods in the WTO that are conducted multilaterally among all members at the same time, the services \"request-offer\" negotiations consist of many series of simultaneous bilateral, plurilateral (many participants), and multilateral (WTO-wide) negotiations among WTO members. The final set of commitment offers or agreements must be accepted by all members to become part of the GATS.",
"The WTO services negotiations have been going on for more than five years. However, as with the negotiations in agriculture and non-agriculture market access that have proceeded slowly with missed deadlines and disappointing results. In July 2006, WTO Director-General Pascal Lamy suspended the entire DDA negotiations, including the services negotiations, because member countries could not agree on fundamental modalities for the negotiations in agriculture trade. He resumed the negotiations in 2007, continuing to the present. Negotiators from major groups of developed and developing countries worked to nail down the basic elements of a draft text; however, they failed so far to reach a consensus on the basic negotiating objectives.\nThis section reviews the main objectives of the United States and of chief trading partners and examines some of the critical issues that have emerged during the negotiations.",
"The United States presented its major goals for the negotiations in the Doha Development Agenda (DDA) Round in July 2002 in its initial set of requests, although it had stated many of the goals in earlier negotiating sessions prior to the launch of the DDA. U.S. negotiators derived these objectives during consultations with U.S. service industry representatives. The main U.S. goal is to secure as many market access commitments from as many trading partners as possible. U.S. policymakers have targeted several other goals for the services negotiations.",
"A long-standing U.S. complaint has been that the market access and national treatment commitments that were made during the Uruguay Round were not as liberal as the then-existing market environment. That is, WTO members were reluctant to commit to maintaining (or \"binding\" in WTO parlance) the market openness at the levels that were actually in place. The United States has called on countries to raise the level of bindings to actual levels to prevent slippage.",
"Government regulation is a pervasive aspect of services trade, even more so than in manufactured goods trade, in virtually all developed and developing economies. GATS rules recognize legitimate needs for governments to regulate services to ensure the health and safety of consumers, for example, by making sure that lawyers and doctors are qualified to practice their professions. However, in most governments, services sectors are regulated by different agencies depending on the service, and one service sector may be regulated by more than one government agency. Some sectors may be regulated by central or federal agencies, while others are regulated by regional or local agencies or perhaps by agencies at various administrative levels. Service providers whether domestic or foreign must be aware of regulations and regulatory procedures in order to conduct business.\nU.S. service providers have cited the lack of transparency in the development and implementation of regulations as a primary obstacle to increasing foreign trade in services in many markets, particularly in developing countries. The United States wants WTO member countries to make commitments\nto establish clear, publicly available domestic procedures for application for licenses or authorizations and their renewal or extension; to establish domestic procedures that provide for a standard formal process for informing the public of regulations or changes to existing regulations, prior to their final consideration by the relevant authority and entry into effect; and to provide opportunities for interested parties to comment and ask questions as regulations are developed, changed, and implemented.",
"U.S. service providers across a number of sectors point to the importance of establishing a commercial presence in a local market in order to conduct business. U.S. negotiators have requested from WTO members that they commit horizontally (across all sectors) to eliminate unnecessary restrictions on foreign direct investment, such as limits on the forms in which a foreign direct investment can take (partnership, branch, minority ownership, etc.).",
"Financial services include insurance, banking, securities, asset management, pension funds, financial information and advisory services. The United States has requested that trading partners make commitments to improve market access in financial services, on transparency in financial services regulations, and fairness in applying financial services regulations. Regarding insurance in particular, the United States proposed commitments to expedite new-to-market initiatives.",
"The United States requested that WTO partners increase market access in telecommunications services, including value-added services, adopt commitments made in the 1998 Telecommunications Agreement, and privatize telecommunications carriers. In addition, the United States has requested market access commitments regarding owning and leasing cable facilities.",
"The United States has requested increased access for road freight transport, order processing services, inventory management services, among other express delivery services. In addition, the United States asked WTO members to address the issue of cross-subsidization of express delivery services, where government authorized monopolies (such as first class postal services) share revenues with express delivery carriers.",
"This category includes energy exploration services, energy transmission and distribution, energy marketing and trading, and energy conservation and anti-pollution services. The United States has requested increased market access to all of these services markets. In addition, the United States has requested that trading partners make commitments regarding third-party access to and use of energy transportation facilities, such as interconnection with energy networks and grids. Energy services do not include energy generation or ownership.",
"Services that protect the environment from degradation have been another priority for the United States in the services negotiations. The United States has requested trading partners to provide increased access to markets for services related to wastewater treatment services, solid/hazardous waste management, soil and water cleanup, noise and vibration abatement, protection of biodiversity and landscape, among other environment-related areas.",
"The United States has requested trading partners to provide full market access to retail, wholesale, and franchising services. This access would include both services direct delivery to the customer or remotely through catalogue, video, or electronic sales.",
"In the context of U.S. requests, ETS includes higher education, training services, and testing services provided in universities and schools, as well as in work places. Training services include job-related courses. ETS do not include primary or secondary education, and U.S. requests for commitments to increased market access do not aim to replace public education.",
"The United States has asked that trading partners increase market access for foreign lawyers, accounts, and other providers of professional services. To do so, they should remove citizenship requirements for licensing, remove restrictions on foreign ownership, lift restrictions on form of organization (subsidiary versus branch or partnership), and remove restrictions on associations with local professionals.",
"The United States has requested increased market access for computer and related services including computer consulting, software development, data processing, and systems integration and maintenance services. It has also requested improved market access commitments for audiovisual and advertising services .",
"The United States presented its initial offer of proposed commitments on March 31, 2003, at the deadline set in the Doha Ministerial Declaration. It submitted a revised offer on May 31, 2005, meeting the deadline set in the July 2004 Framework.\nThe U.S. initial and revised offers would \"bind\" or commit the United States to maintain national treatment and market access to foreign service providers that are already in place, including improvements that have been made since the Uruguay Round agreements were enacted. In other words, the United States would commit to refrain from reducing its current level of trade liberalization.\nThe United States defends its offers arguing that its services markets are already quite open, and that it looks for WTO members to meet U.S. standards. To a large degree this is an accurate statement. Many U.S. services industries are very competitive and, therefore, can withstand foreign competition. Nations logically open their markets in the areas in which they are competitive while protecting sectors that are not competitive. Nevertheless, as will be noted later, not all U.S. WTO-trading partners have been so sanguine about the U.S. offers.\nThe U.S. offers include horizontal commitments, that is commitments that apply to all sectors and subsectors that are listed in the U.S. schedule of commitments. The horizontal commitments include the following areas:\nTemporary entry of personnel (Mode-4): The United States categorically makes no commitments regarding the temporary entry of personnel other than for specific groups of personnel most of whom would be working for foreign firms with affiliates in the United States. These include services sales persons, who sell within the company but not to the U.S. public and who are in the United States no longer than 90 days; inter-corporate transferees (managers, executives, and specialists) for up to three years with the possibility for extension for up to an additional two years; and personnel engaged in the establishment of a business entity in the United States. The United States also allows temporary entry for fashion models and service providers in other specialty occupations. Acquisition of land : The United States permits the temporary entry of personnel engaged in the acquisition of land in the scheduled services sectors and subsectors. The U.S. proposal notes, however, that the initial acquisition of federally owned land is restricted to U.S. citizens. Taxation measures: Foreigners engaged in providing scheduled services are taxed the same as U.S. residents with a few exceptions.\nBesides the horizontal commitments, the United States has offered scheduled commitments in a number of sectors and subsectors: business services, including professional services, accounting and bookkeeping, taxation services, and architectural and engineering services. The format for scheduling commitments requires WTO members to identify any national treatment and market access exceptions for each of the four delivery modes for each of the scheduled sectors and subsectors. In the case of the business services most of the exceptions relate to state restrictions or requirements on foreign service providers.\nIn addition to business services, the United States has offered to make commitments in services related to market research and public opinion polling; management consulting; computer and related services; real estate services (that is, services provided to the ownership or leasing of property); services incidental to agriculture, hunting, forestry, and fishing; express delivery and other delivery services; telecommunication services (with the national treatment exception that foreigners cannot own common carrier or radio licenses); wholesale and retail trade services and franchising; higher education; environmental services; financial services; health related and social services; travel and tourism; recreational, cultural and specialty services; transportation services (except maritime services); energy services; and construction and related services.\nDeveloping countries have criticized the United States for not offering broader commitments, arguing that the sectors in which the United States has offered commitments, such as express delivery and energy services, are not ones that would be useful to them. The European Union has criticized the United States for not offering to open maritime services and postal services to foreign competition. Developing countries and some developed countries have focused most of their criticism on U.S. commitments and offers under the mode-4 category of delivery, for example, that U.S. offers are restricted to business executives and other personnel and with close ties to foreign companies having a commercial presence in the United States. India argues that it would need access for software specialists, computer experts, and information technology engineers who would not be directly affiliated to an Indian-owned firm in the United States. (Mode-4 has proved to be one of the most contentious issues in the DDA and is discussed in more detail later.)",
"The original goal of completing the negotiations by January 1, 2005, has long passed, and deadlines accomplishing procedural steps, such as initial and revised offers, have had to be rescheduled. The complexity of the negotiations may go a long way in explaining the retarded pace, but reports by trade negotiators and discussions with experts suggest several underlying challenges.",
"Some negotiators and other observers have suggested that the \"request-offer\" negotiating format might be stalling the process. The United States and the EU separately proposed that negotiators establish \"benchmarks\" of certain targeted sectors on which WTO members would agree to make commitments. U.S. officials argued for commitments in six core sectors—financial services, telecommunications, energy, express delivery, computer and other information-related services, and audio-visual services. The EU argued for a smaller list and would allow members to choose to make commitments from a certain percentage of the core sectors for all four delivery modes.\nThe \"benchmark\" proposals met with strong opposition from many developing countries who asserted that it was too late in the negotiation to use a different negotiating format and that the established mandate for the DDA negotiations specifically requires the \"request-offer\" format to be used. (Proponents of \"benchmarks\" responded that they would be used as a supplement to the \"request-offer\" approach and not as a substitute.) Some developing countries also argued that benchmarks would probably focus on those sectors that the developed countries favored since they wield the most influence. The U.S. services business community voiced concern that focusing on benchmarks might divert the attention of negotiators and cause additional delays in the process.\nCanada proposed, supported by the United States and other developed countries, changes in the negotiating process in order to provide a jolt to the negotiations on services. For example, the United States has pressed to have countries identify more clearly concessions that they would we willing to put on the table before issues in the agriculture and non-agricultural negotiations are completed. The proposal was intended to address a frustration on the part of those countries that the current \"sequencing\" of negotiations—services to follow agriculture and non-agriculture—has frustrated the services negotiations. Developing countries have rejected the proposal and insist on maintaining the current sequencing.\nThe positive list approach (whereby members list only the sectors and subsectors that are to be covered) to market access commitments has also been criticized. The primary criticism has been that it could be a disincentive to market access liberalization: the default in the negotiations is that sectors and subsectors are not covered by WTO rules unless specifically identified and the schedules of commitments would not cover new sectors and subsectors that emerge in between rounds of negotiations.\nOn the other hand, this approach is also viewed as a more conducive way to get reluctant members, particularly developing countries, to participate in the negotiations. The United States prefers the \"negative list\" approach and has used it in free trade agreements.",
"Mode-4 delivery, temporary entry of supply personnel, has become one of the most controversial issues at this stage of the negotiations in services. It has divided many developed countries and developing countries, although differing positions have emerged among members of each category. Much of developing country criticism of the United States has been regarding mode-4. It has also created some tension between the U.S. business community and the U.S. government. All of this criticism is despite the fact that mode-4 accounts for less that 1% of world trade in services.\nThe controversy arises in part because the issue of mode-4 delivery is closely related to immigration policy in the United States and some other countries, and comes at a time when the United States has tightened restrictions in response to the attacks of September 11, 2001.\nArticle I-1(d) defines mode-4 as pertaining to the supply of a service, \"by a service supplier of one [WTO] Member, through presence of natural persons of a Member in the territory of any other Member.\" An annex to the GATS on mode-4 further states that the GATS, \"shall not apply to measures affecting natural persons seeking access to the employment market of a Member, nor shall it apply to measures regarding citizenship, residence or employment on a permanent basis.\"\nSeveral developing countries have criticized the United States for not offering more on mode-4 commitments. India has criticized the visa restrictions placed on temporary workers entering the United States, particularly workers not directly affiliated with companies located in the United States and has also called for greater transparency of U.S. immigration regulations pertaining to the temporary entry of personnel.\nThe mode-4 issue has also manifested itself as an issue of congressional authority. In July 2003, during congressional consideration of the implementing bills for the U.S.-Chile and U.S.-Singapore free trade agreements, members of the Senate Judiciary Committee and the House Judiciary Committee objected to the inclusion of changes in U.S. visa policies to allow increases in the quotas of workers entering the United States. They argued that changes in visa rules must be separate from trade legislation that is considered by Congress under expedited (fast-track) procedures. Compromises were reached to allow the two bills to be voted on, but not without bipartisan warnings from both committees that changes in visa policy should no longer be part of bilateral or multilateral trade agreements.\nThe U.S. business community has maintained that the United States needs to be more flexible in its mode-4 offers, arguing that failure to do so stalls the negotiations and prevents United States from obtaining useful commitments from developing countries. Business groups have proposed alternative mode-4 options to move the negotiations forward.",
"Not much has been accomplished regarding establishing rules on subsidies and emergency safeguard measures for services. Developing countries, especially East Asian developing countries, consider these issues a high priority. However, the negotiators have not been able to resolve basic questions, such as, what would constitute a countervailable subsidy, how would it be measured and how to measure import surges to which a WTO member could apply safeguards measures. Negotiations on government procurement have also proceeded slowly.",
"There is a general consensus that after more than 10 years the services negotiations have not progressed very far. One assessment for World Bank concluded the offers that many WTO members, especially the developing countries, have changed little from the commitments that they made under the Uruguay Round and do not reflect the actual levels of openness of their services market. The study indicates that the best offers made to date are, on average, 1.9 times more restrictive than the actual policies. In other words, WTO members have refused to even lock in (bind) the trade in services they have in place but instead want to have the option of applying more restrictions on trade in services without violating WTO commitments.\nThe prospects of the negotiations were set back when WTO Director-General Pascal Lamy suspended the DDA, including the services negotiations, indefinitely on July 24, 2006, after a meeting of the G-6 WTO members, consisting of the United States, the European Union, Japan, Australia, Brazil, and India, failed to agree on the basic conditions or modalities, for conducting the agriculture and NAMA negotiations. Although the negotiations resumed in 2007, progress on the services negotiations remains sluggish at best. Even before the suspension, the services negotiations had not been going well.\nSeveral possible reasons can be cited for the lack of progress. One is the division between developed countries that have advanced services sectors employing highly skilled labor and the developing countries with less-developed services industries. The former group seeks market opportunities for its services providers and is more willing to open its markets to competition. The latter group is more protective of its domestic services providers.\nThe halting progress in the agriculture and NAMA negotiations in the DDA has been a major impediment to the services negotiations. Some developing countries have asserted that they will not improve their offers until the United States and the European Union commit to reduce their agriculture subsidies. The developed countries want commitments from developing countries to reduce the \"water\" in their commitments, that is, the difference between the liberalization they have agreed to (bound) and their actual level of market liberalization.\nA third reason could be the complexity of the agenda of the services negotiations and the number of players involved. \"Services\" includes a broad range of economic activities many with few characteristics in common except that they are not goods. The trade barriers exporters face differ across services sectors making the formulation of trade rules a significant challenge. Furthermore, services negotiations include many participants. In addition to trade ministers, they include representatives of regulatory agencies many of whom do not consider trade liberalization a primary part of their mission.\nThe prospects for the negotiations are difficult to evaluate at this point. It is not unusual for negotiations to lag as participants wait to place their best negotiating positions on the table until just before crucial deadlines are reached.\nSeveral factors will determine if and when the services negotiations will be completed. One factor is the political will the WTO members can muster to overcome the obstacles that plague the negotiations. Another factor is the extent the various participants are willing to compromise on goals in order to reach agreements. And a third factor is how quickly the issues in agriculture and non-agriculture market access are resolved; the sooner they are resolved the sooner negotiators can devote their full attention to the services negotiations.\nFrom December 13-18, 2005, WTO trade ministers held the sixth WTO Ministerial in Hong Kong. The trade ministers were expected to emerge from meeting with modalities that would accelerate the DDA negotiations to their conclusion by the end of 2006. In the Hong Kong Ministerial Declaration, WTO members reaffirmed their commitment to complete the services negotiations with special consideration given to the needs of developing and the least developed countries. Annex C to the Declaration provides modalities and parameters for completing the negotiations.\nIn September 2007, the chairman of the trade in services negotiations began a process to develop a draft text of an agreement and called on member-country negotiators to submit contributions. However, by the end of 2007, it was clear that the countries were still sharply divided on basic objectives. Developed countries, including the United States, have argued for member-countries at a minimum to commit to binding their current practices on trade in services. Developing countries, including Argentina, argued against such benchmarks and resisted making additional commitments until developed countries commit to greater reductions of subsidies for agriculture. In July 2008, WTO General Director Lamy called a ministerial meeting in Geneva to again try to hammer out the modalities for the agriculture and NAMA negotiations. On July 26, 2008, a \"signaling\" conference was held with 32 representatives, including the United States and two representing the EU. The conference was designed to ascertain where participants stood in terms of the offers they were willing to make and the expectation they have of their trading partners. While the conference did bring to light some areas of possible commitment, it did little to move the negotiations ahead. In 2009, the WTO members held \"cluster\" meetings to try to provide some momentum with limited results. There was little accomplished in the services negotiations in 2010, in part because they remained hostage to the agriculture and NAMA and negotiations, but also because many of the participants were reluctant to go beyond current levels of liberalization.\nIn a written question submitted to Michael Punke as part of his confirmation hearing to become deputy USTR, ranking member of Senate Finance Committee Senator Charles Grassley said, \"the Doha services negotiations are bogged down. You'll need a strong services package if you want my support for an agreement.\""
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{
"question": [
"What is the DDA?",
"Why was the DDA created?",
"How does the DDA work with foreign countries?",
"How are trade in services covered?",
"Why is it typical for negotiations to be difficult to evaluate at certain points?",
"Why did WTO Director-General Pascal Lamy suspend the DDA negotiations in 2006?",
"How has the negotiations changed in the years since?",
"What does this overall illustrate?",
"What is one factor that is considered when looking at negotiation-related obstacles?",
"What is the second factor?",
"What is the third factor mentioned?",
"How will this report be updated?",
"How do Congress members view the services negotiations?",
"What do these members require?",
"Why might the DDA negotiations still be in discussion later on?"
],
"summary": [
"The United States and the other 153 members of the World Trade Organization (WTO) have been conducting a set or \"round\" of negotiations called the Doha Development Agenda (DDA) since the end of 2001.",
"The DDA's main objective is to refine and expand the rules by which WTO members conduct foreign trade with one another.",
"A critical element of the DDA round is the negotiations pertaining to foreign trade in services.",
"Trade in services has been covered under multilateral rules only since 1995 with the entry into force of the General Agreement on Trade in Services (GATS) and of the Uruguay Round Agreements creating the WTO.",
"It is not unusual for negotiations to lag as participants wait to place their best negotiating positions on the table until just before crucial deadlines are reached.",
"In July 2006, WTO Director-General Pascal Lamy suspended the DDA negotiations, including the services negotiations, because major WTO members could not agree on the terms or modalities for negotiations in agriculture and non-agriculture market access.",
"In 2009, negotiators from major groups of developed and developing countries have worked to nail down the basic elements of a draft text; however, they failed so far to reach a consensus on the basic negotiating modalities. 2010 also produced little progress as the services negotiations continued to be hostage to the negotiations on agricultural and non-agricultural market access (NAMA) negotiations, which also showed little progress.",
"In general participants have been reluctant to liberalize services trade much beyond their commitments already established in the GATS.",
"One factor is the political will the WTO members can muster to overcome the obstacles that hamper the negotiations.",
"Another factor is to what degree the various participants are willing to compromise on goals in order to reach agreements.",
"And a third factor is how quickly the issues in agriculture and non-agriculture market access are resolved; the sooner they are resolved the sooner negotiators can devote their attention to the services negotiations.",
"This report will be updated as events warrant.",
"Many Members of Congress consider the services negotiations to be a critical part, if not the most critical part, of the DDA round.",
"These Members require strong commitments from U.S. trading partners to remove barriers in trade in services as part of an overall trade agreement they could support..",
"The DDA negotiations, including the negotiations on services, could be the subject of oversight during the 112th Congress."
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CRS_R43174
|
{
"title": [
"",
"Introduction",
"Why Strategy?",
"Strategic Reviews and Reports with Statutory Requirements",
"National Security Strategy (NSS)",
"Quadrennial Defense Review (QDR)",
"National Defense Strategy (NDS)",
"National Military Strategy (NMS)",
"Quadrennial Roles and Missions Review (QRM)",
"Chairman's Risk Assessment (CRA)",
"National Defense Panel (NDP)",
"Quadrennial Homeland Security Review (QHSR)",
"Selected Strategic Reviews and Reports without Statutory Requirements",
"Department of Defense Comprehensive Review",
"Department of Defense Strategic Choices and Management Review (SCMR)",
"Quadrennial Diplomacy and Development Review (QDDR)",
"Quadrennial Intelligence Community Review (QICR)",
"Issues for Congress",
"Frequency",
"Synchronization",
"Prioritization and Assignment of Roles and Responsibilities",
"Strategy and Resourcing",
"Competition of Ideas"
],
"paragraphs": [
"",
"The U.S. government's national security system includes the organizations, structures, and processes that govern decision-making, budgeting, planning and execution, and congressional oversight of executive branch national security activities. National security strategic guidance documents, including publicly available reports and classified internal instructions, and the various review processes that help generate them, are a key element of that system. While some strategy-making activities are carried out in response to statutory requirements, others are conducted on the basis of mandates from within the executive branch. As a rule, such activities help guide policy and resourcing decisions, and convey intent to internal and external audiences.\nCore national security strategic guidance documents include the President's national security strategy (NSS), the Secretary of Defense's national defense strategy (NDS) and its associated quadrennial defense review (QDR) report, and the Chairman of the Joint Chiefs of Staff's national military strategy (NMS). In theory, these documents and review exercises are all \"nested\" with each other, such that guidance issued at higher levels of the executive branch, for example by the President, informs guidance issued at lower levels, for example by the Secretary of Defense, whose guidance, in turn, informs that issued by the Chairman of the Joint Chiefs of Staff (CJCS).\nIn recent years, other agencies have adopted analogues to the Department of Defense's (DOD) QDR process: the Department of Homeland Security's Quadrennial Homeland Security Review (QHSR), the Department of State's Quadrennial Diplomacy and Development Review (QDDR), and the intelligence community's Quadrennial Intelligence Community Review (QICR). Arguably, all of these reviews fall under the broad rubric of national security. Indeed, in recent years, many have suggested defining the concept of \"national security\" more broadly, beyond its traditional focus on national defense. The Obama Administration, at the start of its first term, declared the concepts of \"national security\" and \"homeland security\" to be \"indistinguishable,\" and it institutionalized that concept organizationally by merging the previously separate National and Homeland Security Councils. Others would stretch the concept of national security even further to include economic, energy, and/or environmental security.\nSome critics charge that executive branch processes for developing strategy are flawed because, for example, they fail to establish clear priorities, consider and apply fiscal constraints, or assign roles and responsibilities to specific agencies. Some note that executive branch conduct of strategic reviews and submission to Congress of statutorily required strategic guidance documents do not always fully comply with legislative mandates, while others note that some of the mandates themselves could be improved—for example, by better synchronizing requirements for related documents.\nFor Congress, examining and shaping the Administration's national security strategy activities may be one effective avenue for providing congressional oversight of executive branch national security activities. For example, Congress as a whole may enact or amend requirements for the conduct of strategic reviews and/or the creation and submission to Congress of strategy reports. Committees, in turn, may hold hearings to probe the processes and thinking behind required strategy reports or internal strategic review processes. And individual Members may shape the crafting or application of strategy through public statements or private correspondence with the executive branch.\nThis report provides an overview of mandates, statutory and otherwise, for key national security strategic reviews and reports; assesses recent execution; and raises issues that Congress may wish to consider as it conducts future oversight activities.",
"In general, strategy articulates \"ends\" and then links \"means\" (resources) and \"ways\" (activities that utilize those resources) in a plan of action designed to achieve those ends, in a given context. Strategy may also indicate the relative priority of each desired end. A strategy may be narrowly targeted, designed to achieve one specific goal, such as a strategy for a marketing campaign for a single new product, or it may address a broad field including multiple, prioritized objectives and initiatives, such as a company's overall strategy to succeed in the marketplace. At its best, strategy is iterative—that is, there are feedback loops in place to facilitate updating the strategy changes in the strategic environment and on lessons learned as the strategy is implemented.\nNational security strategy for the U.S. government as a whole theoretically can serve several distinct purposes:\nBy offering prioritized objectives and indicating which elements of national power are to be used to meet them, it can provide guidance to departments and agencies to use in their internal processes for budgeting, planning and executing, and organizing, training, and equipping personnel. By clearly linking goals with approaches designed to meet them, national security strategy can provide the executive branch with a key tool for internal decision-making, and for justifying requested resources and authorities to Congress. By laying out a detailed strategic vision, it can help inform public audiences both at home and abroad about U.S. government intent.\nAt the level of an individual agency, in turn, strategy can help locate that agency's efforts in the context of the national security efforts of the government as a whole; confirm agency priorities; clarify internal roles and missions; and provide a foundation for external communications including with Congress.",
"Congress has enacted, and sometimes amended, an array of requirements for the executive branch to conduct strategic reviews and/or to publish strategy documents. In many cases, these strategic efforts are required to be synchronized with each other, though in some cases, the specified timelines arguably make synchronization a challenge. Executive branch compliance with these mandates, in form and substance, has varied a great deal over time. Evaluating the effectiveness of congressional oversight of executive branch strategy-making may depend in part on how one defines \"effective strategy-making.\"",
"NSS documents are issued by the President and pertain to the U.S. government as a whole.\nRequirement: The NSS was initially required by the Goldwater-Nichols Department of Defense Reorganization Act of 1986 (Goldwater-Nichols Act), P.L. 99-433 , §603, and is codified in Title 50, U.S. Code, §3043. Contents of the mandate: The NSS is a report \"on the national security strategy of the United States\" from the President to Congress. It is required to be submitted annually on the date the President submits his annual budget request, and in addition not more than 150 days from the date a new President takes office. It must be submitted in both classified and unclassified forms. The report must address U.S. interests, goals and objectives; the policies, worldwide commitments, and capabilities required to meet those objectives; and the use of elements of national power to achieve those goals; and it must provide an assessment of associated risk. Execution: From 1987 through 2000, an NSS was submitted every year except in 1989 and 1992, though on various dates. The George W. Bush Administration submitted two NSSs—in September 2002 and in March 2006. The Obama Administration has submitted one so far, in May 2010. As a rule, recent NSS reports have described objectives and activities designed to meet those objectives; they have not as a rule directly tackled \"risk\"—that is, the gap between anticipated requirements and planned ability to meet them. NSSs to date have been resource-unconstrained. They have not typically prioritized among the objectives they describe, or delineated responsibilities across agencies of the U.S. government—nor are they required to do so.",
"Quadrennial defense reviews, required by law, are internal DOD processes designed to formulate national defense strategy, and to determine the policies, approaches, and organization required to achieve that strategy, in broad support of national security strategy.\nRequirement: The original QDR mandate was provided by the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 1997, P.L. 104-201 , §923. The requirement was amended and made permanent by the NDAA for FY2000, P.L. 106-65 , and codified in Title 10, U.S. Code, §118. The mandate has been further amended by the NDAAs for FY2002, FY2003, FY2007, FY2008, FY2010, and FY2012. The QDR was preceded by several other attempts to take a comprehensive look at defense strategy. These included DOD's Base Force work, an attempt spearheaded by then-CJCS Colin Powell to define the minimum sufficient force structure for the post-Cold War era; its results were incorporated into the President's August 1991 NSS and CJCS's January 1992 National Military Strategy. That effort was followed by DOD's 1993 Bottom-Up Review (BUR), a \"comprehensive review\" of \"defense strategy, force structure, modernization, infrastructure, and foundations,\" launched by Secretary of Defense Les Aspin that built on his work from his previous role as Chairman of the House Armed Services Committee. Contents of the mandate: The QDR itself is a review process, required to be conducted during the first year of every presidential administration. The review is required to take a 20-year outlook, and to be resource-unconstrained. The process is required to \"delineate a national defense strategy\"; to determine the force structure, modernization plans, and infrastructure required to implement that strategy; and to craft an associated budget plan. Secretary of Defense is required to deliver a report based on the review to the House and Senate Armed Services Committees the year following the year in which the QDR is conducted, no later than the date on which the President delivers his budget request to Congress. Legislation does not specify a classification level for the report. The report is required to address 16 specific points including the results of the review, as well as any other items the Secretary deems appropriate. Execution: To date, each QDR report has been submitted to Congress as required—in 1997, 2001, 2006, and 2010. The next report is due in February 2014. Substantive compliance has arguably been mixed, depending on how much detail one believes is required to meet congressional intent. For example, while QDR reports all address some capability requirements, they rarely if ever specify the \"number and type of specific military platforms.\" QDR reports typically do not prioritize among defense objectives or specifically delineate roles and responsibilities within the Department. As of mid-2013, the 2014 QDR process is reportedly underway, but many defense officials wonder whether, and to what extent, the scope and depth of the QDR may be curtailed by the conclusions of the Strategic Choices and Management Review process conducted in spring 2013.",
"National defense strategy articulates the ends that the Department of Defense will pursue to help execute the national security strategy, together with the ways and means that DOD will use to do so.\nRequirement: Title 10, U.S. Code, §118 requires that the QDR process \"delineate a national defense strategy\" and that the QDR report include a \"comprehensive discussion of the national defense strategy of the United States.\" There is no separate statutory mandate for an NDS. Contents of the mandate: §118 requires that the NDS—as part of the QDR report—be submitted to Armed Services Committees every four years, no later than the President's budget submission. There is no statutory description of the discrete contents of defense strategy, but §118 requires that it be consistent with the most recent NSS. Execution: The 1997 and 2001 QDR reports each explicitly included a national defense strategy. The 2006 and 2010 QDRs did not. Instead, DOD issued stand-alone NDSs in 2005 and 2008. In addition, on January 5, 2012, DOD issued \"Sustaining U.S. Global Leadership: Priorities for 21 st Century Defense,\" commonly referred to as the 2012 Defense Strategic Guidance (DSG). It is generally expected that this DSG will serve as the basic foundation for the QDR report due in 2014; but many have raised questions about the DSG's continued pertinence, since it explicitly did not account for the pressures on the defense budget associated with sequestration-level topline budget caps.",
"In general, national military strategy concerns the organized application of military means in support of broader national (political) goals.\nRequirement: The NDAA for FY2004, P.L. 108-136 , §903, introduced a permanent requirement for an NMS, codified in Title 10, U.S. Code, §153(b), as amended by the NDAAs for FY2012 and FY2013. While no explicit permanent mandate for an NMS was enacted until 2003, the general need for a military strategy was recognized in both law and practice much earlier. Title 10, U.S. Code, §153(a), as introduced by the Goldwater-Nichols Act, assigns responsibility to CJCS for \"assisting the President and Secretary of Defense in providing for the strategic direction of the armed forces.\" In the early 1990's, Congress enacted a temporary NMS requirement; §1032 of the NDAA for FY1991, P.L. 101-510 , required CJCS to submit to the Secretary of Defense a strategic military plan, in both classified and unclassified form, by the first day of each calendar year from 1991 through 1993. Each plan would address three different scenarios based on specified strategic contexts and fiscal constraints. For each scenario, the plan would address strategic threats, the requirements for meeting those threats, the roles and missions of the Military Services, and force structure. In turn, the Secretary of Defense was required to forward each plan to Congress—during fiscal years 1992, 1993, and 1994 respectively—together with his comments and recommendations. Before that time, it had been common practice for CJCS to craft a classified NMS as a vehicle for advising the Secretary and the President. After the expiration of the temporary mandate, CJCS issued unclassified NMSs in 1995 and 1997. Contents of the mandate: CJCS is required, every two years, to determine whether to prepare a new NMS or to update the previous one; and to submit the new NMS or update, through the Secretary of Defense, to the House and Senate Armed Services Committees by February 15 of each even-numbered year. The legislation does not prescribe the classification level. The NMS is required to be consistent with the most recent NSS, the most recent QDR, and with \"any other national security or defense strategic guidance issued by the President or the Secretary of Defense.\" Each NMS is required to address strategic challenges and opportunities; U.S. military objectives; the missions and activities required to accomplish those objectives; force planning and sizing; contributions from interagency and international partners and from contractors, and resource constraints that affect the strategy. The Secretary is required to include with the strategy transmittal any comments the Secretary considers appropriate. Execution : The first NMS issued on the basis of the permanent requirement was the 2004 National Military Strategy. It stated that it \"supports the aims of the National Security Strategy and implements the National Defense Strategy.\" While it was issued in advance of the March 2005 NDS, key concepts in both strategies were developed in tandem, for example the \"four strategic challenges\"—traditional, irregular, catastrophic, and disruptive. The subsequent, and most recent, NMS was issued in 2011, following the release of both an NSS and a QDR report in 2010.",
"While mandates have varied over time, both law and practice have long recognized the potential value of a rigorous assessment of roles and missions within DOD.\nRequirement: The permanent statutory requirement for a separate QRM review by the Secretary of Defense, in coordination with CJCS, is found in Title 10, U.S. Code,§118b, as amended by §941 of the NDAA for FY2008, P.L. 110-181 . An earlier requirement for a roles and missions review by CJCS was created by the Goldwater-Nichols Act, §201, which amended Title 10, U.S. Code to include the requirement, in §153(b), that CJCS provide the Secretary of Defense a report on the assignment of roles and missions to the armed forces. The report was to be produced not less than once every three years, or at the request of the President or the Secretary. It was to take into account threats, changes in technology, and the need to prevent unnecessary duplication of effort. There was no requirement to submit the report to Congress. The NDAA for FY2001, P.L. 107-107 , preserved the premise that CJCS should assess roles and missions but made that responsibility part of the Chairman's assessment of the QDR—thus mandating that the assessment be quadrennial rather than triennial, and that its results be presented to Congress (as part of the QDR submission). Contents of the Mandate: The current QRM mandate requires the Secretary of Defense, in coordination with CJCS, to conduct a roles and missions review every four years, and to submit a report based on the review to the Armed Services Committees no later than the submission of the President's budget request, in February of the following year. As part of the review, the Secretary is required to identify the \"core mission areas\" of the armed forces, the capabilities required to perform those missions, the assignment of responsibility within DOD for providing those capabilities, and any gaps or unnecessary duplication of effort. The Secretary is required to base these findings in part on the results of a separate, independent military review of roles and missions conducted by CJCS. P.L. 110-181 §941(c) required that the first QRM under this mandate be conducted in 2008, and that subsequent QRMs be conducted every four years beginning in 2011. Execution: To date, DOD has complied with QRM mandated timelines, submitting the first report in 2009 and the second in 2012. Some observers suggested that the 2012 QRM report—compared with its 2009 predecessor—reflected a certain lack of rigor, not least because the 2012 report appeared to pull most of its contents directly from the 2012 DSG. The next QRM report is due to Congress in 2016. Some observers have raised questions about the division of labor, in theory and in practice, between the QRM and the QDR. Statutory requirements space QRM execution and submission squarely in the middle of the QDR cycle. In theory, DOD's \"core missions,\" as laid out in the QRM, might be derived from the assessment of the strategic landscape and DOD's strategy for meeting its challenges, as laid out in the QDR and its built-in NDS. As long as the basic premises of the defense strategy still hold, which is by no means a given, a two-year gap between adjudication of defense strategy, and assessment of the appropriateness of the assignment of roles and missions for executing that strategy, might in principle allow sufficient time to gauge the effectiveness of the division of labor. However, the practice of de-linking the NDS from the QDR might distort the logic of that timeline somewhat.",
"Formal strategy-making and planning both include, by definition, a consideration of \"risk\"—the gap between what the strategy or plan is designed to accomplish, and what it would take to fully meet identified challenges. Statute requires that CJCS regularly assess the risk associated with the NMS.\nRequirement: The permanent requirement for a CRA is codified in Title 10, U.S. Code, §153(b). The original requirement was introduced by the NDAA for FY2000, P.L. 106-65 , §1033, which amended Title 10, U.S. Code, §153, adding the requirement that CJCS, not later than January 1 each year, submit to the Secretary of Defense \"a report providing the Chairman's assessment of the nature and magnitude of the strategic and military risks associated with executing the missions called for under the current national military strategy.\" The Secretary was required to forward that report to Congress, together with the annual budget request. If the Chairman assessed any \"significant\" risk, the Secretary was required to include in the transmittal to Congress a plan for mitigating that risk. The creation of a requirement to address risk associated with the NMS actually pre-dated the permanent statutory requirement for an NMS itself by several years, although it was already established practice for the CJCS to craft an NMS. The NDAA for FY2003, P.L. 107-314 , re-designated the CRA provision as §153(b), and the NDAA for FY2004, P.L. 108-136 , made the mandate biennial by substituting \"each odd-numbered year\" for the previous annual submission requirement. The NDAA for FY2012, P.L. 112-81 , § 941, refined the content of the CRA; and the NDAA for FY2013, P.L. 112-239 , §952, substantially re-organized §153 of Title 10, U.S. Code, changed the CRA back to an annual requirement, and significantly revised the required contents of the NMS as well as of the CRA. Contents of the Mandate: By current mandate, CJCS is required, every year, to prepare an assessment of risks associated with the most current NMS (or update), and to submit that assessment, through the Secretary of Defense, to the Armed Services Committees, no later than February 15. The CRA must address strategic risks to U.S. interests, and military risks to executing the missions required by the NMS, distinguishing as it does so between the probability and severity of those risks. It must give attention to fiscal constraints and address anticipated contributions by others including other U.S. agencies, international partners, and contractors. The Secretary is required to produce and submit to Congress, with the CRA, a risk mitigation plan (RMP) that addresses any \"significant\" risks identified by the CRA. The RMP must include steps designed to mitigate the risks, and it must describe the extent to which, and the timeline by which, it is anticipated that the risks will be mitigated. Execution: Over the past decade, as statutory requirements regarding CRA submission timelines were adjusted several times, DOD has submitted CRAs to Congress frequently, if not always in compliance with the current mandate at the time. The most recent CRA was submitted in April 2013. All have been submitted in classified format, although the legislation does not specify a classification level. In substance, CRAs have defined the statutory categories of strategic and military risk in somewhat varied ways, with some apparent impact on the issues selected for inclusion. The RMPs, as a rule, have struggled to distinguish between \"risks\"—that is, the gaps, given existing threats to national security, between what it would take to meet those threats and current capacity and capabilities for doing so—and simple \"threats\"; and thus the plans for \"risk mitigation\" have more typically been, instead, descriptions of ways and means designed to meet threats.",
"Many practitioners and observers have suggested the value of a competition of ideas, to spur the rigor and creativity of any strategic review process. Such a competition may be internal or external—aimed respectively at improving the process itself or at fostering a robust debate that weighs the findings of the process against alternatives. The current NDP requirement is the most recent expression of congressional interest in fostering a competition of ideas associated with the QDR.\nRequirement: The current statutory mandate for the NDP is found in Title 10 U.S. Code, §118(f), as amended most recently by §1071 of the Ike Skelton NDAA for FY2011, P.L. 111-383 . This mandate borrows its name and broad intent from a series of prior requirements. The original requirement for an NDP was introduced by §923 and 924 of the NDAA for FY1997, P.L. 104-201 , which also created the initial, one-time requirement for the 1997 QDR. That law called for a one-time \"nonpartisan, independent\" panel of universally-recognized senior defense experts to do a mid-course assessment of the DOD QDR process; to provide an assessment of DOD's review upon completion; and to conduct an \"alternative force structure assessment.\" The permanent requirement for a QDR assessment panel dates to 2006. In the wake of the 2006 QDR process, Congress, in the John Warner NDAA for FY2007, P.L. 109-364 , §1031, amended Title 10 U.S. Code, §118, to revive the basic premise of the NDP. The provision created a permanent mandate for a QDR independent panel (QDRIP) to conduct an \"assessment of the [QDR] review, including the recommendations of the review, the stated and implied assumptions incorporated in the review, and the vulnerabilities of the strategy and force structure underlying the review.\" In the NDAA for FY2010, P.L. 111-84 , §1061, Congress, without amending Title 10, provided one-time guidance, regarding panel membership and duties, for the work of the QDRIP in support of the 2010 QDR process. In terms of substance, the QDRIP was tasked that year to review the Secretary's terms of reference; assess the assumptions, strategy, findings and risks in the QDR report; conduct an independent assessment of possible force structures; and compare the resource requirements of its own alternative force structures with the QDR's budget plan. Contents of the Mandate: The current NDP mandate flows directly from that legislative history. In the Ike Skelton NDAA for FY2011, P.L. 111-383 , §1071, Congress amended Title 10, US Code, §118(f), regarding the QDRIP. It renamed the panel the National Defense Panel. And it incorporated key provisions, including the panel's mandate, from the FY2010 NDAA one-time mandate regarding the role of the QDRIP in the 2010 QDR process. By statute, the NDP must be established no later than February 1 of any year in which a QDR process is conducted. The NDP must include ten members total—two each appointed by the Chairmen and Ranking Members of the two Armed Services Committees, and two by the Secretary of Defense. And the NDP must submit its findings to the Armed Services Committees no later than three months after the date of the QDR's submission. Execution: The original NDP, constituted to support the 1997 QDR, did not meet the requirements specified by law. It found itself unable to conduct a full alternative assessment, and it did not attempt to evaluate the work of the formal QDR process. Instead, it crafted an alternative conceptual approach—the need for \"transformation\" as the foundation for determining future force structure. The QDRIP, to support the 2010 QDR, completed its final report in July 2010 and presented its findings to Congress in a public forum shortly thereafter. Rather than grade the homework of the 2010 QDR, per se, the QDRIP critically assessed the conduct of QDRs since their inception, and it called for the discontinuation of the QDR process in favor of normal DOD planning cycles and a proposed new interagency-level strategic planning process. The QDRIP did provide its own alternative strategic assessment and force structure recommendation as required by law; it did not provide the required comparative cost estimates. The NDP, to support the 2014 QDR, got off to a somewhat late start, in part to allow time for new Secretary of Defense Chuck Hagel, sworn in on February 27, 2013, to appoint the panel's leadership.",
"The U.S. government's homeland security architecture was created in response to the terrorist attacks of September 11, 2001. The QHSR (\"kisser\" in common parlance), modeled explicitly on DOD's QDR, was part of that set of changes.\nRequirement: The permanent mandate for a QHSR was introduced by §2401 of the Implementing Recommendations of the 9/11 Commission Act of 2007, P.L. 110-53 , §2401, which amended Title VII of the Homeland Security Act of 2002, P.L. 107-296 , adding §707. The requirement is codified at Title 6, U.S. Code, §347. Contents of the Mandate: Statute requires that every four years, beginning in FY2009, the Secretary of Homeland Security conduct a \"review of the homeland security of the nation.\" The review must be conducted in consultation with a number of specified governmental and nongovernmental agencies. The review must delineate a national homeland security strategy; outline and prioritize missions; describe interagency cooperation and preparedness; identify the budget plan required; assess organizational alignment; and assess the procedures of the Department of Homeland Security (DHS) for acquisition and expenditure. The legislation does not specifically require the QHSR to be consistent with the current National Security Strategy, but the requirement for consistency with \"appropriate national and Department strategies\" might be understood to include the NSS. The legislation does require, however, that the QHSR be consistent with the National Strategy for Homeland Security. The Secretary must submit a report based on the review to Congress by December 31 of the year in which the QHSR is conducted. The report is to be unclassified, and DHS is further instructed to make the report publicly available on its website. The next report is due to be conducted in 2013 and submitted to Congress by December 31, 2013. Execution: To date, one QHSR has been required; it was submitted to Congress in February 2010. The first QHSR report included a striking disclaimer up front: \"The report is not a resource prioritization document, although in identifying key mission areas for priority focus, it is highly indicative of where those priorities should lie. Nor does the QHSR detail the roles and responsibilities of Federal or other institutions for each mission area.\"",
"Departments, agencies, and the executive branch as a whole may conduct strategic reviews and craft strategic guidance apart from any congressional mandate. Such efforts have the potential to contribute constructively to U.S. national security efforts, but they may, however, raise questions for Congress concerning whether and how to provide oversight.",
"DOD's 2011 comprehensive review was reportedly driven by both strategic and budgetary imperatives. Falling under the auspices of two consecutive Secretaries of Defense, Robert Gates and Leon Panetta, the review went by several different names rather than a single acronym.\nRequirement: While DOD's 2011 comprehensive review had no explicit statutory mandate, executive and legislative branch actions variously prompted or catalyzed the conduct of the review. In April 2011, President Obama directed DOD to identify $400 billion in \"additional savings\" in the defense budget, as part of a broader effort to achieve $4 trillion in deficit reduction over 12 years. DOD's efforts to comply with that guidance received an additional jumpstart from the enactment, in August 2011, of the Budget Control Act of 2011 (BCA), P.L. 112-25 , which established topline budget caps. Contents of the Mandate: The mandate for the comprehensive review explicitly included strategy as well as resources. President Obama indicated from the outset that the search for savings should be driven by strategic considerations, calling for \"a fundamental review of America's missions, capabilities, and our role in a changing world.\" In May 2011, then-Secretary of Defense Gates, accepting the assigt from the President, stressed that DOD's review would help \"ensure that future spending decisions are focused on priorities, strategy, and risks, and are not simply a math and accounting exercise.\" And in August 2011, new Secretary of Defense Panetta confirmed that DOD was implementing the President's April guidance by conducting a \"fundamental review.\" He added that key questions in the review included: \"What are the essential missions our military must do to protect America and our way of life? What are the risks of the strategic choices we make? What are the financial costs?\" Execution: Publicly and privately, DOD officials confirmed that based on the President's guidance, DOD launched a robust, senior-level review process that gave some consideration to strategic imperatives and involved iterative engagement with the White House. According to DOD officials, the results were manifested in the January 2012 DSG and in the defense budget request for FY2013.",
"The SCMR (\"skimmer\" in common parlance), like the comprehensive review, was an internally-driven exercise nominally concerned with both strategy and resourcing.\nRequirement: The SCMR had no external mandate. Instead, it was conducted based on direction given by new Secretary of Defense Chuck Hagel in March 2013, not long after he assumed office. Contents of the mandate: Secretary Hagel assigned responsibility for the conduct of the SCMR to Deputy Secretary of Defense Ashton Carter, in coordination with the Joint Staff, and established a deadline for completion of May 31, 2013. OSD CAPE (Cost Assessment and Program Evaluation) was given day-to-day management responsibility for the effort, and the process, like recent QDR processes, was designed to be participatory. A number of participants later suggested that the SCMR was fundamentally budget-driven—designed to examine, in Deputy Secretary Carter's words, \"every nickel\" that DOD spends. DOD officials indicated that the review would be used to inform revisions to the FY2014 defense request should sequestration continue; to inform the fiscal guidance given to Military Services as they build their FY2015 and associated five-year budget plans; and to serve as the anchor for the 2014 QDR process. According to DOD officials, the SCMR considered three potential budget scenarios: the President's FY2014 budget; the BCA's sequester-level topline caps; and an \"in-between\" scenario. The review examined three substantive areas—management efficiencies and overhead reductions; compensation reforms; and changes to force structure and modernization plans. In the force structure and modernization arena, the SCMR considered the two sides of a core trade-off, between the size of the force and high-end technology. Execution: DOD concluded the SCMR on schedule, briefed the results to President Obama, and then briefed the major conclusions to Congress and also to the public. DOD officials noted that the SCMR took the 2012 DSG as its baseline. Yet the tenor of the 31 July roll-out and associated discussions underscored that the primary focus of the review was budgetary—\"the purpose\" of the SCMR \"was to understand the impact of further budget reductions on the Department, and develop options to deal with these additional cuts.\" The SCMR concluded that even the most drastic options under consideration in all three categories—efficiencies, compensation, and force structure/modernization—could help DOD meet sequester-level topline caps only toward the end of the BCA's ten-year application. DOD officials stressed that the SCMR generated ideas not decisions—it would be the 2014 QDR process, they argued, that would help DOD make tough strategic choices, and those choices would require, as a prerequisite, further clarity about fiscal constraints. Some DOD officials and outside observers have suggested that at some unspecified point of increased austerity, it becomes time to reconsider both the most fundamental aims that defense strategy seeks to realize, and the role that the U.S. intends to play on the world stage.",
"In 2010, the Department of State and the U.S. Agency for International Development issued the first—and to date only—QDDR report, based on a robust internal review process that broadly echoed the QDR process.\nRequirement: There was no external mandate for the QDDR. Secretary of State Hillary Clinton directed the State Department to conduct the review. Contents of the mandate: The QDDR process was explicitly based on the QDR and the QHSR. It was designed to consider priorities, resourcing, and organization. Execution: The QDDR report was issued in December 2010 as an unclassified public document. It explicitly proposed a reform agenda, calling for specific changes in both the focus and the organizational structure of the State Department. The QDDR report described the 2010 NSS as an overall \"blueprint,\" and specifically invoked a number of its concepts, including \"smart power\" and its approach toward development. State Department officials have suggested that there are no immediate plans to conduct a second QDDR.",
"In the wake of the 9/11 terrorist attacks, the national intelligence architecture—like that for homeland security—was overhauled, through legislation and presidential directives. None of this guidance explicitly included a requirement for an intelligence strategy or a formal review, but the advent of the QICR (\"quicker\" in common parlance) may be considered a reflection of broadly shared interest, post-9/11, in improving the ways in which intelligence supports national security writ large. The lack of an external mandate for the QICR and the classification of most of its outputs may be responsible for the relative lack of attention that has been paid to the QICR, compared to its quadrennial counterparts, in the national security debates.\nRequirement: The QICR does not have a statutory mandate, but Congress has shown interest in the possible creation of such a mandate. In its Report on the Intelligence Authorization Act for FY2006, the House Permanent Select Committee on Intelligence recommended that the Director of National Intelligence develop a \"formalized, periodic, and structured\" quadrennial intelligence review modeled on the QDR. There is also no statutory mandate for a national intelligence strategy (NIS) which might serve as a conceptual umbrella for a more detailed QICR. However, two NISs have been issued in recent years, in 2005 and in 2009, by the Director of National Intelligence (DNI), addressing both mission and organization. Contents of the mandate: QICR mandates are not statutory and do not appear to be publicly available. However, the basic quadrennial timeline, and the broad notion of considering the link between strategy and resourcing over a relatively long time frame, follow the basic contours of the QDR. Execution: QICRs have been conducted in 2001, 2005, and 2009. The first two produced classified outcomes. The third was a scenario-based exercise, looking out to 2025, which considered an array of alternative futures and the missions that would be required to address them. The 2009 QICR unclassified report merely described the scenarios; a separate, classified QICR Final Report reportedly addressed the implications of those scenarios for missions and capabilities.",
"Over time, there has been no shortage of debate and commentary about the role of \"strategy\" in the national security system, which also includes decision-making, budgeting, planning and execution, and congressional oversight. Attention has been focused on both congressional requirements for strategic reviews and reports, and execution of those activities by the executive branch. This section highlights issues that have been raised in these debates, and provides questions which, among others, Congress may wish to consider in evaluating current performance and considering proposals for change.",
"Most observers would suggest that the optimal frequency for any given national security strategic review would balance the need to update strategic thinking based on changing circumstances and priorities, with the need to provide sufficient continuity for effective and efficient execution. The available time of senior leaders and their staffs might also be a consideration. In the defense arena of national security, Congress requires the submission of a national security strategy (NSS) at least once per year, of a national defense strategy (NDS) as part of the quadrennial defense review (QDR) report every four years, and of a national military strategy (NMS) or update every two years.\nSome observers have suggested that in today's fast-paced, globalized age, any written document is by definition too static—that agencies need more frequently updated internal guidance, and that both Congress and the public can gain a more accurate understanding of current Administration intent from public statements and congressional testimony.\nOthers still see a role for formal strategic reviews and published strategic guidance, but question currently mandated frequency. In particular, some have questioned the rationale for requiring a new NSS every year, arguing that the broad contours of the global security environment do not change rapidly enough to warrant a complete overhaul of the nation's basic outlook that frequently. Responses to specific changes in the global environment might be captured instead, they suggest, in specific policies or approaches. Too-frequent NSSs, they add, might introduce the risk of routinization. A number of observers, following that line of thinking, have proposed that NSSs be crafted and issued less frequently—for example, once every four years, rather than annually.\nEvaluating the advisability of possible revisions to statutory requirements regarding the frequency of strategy-crafting is complicated somewhat by the fact that, in practice, Administrations do not always comply with mandated frequency. For example, the George W. Bush Administration submitted only two NSSs in two terms, while the Obama Administration, by six months into its second term, had submitted only one. Such non-compliance can make it difficult to gauge the value of strategy mandates as written.\nBalancing real-world change with the importance of consistency for effectiveness and efficiency, how frequently should each key strategic review be conducted, and each key piece of strategic guidance issued? Does it make sense, in principle, that the higher-level the strategy—for example, national-level strategy versus strategy for a single Department—the less frequently it is likely to require substantial revision? What, if any, would be the costs of taking too long to revise a strategy, or of revising a strategy too frequently? At what point does the value of iterative strategy-generation run into the problem of diminishing returns? Does the failure of many Administrations to comply with the statutorily mandated frequency for NSS submissions suggest that Administrations need to be reminded of this statutory provision? Does it suggest, instead, that the requirement is not realistic and/or necessary? And in any case, what is the appropriate locus in Congress for NSS oversight responsibility?",
"In theory, it might make sense that national-level strategic guidance inform agency-level strategic guidance, which would in turn inform the strategies of agency components; and that individual agency strategies under the broad national security umbrella constructively inform each other. For example, the NSS might inform the QDR and its NDS, and they, in turn, might inform the NMS and the Chairman's risk assessment (CRA). In turn, the QDR, the quadrennial diplomacy and development review (QDDR), the quadrennial homeland security review (QHSR), and the quadrennial intelligence community review (QICR) all might cross-reference each other, to ensure that there are no conceptual disconnects, and no major gaps or unnecessary overlaps, in implementing the NSS. Statute explicitly requires some of this synchronization, and some non-statutorily-mandated strategic efforts explicitly note their relationships to other strategic reviews or guidance.\nTo make such synchronization possible, the timelines, formal or otherwise, for the conduct of reviews and the submission of reports, must line up appropriately. In principle, a strategic review may inform another by taking place earlier, although not too much earlier; and it could also do so while taking place concurrently if the two efforts are properly coordinated.\nIn the defense arena, current submission timelines are fairly well-suited for logical, sequential development of strategies. The QDR report and its accompanying NDS are due to Congress at the beginning of an Administration's second calendar year in office, by the date the President submits the budget for the next fiscal year. The NSS is due to Congress on the same day. In theory, the QDR report and defense strategy could draw on the previous year's NSS, required \"150 days\" after an Administration takes office, and on the concurrent development process for the second-year NSS. The NMS, in turn, is required to be submitted to Congress by February 15 of even-numbered years—that is, just several days after the submission of the NSS, and either several days, or two years and several days, after the submission of the QDR report with its accompanying NDS. By these timelines, development of the NMS could draw on the defense strategy from two or four years earlier, as well as on the concurrent NDS/QDR process.\nIn practice, review and reporting timelines have been less coherent. In the defense arena of national security, for example, the 2001 QDR Report (with its embedded NDS) was issued in September 2001, before the George W. Bush Administration issued its first NSS (September 2002) from which the NDS might naturally take guidance. The NMS followed, but not until 2004, arguably a significant gap after the preceding NDS; and its publication almost immediately preceded the publication of the next NDS (March 2005), which arguably trumped the 2004 NMS. The 2005 NDS, in turn, preceded its \"accompanying\" QDR Report (February 2006) by almost a year, while that QDR Report was published just ahead of a new NSS (March 2006), which ought, arguably, to have informed the QDR process.\nHow important is it that national security-related strategic efforts at all levels reinforce each other? What are the potential pitfalls of developing strategy at lower levels without higher-level strategic top cover? What are the potential benefits, if any, of strategy-formulation unconstrained by parameters set by other strategies? To what extent does current statute support synchronization? To what extent if any might adjustments to statutory timelines help foster greater synchronization?",
"Most observers consider that both prioritization and the assignment of roles and responsibilities are critical for the effective, efficient implementation of strategy.\nAttention to prioritization during a strategic review process can improve the rigor of that process, providing a clear, agreed framework for making follow-on programmatic and policy decisions. Prioritization of objectives and activities by leadership at one level can help leaders at the next subordinate level more appropriately shape their own strategies and focus their planning and budgeting. And prioritization can also facilitate clearer communications with key audiences, including Congress and international partners.\nThe assignment of roles and responsibilities, in turn, is typically necessary because many missions could be performed, in principle, by any of several different agencies or components. At the national level, for example, a call to strengthen international partnerships could be met through military exercises led by DOD, development assistance programs led by the U.S. Agency for International Development, or participation in multi-lateral organizations led by the Department of State, among other options. If systemic-level priorities are named, but roles and responsibilities are not assigned, subordinate agencies or components may assume that the systemic-level priorities apply to each of them equally and that they should each apply their own respective tool kits against those priorities. Clear assignment of roles and responsibilities could help agencies, or agency components, far more effectively plan and resource; could help prevent unnecessary duplication of effort; and could help ensure that there are no major gaps in responsibility for strategy implementation.\nGenerally speaking, most recent strategic efforts—reviews and reports—have not prioritized the objectives or missions they prescribe, or assigned roles and responsibilities for implementing various facets of the strategy. For example, the 2012 defense strategic guidance (DSG) named ten \"priority missions\" but did not prioritize among those missions, and did not assign responsibility for those missions to specific actors. Those strategic reviews and reports that have statutory mandates are, as a rule, not required by law either to prioritize or to assign roles and missions.\nSome observers trace the failure to include sufficiently specific guidance in strategy documents to the fact that explicit prioritization may not always be appropriate for unclassified discussions and publications. Some point to a tension between the need to provide detailed guidance to subordinates who will implement it, and the need to explain—and sell—a strategic vision to broader, potentially skeptical, public audiences. Those two imperatives may not be easily reconcilable in a single product.\nFrustration with the lack of prioritization and assignment of roles and responsibilities has prompted some to call for institutionalizing the use of national security planning guidance (NSPG)—classified, internal guidance, at the national level, that includes both priorities and specific assignments. Such guidance could be one product of a strategic review process that could also generate an unclassified strategic guidance document—typical national security strategy—thus satisfying the requirements of two audiences, internal and external, in one broad effort. Such a process might be modeled loosely on DOD processes, in which a strategic review, the QDR, informs the production of both unclassified strategic documents for public consumption, including the QDR Report and its organic NDS; and internal classified guidance that does prioritize and assign responsibilities, such as the Guidance for the Employment of the Force (GEF), which reportedly names specific overall and Combatant Command-based priorities; and the Defense Planning Guidance (DPG), which reportedly assigns responsibilities, lead and supporting, to specific Military Services, agencies and components. In its \"Beyond Goldwater-Nichols\" project, the Center for Strategic and International Studies called for institutionalizing the use of a national-level Quadrennial National Security Review (QNSR) that would yield both NSPG and unclassified national security strategy; and the 2006 QDR echoed the call for the use of NSPG. Congress took one step in this direction, in §1032 of the NDAA for FY2012, by requiring the President to issue national security planning guidance—specifically including priorities and assigned roles—in the arena of counter-terrorism.\nDo current strategic efforts in the arena of national security sufficiently prioritize among national interests, objectives, and the approaches designed to achieve those objectives? Do such strategic efforts sufficiently assign roles and responsibilities for executing the strategy to subordinate agencies and components? To what extent if any might additional statutory mandates to incorporate prioritization and/or the assignment of roles and responsibilities into strategic reviews and reports be likely to produce constructive changes? What are the potential advantages and drawbacks, if any, of institutionalizing the use of national security planning guidance?",
"Both in practice and in theory, the relationship between strategy-making and resourcing can be fraught. Experts and practitioners differ markedly regarding how the two exercises ought to inform each other.\nSome argue that good strategy should begin with resource-unconstrained consideration of the strategic context, U.S. national interests, U.S. objectives, and approaches designed to achieve those objectives, before considering the fiscal implications. Others argue that—particularly in tougher economic times—strategy is only germane if it takes into account current fiscal realities. In theory that might be done in a number of ways, for example by predicating strategy on a single set of fiscal assumptions, or by testing draft strategy against several different fiscal scenarios.\nAs a rule, statutory mandates for strategic reviews and reports do not require the incorporation of fiscal constraints. Indeed, the mandate for the QDR—which is required to make recommendations that are not constrained by the President's budget request—expressly prohibits it. Some mandates—for example, those for the QHSR, the QDR, and the NDP's alternative force structure proposal—do require a cost estimate or budget plan, but those exercises are unconstrained in the sense that no parameters are specified for those plans or estimates.\nIn turn, most observers and practitioners agree that strategy is powerful only when it shapes decision-making, and in particular, when it is reflected in budget requests. To that end, some observers have recommended the adoption of more \"unified\" approaches to national security budgeting that would link budgeting more closely with strategy.\nWhat are the potential advantages and disadvantages of using fiscal constraints to shape the conduct of strategy reviews and the content of strategy reports? What mechanisms might help ensure that conclusions of strategic reviews and the content of strategic guidance directly shape specific policy and resourcing decisions?",
"Many observers suggest that strategic review processes can benefit greatly from a competition of ideas. Such competitions can take an internal form. In one internal approach, a \"red team\" that enjoys full access to the formal review process regularly grades the homework of that formal process by challenging its assumptions and conclusions. DOD used a red team to support the conduct of its 2006 QDR. In another internal approach, several groups are tasked simultaneously with the same assignment. The best-known historical example may be President Eisenhower's top secret \"Project Solarium,\" carried out shortly after Stalin's death in 1953 to reassess U.S. \"containment\" policy toward the Soviet Union. The methodology included the formation of three teams of seasoned experts and practitioners, both military and civilian. Each team was assigned a strategy to elaborate and defend. After working for six weeks at the National War College, the teams presented the strongest cases they could muster at a session with the President Eisenhower, attended by the rest of the National Security Council, senior military leaders, and others.\nA competition of ideas can also take an external form. In this approach, one or more external reviews might be conducted in parallel with a formal process. Their results might be considered together with, and compared to, those of the formal process, by some outside adjudicator such as the President or Congress. Part of the mandate for the national defense panel (NDP), conducted in conjunction with the QDR, is \"external\"—to produce and cost out alternative force structures.\nNo such mandate exists for a \"competition of ideas\" mechanism to run in parallel with the crafting of national security strategy. But the QDR independent panel (QDRIP), which paralleled the work of the 2010 QDR, recommended the creation, by the executive and legislative branches, of a standing Independent Strategic Review Panel of leading experts to review and assess the national security environment; review and assess the current NSS; review and assess current national security missions and organization; and make recommendations to inform the formal national security strategy process.\nHow important is it to the crafting of good strategy to build a competition of ideas into the process? What are the respective advantages of internal and external versions of a competition of ideas? How important is it effective, \"honest broker\" adjudication of a competition of ideas, to the effectiveness of that competition?"
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"question": [
"At what levels do the U.S. government conduct strategic reviews and issue strategic guidance?",
"What is the pinnacle of the national security strategic architecture?",
"What subordinate strategies and quadrennial reviews support that effort?",
"Why in practice is the strategic architecture more complex and less coherent than this synopsis might suggest?",
"What has Congress provided for many but not all U.S. government strategy-making activities?",
"Why is congressional oversight of Administration strategic efforts helpful?",
"To what extent can such strategy oversight be a powerful tool for shaping real-world outcomes?",
"How has executive branch compliance with statutory mandates been mixed in practice?"
],
"summary": [
"In practice, the U.S. government—at the levels of both the White House and individual agencies—conducts a wide array of strategic reviews, and issues many forms of strategic guidance.",
"The pinnacle of the national security strategic architecture is the national security strategy, issued by the President.",
"That effort is supported by an array of subordinate quadrennial reviews—the Quadrennial Defense Review by the Department of Defense, the Quadrennial Diplomacy and Development Review by the Department of State, the Quadrennial Homeland Security Review issued by the Department of Homeland Security, and the Quadrennial Intelligence Community Review issued by the Office of the Director for National Intelligence—as well as a number of subordinate strategies including national defense strategy, national military strategy, national homeland security strategy, and national intelligence strategy.",
"Yet in practice, the strategic architecture is more complex and less coherent than this synopsis might suggest, because these core strategic efforts are joined by a number of one-off strategic reviews and documents, and because timelines, content, and relationships among the various documents have all varied a great deal over time.",
"Congress has provided statutory mandates for many but not all U.S. government strategy-making activities.",
"In principle, congressional oversight of Administration strategic efforts can help hold the executive branch accountable for both the content and the rigor of its thinking. To the extent that strategy actually shapes policy-making and resourcing, such strategy oversight can be a powerful tool for shaping real-world outcomes.",
"To the extent that strategy actually shapes policy-making and resourcing, such strategy oversight can be a powerful tool for shaping real-world outcomes.",
"In practice, executive branch compliance with statutory mandates—in terms of both form and content—has been mixed at best in recent history."
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GAO_GAO-15-631
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{
"title": [
"Background",
"The LPI Process",
"Differences between LPI and Borrower- Purchased Insurance",
"Role of State Insurance Regulators",
"Role of Federal Regulators",
"Few Mortgages Receive LPI, and Those That Do Usually Receive It Due to Premium Nonpayment by the Borrower or Coverage Cancelation by the Original Insurer",
"Tracking and Notification Processes Identify a Small Percentage of Mortgages Requiring LPI",
"LPI Is Most Often Placed on Non-Escrowed Mortgages When Borrowers Stop Paying Required Homeowners Insurance Premiums",
"Insurers Said They Refund Premiums on about 10 Percent of Policies",
"FEMA Offers Flood LPI, but Servicers Prefer Private Coverage",
"Stakeholders’ Views on LPI Rates and Practices Were Mixed",
"Industry Officials Provided a Number of Reasons for LPI’s Higher Premium Rates",
"Stakeholders’ Views Differed on the Appropriateness of LPI Premium Rates",
"Some Consumer Advocates and State Regulators Said Several Factors Resulted in Higher Rates and Other Practices That Harmed Consumers, but Industry Officials Disagreed",
"Some State and Federal Regulators Have Taken Actions Related to LPI, but Incomplete Data Limit Oversight",
"State Oversight of LPI Varies",
"Federal Regulators Have Long-standing Procedures for Overseeing Servicers’ Flood LPI Activities and Are Implementing Recent Regulatory Changes for Homeowners LPI",
"Insurer Data for Assessing the LPI Industry Are Unreliable Despite Efforts to Collect More Complete and Consistent Data",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Comments from the National Credit Union Administration",
"Appendix III: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"LPI, also known as “force-placed” or “creditor-placed” insurance, is an insurance policy purchased by a mortgage servicer on a home to ensure continuous coverage when the borrower’s homeowners or flood insurance lapses or otherwise becomes inadequate. Most investors, such as Fannie Mae and Freddie Mac, require continuous homeowners insurance coverage on properties that serve as collateral for loans, and mortgage contracts usually require that borrowers maintain continuous coverage to protect the investor’s financial interest in the property. Regulated lending institutions are also required to ensure that borrowers obtain and maintain flood insurance for properties in special flood hazard areas. If a borrower does not maintain continuous coverage as required by the mortgage contract, the servicer is required to purchase LPI and may charge the borrower for the associated premiums and costs. As a result, LPI allows servicers to meet these requirements and protect the mortgage holder’s financial interest in the property. A distribution of LPI policies in 2013 can be seen in figure 1.",
"Servicers generally contract with LPI providers to cover all the mortgages in their portfolios from the date any borrower-purchased coverage lapses, regardless of when the coverage lapse is discovered. According to industry officials, most servicers outsource tracking and notification services—that is, monitoring of the mortgages’ insurance policies for possible lapses in coverage and communicating to borrowers that LPI will be placed unless the borrower provides proof of insurance—to LPI insurers or managing general agents. Because LPI insurers are responsible for losses that occur during coverage lapses, some of the larger insurers perform these services themselves. Industry officials said that some smaller LPI insurers use a managing general agent to perform some or all of the tracking services, usually because setting up these services requires a large upfront investment, but generally continue to perform the notification services directly. Insurers typically factor the expenses associated with such activity into the LPI premium rates, which are based on the value of the underlying properties. When the servicer places an LPI policy, it pays the premium to the LPI insurer and reimburses itself with funds from the borrower’s escrow account or by adding the premium amount to the mortgage’s principal balance. In some cases, the insurer may pay a commission to the servicer or servicer’s agent for the business and can also use a portion of its premium revenue to purchase reinsurance to hedge its risk of loss (see fig. 2). Also in some cases, the company providing reinsurance to the LPI insurer could be affiliated with the servicer who placed the LPI policy.",
"LPI differs from borrower-purchased homeowners insurance in several ways. First, with borrower-purchased insurance, insurers evaluate the risks for individual properties and decide whether to cover a property and how much to charge. Because LPI covers all mortgages in a servicer’s portfolio, insurers do not underwrite properties individually. Instead, they provide coverage without assessing the condition of individual properties and provide coverage for a broader range of risks, including defaults and vacancies. Second, industry officials said that the servicer rather than the borrower is typically the named insured on the LPI policy, although in some cases, borrowers can be additional insureds who have the right to file a claim in the event of a loss, and their interest is included in any settlement. Third, servicers rather than insurers are responsible for determining the amount of coverage. Most servicers purchase the same amount of coverage that was available under the lapsed borrower- purchased policy. This amount approximates the replacement value of the home and protects the borrower’s financial interest and the servicer should the property be damaged. However, in some situations the servicer may not know the amount of coverage under the previous policy and may instead use the mortgage’s unpaid principal balance. Finally, LPI coverage may differ from the coverage provided by borrower-purchased insurance. Industry officials said that LPI policies typically insure the dwelling and other related structures on a property but often do not include the borrower’s belongings or liability risks, as borrower-purchased policies do. However, one industry official said that LPI policies typically provide broader structural coverage, insure against vandalism, and continue coverage in the event of vacancy.",
"Like borrower-purchased insurance, LPI is subject to state insurance regulation, including rate and form reviews and approvals where applicable. The McCarran-Ferguson Act provides that state law governs the business of insurance and is not superseded by federal law unless a federal law specifically relates to the business of insurance. State regulators license agents; review insurance products and premium rates, including LPI products and rates where applicable; and routinely examine insurers’ financial solvency. State regulators also generally perform market examinations in response to specific consumer complaints or regulatory concerns and monitor the resolution of consumer complaints against insurers.\nNAIC is a voluntary association of the heads of insurance departments from the 50 states, the District of Columbia, and five U.S. territories. While NAIC does not regulate insurers, it provides services to make certain interactions between insurers and state regulators more efficient. These services include providing detailed insurance data to help regulators understand insurance sales and practices; maintaining a range of databases useful to regulators; and coordinating state regulatory efforts by providing guidance, model laws and regulation, and information- sharing tools. NAIC has coordinated state regulatory efforts on LPI by developing a model law for LPI and holding public hearings on LPI. In 1996, NAIC developed the Creditor-Placed Insurance Model Act, which serves as a guide for state legislation on LPI for personal property, such as automobiles. Additionally, in August 2012, NAIC held a public hearing to discuss the use of LPI for mortgages and the effect of the practice on consumers.",
"Although the business of insurance is regulated by the states, federal regulators generally have authority over regulated lenders’ and their servicers’ activities related to flood insurance, including flood LPI. The Board of Governors of the Federal Reserve System (Federal Reserve), Farm Credit Administration (FCA), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and National Credit Union Administration (NCUA) are the regulators responsible for overseeing the mandatory flood insurance purchase requirement for their institutions (see table 1). Since the passage of the Flood Disaster Protection Act of 1973, flood insurance has been mandatory for certain properties in special flood hazard areas within communities participating in the National Flood Insurance Program (NFIP), and federal regulators have been responsible for enforcing compliance with this mandatory purchase requirement. In 1994, the enactment of the National Flood Insurance Reform Act required a regulated lending institution or a servicer acting on its behalf to notify borrowers of lapsed coverage, and if the borrower did not purchase coverage within 45 days of the notice, to purchase flood LPI. The act clarified that servicers could charge the borrower for the cost of premiums and fees for flood LPI. It also required regulators to issue civil money penalties against regulated lending institutions for a pattern or practice of mandatory flood insurance purchase requirement violations, including LPI requirements. In 2012, the Biggert-Waters Flood Insurance Reform Act (Biggert-Waters Act) clarified that servicers could charge for flood LPI from the date of a coverage lapse or from the beginning date of insufficient coverage and also required them to issue refunds to borrowers who provided proof of insurance for any period of duplicate coverage. Each of the federal regulators has issued regulations to implement flood LPI rules for their respective institutions.\nFederal regulators also have supervision and enforcement authority for their regulated entities’ activities related to homeowners LPI. In 2010, the Dodd-Frank Act amended RESPA with specific provisions for homeowners LPI and granted CFPB rulemaking authority under RESPA. In 2013, CFPB adopted amendments to Regulation X to implement Dodd- Frank Act amendments to RESPA. CFPB’s amendments to Regulation X became effective in January 2014. The rules: prohibit servicers from charging borrowers for homeowners LPI unless they have a reasonable basis for believing that the borrower has not maintained homeowners insurance as required by the loan contract; require all charges to be bona fide and reasonable (does not cover charges subject to state regulation as the “business of insurance” and those authorized by the Flood Disaster Protection Act); require servicers to send two notices to borrowers before placing LPI; specify the content of the notices with model forms; generally prohibit servicers from obtaining homeowners LPI for borrowers with escrow accounts for the payment of hazard insurance whose mortgage payments are more than 30 days overdue unless the servicer is unable to disburse funds from the borrower’s escrow account to ensure that the borrower’s hazard insurance premiums are paid on time. The servicer is not considered unable to disburse funds because the borrower’s escrow account contains insufficient funds or if the loan payment is overdue. A servicer is considered unable to disburse funds from a borrower’s escrow account only if the servicer has a reasonable basis to believe either that the borrower’s insurance has been canceled (or not renewed) for reasons other than nonpayment of premium charges or that the property is vacant. The servicer generally must advance funds through escrow to maintain the borrower’s coverage; and specify procedures for terminating LPI and issuing refunds for duplicative premiums.\nIn addition to homeowners LPI provisions, amendments to Regulation X included new provisions related to escrow payments; error resolution and information requests; general servicing policies, procedures, and requirements; loss mitigation activities; and mortgage servicing transfers. Mortgage servicers that service loans for investors in mortgage-backed securities must also comply with LPI rules required by their investors, particularly from Fannie Mae and Freddie Mac. In November 2013, the Federal Housing Finance Agency (FHFA), which oversees these entities, directed Fannie Mae and Freddie Mac to issue guidance to their servicers on LPI. In December 2013, the entities issued corresponding guidance, prohibiting their servicers and affiliated entities from receiving commissions or similar incentive-based compensation from LPI insurers and servicers’ affiliated companies from providing LPI insurance, including any reinsurance arrangements. See figure 3 for a summary of these and other key events related to LPI oversight.",
"Mortgage servicers and LPI insurers use tracking and notification processes to determine when required coverage lapses and LPI is necessary. They ultimately place LPI on about 1 percent to 2 percent of mortgages in their portfolios, usually resulting from borrowers not paying their insurance premiums or the original insurers canceling or not renewing coverage. Servicers and insurers said that they use the tracking and notification systems to ensure that LPI placement is as accurate as possible, but that they must refund premiums when the borrower provides proof of coverage, which occurs on about 10 percent of policies. Finally, the Federal Emergency Management Agency (FEMA) offers flood LPI through its Mortgage Portfolio Protection Program (MPPP), but servicers generally said that they prefer private flood LPI coverage for a number of reasons, including more comprehensive coverage and lower premium rates.",
"Mortgage servicers place LPI on a small percentage of mortgages when required coverage lapses, usually as a result of nonpayment by the borrower or cancelation or nonrenewal by the insurer. According to industry officials, mortgage servicers ultimately place homeowners LPI coverage on 1 percent to 2 percent of the mortgages in their portfolio. They said that placement rates were often under 2 percent prior to the 2007-2009 financial crisis but peaked at about 3 percent at the height of the crisis due to increased delinquencies. Industry officials said that placement rates increased as borrowers stopped paying their homeowners or flood insurance premiums along with their mortgage payments. One consumer advocate said that LPI placement rates were much higher for subprime lenders and may have peaked at 15 percent to 20 percent for some of them. Industry officials also said that placement rates were much higher for mortgages that were delinquent or in foreclosure. For example, one official said that its company’s placement rate was 0.6 percent for current loans, compared with 17 percent for noncurrent loans. Industry officials said that even as the housing market has improved, properties can remain in foreclosure for an extended period of time in some states, keeping the placement rate above its pre- crisis level. However, they said that they expected the rate to continue to decline as older foreclosures were resolved.\nAs discussed earlier, some LPI insurers perform tracking and notification services for servicers both to manage their exposure and to meet the needs of servicers. As part of the tracking process, the insurer (or insurer’s agent) monitors mortgages on behalf of the servicer for possible lapses in borrower-purchased coverage—for example, when coverage has been canceled or is about to expire. One industry official said that this process involves obtaining and reviewing millions of insurance documents each year, many of which are in hard copy and not in a standardized format, and updating the servicers’ records accordingly. Industry officials said that within about 2 weeks of a borrower-purchased policy’s expected renewal date, the insurer generally receives renewal documentation on behalf of the servicer, and at this point, they have confirmed coverage for all but about 14 percent of mortgages (see fig. 4). If the insurer does not receive this documentation, it contacts borrowers’ insurers, their agents, and the borrowers themselves for proof of coverage. This process typically reduces the number of mortgages whose coverage status is unknown to about 9 percent around the expiration date. If renewal documentation does not arrive and the renewal date passes, the insurer sends a first letter to the borrower asking for proof of coverage. If the borrower does not provide proof of coverage, the insurer must send a second letter at least 15 days before charging the borrower for LPI (and at least 30 days after sending the first notice), this time with the cost or a reasonable estimate of the LPI policy’s premium. This second letter is sent to about 3 percent of loans whose coverage status has not yet been confirmed. Industry officials said that insurers had such notification procedures in place prior to the CFPB regulations, but noted that the regulations had helped standardize and clarify the notification letters.\nBy the end of this process, the insurer is generally able to confirm borrower-purchased coverage for most of the mortgages in a servicer’s portfolio, but servicers ultimately place new coverage on the approximately 1 percent to 2 percent of borrowers who do not respond to the notifications. Industry officials said that because CFPB regulations require servicers to complete the 45-day notification process before charging for LPI coverage, most LPI policies are not issued until at least 60 days after the borrower’s insurance lapses. However, they said that most LPI policies are retroactive to the date of the insurance lapse. Industry officials said that LPI policies had a 1-year term but that most were canceled before the policy expired because borrowers eventually obtained the required borrower-purchased coverage to replace the LPI policy.",
"According to industry officials and consumer advocates with whom we spoke, most LPI policies are placed on mortgages without escrow accounts when borrowers stop paying premiums on their required homeowners insurance policies. Industry officials said that mortgages with escrow accounts require LPI less often, because Regulation X requires mortgage servicers to use escrow funds to maintain borrower- purchased coverage—even when the escrow funds are insufficient. Industry officials noted that these regulations had had little effect on the LPI industry because servicers already maintained coverage for escrowed borrowers, including when escrow funds were insufficient. Additionally, industry officials with whom we spoke also estimated that 60 percent to 75 percent of U.S. mortgages had escrow accounts. Industry officials said that mortgages without escrow accounts are more likely to require LPI because servicers do not have escrow accounts to draw on to continue paying borrower-purchased insurance premiums.\nHowever, CFPB regulations do not require servicers to maintain borrower-purchased coverage for mortgages with escrow accounts if they believe the property is vacant or that the borrower-purchased coverage was canceled or not renewed for reasons other than nonpayment. Regulatory and industry officials said that, as a result, LPI placement on escrowed mortgages primarily occurred when the previous insurer canceled or declined to renew coverage. Regulatory and industry officials said that cancelation or nonrenewal happens for a number of reasons, most commonly because of a change in occupancy status, especially vacancy, often in connection with a foreclosure. They also cited other reasons, including a history of large losses on the property, a change in the condition or risk of the property, the borrower’s failure to maintain or repair the property, a misrepresentation of the property’s characteristics on the insurance application or other violations of the insurance contract, or a desire by the insurer to limit their concentration of risk in a particular high-risk geographic area. Even state residual insurance programs, which are designed to be insurers of last resort, may refuse to insure some high-risk properties, particularly those that are vacant. In addition, industry officials said that high risks in some areas could make borrower- purchased coverage difficult to obtain—for example, parts of the Gulf Coast and especially Florida—and result in placement of LPI. Industry officials said that a much less frequent cause of LPI placement was administrative errors that occurred, for instance, when a mortgage was transferred to a new servicer and the insurer was not notified. Industry officials said these errors were rare, but they did not provide more specific data.",
"LPI insurers with whom we spoke said that they used the tracking and notification process to ensure that flood and homeowners LPI placement was as accurate as possible. However, industry officials and a consumer advocate said that insurers generally determined that placement was unnecessary for about 10 percent of the LPI policies they issued. Industry officials said that this unnecessary placement usually occurs because the borrower does not provide proof of coverage until after the LPI policy is placed, despite multiple requests from the servicer. CFPB regulations require the insurer to cancel the LPI and refund all homeowners LPI premiums and related fees for any overlapping coverage within 15 days of receiving proof of coverage.\nIndustry officials told us that insurers had no incentive to place LPI unnecessarily, because doing so generated administrative expenses without a corresponding receipt of premium. For example, insurers incur expenses for corresponding with borrowers through calls and letters, issuing the policy, processing the cancelation, and issuing the premium refund. In addition to avoiding unnecessary expenses, industry officials said that insurers also want to avoid exposing their clients (the servicers) to borrower dissatisfaction and complaints. However, consumer advocates have cited unnecessary placements as an issue that needs to be addressed. While borrowers eventually receive a full refund of any unnecessary premiums, they may also be inconvenienced by having to initially pay the premium and go through the process of getting the policy canceled. One consumer advocate also cited concerns about unnecessary placement of flood LPI, particularly that borrowers incurred costs, such as hiring surveyors, to refute the servicer’s determination that flood insurance was necessary.",
"LPI is also used when mandatory flood insurance policies lapse. The Flood Disaster Protection Act of 1973 requires flood insurance for properties in special flood hazard areas located in communities participating in NFIP that secure mortgages from federally regulated lenders. FEMA offers flood LPI coverage through MPPP, but most servicers obtain coverage through private insurers. FEMA officials said that as of March 2015, MPPP had about 800 policies, a small number compared with the approximately 5.2 million policies in its National Flood Insurance Program, the primary provider of borrower-purchased flood coverage. Industry officials told us that MPPP was mostly used by smaller servicers that did not have access to LPI insurers that offer flood LPI.\nIndustry officials cited a number of reasons that servicers preferred to do business with private flood LPI insurers rather than FEMA’s MPPP. First, industry officials said that private insurers would provide coverage from the date of lapse. Industry officials said that MPPP policies, in contrast, do not allow for automatic coverage upon lapse of borrowers’ policies, resulting in the possibility of short periods with no coverage in place, while investors require the servicer to ensure continuous coverage. Second, industry officials said that private flood LPI rates are lower than MPPP rates, although they are still higher than rates for borrower-purchased flood insurance. For example, some told us that MPPP policies were about 4 times more expensive than private LPI flood policies, making MPPP a less attractive option. Further, some industry officials said that using MPPP for flood LPI would require servicers to have two insurers, one for homeowners LPI and one for flood, but that most servicers preferred to have the same insurer for both lines.",
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"According to one actuary who works with LPI, premium rates are determined by looking at expected losses (both catastrophic and noncatastrophic), expected other expenses, and target profit commensurate with the exposure and risk. Several industry officials said that some of the ways that LPI insurance differs from typical homeowners insurance can make LPI rates higher than borrower-purchased insurance. These differences include the following:\nCovering all properties regardless of associated risk: LPI insurers do not underwrite individual properties, but instead agree to cover all properties in a servicer’s mortgage portfolio and cannot reject coverage for high-risk borrowers. Insurers told us previously that to manage risk, they need the ability to accept and reject applicants as necessary. Some industry officials told us that because of the lack of information on the risks associated with the covered properties, insurers set LPI premium rates higher than rates for fully underwritten borrower-purchased insurance.\nHigher geographical concentrations of high-risk properties: Some industry officials told us that the inability to reject coverage for high-risk borrowers resulted in LPI insurance portfolios having large concentrations of high-risk properties—including in coastal states prone to catastrophic damage—that did not generally exist in borrower-purchased insurance portfolios. For example, one LPI insurer said that approximately 70 percent of its premiums in 2014 were in what it considered to be hurricane-exposed states.\nHigher concentrations of delinquent mortgages: Several industry officials said that LPI policies were more likely than borrower- purchased insurance policies to cover mortgages that were in delinquency and foreclosure. According to one insurer, 30 percent to 35 percent of its LPI policies as of March 2015 were on mortgages that had been delinquent for at least 90 days. Several industry officials said that properties in foreclosure are often vacant and inadequately maintained, increasing the risk and therefore the potential cost to the insurer.\nAdditional administrative costs: Several industry officials also told us that LPI policies carried additional administrative costs. These costs can include tracking mortgages, obtaining reinsurance, and notifying homeowners of potential lapses. According to one LPI insurer, these efforts require significant and ongoing investments in technology that help effectively manage risk exposure and lower unnecessary placements. Further, several insurers said they also incur costs for communicating with borrowers during the notification process and when LPI is placed unnecessarily.\nSeveral industry officials also pointed out that investors and servicers bore at least some of the cost of LPI, especially on delinquent mortgages. One LPI insurer said that based on its own calculations, 35 percent of LPI premiums were paid by someone other than the borrower, usually the investor, and that this percentage had decreased in recent years. According to industry officials, when borrowers do not recover from delinquencies, investors—which could include Fannie Mae and Freddie Mac—typically reimburse servicers for the cost of LPI premiums once the foreclosure process is complete, which in some cases can take years.",
"According to several consumer advocates and state regulators, some LPI premiums were higher than they should be. NAIC’s general principles for determining premium rates state that they should not be inadequate, excessive, or unfairly discriminatory. Some of the advocates and regulators cited low loss ratios—claims and adjustment expenses as a percentage of premiums—as evidence that the policies were priced too highly. For example, one study by a consumer advocate examined loss ratios from 2004 through 2012 and found that the average LPI loss ratio was 25.3 percent, compared with 63 percent for borrower-purchased insurance. Further, it found that the LPI loss ratio was lower than the borrower-purchased loss ratio in each of the 9 years in that time period.\nIndustry officials responded to these assertions by noting that LPI claims were highly volatile and needed to be examined over much longer loss histories. They said that insurers set rates prospectively using models to estimate the full range of expected losses before they occurred and that these rates were reviewed by most state regulators as part of the rate filing process. They added that a loss ratio analysis, instead, is a retrospective process because it examines rates after the losses have occurred and is only one of many factors that state regulators consider when conducting an actuarial review of the filed rates.\nSome insurers also said that the potential for catastrophic losses in some years requires rates that may exceed losses in other years. For example, some LPI insurers have said that LPI may have lower losses in many years but significantly higher losses in catastrophic years, offsetting the profits from lower loss years. However, California and New York required insurers in their states to resubmit rate filings with lower rates because, based on their review of some insurers’ loss histories in recent years, they did not see the pattern of profits from lower loss years offsetting significantly higher losses in catastrophic years.",
"Consumer advocates said that the primary cause of higher LPI rates was reverse competition—a market structure that drives up prices for consumers because insurers compete for mortgage servicers’ business rather than consumers’ business—by providing financial incentives to the servicer. They said that borrowers had little or no influence over the price of the insurance because the servicer was responsible for selecting it and that the costs of the financial considerations were passed on to the borrower. They also said that some insurers have paid commissions to servicers or servicers’ agents and that the servicers and agents did little work to justify them. They said that these commissions contribute to higher premium rates. One industry official, however, said that commissions were a standard industry practice and that their costs were within reasonable ranges. After reviewing proposals from Fannie Mae and Freddie Mac on reducing expenditures related to LPI, FHFA in November 2013 instructed the enterprises—i.e., Fannie Mae and Freddie Mac—to prohibit servicers from receiving commissions paid for LPI. FHFA, as well as an insurer and a servicer with whom we spoke, told us that the use of commissions had decreased since then.\nSome state regulators noted that some insurers provided tracking and other services for free or below cost, benefitting the servicer, but included the costs of such services in what they charge consumers. One regulator and a consumer advocate said that some LPI insurers have purchased reinsurance at inflated prices from reinsurers owned by the lender. They said this overpayment to the reinsurer affiliated with the servicer could be a benefit to the servicer for purchasing LPI coverage from the insurer. One insurer and an industry official with whom we spoke commented that the use of affiliated reinsurers had decreased in recent years, with the industry official adding that this was at least in part due to the enterprises’ guidance, which also prohibited their servicers from entering into reinsurance arrangements with LPI providers.\nSome consumer advocates also said that the concentrated LPI market further contributed to high premiums. Two insurers account for most of the LPI market, with estimates of their market share ranging from 70 percent to 90 percent. Industry officials said that the two largest insurers had extensive systems to track large servicers’ mortgage portfolios, and one consumer advocate said that the expense of setting up such systems could be a barrier to entry for smaller insurers that must often outsource tracking services to independent agents. Some industry officials said that recent state and federal actions—for example, state actions establishing minimum loss ratio requirements—could have the unintended consequence of forcing smaller insurers out of the market because of increased compliance costs. This limited competition, they said, could contribute to higher premium rates. One insurer said that there were at least 10 major LPI insurers in the United States in 1992. The insurer said that since then, catastrophic losses—notably Hurricane Andrew in 1992— and other related factors have resulted in the majority of them choosing to exit the market. The insurer told us that most insurance companies were not willing to assume the level of risk involved in LPI.\nFinally, consumer advocates and some state regulators said that LPI had other negative effects on consumers in addition to the financial hardship of higher premiums. For example, they said LPI offers more limited coverage than borrower-purchased insurance. In particular, the policies purchased by the servicer for the borrower to protect the mortgage holder do not cover contents (personal property), liability, or additional living expenses. The servicer, not the borrower, is typically the primary insured party on an LPI policy and therefore determines the amount of coverage. Some state regulators said that as a result, the servicer may, in some cases, select coverage for the mortgage’s unpaid principal balance, which would not cover the property’s replacement cost. Some industry officials, however, said that servicers prefer to use the coverage amount the borrower had in place for the lapsed policy when it is known.",
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"Oversight of homeowners LPI varied across selected states in terms of requirements, reviews of LPI practices, and the rate filing process. NAIC does not have a model law or guidelines to address LPI for real property. We found variations in the regulatory treatment of LPI among the seven states we reviewed. For example, of the states we reviewed, only New York had adopted regulatory requirements applicable to LPI insurer practices. New York’s LPI regulations applicable to insurers include requirements for insurers and affiliates to notify the borrower before issuing LPI and for renewing or replacing LPI. Additionally, the New York LPI regulations prohibit the amount of LPI coverage from exceeding the last known coverage amount and prohibit insurers from engaging in several practices, including issuing LPI on property serviced by affiliated servicers, paying commissions, and providing insurance tracking to a servicer or affiliate for free or reduced charge. Six of the states (California, Florida, Illinois, Ohio, New Jersey, and Texas) did not have statutory or regulatory requirements specifically for LPI insurers in connection with mortgages (see table 2).\nSome states had LPI laws and regulations for mortgage servicers in addition to what the federal regulators required, as the following examples illustrate.\nThe Texas Finance Code includes a chapter on LPI, which requires that the creditor (servicer) notify the debtor (borrower) no later than 31 days after the LPI is charged to the debtor. It also provides that a creditor may obtain LPI that will cover either the replacement cost of improvements or the amount of the unpaid indebtedness. The debtor is obligated to reimburse the creditor for the premium, the finance charge, and any other charges incurred by the creditor in connection with the placement of insurance.\nIllinois has a law that applies to servicers using LPI. Specifically, the law requires that notification forms include language similar to the “Notice of Placement of Insurance” forms set out in the act. The notice must be provided within 30 days following the purchase of the insurance. In 2014, the Illinois Collateral Protection Act was amended to provide that a servicer subject to Regulation X that places LPI in substantial compliance with Regulation X would be deemed in compliance with the Illinois law.\nNew York has emergency regulations setting out business conduct rules for mortgage loan servicers. Servicers are prohibited from placing homeowners or flood insurance on the mortgaged property when the servicer knows or has reason to know that the borrower has an effective insurance policy. Servicers also must provide written notice to a borrower on taking action to place LPI on a property.\nLPI premium rates are subject to different levels of review across states. In most states, LPI is considered commercial lines coverage—that is, the policy is considered to cover the interests of a business (the servicer) rather than a consumer. NAIC officials stated that LPI is usually considered commercial lines coverage because insurers typically sell LPI to the servicer as a commercial product. States can use different rate review systems for commercial insurance, and some states may not have a rate review system for all commercial lines.\nAccording to NAIC officials, state regulators generally review every rate filing for personal lines coverage but may review only some rate filings for commercial lines. The officials told us that state insurance regulators often decided how to allocate resources for rate reviews based on consumer complaints, and personal lines typically generated more complaints than commercial lines. The seven states we selected all considered LPI to be commercial insurance but varied in whether they conducted rate reviews, how they conducted rate reviews, and how often rates were reviewed (see table 2), as the following examples illustrate.\nIn New Jersey, commercial lines are subject to the use and file system—that is, the insurers can begin using new rates before filing but must file within a specified period. However, New Jersey does not require insurers to file LPI rates because the state considers it to be a deregulated product.\nIn Ohio and Texas, commercial lines are subject to the file and use system, which, unlike use and file, generally allows them to begin using rates as soon as they are filed while the state regulator reviews the filing.\nIn Florida, commercial lines and LPI are subject to the file and use system, which as previously noted, requires approval before the rates can be used, or use and file, which allows insurers to use rates as soon as they are filed as long as they are filed no later than 30 days after implementation, subject to refunds if the rates are determined to be excessive. Additionally, Florida requires annual rate filings from its top two LPI insurers.\nIn California, commercial lines are subject to the prior approval system, which requires insurers to get state approval before using new rates. For example, after the first filing, California requires property-casualty insurers, including LPI insurers, to refile whenever their rates become inadequate or excessive.\nNew York uses the file and use rating system for commercial lines.\nNew York also requires LPI insurers to file rates that reflect loss ratios of at least 62 percent and to refile rates following any year in which the actual loss ratio falls below 40 percent. As of 2015, New York required LPI insurers to file rates at least every 3 years.\nIllinois does not have a rate filing system for all commercial lines.\nAs with reviews of rate filings, reviews of LPI insurer practices also differed across states. Of the states we selected, those with the highest incidence of LPI were generally the most active in overseeing LPI. According to 2012 NAIC data, California, Florida, New York, and Texas were the top four states in LPI premium volume. Since 2011, three of them—California, Florida, and New York—have reviewed LPI practices in their states in response to increased attention from consumer advocates and NAIC. For example, the New York State Department of Financial Services (NYDFS) took several steps to review LPI practices in its state, which resulted in development of regulations on the LPI activities of insurers and servicers. According to NYDFS officials, the department began an investigation of LPI in October 2011 after receiving complaints from consumer advocates that LPI loss ratios were significantly lower than loss ratios for borrower-purchased insurance. In May 2012, NYDFS subpoenaed LPI insurers and servicers and held public hearings on LPI premiums and the financial relationship between servicers and insurers. In March, April, and May 2013, when NYDFS reached settlements with the four largest LPI insurers, the agency noted in its findings that payments of commissions to affiliated servicers and reinsurance agreements could have led to the high premium rates. The settlements required the LPI insurers to refile premium rates with a permissible loss ratio of 62 percent; to refile rates every 3 years; to annually refile any rates that have an actual loss ratio of less than 40 percent; to have separate rates for LPI and borrower-purchased insurance; and prohibited certain practices, including the payment of commissions. The settlements also required the four LPI insurers to pay restitutions to eligible claimants and pay a combined total of $25 million in civil money penalties to NYDFS. Additionally, four other LPI insurers agreed to sign codes of conduct implementing New York’s LPI reforms. As noted earlier, effective February 2015, New York regulations began addressing several practices, including the use of affiliated insurers, commissions, tracking services, loss ratios, and borrower notification. NYDFS officials stated that since these hearings and settlements, LPI insurers had reduced their rates in New York.\nCalifornia’s and Florida’s actions did not result in revised regulations, but both states did require reduced LPI rates. Officials from the California Department of Insurance said that in March 2012, they contacted LPI insurers and ultimately required four of them to refile their LPI rates. They said that after examining the insurers’ annual financial statement data, they found that the insurers’ loss ratios were low, and required four insurers to lower their rate schedules. The officials said that these refilings resulted in rate reductions ranging from about 21 percent to 35 percent. Similarly, officials from the Florida Office of Insurance Regulation said that the New York settlements, NAIC hearing, and information from consumer advocates on LPI prompted them to review LPI practices. In July 2012 and May 2013, it held public rate hearings on two of its LPI insurers. Both hearings resulted in orders for the insurers to reduce rates and other reforms, including a prohibition on payment of commissions to the mortgage servicer, borrower notification requirements, and annual rate filings. Florida officials said that the annual rate filings have resulted in rate reductions of about 14 percent and 22 percent for the two insurers. In a 2014 filing, a third LPI insurer agreed to reduce its rates by 4 percent.\nAccording to NAIC data, Illinois, New Jersey, Ohio, and Texas were among the seven states with the highest market share of LPI premiums, but officials from these states stated they have not taken specific actions regarding LPI. Illinois officials stated that although they had not taken actions related to LPI, their market conduct unit was conducting examinations of three LPI insurers and planned to publish the findings in 2015. New Jersey officials stated that in the past 2 years they had received one consumer complaint related to LPI. They added that in general when they receive consumer complaints about any issue, they conduct market examinations and consider regulatory changes if the issue is widespread. Ohio officials said that they had not received consumer complaints related to LPI or identified any issues related to LPI in their state.",
"Federal regulators have recently revised regulations related to flood and homeowners LPI. In 2010, the Dodd-Frank Act amended RESPA to add provisions on homeowners LPI, which CFPB implemented through amendments to Regulation X. Federal regulators have monitored mortgage servicers’ flood LPI activities since the 1994 amendments to NFIP. The Flood Disaster Protection Act of 1973 made flood insurance mandatory for properties with mortgages from federally regulated lenders in special flood hazard areas and in communities participating in NFIP. Among other things, the Flood Disaster Protection Act required regulators—including FDIC, the Federal Reserve, NCUA, OCC, the Federal Home Loan Bank Board (FHLBB), and the Federal Savings and Loan Insurance Corporation (FSLIC)—to issue regulations prohibiting lending institutions from approving loans without adequate flood insurance where available. The National Flood Insurance Reform Act of 1994 (1994 Act) included specific provisions on placement of flood insurance by lenders. The 1994 Act also replaced the FHLBB and FSLIC with the Office of Thrift Supervision and added FCA as a regulator for flood insurance compliance, and required the six regulators to impose civil money penalties for patterns or practices of violations of the mandatory flood insurance purchase requirement, including violations of flood LPI rules. The 1994 Act also required regulated lending institutions to notify borrowers of a coverage lapse and to purchase flood LPI on their behalf if the borrower failed to obtain coverage within 45 days after notice. The 2012 Biggert-Waters Flood Insurance Reform Act (Biggert-Waters Act) included new requirements for flood LPI, among other items. Like the Dodd-Frank Act for homeowners insurance, the Biggert-Waters Act established rules for refunding flood LPI premiums when the borrower provided proof of existing coverage and clarified that the lender could charge for flood LPI from the date the borrower-purchased insurance lapsed. The act also increased the civil money penalty amounts for violations of flood insurance requirements and eliminated the per year cap on the amount of civil money penalties for regulated institutions. In March 2013, the regulators published interagency guidance on amendments resulting from the Biggert-Waters Act with a section specifically about flood LPI. In July 2015, the regulators published a joint final rule implementing the provisions of the Biggert-Waters Act related to LPI.\nEach of the five financial regulators has adopted flood insurance examination procedures that address flood insurance requirements, including requirements for LPI. Specifically, the examination procedures discuss borrower notification regarding the need to purchase an adequate amount of flood insurance, and as required by statute, provide that if the borrower does not purchase such coverage within 45 days from notification, the lender or servicer will purchase insurance on behalf of the borrower and may charge the borrower for the cost of premiums and fees incurred in purchasing the insurance. To enforce the flood insurance requirements, the regulators identify flood insurance-related violations, including flood LPI violations, through their examinations. These examinations are risk based, so examiners may not address all policies and procedures or review flood LPI policies and procedures during every examination. For example, NCUA’s examiner’s guide states that although they must review flood compliance in every examination, depending on scope, an examiner may review one or more of the following: coverage and internal controls, property determination requirements, LPI requirements, and flood insurance checklists.\nSince the amendments to Regulation X became effective in 2014, the five financial regulators and CFPB have been responsible for supervising the regulated entities’ activities related to homeowners LPI. Rule-making authority for Regulation X, which implements RESPA, was transferred to CFPB from the Department of Housing and Urban Development under the Dodd-Frank Act. As discussed earlier, for homeowners LPI, Regulation X, as amended, requires servicers to send two notices to borrowers to confirm that the borrowers do not have the required homeowners insurance before charging the borrower for LPI. Among other requirements, the regulation also prohibits servicers from obtaining LPI if the borrower has an escrow account for homeowners insurance, unless the servicer is unable to disburse funds from the account. Under the regulations, inability to disburse funds does not exist when the borrower’s escrow account contains insufficient funds to pay the premiums, but it exists when the servicer has a reasonable basis to believe either that the borrower’s coverage has been canceled (or not renewed) for reasons other than nonpayment of premiums, or that the borrower’s property is vacant.\nOf the five financial regulators and CFPB, CFPB, FCA, FDIC, the Federal Reserve, and OCC have adopted revised examination procedures for RESPA compliance, including compliance with homeowners LPI requirements. NCUA is in the process of updating its examiner’s guide and related materials to include the new requirements for homeowners LPI. CFPB’s, FDIC’s, the Federal Reserve’s, and OCC’s manuals discuss RESPA requirements for escrow accounts, notifying borrowers, and canceling and renewing LPI, among other requirements. Similar to the procedures they use for flood LPI, examiners also identify violations of homeowners LPI through risk-based examinations of financial institutions.\nBecause Regulation X’s mortgage servicing requirements for homeowners LPI became effective in January 2014, regulators had limited data on the servicers’ compliance with them compared to the data on compliance with flood LPI requirements as of May 2015. CFPB officials said that because consumers might not know about LPI until their coverage lapsed, there might be a greater lag in complaint and violations data than there would be for other housing issues. Of the six regulators responsible for enforcing homeowners LPI rules, CFPB, FDIC, Federal Reserve, and OCC had cited violations as of June 2015. The regulators may also impose civil money penalties for servicer violations of homeowners LPI requirements under RESPA and Regulation X, but they stated that as of June 2015 they had not imposed any.\nCFPB and several state regulators have reached joint settlements with some servicers for alleged violations of federal and state laws, including some violations related to homeowners LPI. In February 2012, 49 states and the District of Columbia (excepting Oklahoma) and federal government partners reached a settlement with banks and mortgage servicers over similar mortgage servicing violations, including LPI, requiring them to provide $20 billion in consumer relief and $5 billion in other payments. In December 2013, CFPB, along with 49 states and the District of Columbia, filed a civil action against a nonbank mortgage servicer alleging misconduct related to servicing mortgages. The complaint identified mortgage servicing violations, including the placement of LPI when the servicers knew or should have known that borrowers already had adequate coverage. In February 2014, CFPB and the states reached a settlement with the servicer, requiring the servicer to pay over $2 billion to borrowers and to follow certain servicing standards. Additionally, in December 2014, NYDFS reached a settlement with this servicer over mortgage servicing rules, alleging the servicer had conflicts of interest related to LPI, among other violations. CFPB and the same states also reached a joint settlement with another servicer in September 2014 over similar mortgage servicing violations.\nThe consent judgment required the servicer to pay $540 million to borrowers and to follow certain servicing standards.\nFHFA has also taken actions to address LPI concerns (as noted earlier). In November 2013, FHFA instructed Fannie Mae and Freddie Mac to prohibit their servicers from receiving commissions for LPI and from using servicer-affiliated entities to insure or reinsure LPI. Effective June 2014, Freddie Mac prohibits servicers from receiving commissions from LPI insurers, and Fannie Mae requires servicers to exclude from premiums charged to borrowers any commissions received from LPI insurers. Also in June 2014, FHFA’s Office of Inspector General (OIG) published a report on FHFA’s oversight of LPI and stated that in 2012 the enterprises paid approximately $360 million in LPI premiums, including, potentially, an estimated $158 million in excessive LPI rates. The FHFA OIG noted that during a foreclosure, the enterprise that owns or guarantees the mortgage is responsible for the cost of the borrower’s unpaid LPI premiums. The OIG recommended that FHFA assess whether the enterprises should pursue litigation against their servicers and LPI insurers to remedy potential damages caused by past abuses in the LPI market. FHFA accepted the recommendation and stated that they completed the assessment in June 2015.",
"Limited reliable data exist at the state and federal levels to evaluate the LPI industry and ensure that consumers are being protected. As part of its efforts to collect financial data on the insurance industry, NAIC updated its Credit Insurance Experience Exhibit (CIEE) in 2004 to require insurers to submit data on LPI to NAIC and state regulators. NAIC and state regulators are responsible for reviewing and analyzing data from insurers, including the CIEE. The CIEE data include information on premiums, claims, losses, compensation, and expenses. However, we determined that these data were unreliable for our purposes. For example, a number of LPI insurers did not submit data to state regulators for CIEE, as required. Also, data in some states and for some years were incomplete. For example, one company reported data for some states but not for others. NAIC officials stated that another company reported LPI data in the wrong section of the CIEE. NAIC officials stated that they performed some basic reviews and tests to identify data errors, such as significant fluctuation between years related to premiums and claims, and worked with the state regulators to address such issues. However, they said that state regulators were responsible for resolving incomplete submissions, such as ensuring that insurers provided answers for every field. Each state, for example, determines its own policies and procedures for reviewing annual statements, including CIEE data, from insurers. As a result, states may not review and analyze similar levels of LPI data. In addition, NAIC officials stated that in 2013 they updated their data submission instructions to request that the insurers report LPI data separately from the borrower-purchased data. NAIC officials said that state regulators allocate their resources on what they deem to be the most cost-effective activities. LPI is a relatively small insurance line, representing only about 0.1 percent of the overall U.S. insurance industry, but its relatively high premium rates can have a significant impact on affected consumers. Given recent state and federal actions regarding the LPI industry, it has become more important for NAIC and state regulators to have adequate data to effectively oversee the industry. Without more comprehensive and reliable data and adequate policies and procedures to ensure the usefulness of the data, NAIC is limited in its ability to coordinate LPI regulation nationwide, and state and federal regulators lack reliable data about the industry. As a result, they are unable to analyze the relationship between LPI prices and the underlying costs to make sure premium rates are reasonable and cannot ensure that consumers are receiving fair and equitable treatment from the LPI industry.\nRecognizing a need to better understand the LPI industry, federal and state regulators have begun coordinating in recent years to collect more detailed data about the LPI industry. FHFA and NAIC officials stated that in 2013 they held discussions about LPI and potential strategies for collecting data to better understand the LPI industry and evaluate whether recent concerns raised were valid. These discussions resulted in an interagency working group, consisting of state and federal regulators, to discuss LPI. FHFA officials said that in addition to examining the need to obtain more data on the LPI industry, this working group opened a dialogue between several entities, including state regulators, insurers, and servicers. The working group created a template to obtain about 80 LPI industry data variables and tasked a committee with requesting the LPI data (the data call effort). The 80 variables included the type of loan; whether the mortgage had an escrow account; the property’s occupancy status; the reason for the coverage lapse; and the company, premium, coverage amount, and deductible for the LPI policy as well as the last known borrower-purchased policy. These data are more granular than what is collected through the annual CIEE in that they include policy-level data that would, among other things, allow for a more direct analysis of LPI premium rates, whereas the CIEE data contain substantially fewer variables and are aggregated at the state and insurer level.\nAccording to NAIC officials, NAIC tasked the Mississippi Insurance Department’s Commissioner, chair of NAIC’s Property and Casualty Committee, to lead the data call effort. Mississippi officials requested that the top three LPI insurers—which NAIC estimated accounted for about 90 percent of the LPI market—provide the 80 variables. Mississippi officials requested the data in April 2014 for submission by July 2014. However, the insurers and servicers did not submit their final data until December 2014. NAIC and Mississippi officials said the delay was due to the need to clarify data issues with the insurers and correct errors, such as missing fields and missing and outlier values. But the final data lacked values for many of the variables, and some insurers and servicers said that certain information was not available. For example, all three insurers reported annual LPI premium amounts, but only one insurer reported the premium amount of the last known borrower-purchased insurance, and only for some policies. Both of these variables are necessary to determine the difference in cost between LPI and borrower-purchased insurance and understand whether premium rates are reasonable. Additionally, only one insurer reported the lapse date of the borrower-purchased insurance, which would help determine how quickly insurers and servicers are identifying coverage lapses, but this insurer did not consistently report the lapse dates for all policies. According to NAIC and Mississippi officials, one insurer said it did not maintain much of the requested data itself and was unable to get approval from many of its servicers to release the data. As a result, state and federal regulators lack the comprehensive and reliable data necessary to assess LPI industry practices and premium rates and their effects on consumers.\nNAIC and Mississippi officials said that they were surprised that the insurers were unable to produce some of the requested data because much of the data seemed necessary for the insurers to maintain. As a result, NAIC members have opened multistate examinations of the LPI practices of the top two LPI insurers which, among other things, officials expected would help produce the remaining data. As of August 2015, 42 jurisdictions—mostly states—had committed to participate in the examinations, and officials expect to have preliminary findings in the fall of 2015. NAIC is working to address the issue of missing data through the multistate examinations, but it is unclear when such data will be available.",
"Some state and federal regulators have taken action to improve oversight of LPI. However, NAIC and state insurance regulators lack comprehensive and reliable data on LPI premium rates and industry practices to assess their effects on consumers. For example, NAIC has attempted to collect some data aggregated at the state and company levels, but these efforts have yielded incomplete data. Recognizing the need for more robust data on the LPI industry, NAIC and FHFA have coordinated to collect policy- and servicer-level data on LPI. However, LPI insurers and their servicers did not provide all of the requested data. NAIC was created to coordinate insurance regulation across states, and the agency needs quality information to evaluate the LPI industry and the effects of its premium rates and practices on consumers. Although NAIC is working to obtain the missing data, it is unclear when such data might be available, or that its efforts will be effective without additional action. Without more comprehensive and reliable data, state and federal regulators are lacking an important tool to help them fully evaluate the LPI industry and ensure that consumers are adequately protected.",
"To help ensure that adequate data collection efforts by state insurance regulators produce sufficient, reliable data to oversee the LPI market, we recommend that NAIC: work with the state insurance regulators to develop and implement more robust policies and procedures for the collection of annual data from LPI insurers to ensure they are complete and reliable; and work with the state insurance regulators to complete efforts to obtain more detailed national data from LPI insurers.",
"We provided a draft of this report to NAIC, as well as CFPB, FCA, FDIC, Federal Reserve, FEMA, FHFA, FIO, FTC, NCUA, and OCC for their review and comment. NCUA provided written comments that we reprinted in appendix II. CFPB, FCA, FDIC, Federal Reserve, FHFA, NAIC, NCUA, and OCC provided technical comments that were incorporated, as appropriate. NAIC officials said they understand the importance of ensuring reliable data and will consider the recommendations as part of NAIC’s continuing work in the area, which includes multistate examinations and potential revisions to model laws.\nWe are sending copies of this report to the appropriate congressional committees and the agencies listed above. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you have any questions about this report, please contact me at (202) 512-8678 or cackleya@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.",
"We were asked to review the lender-placed insurance (LPI) industry and the role of federal and state regulators in monitoring LPI practices. This report (1) describes the extent to which LPI is used, (2) discusses stakeholder views on the cost of LPI, and (3) describes state and federal oversight of LPI.\nTo address these objectives, we reviewed relevant laws and regulations on lender-placed insurance. We conducted a literature review and reviewed relevant articles, hearings, settlements, and agency guidance on the LPI industry. We also reviewed past GAO reports on homeowners and flood insurance. We interviewed officials from federal agencies, including the Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Department of the Treasury’s Federal Insurance Office, Farm Credit Administration, Federal Deposit Insurance Corporation, Federal Emergency Management Agency (FEMA), Federal Housing Finance Agency (FHFA), Federal Trade Commission, National Credit Union Administration, and Office of the Comptroller of the Currency. We selected these agencies because they regulate mortgage servicers’ LPI activities or might have an interest in LPI issues. Further, we interviewed officials from the National Association of Insurance Commissioners (NAIC) as well as officials from seven state insurance regulators—California, Florida, Illinois, New Jersey, New York, Ohio, and Texas. We selected these states because they had higher LPI premium volumes and some had taken regulatory action in LPI. In selecting states, we also reviewed publicly available information as well as LPI laws and regulations, whether they had adopted NAIC’s model law for personal property LPI and adapted it to real property LPI, whether they had separate banking and insurance offices, and rate approval methods. This selection of states is not generalizable to all states. In addition to the selected states, we met with officials from Mississippi’s insurance department to discuss their involvement in NAIC’s LPI data request. Finally, we met with four LPI insurance providers of varying sizes, as well as four mortgage servicers, four industry associations, and two consumer advocates. We selected these stakeholders based on their level of involvement in the LPI industry and mortgage servicers to get a mix of bank and nonbank servicers with large and mid-sized mortgage volume. When we refer to “industry officials” in this report we mean officials of the insurance industry associations, insurance companies, and bank and nonbank mortgage servicing companies we interviewed.\nTo describe the extent to which LPI is used, we reviewed studies, testimonies, and public comments on related regulations to obtain a wide variety of views on how LPI operates. We interviewed the same consumer advocates, industry associations, and a selection of state insurance regulators, insurers, and mortgage servicers to better understand how each party is involved in LPI and the circumstances surrounding its use. Specifically, we interviewed insurers and servicers to understand their processes for tracking mortgage portfolios, notifying borrowers, and placing LPI. We also interviewed FEMA to understand its flood LPI program—the Mortgage Portfolio Protection Program—and the reasons servicers might choose it versus private flood LPI coverage.\nTo discuss stakeholder views on the cost of LPI, we interviewed state insurance regulators, consumer advocates, and industry officials about their opinions on the reasons for differences in premium rates between LPI and borrower-purchased insurance and their opinions on the effects on consumers. We reviewed studies, testimonies, and public comments on proposed regulations on flood and homeowners LPI. We obtained premiums and claims data for LPI and borrower-purchased insurance so that these might be compared. We first reviewed NAIC’s Credit Insurance Experience Exhibit (CIEE) database—financial data collected annually from insurers that are aggregated at the state and company levels—with the intended purpose of comparing LPI premiums to those of borrower- purchased insurance. However, we determined that these data were unreliable for our purposes. For example, a number of LPI insurers did not submit CIEE data, and there appeared to be missing data in some years. Further, NAIC officials said that they perform some basic tests on the CIEE data to identify data errors but that state regulators are responsible for resolving incomplete data submissions. We discuss these data issues in greater detail in the report. We also obtained and reviewed data from a data call effort coordinated by NAIC and FHFA that requested policy- and servicer-level data from what they believed to be the top three LPI insurers to get a better understanding of the LPI industry. NAIC and FHFA estimated that these three insurers represented 90 percent of LPI premium revenue in the U.S. However, the total number of LPI insurers as well as the total LPI premium volume are unclear because of a lack of comprehensive national data on the LPI industry. Further, we cannot assume that these three insurers are representative of the other insurers in the industry. Moreover, most of the variables were incomplete for one or more of the insurers. To address these omissions, we limited our analysis to high-level figures summarizing variables that were at least 90 percent complete for each of the top two insurers. We determined that variables where more than 10 percent of the values were missing could produce invalid results. Because of the missing data, we were unable to analyze most of the variables, including those that could have compared LPI premiums to the premiums of the last-known borrower-purchased policies.\nTo describe state and federal oversight of LPI, we reviewed and summarized federal laws, regulations, and policies and procedures relating to agencies’ enforcement of LPI-related requirements. Further, we interviewed federal agency officials, including examiners and enforcement officials, on flood and homeowners LPI monitoring and enforcement activities. We interviewed insurers, mortgage servicers, and lenders for their perspectives on federal regulations and their enforcement. We reviewed and summarized selected state laws and regulations related to LPI, particularly those related to rate setting, and interviewed NAIC officials and selected state insurance regulatory officials on LPI oversight activities.\nWe conducted this performance audit from March 2014 to September 2015 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
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"In addition to the contact named above, Patrick Ward (Assistant Director); Christopher Forys (Analyst-in-Charge); Abby Brown; Emily Chalmers; William Chatlos; Juliann Gorse; Camille Keith Jennings; John Karikari; John Mingus; Patricia Moye; Jena Sinkfield; and Heneng Yu made key contributions to this report."
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"question": [
"Why do mortgage servicers purchase lender-placed insurance (LPI)?",
"How has LPI been since the 2007-2009 financial crisis?",
"When do servicers use LPI?",
"What services do LPI insurers often provide to help servicers?",
"Why do most servicers prefer private coverage to flood LPI?",
"Why did stakeholders disagree about LPI premium rates?",
"How did insurers justify for higher LPI premium rates?",
"How did some consumer advocates and state regulators respond to that justification?",
"What did insurers say about LPI premium rates and commissions questioned by some consumer advocates and state regulators?",
"What are the roles of state insurance regulators and federal financial regulators in the oversight of the LPI industry?",
"What limits effective oversight of the LPI industry?",
"Why were the data incomplete and unreliable?",
"What are the consequences of a lack of comprehensive and reliable data?",
"What aspects of LPI does this report address?",
"What efforts did GAO take to achieve this report?",
"How did GAO select the interviewees?",
"What factors did GAO consider to select the seven state insurance regulators to interview?",
"What recommendation does GAO give to NAIC?",
"How should NAIC work with state insurance regulators?",
"How did NAIC respond to the recommendations?"
],
"summary": [
"Mortgage servicers purchase lender-placed insurance (LPI) for mortgages whose borrower-purchased insurance coverage lapses, most often because of nonpayment by the borrower or cancellation or nonrenewal by the original insurer.",
"The limited information available indicates that LPI generally affects 1 percent to 2 percent of all mortgaged properties annually and has become less prevalent since the 2007-2009 financial crisis as foreclosures have declined.",
"Although used more often when borrowers without escrow accounts (about 25 percent to 40 percent of borrowers) stop paying their insurance premiums, servicers also use LPI when an insurer declines to renew a policy.",
"LPI insurers often provide services such as tracking properties to help servicers identify those without insurance and confirming coverage. LPI insurers said they must refund premiums if a borrower provides evidence of coverage, which occurs on about 10 percent of policies.",
"The Federal Emergency Management Agency offers flood LPI, but industry officials said most servicers prefer private coverage because of more comprehensive coverage and lower rates, among other things.",
"LPI premium rates are higher than rates for borrower-purchased insurance, and stakeholders disagreed about whether the difference is justified.",
"LPI premium rates are higher than rates for borrower-purchased insurance, and stakeholders disagreed about whether the difference is justified. Insurers pointed out that they provide coverage for any property in a servicer's portfolio without a rigorous underwriting process, and the limited information requires higher rates. They added that LPI properties tended to have higher risk characteristics, such as higher-risk locations (along the coast) and higher vacancy rates because of foreclosures.",
"But some consumer advocates and state regulators said that the factors that insurers cite for higher rates, as well as the insurers' limited loss histories, do not justify the magnitude of the premium differences. They also said borrowers have little influence over the price of LPI and that some insurers competed for the servicers' business by providing commissions to the servicer that passed the costs on to the borrower through higher premium rates.",
"Insurers, however, said that LPI premium rates were filed with and approved by state regulators and that commissions were a standard industry practice, but their use had decreased.",
"State insurance regulators have primary responsibility for overseeing LPI insurers, but federal financial regulators generally oversee the servicers that purchase LPI coverage for their portfolios.",
"However, a lack of comprehensive data at the state and national levels limits effective oversight of the LPI industry. For example, regulators lack reliable data that would allow them to evaluate the cost of LPI or the appropriateness of its use. The National Association of Insurance Commissioners (NAIC), which helps coordinate state insurance regulation, requires insurers to annually submit state-level LPI data, but the data were incomplete and unreliable.",
"NAIC provides guidance for the reporting of these data and shares responsibility with state regulators for reviewing and analyzing the data, but neither has developed policies and procedures sufficient for ensuring their reliability. State and federal regulators have coordinated to collect more detailed national data to better understand the LPI industry, but insurers failed to provide them all of the requested information, and whether and when they will is unknown.",
"Without more comprehensive and reliable data, state and federal regulators lack an important tool to fully evaluate LPI premium rates and industry practices and ensure that consumers are adequately protected.",
"This report addresses (1) the extent to which LPI is used; (2) stakeholder views on the cost of LPI; and (3) state and federal oversight of LPI.",
"GAO examined documentation, studies, and laws and regulations related to LPI, and interviewed stakeholders including state insurance and federal financial regulators, consumer advocates, insurers, servicers, and industry associations.",
"GAO selected interviewees based on their involvement in the LPI market and other factors to obtain a diverse range of perspectives.",
"GAO selected the seven state insurance regulators to interview based on a number of factors including LPI premium volume and involvement in the LPI market.",
"GAO recommends that NAIC work with state insurance regulators to collect sufficient, reliable data to oversee the LPI market.",
"This includes working with state insurance regulators to develop and implement more robust policies and procedures for LPI data collected annually from insurers and to complete efforts to obtain more detailed national data from insurers.",
"NAIC said it would consider the recommendations as part of its ongoing work in the area."
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GAO_GAO-17-165
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{
"title": [
"Background",
"Characteristics of D.C. Charter Schools",
"Charter School Governance Structure",
"Rights of Students Suspended or Expelled from Charter Schools",
"Suspension and Expulsion Rates in D.C. Charter Schools Are Down, but Are About Twice the National Charter School Rates",
"Discipline Rates of Students in D.C. Charter Schools Have Dropped",
"Suspension Rates in D.C. Schools Are About Twice the National Rates",
"Discipline Rates Varied Widely Among Student Groups and Schools in D.C.",
"Efforts to Reduce Discipline Rates Have Met with Some Success, but Charter Schools We Visited Continue to Face Challenges",
"PCSB and Other D.C. Agencies Oversee Charter Schools, but Have Not Created a Coordinated Plan to Help Schools Continue to Bring Down Discipline Rates",
"PCSB Collects and Publishes Discipline Data by School and Alerts Schools of Concerns",
"Several D.C. Agencies Oversee Charter Schools but We Observed a Lack of Consensus around Roles, Responsibilities, and a Key Agency’s Authority",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Data Analysis",
"Analysis of Federal Civil Rights Data Collection",
"Regression Analysis",
"Analysis of D.C. Data",
"Review of Laws, Regulations, and Guidance and Interviews with D.C. Officials",
"Interviews with Advocacy Groups and Associations",
"Charter School Interviews",
"Appendix II: Regression Analysis",
"Appendix III: Public Charter School Board Responsibilities",
"Appendix IV: Public Charter School Application Process",
"Criteria for Review of Applications",
"Determination of Applicants’ Ability to Operate a Charter School",
"Appendix V: Summary of Public Charter School Board 2016 Annual Report Contents",
"Appendix VI: Public Charter School Board Revenues and Expenditures",
"Revenues",
"Appendix VII: Public Charter School Board’s Discipline and Demographic Data",
"School name",
"School name",
"School name",
"School name",
"Appendix VIII: Comments from the Public Charter School Board",
"Appendix IX: Comments from the Office of the State Superintendent of Education",
"Appendix X: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"Education and Justice have an initiative underway to support local and statewide school discipline initiatives that build positive school climates while keeping students in school. Education has made school discipline reform a priority and recently launched its #RethinkDiscipline campaign to increase awareness about the detrimental impacts of exclusionary discipline. As part of this awareness campaign, Education has developed a webpage where administrators, educators, students, parents and community members can find data and resources to increase their awareness of the prevalence, impact, and legal implications of suspension and expulsion. This webpage contains, among other things, guidance for addressing the behavior needs of students with disabilities and a directory of federal school climate and discipline resources available to schools and districts.",
"Of the approximately 87,000 public school students in D.C. in school year 2015-16, about 45 percent attended charter schools, while about 55 percent attended traditional public schools. Charter schools in D.C. serve students ranging from pre-kindergarten (pre-K) through grade 12. D.C. charter schools offer a range of focuses and specialized curricula, such as foreign language immersion or a focus on serving students who have not been successful in traditional public school settings. For the vast majority of public charter schools, students enroll through D.C.’s common lottery system, My School DC.\nD.C. charter schools, like all public schools, must comply with various laws governing the education of children, including those pertaining to individuals with disabilities, civil rights, and health and safety conditions. Further, in January 2014 guidance, Education and Justice stated that school districts that receive federal funds must not intentionally discriminate on the basis of race, color, or national origin, and must not implement any policies that have the effect of discriminating against students on the basis of race, color, or national origin. In addition, charter schools are to be held accountable for their financial and educational performance, including the testing requirements under the Elementary and Secondary Education Act of 1965 (ESEA), as amended. In D.C., all charter schools are nonprofit organizations and are required to be governed by a board of trustees. Members of the board of trustees are selected according to terms laid out in the school’s charter, and the board assumes a fiduciary role and sets the overall policy for the school.\nSome D.C. charter schools are part of larger charter school networks that have schools in other states, such as KIPP or BASIS Schools. While some charter schools are managed by charter management organizations—which may handle, for example, curriculum development, teacher recruitment and training, and operational support services for the charter school—other charter schools are single-school networks and operate without such an entity. In the 2015-16 school year, there were 114 charter schools in D.C., run by 65 different organizations. In the District, each charter school or group of charter schools functions as its own local educational agency (LEA), both for purposes of Title I of ESEA, and other purposes. As such, each charter school or group of charter schools is responsible for a wide range of functions associated with being an LEA, such as applying for certain federal grants and acquiring and maintaining facilities. PCSB officials told us that each charter LEA also has the autonomy to establish its own discipline policies and suspend and expel students. Officials from the State Board of Education also told us that, unlike D.C. traditional public schools, charter LEAs are not subject to the discipline policies and procedures in D.C. municipal regulations.\nAs shown in figure 1, charter schools and traditional public schools in D.C. both serve a largely Black population. In the 2013-14 school year, 80 percent of the students in charter schools were Black, compared to 67 percent in traditional public schools in the District. Both charter and traditional public schools in D.C. serve much higher percentages of Black students compared to schools nationally, reflecting D.C.’s large Black population.\nWith respect to students with disabilities, D.C. charter schools serve slightly lower percentages of these students than D.C. traditional public schools, but D.C. charter schools and D.C. traditional public schools both serve slightly higher percentages of these students than their national counterparts (see fig. 1). The Individuals with Disabilities Education Act (IDEA) contains specific procedures that govern the discipline of IDEA- eligible students with disabilities. In 2016, Education issued two pieces of “significant guidance” relevant to these students. The first emphasizes the importance of using IDEA’s individualized education program (IEP) and placement provisions to provide needed positive behavioral interventions and supports and other strategies to address the behavior of a student whose behavior impedes his or her learning or that of others. The guidance explains that these supports are especially important in light of research showing the detrimental effects of disciplinary suspensions, both short- and long-term, on students with disabilities. The second guidance document emphasizes that charter schools have the same obligation as other public schools to provide IDEA-eligible students with these supports, as well as all other protections under the law. In addition, Education noted in this guidance that it expects that a charter school authorizer will be able to ensure that any charter school that it authorizes complies with the terms of its charter, as well as applicable federal and state laws, including IDEA and other civil rights laws. Examples of covered disabilities under IDEA include intellectual disabilities, hearing or visual impairments, emotional disturbance, autism, and specific learning disabilities.",
"In the District, traditional public schools and charter schools have different oversight structures. The Chancellor of D.C. Public Schools oversees the traditional public schools, which operate as a single LEA. In contrast, each charter school or group of charter schools operates as its own LEA. The District of Columbia School Reform Act of 1995 (School Reform Act) established PCSB, an independent agency which provides the primary oversight of D.C. charter schools. However, as in the states, general oversight of federal education program funding requirements—including requirements for serving students with disabilities and those related to federal civil rights—is the responsibility of the state educational agency, which in D.C. is OSSE. In addition, other D.C. education agencies are to coordinate with PCSB and interact with charter schools in various ways (see fig. 2).\nPCSB, as the sole chartering authority in D.C., has the power to approve, oversee, renew, and revoke charters. (See app. III for a list of PCSB’s responsibilities.) PCSB reviews applications for new charters, as described in appendix IV, and then is responsible for monitoring charter schools’ academic achievement, operations, and compliance with applicable laws. PCSB is also required to submit an annual report that includes information on charter renewals, revocations, and other actions related to public charter schools. (See app. V for more information on PCSB’s annual reporting.) The School Reform Act allows PCSB to grant up to 10 charters per year. Each charter remains in force for 15 years. After 15 years in operation, if a school desires to renew its charter, it is required to submit a renewal application requesting to renew its charter for another 15-year term. Charters may be renewed an unlimited number of times. PCSB is also required to review each charter at least once every 5 years to determine whether the charter should be revoked.\nPCSB itself is comprised of seven unpaid board members who are appointed by the Mayor, with the advice and consent of the D.C. Council, and who are to be selected so that knowledge of specific areas related to charter schools is represented on the board. In addition, there are 37 employees who implement the board’s policies and oversee charter schools. PCSB’s main source of revenue is administrative fees from charter schools, and its main expenditures are for its personnel and for other costs related to its monitoring activities (see app. VI for more information on PCSB’s revenues and expenditures).",
"Students who are suspended or expelled from any public school have certain rights. These rights are derived from a number of sources, including state and federal constitutional and statutory law and court decisions interpreting them. For instance, the U.S. Supreme Court has held that all students facing temporary suspension have interests qualifying for protection under the Due Process Clause of the U.S. Constitution and that due process requires, in connection with a suspension of 10 days or less, that a student be given oral or written notice of the charges against them and an explanation of the evidence the authorities have and an opportunity to present the student’s side of the story. Further, students with disabilities under IDEA have specific rights afforded under that statute. In particular, if a school proposes suspending a student served under IDEA for more than 10 days, the LEA, the student’s parents, and relevant members of a child’s IEP team must conduct a review to determine whether the behavior in question is a manifestation of the student’s disability. If so, the suspension cannot proceed. Students with disabilities also have rights to educational services while suspended.",
"District of Columbia Charter School Discipline at a Glance\nDiscipline rates for charter schools overall dropped from school year 2011-12 through school year 2013-14 according to federal data, and continued to drop through school year 2015-16, according to D.C. data.\nAccording to federal data, in school year 2013-14: o Both charter and traditional public schools in D.C. had suspension rates that were about double the rates for schools nationally. o D.C. charter school suspension rates were slightly higher than D.C. traditional public school suspension rates overall. o Discipline rates remain disproportionately high for Black students and students with disabilities.\nRates for individual charter schools varied widely in 2015-16, according to D.C. data.",
"Discipline rates—that is, out-of-school suspensions and expulsions—at D.C. charter schools dropped from school year 2011-12 through school year 2013-14, but remained disproportionately high for Black students and students with disabilities, as well as at some schools. The overall suspension rate for K-12 students dropped from 16.4 percent of all students to 13.4 percent, a 3 percentage point drop from school years 2011-12 to 2013-14, the most recent years for which national data are available (see fig. 3). The number of students suspended similarly dropped from 4,465 to 3,980 students over that same period. D.C.’s own data, which is collected annually and is more recent, also indicated that suspension rates for D.C. charters schools dropped from school year 2012-13 through school year 2015-16. (See app. VII for PCSB’s data on D.C. charter school discipline rates for school years 2012-13 through 2015-16).\nExpulsions for K-12 students were also down, with 188 students expelled in 2011-12 (a rate of 0.7 percent) compared to 133 students expelled in D.C. charter schools in 2013-14 (a rate of 0.4 percent), according to Education’s data (see fig.3). D.C.’s data similarly show expulsion rates for D.C. charter schools dropping over the 4-year period from 2012-13 through 2015-16 (see app. VII). Expulsions for pre-K students remained very low—there were zero pre-K expulsions in 2013-14 compared to two expulsions in 2011-12—an expulsion rate of less than .01 percent.",
"In both 2011-12 and 2013-14 both D.C. charter schools and traditional public schools had suspension rates that were about double the rates for schools nationally, according to Education’s data (see fig. 4). For example, in 2013-14, D.C charter schools had about a 13 percent suspension rate, while the national rate for all charter schools was about 6 percent. This was also true for expulsions, with charter schools in D.C. reporting double the rate of charter schools nationally. Within D.C., charter schools’ suspension rates were slightly higher than D.C. traditional public schools. In the same year, D.C. charter schools expelled 133 K-12 students (a rate of 0.4 percent). D.C. charter school students who are expelled are not permitted to return to their charter school. They typically return to their traditional public school for the remainder of the school year but may re-enter the D.C. school lottery for a different charter school the next year. In contrast, D.C. traditional public schools generally do not expel students. Instead, D.C. traditional public schools generally use long-term suspensions (greater than 11 days) and temporarily transfer these students to an alternative middle and high school.\nFurther, for both charter and traditional public schools in D.C., some stakeholders we spoke with had concerns about schools removing students from school without issuing them formal suspensions—a practice they said occurs in some schools. Both the Ombudsman for Public Education and officials from a legal advocacy group for children told us they had worked on cases in which students were sent home for part or all of a school day for behavior-related reasons without being formally suspended. The three D.C. charter schools we visited all engaged in these practices to some extent. For example, at one of the three schools, officials said a student may be asked to stay home, but not formally suspended, while the school investigates a behavior incident. Such full-day removals from school should be reported as suspensions under D.C. law, which defines out-of-school suspension as removing a student from school for disciplinary reasons for 1 school day or longer. At this school and the two others we visited, officials also said that when a behavioral incident occurs, they may send a student home for the remainder of the school day without issuing a formal suspension. Based on D.C.’s legal definition of suspension and PCSB reporting requirements, these partial day removals would only be tracked in the D.C. data if the student had a disability and was sent home for at least half of the school day. PCSB officials told us they require charter schools to follow the law in reporting suspensions and have discouraged schools from using partial day removals as a way to avoid formal suspensions. Frequent partial or full day removals from school can contribute to a significant amount of missed instruction time that is currently not fully captured, tracked, or monitored by PCSB or other D.C. education agencies, despite their stated goals of using data to reduce exclusionary discipline practices.",
"Although suspension and expulsion rates at D.C. charter schools have dropped overall and across most student groups, rates varied widely among groups of students and among individual D.C. charter schools. Specifically, Black students and students with disabilities were disproportionately suspended and expelled from D.C. charter schools, according to Education’s 2013-14 data. As shown in figure 5, although Black students represented 80 percent of charter school enrollment, they represented 93 percent of those suspended and 92 percent of those expelled. Black boys, who represented 39 percent of enrolled students, were 56 percent of those suspended and 55 percent of those expelled over this period (not shown). Similarly, students with disabilities comprised 12 percent of D.C. charter school enrollment but represented 20 percent of those suspended and 28 percent of those expelled.\nOur analysis also found that the rates of suspension for Black students in D.C. charter schools were about six times higher than the rates for White students and the rates for students with disabilities were almost double the rates for students without disabilities, as shown in figure 6. In addition, male students in D.C. charter schools had suspension rates that were approximately 65 percent higher and expulsion rates that were two times higher than female students (not shown). The pattern of higher rates of discipline for Black students, students with disabilities (as shown in fig. 7), and male students (not shown) also occurred in D.C. traditional public schools, as well as charter and traditional public schools nationally. Further, our regression model found an association between some student characteristics and a higher incidence of suspensions. Specifically, schools that served upper grades (grade 6 and up), or served higher percentages of Black students or English Learners were associated with higher rates of suspensions. This effect existed for both types of public schools in D.C. but was larger for traditional public schools than charter schools. (See app. I for a full discussion of the regression analysis and app. II for the results.)\nWhen we looked at suspensions and expulsions for individual D.C. charter schools for school year 2015-16, we found wide variation in rates. In particular, 16 of the 105 D.C. charter schools suspended 20 percent or more of their students, with 5 schools suspending 30 percent or more of their students over the course of that school year. With respect to expulsions, 6 charter schools expelled more than 1 percent of their students, and these 6 schools accounted for over half of all charter school expulsions. (See fig. 8; see app. VII for a full list of D.C. charter schools and their school year 2015-16 discipline rates.) The schools with the highest suspension rates tended to serve middle school students (grades 5-8), while the schools with the highest expulsion rates varied in the grades they served.\nPCSB officials said that the D.C. charter schools with the highest rates either served high percentages of at-risk students or had strict discipline policies. According to these officials, some of these charter schools serve a high percentage of students with risk factors associated with behavioral problems—such as being formerly incarcerated or expelled—and these schools may struggle to manage their behavior while maintaining a safe school environment. One charter school we visited fell into this category and officials told us that their rates were high because they served many students who had been encouraged to leave their previous schools because of bad behavior. In addition, charter school officials in all three schools we visited said that managing the behavioral issues of some students with disabilities was one of the key discipline challenges they faced. Officials at these schools also said that many of their students have experienced trauma, which can manifest as behavior issues in the classroom. All of these schools had hired or planned to hire more mental health experts to better address these issues. However, officials at two schools said they have had challenges obtaining additional mental health resources and added that their staff could benefit from further training on working with traumatized students.\nWith respect to school discipline policies, PCSB officials also said that many of the schools with high discipline rates are part of networks with reputations for strict policies. For example, they said that one network started with a “no excuses” discipline philosophy that encouraged punishment for minor offenses, although their approach to discipline is now changing. PCSB officials described another network that runs D.C. charter schools with high suspension rates as having an “elaborate” behavior management system, which uses 1-day suspensions as an anchor of their discipline system. The network does not see their high suspension rate as a problem because their policy does not keep students out of school for a long time, and, according to school officials, helps correct student behavior. PCSB officials said they conducted an analysis which found no correlation between 1-day suspensions and withdrawal rates. However, several other stakeholders we interviewed told us that some parents have withdrawn their children from so-called “no excuses” charter schools out of frustration because of the multiple suspensions their child received. Further, the Ombudsman for Public Education said that her office had heard from some charter school parents who were frustrated with such discipline practices, but felt they had no option but to keep their child at the school for the remainder of the school year because the school lottery had closed.",
"According to officials we interviewed, charter schools have made a concerted effort to reduce discipline incidents but continue to face challenges. According to PCSB and other stakeholders, most D.C. charter schools have been motivated to address discipline issues in their schools. At the three charter schools we visited, all of the officials said they took steps to reduce their suspension rates and create a more positive environment to reduce behavior problems. For example, one charter school official described an approach that incorporates empathy and problem solving skills to address discipline, while keeping the student in school. This school is part of an OSSE pilot program in which five D.C. traditional public and charter schools receive on-site technical assistance to implement such practices. An official at a second charter school said that they were using interventions and supports that emphasize positive behaviors to reduce incidences of discipline. (See text box.) An official from the third school said that they have implemented an alternative to in- school suspensions when a student is disruptive, giving the student an opportunity to reflect and continue classwork in a separate environment. D.C. data for school year 2015-16 showed that discipline rates in these three schools had declined from 2014-15, although suspension rates at all three remained above the public charter school average, with one school’s suspension rate remaining above 30 percent.\nAlternatives to Exclusionary Discipline Restorative Justice Practices: An alternative disciplinary approach which uses non-punitive disciplinary responses that focus on repairing harm done to relationships and people. The aim is to teach students empathy and problem solving skills that can help prevent the occurrence of inappropriate behavior in the future. For example, officials at one school we interviewed described asking a student who stole a laptop to “restore” his community by writing a reflection paper, as well as attend Saturday school, instead of being suspended. Positive Behavior Intervention and Supports: A schoolwide framework, which focuses on positive behavioral expectations. By teaching students what to do instead of what not to do, the school can focus on the preferred behaviors. At one school implementing this practice, officials told us they instruct teachers to note three positive behaviors for every negative behavior, for each student.\nSchool officials told us that implementing changes to their discipline practices and creating a more positive environment is time and resource intensive and that full implementation would take several years. In implementing these changes, schools officials told us they faced resistance from both staff and parents. Some teachers may not fully adhere to these new practices, finding it easier to remove students from class when they are misbehaving, according to charter school officials. Officials at two schools said they had recently hired new principals to more effectively implement their new discipline philosophies, and all three of the schools had hired more staff to focus on school climate issues. In addition, school officials told us that some parents protested the changes, preferring a strict discipline culture that they perceive as keeping their children safe.",
"",
"PCSB has increased its focus on school discipline in recent years and uses several mechanisms to oversee charter schools’ use of suspensions and expulsions (see fig. 9).\nSpecifically, PCSB officials said that in 2012, PCSB began reviewing discipline data it collected from each charter school on a monthly basis. They told us they use the data to focus schools’ attention on suspension and expulsion rates and encourage schools to address high rates. In these monthly reviews, PCSB officials said they examine year-to-date suspension and expulsion rate averages, including averages by grade band (pre-K, elementary, etc.), and also identify outlier schools that have the highest suspension and expulsion rates, highest number of days students were suspended, and highest suspension rates for students with disabilities. PCSB officials said they communicate with schools regularly about the patterns they see in their discipline data and that they request meetings with charter school officials of outlier charter schools to discuss their schools’ rates and how they compare to other charter schools.\nPCSB officials told us they use this approach because charter school officials will usually choose to make changes when they are provided with this information. Officials from the three schools we interviewed said that PCSB has generally been active in sharing information and data, highlighting issues, and encouraging schools to reduce suspension and expulsion rates. Further, PCSB has offered training and professional development opportunities to charter school officials on topics related to school discipline, including conferences on classroom management and multiple quarterly meetings for school officials devoted to the topic.\nPCSB and OSSE work together to annually publish discipline data by school in Equity Reports, which are reports that PCSB officials said drive schools to lower their suspension and expulsion rates. The Equity Reports are also meant to provide school leadership, school boards, families, and the community with information that will allow them to compare data on both charter schools and traditional public schools in D.C. See figure 10 for an excerpt from one charter school’s 2014-15 Equity Report.\nPCSB officials told us that they also review schools’ discipline policies during the charter application and renewal processes. These officials said that they use the application process to shape new charter schools’ discipline policies. According to PCSB officials and application guidance, PCSB is unlikely to approve an application whose discipline policy will result in frequent removal of students from the school (see text box). PCSB officials said that this process is their opportunity to ensure that charter school policies limit the use of suspensions and expulsions. For example, in a May 2015 letter explaining the reasons for denying a new charter school application, PCSB noted that the “demanding behavioral program may result in high percentages of students being suspended or expelled and the founding team has not developed realistic supports to meet the needs of all learners. When asked about how the school will support students who struggle with strict behavior expectations, the founding group…did not provide a cohesive and deliberate approach.”\nExcerpts from PCSB Policy Documents “Discipline plans that provide for expulsion for minor offenses such as possession of tobacco or insubordination will not be approved.” –PCSB Discipline Plan Policy “PCSB is unlikely to approve applications for schools with discipline policies that rely on school exclusion to manage student behavior and/or that are likely to result in high rates of suspensions and expulsions.” –PCSB 2016 Charter Application Guidelines “PCSB expects that schools will only expel students for federally- recognized reasons.” –PCSB 2016 Charter Application Guidelines With respect to charter renewals, which occur every 15 years, PCSB officials said that recently they have begun to use this process to, among other things, renegotiate parts of schools’ discipline policies. Officials said that if PCSB and the charter school board fail to reach agreement, the school’s funding will cease, which according to PCSB officials provides a strong incentive for charter schools to comply.\nIn addition, PCSB conducts higher-level reviews of schools’ discipline policies on an annual basis. Officials told us that these reviews are meant to confirm that schools’ discipline policies include three key elements: due process and appeals procedures, clearly outlined reasons for suspensions and expulsions, and adherence to federal protections for students with disabilities in the discipline process. (See text box below for the full list of discipline policy elements PCSB requires of charter schools.) If a school’s policy does not include one or more of these elements, PCSB officials said they will give the school 2 weeks to revise the policy and, if the school fails to fix the issue, PCSB will send a “notice of concern”— a formal, written notification alerting a school of issues that need to be addressed. If the school still fails to fix the issue, PCSB will send a charter warning letter indicating that the charter could be subject to revocation. PCSB officials told us they have never had to send a warning letter for issues related to discipline policies.\nRequired Elements of Charter School Discipline Policies\nParent, student, and staff rights and responsibilities;\nClear explanation of infractions, what specific acts are not tolerated in the school, tiered consequences and interventions, and a clearly outlined basis for suspensions and expulsions;\nDue process and appeals procedures;\nProvisions to ensure that all rules are enforceable and applied consistently by all staff; and\nAll Individuals with Disabilities Education Act (IDEA) guidelines and requirements, which concern services for students with disabilities.\nFinally, PCSB also monitors parent and stakeholder complaints. PCSB officials told us that if they notice a trend or pattern in these complaints they will follow up with schools. They said that they have never had a pattern of complaints against a school related to suspensions or expulsions.",
"While other D.C. education agencies also have oversight responsibility with respect to charter schools (see fig. 2), plans to further bring down discipline rates have been hampered by agencies’ lack of consensus regarding roles and responsibilities, and by one agency’s stated lack of clarity around its own authority. In interviews, the Deputy Mayor for Education (DME), OSSE, and PCSB officials described different views regarding agency roles in overseeing charter schools and providing guidance and training. In particular, officials described differing views on the appropriate scope of PCSB’s role with respect to charter schools. For example, the DME—whose role is to oversee District-wide education strategy—said that PCSB could issue further guidance on certain discipline-related topics and place additional requirements on schools. In contrast, officials from PCSB—the entity charged with overseeing charter schools—told us that providing additional or more specific guidance would be inconsistent with their role as authorizer. PCSB officials said that they interpret certain provisions of the School Reform Act as providing “a strong legal bulwark against the District government, including , mandating school disciplinary processes,” thereby limiting the actions that D.C. agencies, including PCSB, may take. In addition, officials from these three agencies differed in their views regarding charter schools’ needs with respect to discipline, including whether charter schools needed additional guidance on due process procedures, training, or other resources.\nFurther, OSSE officials said that the agency’s current view of its authority to regulate charter schools on discipline differs from previous administrations’ interests in that area, and that they still lacked clarity on their authority in some areas. Specifically, in a 2014 report, OSSE—the agency with general oversight of federal education funding requirements—stated its intent to issue regulations applying to both D.C. traditional public and charter schools that would address high discipline rates. In the report, OSSE said that this effort would address potential discipline disparities across D.C. charter and traditional public schools and help ensure that all public school students in the District are treated fairly. However, OSSE never issued the regulations, and OSSE officials told us in 2016 that, in contrast with previous administrations’ interests, the current administration does not interpret the School Reform Act as providing them with clear authority to issue such regulations. OSSE officials also stated that the complexity of the D.C. regulatory framework, combined with the fact that some regulations were promulgated prior to the creation of D.C. charter schools, resulted in a lack of clarity around their oversight authority over charter schools in some areas. OSSE did, however, issue non-regulatory guidance in June 2016, which provides high-level descriptions of federal and D.C. laws relating to school discipline and cites some leading practices. It is unclear whether this guidance will lead to any changes in charter schools’ discipline rates. Subsequent to releasing this guidance, OSSE released a new report in 2016, concluding that further progress is still needed on discipline policy, implementation, and disproportionality across all D.C. public schools.\nDespite these challenges, officials from these three agencies and D.C. traditional public schools have collaborated together on a key effort to address discipline rates by publishing the Equity Reports for each charter and traditional public school in the District. In addition, officials told us that the other key D.C. education agencies reviewed OSSE’s draft non- regulatory guidance on discipline, and that officials from these agencies also work together along with officials from other D.C. agencies that support families and young people through regular meetings convened by the DME. OSSE and PCSB officials said that they also promote and support each other’s training programs on classroom management and discipline. Further, they work together on education-related issues as participants on a number of city-wide task forces and other collaborative efforts. However, while some of those task forces focus on issues related to discipline, such as bullying or truancy, none specifically address discipline rates or disparities in a comprehensive manner.\nLeading practices on interagency collaboration state that to achieve a common outcome, agencies should agree on roles and responsibilities and create mutually reinforcing or joint strategies that align the agencies’ activities, processes, and resources. Similarly, standards for internal control state that to achieve an entity’s objectives management should establish an organizational structure and assign responsibilities. The agencies differing views on roles and responsibilities, and OSSE’s stated lack of clarity on its authority around the issue of discipline in charter schools makes it difficult for them to leverage resources and the collective expertise of other agencies in the District to develop plans and strategies to address D.C.’s high discipline rates. Absent such a plan, as well as explicitly stated roles and responsibilities, charter schools may face challenges in continuing to bringing down rates.",
"PCSB and the District’s charter schools have made notable progress in bringing down discipline rates in recent years. However, rates remain troublingly high, at twice the national rate for school year 2013-14—the most recent year for which nationally comparable data are available—and particularly for certain schools and for Black students and students with disabilities. PCSB has taken steps to address this issue by using school- level discipline data to focus schools’ attention on reducing reliance on those practices that remove students from school. However, some schools are removing students from school for partial or even full school days without fully reflecting these actions in the discipline data or consistently documenting them. As a result, PCSB does not have a clear sense of how widely these practices are used or what strategies might help it best address the problem.\nPCSB, the DME, and OSSE all play key roles in charter school oversight. While these agencies communicate regularly and have worked together in a number of areas, including making data on school discipline across all District schools more available through the Equity Reports, we observed a lack of consensus around their roles and responsibilities, and OSSE’s view of its authority to regulate charter schools on discipline differs from previous administrations’ interests in that area. This has contributed to inertia around creating and implementing a coordinated plan that could help further address high discipline rates. Absent such a plan, continued progress in bringing down discipline rates may be slowed.",
"1. PCSB should further explore ways to more accurately measure behavior-related time out of school—both partial and full day removals—not captured under current reporting procedures. 2. The D.C. Mayor should direct the DME and OSSE to deepen collaboration with PCSB and other relevant stakeholders, such as charter school LEAs, to develop a coordinated plan to continue progress in reducing discipline rates and, as part of this process, make explicit their respective roles, responsibilities, and authorities with regard to discipline in D.C. charter schools. This plan could include developing additional guidance, training, or resources, consistent with the unique autonomy of charter schools.",
"We provided a draft of this report to PCSB, the D.C. Mayor’s Office, and Education for review and comment. PCSB’s written comments, which also include technical comments, are reproduced in appendix VIII. OSSE provided written comments on behalf of the D.C. Mayor’s Office, which are reproduced in appendix IX. Education and the D.C. State Board of Education provided technical comments on the report. In each case, we incorporated their comments into the report, as appropriate.\nIn its written comments, PCSB said that by not focusing our analysis on D.C. data, we reached inaccurate conclusions. Specifically, it stated that by focusing on CRDC data, which are most recently available for school years 2011-12 and 2013-14, the report failed to acknowledge the more recent reductions in D.C. charter schools’ suspension and expulsion rates shown in D.C.’s own data for school years 2014-15 and 2015-16. PCSB also commented on our analysis that used CRDC data to make comparisons between D.C. charter school rates to those of charter schools nationally. These data showed that suspension rates at D.C charter schools were double the national rates for school years 2011-12 and 2013-14. In its comments PCSB presented a table with its own data for all 4 of these school years and stated that its data show that D.C. charter schools’ discipline rates have moved closer to national rates. PCSB asked that our report prominently incorporate D.C.’s 2014-15 and 2015-16 data throughout.\nAs stated in our draft report, the most recent available PCSB data at the time we did our work was for school year 2014-15, which we presented in selected analyses where appropriate throughout the draft report. We have updated these analyses with PCSB’s recently available 2015-16 data. PCSB’s 2015-16 data continue to show modest declines in D.C. charter school discipline rates, compared to previous years of PCSB data.\nHowever, as stated in our draft report, PCSB’s data are not comparable to other states’ data collected by CRDC. Further, because school year 2013-14 is the most recent year for which national comparable CRDC data are available, it is not possible to know whether D.C. charter school rates have moved closer to national rates, which may have also changed since 2013-14.\nPCSB agreed that D.C. charter schools’ discipline rates remain higher than PCSB would like, and that they remain disproportionate with respect to race and disability status. PCSB also stated that steady progress seen in D.C. charter schools is the right way to reduce discipline. We applaud PCSB’s efforts in steadily bringing down rates, as noted in the draft report, and continue to believe that a coordinated multi-agency plan is needed to continue this progress.\nIn addition, PCSB said in its comments that our draft report failed to acknowledge the autonomy granted to D.C. charter schools under the School Reform Act, which it interprets as preventing any D.C. agency from mandating charter school disciplinary processes. We believe that the report clearly states that each charter LEA has the autonomy to establish its own discipline policies and suspend and expel students, and that unlike D.C. traditional public schools, charter LEAs are not subject to the discipline policies and procedures in D.C. municipal regulations. However, as also stated in the draft report, PCSB exercised its authority by putting some requirements and oversight mechanisms in place for charter schools, including regularly reviewing charter schools’ discipline data and policies. Moreover, Education’s recent guidance highlights its expectation that charter school authorizers ensure that the schools they authorize comply with federal and state laws, including those pertaining to the discipline of students with disabilities.\nPCSB did not comment on our first recommendation (that PCSB further explore ways to more accurately measure behavior-related time out of school—both partial and full day removals—not captured under current reporting procedures). However, PCSB said that a related statement in the report—that it has no official policy on partial day removals of students for disciplinary reasons—was erroneous. We have removed this statement in the final report.\nPCSB and OSSE both disagreed with our characterization of their collaboration around charter school discipline, but both indicated that they look forward to deepening their collaboration to continue progress made in reducing discipline rates. We have added additional information to our report to more fully reflect new information both entities provided in their comments regarding the level of collaboration between these two entities.\nFinally, OSSE, in commenting on the report, agreed that there is some ambiguity around its authority with respect to D.C. charter schools. Specifically, OSSE stated that the complex D.C. regulatory framework is unclear regarding oversight authority in some instances. As such, the agency’s current view of its authority to regulate charter schools on discipline differs from previous administrations’ interests in that area. Specifically, OSSE stated that its current conclusion is that the D.C. code does not provide OSSE clear authority to regulate charter schools with respect to discipline. Such views about D.C.’s regulatory framework are an example of the importance of clarifying agency roles and responsibilities with respect to D.C. charter school discipline.\nIn light of PCSB’s and OSSE’s comments around collaboration and their respective authorities around discipline, we modified our second recommendation slightly. We now specify that these agencies should deepen their collaboration in order to continue progress in reducing discipline rates, and that in doing so they should make explicit their respective oversight authorities, in addition to roles and responsibilities. We also specify that the multi-agency plan to continue progress reducing discipline rates should be consistent with the unique autonomy of charter schools.\nWe are sending copies of this report to the D.C. Mayor, the Chairman and Executive Director of the Public Charter School Board, and the U.S. Secretary of Education. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff should have any questions about this report, please contact me at 617-788-0580 or nowickij@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix X.",
"The objectives of this study were to examine: (1) what is known about suspensions and expulsions in District of Columbia (D.C. or District) charter schools, and (2) to what extent the Public Charter School Board (PCSB) oversees the use of suspensions and expulsions at charter schools. To address these objectives, we used a variety of methods, including analyzing federal and D.C. data; reviewing published reports and monitoring documentation from PCSB and other D.C. agencies; and interviewing officials from these agencies, representatives from associations and advocacy groups, and officials from three charter schools.",
"To determine the out-of-school suspension and expulsion rates at charter and traditional public schools, both in D.C. and nationally, we analyzed federal data from the U.S. Department of Education’s (Education) Civil Rights Data Collection (CDRC) for school years 2011-12 and 2013-14, the 2 most recent years available. The CRDC is a comprehensive source of data on suspensions and expulsions that collects comparable data across the nation’s public school districts, schools, and students. As such, we used the CRDC to make comparisons between D.C. charter schools, D.C. traditional public schools, and traditional and charter schools nationally. PCSB also collects information on suspensions and expulsions in D.C. charter schools, but these data are not comparable to CRDC data on schools and students in other states. At the time we did our work PCSB had data that were more recent than data available through the CRDC (school year 2014-15 for PCSB versus 2013-14 for CRDC). We therefore chose to present PCSB’s data in selected analyses in the report, while also being careful not to make comparisons between the PCSB and CRDC data. In its written comments on a draft of this report, PCSB noted the recent availability of data for the 2015-16 school year. We updated our analyses accordingly to provide the most current picture of D.C. charter school discipline rates. Doing so did not materially change the findings in this report.",
"The Civil Rights Data Collection is a biennial survey that is mandatory for every school and district in the United States. Conducted by Education’s Office for Civil Rights, the survey collects data on the nation’s public schools, including student characteristics and enrollment; educational and course offerings; disciplinary actions; and school environment, such as incidences of bullying. From school years 2000 through 2010, the CRDC collected data from a representative sample of schools, but in school years 2011-12 and 2013-14, the CRDC collected data from every public school in the nation (approximately 17,000 school districts, 96,000 schools, and 50 million students in school year 2013-14). The dataset includes traditional public schools (pre-K through 12th grade), alternative schools, magnet schools, and charter schools.\nFor school years 2011-12 and 2013-14, the most recent years of data available, we calculated aggregate discipline rates. To determine the extent to which discipline rates varied by student demographic groups and school type, we calculated aggregate discipline rates by student demographics and for all charter and traditional public schools in D.C. Further, we calculated discipline rates for each school in D.C.—both charter and traditional—to determine the extent of variation in rates by school and school type. We also compared the aggregate rates in D.C. charter and traditional public schools to rates for charter and traditional public schools nationally.\nWe analyzed the following discipline and demographic variables:\nTotal out-of-school suspensions, calculated by combining the CRDC\nStudents receiving only one out-of-school suspension\nStudents receiving more than one out-of-school suspension\nTotal expulsions, calculated by combining the CRDC variables:\nExpulsions with educational services\nExpulsions without educational services The CRDC has seven race and ethnicity variables, which we combined into five categories, as shown in table 1.\nWe also analyzed rates for students identified as English Learners and students with a disability. Our analysis of students with disabilities included only those students served under the Individuals with Disabilities Education Act. We excluded Section 504 students because the CRDC does not collect discipline data for Section 504 broken out by race and ethnicity. In school year 2013-14, students only receiving services under Section 504 represented 8 percent of public school students with disabilities in D.C.\nTo analyze the poverty levels of schools with different suspension and expulsion rates, we matched schools in both years of the CRDC with data on free or reduced-price lunch (FRPL) eligibility from the Common Core of Data, which is administered by Education’s National Center for Education Statistics, and which annually collects non-fiscal data about all public schools in the nation. These data are supplied by state education agency officials for their schools and school districts. However, we determined that the school year 2013-14 FRPL data for D.C. were not sufficiently reliable for our purposes. These FRPL data differed dramatically from the school year 2011-12 data and when we asked officials from the Office of the State Superintendent of Education (OSSE), the state educational agency responsible for reporting these data, to corroborate these data, they reported having no confidence in the data they had reported. Therefore, we did not use this FRPL data in any of our analyses.\nTo assess the reliability of the federal data used in this report, we reviewed technical documentation about the survey and dataset and interviewed officials from Education’s Office for Civil Rights about their procedures for checking the data. We also conducted electronic testing and logic checks of our analysis. Based on these efforts, we determined that the CRDC data were sufficiently reliable for our purposes. We used the version of the 2013-14 CRDC data that was publicly available as of September 30, 2016 because it corrected errors in the original data previously submitted by Florida.",
"We also analyzed the data using a generalized linear regression model to determine (1) whether and the extent to which certain school level characteristics are associated with a higher incidence of suspensions and (2) whether and the extent to which an association exists between high incidences of suspension and school type in the District (charter schools versus traditional public schools). For our regression model, we used the CRDC for school year 2013-14, limiting our analysis to suspensions because expulsions are a rare event and therefore difficult to model. We included demographic variables in our model that Education’s Office for Civil Rights has identified as key drivers of suspension. We used these variables in our model as follows:\nOutcome: number of students with one or more out-of-school Independent variable: Charter school status (Yes/No)\nAdjustment variables: Percent of student population that is male, Black, students with disabilities, and English Learners; whether school offers upper grades (grades 6 and above) (Yes/No)\nSome variables that were thought to be important were not included in our model due to estimation or reliability issues. Specifically, we excluded:\nFRPL in school year 2013-14, due to reliability issues as indicated by OSSE, the agency responsible for reporting the data; percent of students within a school who are Hispanic, due to collinearity with English Learners; and alternative school designation, due to lack of variability and sparseness in data.\nWe used the number of students enrolled as an exposure variable to account for different school sizes. Our analysis included K-12 schools. We excluded pre-Kindergarten (pre-K) schools because pre-K suspensions are rare and reported differently in the data. This resulted in dropping 8 schools that offered only pre-K. Additionally, for schools that offered both pre-K and later grades we excluded out-of-school suspension and student counts for pre-K students. We also excluded 5 magnet schools because they are too dissimilar to the other schools in our model, since students are admitted to such schools based on the merits of their application. With these schools excluded, the 2013-14 CRDC data resulted in 191 D.C. Public Schools in our analysis file, where 105 were traditional and 86 were charter.\nAll models are subject to limitations. For this model, the limitations included:\nThe data we analyzed are at the school level, rather than student level. Ideally, data would be analyzed at the student level in order to describe the association between a charter versus traditional public school student’s suspension rate, controlling for characteristics of the individual students suspended, such as gender, race/ethnicity, and grade level. Instead, the school-level nature of the CRDC data limited what we could ascribe to the association between these schools’ suspension incidence, controlling for the characteristics of the entire school’s population, such as percent of students who are male, Black, etc.\nSome variables that may be related to out-of-school suspensions are not available in the data. For example, in this context, it could be that parent education or household type (single- versus multiple-headed household) could be related to student behavior, such as those that lead to out-of-school suspensions.\nThese data were not gathered through a randomized control trial in which students would be randomized to attend either a traditional or a charter school. Although there is some randomness inherent in the lottery for oversubscribed charter schools, this is not systematic and, for students who were offered the option to attend charter schools, the students’ families decide whether to accept or not.\nTypically, a generalized linear regression model provides an estimated incidence rate ratio, where a value greater than 1 indicates a higher or positive association, in this case, between suspensions and the variable of interest, such as being a charter school or having a higher percentage of Black students. An estimated incidence rate ratio less than 1 indicates a lower incidence of suspensions when a factor is present. Given the limitations of our model as described above, in appendix II we present a general summary of association by providing the direction, rather than an estimated rate (incidence) of suspensions of charter versus traditional public schools in the District.",
"To analyze more recent data on D.C. charter schools, we obtained aggregate data from PCSB for school years 2012-13 through 2015-16. In addition, we obtained more detailed school-level data on charter school suspensions and expulsions from PCSB for school years 2013-14, 2014- 15, and 2015-16 which are part of data that the District collects annually on both charter schools and traditional public schools. The data included published reports on discipline from PCSB, and Equity Reports for each school. Equity Reports contain data on: total enrollment;\nLimited English Proficiency; suspension rate by student subgroup; and overall expulsion rate.\nIn addition, we obtained published reports on discipline, as well as data from OSSE on the numbers of students transferred to an alternate school for students who received long-term suspensions and expulsions in school year 2014-15.\nTo assess the reliability of the D.C. data, we reviewed documentation, interviewed relevant officials from PCSB and OSSE, and conducted logic checks. Based on these efforts, we determined that these data were sufficiently reliable for our purposes. D.C.’s data however, are not comparable to Education’s data because they do not distinguish between pre-K and K-12 rates and because not all schools were captured in Education’s data.",
"To determine the extent to which PCSB oversees suspensions and expulsions at charter schools, we reviewed documentation and guidance from PCSB, as well as federal and District laws and regulations. We also reviewed documentation from other D.C. education agencies that also have a role in overseeing D.C. charter schools and reviewed discipline guidance from the U.S. Departments of Education and Justice. In addition, we interviewed PCSB officials and officials at other D.C. agencies that have oversight of charter schools. These other D.C. agencies were\nDeputy Mayor for Education;\nState Board of Education, including the Ombudsman for Public Education and the Chief Student Advocate; and\nD.C. Office of the Inspector General.\nWe evaluated PCSB’s oversight of charter school discipline against federal standards for internal control for communicating quality information to external parties and establishing structure, responsibility, and authority, and evaluated D.C. education agencies’ collaboration on this issue against leading practices for interagency collaboration.\nWe also reviewed selected research studies that provided further context and insight into school discipline in charter schools.",
"To obtain additional context and insights, we selected and interviewed researchers and officials from advocacy groups and associations with different perspectives on charter schools and discipline. The researchers and officials we interviewed were located at\nThe Center for Civil Rights Remedies at the Civil Rights Project,\nThe Center on Reinventing Public Education,\nThe Children’s Law Center,\nThe Council for Court Excellence,\nThe D.C. Association of Chartered Public Schools,\nD.C. Lawyers for Youth,\nThe Dignity in Schools Campaign, and\nThe National Association of Charter School Authorizers.",
"In order to obtain the views of charter school officials with diverse perspectives on discipline policies and practices, reasons for high discipline rates, and experiences with PCSB oversight, we interviewed school and local educational agency (LEA) officials at three D.C. charter schools. We selected two schools that had high suspension and/or expulsion rates in school year 2014-15, as well as one school with formerly high discipline rates, according to D.C. data. In making our selections, we also took into consideration: the number of LEA campuses in D.C., to get perspectives from large and small charter school networks; grade levels served, because both research and stakeholders indicated that discipline rates are higher for middle and high school students than elementary school students; school location and demographics, to ensure that we spoke to schools serving similar populations of students; and rank in the 2014 Performance Management Framework (PMF), when available, to get perspectives from higher and lower performing schools. The PMF is PCSB’s rating system to measure school quality and includes three tiers. The highest performing schools are ranked as Tier 1, while the lowest are ranked Tier 3.\nWe conducted two interviews each for the three schools: we interviewed LEA staff from the school’s central office and school-based staff including the principal and other administrators with responsibility for implementing discipline policy. We asked officials to describe their school’s discipline policies and practices, how and why they have changed over the years, and discipline challenges they are facing. We also reviewed their discipline policies in their most recent student handbook, as well as other relevant documentation, such as annual reports, renewal reports, and Equity Reports which capture schools’ discipline data. Because we selected the schools judgmentally, we cannot generalize our findings about their policies, practices, and challenges.\nWe conducted this performance audit from November 2015 to February 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"Using the school year 2013-14 CRDC data, we conducted a generalized linear regression model examining the association between District of Columbia (D.C.) schools’ out-of-school suspensions and various school– level characteristics. For further discussion of our methodology for this analysis, see appendix I.\nOur regression model found an association between certain school demographic characteristics and suspension, regardless of type of school (charter versus traditional public schools). Specifically, serving the upper grades (grades 6 and up) or having higher percentages of Black students or English Learners were associated with a higher incidence of suspensions. Further, our model showed that D.C. charter schools overall were associated with a higher incidence of suspensions than D.C traditional public schools. However, our model also examined the interactions between school type and school demographic variables and found that the association between school type and suspension rate varied across several demographic variables. Specifically, while serving upper grades, higher percentages of Black students, or higher percentages of English Learners is generally associated with a higher incidence of suspensions, this effect was smaller for charter schools than for traditional public schools.\nThese relationships are shown in table 3, which presents coefficients from our model, where positive means that a particular variable was significantly associated with an increase in the suspension rate at the 0.05 level and negative indicates a decrease in the suspension rate. Insignificant indicates the variable is not significantly associated with suspensions at the 0.05 level.\nOur model did not find an association between gender or the percentage of students with disabilities in a school and increased suspension rates. The absence of an association here may be due to the way that federal data is collected and reported at the school, rather than student, level.",
"The District of Columbia School Reform Act of 1995 (School Reform Act) established the Public Charter School Board (PCSB) as an eligible chartering authority with specific powers and duties. Under the School Reform Act, PCSB has specific responsibilities with regard to reviewing petitions (applications) for new charters, monitoring charter school operations, reviewing charter renewal applications, and revoking charters. Table 4 provides the detailed requirements for these activities as specified in the School Reform Act. As required by the School Reform Act, PCSB must issue annual reports and financial statement audits. (See app. V for information on PCSB’s 2016 annual report.)",
"The Public Charter School Board (PCSB) reviews all applications for new charter schools in the District of Columbia (D.C.), which can be submitted by parents, educators, nonprofit organizations, or other groups. With some exceptions, applicants must generally adhere to the same guidance and must meet PCSB’s standards for approval. (See table 5.)\nPCSB provides application instructions and sample documents on the agency’s website. Once PCSB receives an application, the review process generally takes 3 months. (For example, see table 6 for PCSB’s fall 2016 charter application timeline.)\nPCSB’s charter school application review is a four-part process including written applications, site visits (if applicable), interviews, and public hearings (see table 7). Following the application review, PCSB votes on each charter application at a public meeting.\nApplications for a charter school follow a standard format and are required to include specific elements. (See text box.)",
"In addition to the written applications, site visits, interviews, and public hearings, PCSB evaluates charter school applicants against established criteria (see table 8).",
"PCSB may approve any application if it determines that the application (1) meets the legal requirements; (2) agrees to any condition or requirement set forth by the authorizer; and (3) has the ability to meet the educational objectives outlined in the application. If PCSB does not approve an application, it must provide written notice to the applicant explaining why the application was not approved. Based on all components of the application process, the PCSB Board votes on each charter school application at a public meeting. There are three possible outcomes for an application: 1. Full approval: Applicant has met all of the requirements. 2. Conditional approval/approval with conditions: Applicant is approved pending satisfaction of all requirements, wherein they are determined to have Full Approval. 3. Denial: Applicant does not meet all of the requirements and no further consideration is given to the application. Such applicants may address the shortcomings and reapply in a future cycle, though not in the same 12-month period.",
"A list of the dates and places of each meeting of PCSB during the year preceding the report.\nDecember 14, 2015 January 27, 2016 February 10, 2016 (Special Meeting)\nThe number of petitions received for the conversion of an existing school to a public charter school and for the creation of a new charter school.\nThe number of petitions that were approved and the number that were denied.\nSummary of the reasons for which such petitions were denied.\nFour public charter school proposals received: 1. Sustainable Futures 2. Interactive Academy 3. Pathways in Education 4. The Adult Career Technical Education One approved—Sustainable Futures One denied—Interactive Academy Two withdrawn—Pathways in Education and The Adult Career Technical Education. The Board denied the application of Interactive Academy for three reasons: (1) capacity of the founding group; (2) insufficient development of the plan for supporting students with disabilities; and (3) insufficient evidence of the success of the founding group in driving academic achievement.\nAnnual Reporting Requirements A description of any new charters issued by PCSB during the year preceding the report.\nA description of any charters renewed by PCSB during the year preceding the report.\nContent Shown in Report Sustainable Futures will serve 131 students in its first year, growing to no more than 288 students by its third year of operation. The school seeks to serve disconnected youth in the District and will offer project-based learning, along with a competency- based approach to allow students to move through the curriculum at their own pace. The school will also offer social-emotional supports (e.g., mental health services) and wraparound services (e.g., on-site health clinic, transportation assistance, and three meals per day). Two charters renewed: 1. KIPP DC PCS 2. Thurgood Marshall Academy PCS Four charters reviewed: 1. Inspired Teaching Demonstration PCS 2. Imagine Hope Community PCS 3. Washington Latin PCS 4. The Next Step PCS. Potomac Preparatory PCS charter revoked for poor academic performance.\nA description of any charters revoked by PCSB during the year preceding the report. A description of any charters refused renewal by PCSB during the year preceding the report. Any recommendations concerning ways to improve the administration of public charter schools.\nNo recommendations found.",
"",
"Grants includes both federal and private grants. PCSB has not received any federal grant funds since FY 2014. Other revenues include school closure funds and sponsorship income, among other sources. Other expenditures include facilities costs, community events, w ebsite costs, and other overhead expenses.",
"Appendix VII: Public Charter School Board’s Discipline and Demographic Data Suspension rate (percent)",
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"In addition to the contact named above, Sherri Doughty (Assistant Director), Lauren Gilbertson (Analyst-in-Charge), Melinda Bowman, Jean McSween, John Mingus, James Rebbe, Alexandra Squitieri, and Sonya Vartivarian made key contributions to this report. Also contributing to this report were Deborah Bland, Grace Cho, Sara Daleski, Holly Dye, Lauren Kirkpatrick, Sheila R. McCoy, Mimi Nguyen, Sara Pelton, and Ronni Schwartz."
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"question": [
"How did discipline rates at D.C. charter schools change from school years 2011-12 through 2013-14?",
"How did the rates compare to the rates of charter schools nationally and D.C. traditional public schools?",
"How did suspension and expulsions rates change specifically during this period?",
"What were the problems with these rates?",
"How does the Public Charter School Board (PCSB) oversee charter schools' use of suspensions and expulsions?",
"What is the problem among several D.C. agencies regarding charter school discipline?",
"What could happen without a coordinated plan?",
"Why was a plan to issue regulations addressing discipline disparities among D.C. public schools unsuccessful?",
"What provision did the District of Columbia Appropriations Act, 2005 provide to GAO regarding PCSB?",
"What does this report examine?",
"What efforts engaged in this report did GAO make?",
"What kind of charter schools did GAO visit?"
],
"summary": [
"Discipline rates (out-of-school suspension and expulsion rates) at District of Columbia (D.C.) charter schools dropped from school years 2011-12 through 2013-14 (the most recent years of national Department of Education data available).",
"However, these rates remained about double the rates of charter schools nationally and slightly higher than D.C. traditional public schools and were also disproportionately high for some student groups and schools.",
"Specifically, during this period, suspension rates in D.C. charter schools dropped from about 16 percent of all students to about 13 percent, and expulsions, which were relatively rare, went down by about a half percent, according to GAO's analysis.",
"However, D.C. Black students and students with disabilities were disproportionately suspended and expelled. For example, Black students represented 80 percent of students in D.C. charter schools, but 93 percent of those suspended and 92 percent of those expelled. Further, 16 of D.C.'s 105 charter schools suspended over a fifth of their students over the course of school year 2015-16, according to D.C. data.",
"The Public Charter School Board (PCSB) regularly uses several mechanisms to oversee charter schools' use of suspensions and expulsions. For example, PCSB reviews school-level data and schools' discipline policies to encourage schools to reduce reliance on suspensions and expulsions to manage student behavior.",
"Several D.C. agencies have roles in overseeing charter schools and reported collaborating on other issues, but we observed a lack of consensus around roles and responsibilities regarding charter school discipline. Further, a plan to issue regulations addressing discipline disparities among D.C. public schools was unsuccessful because the D.C. agency that planned to issue the regulations was unsure of its authority to do so.",
"Absent a coordinated plan to continue progress in reducing discipline rates in charter schools, as well as clarified roles, responsibilities, and authorities of D.C. agencies with respect to oversight of discipline in charter schools, continued progress may be slowed.",
"Further, a plan to issue regulations addressing discipline disparities among D.C. public schools was unsuccessful because the D.C. agency that planned to issue the regulations was unsure of its authority to do so.",
"The District of Columbia Appropriations Act, 2005, as amended, included a provision for GAO to conduct a periodic management evaluation of PCSB.",
"This report examines (1) what is known about suspensions and expulsions in D.C. charter schools, and (2) to what extent PCSB oversees charter schools' use of suspensions and expulsions.",
"GAO analyzed the most recent national federal data (school years 2011-12 and 2013-14) and D.C. data (school year 2015-16) on suspensions and expulsions; reviewed relevant laws, regulations, and agency policies and documentation; and interviewed officials at PCSB and other D.C. agencies, as well as other stakeholders selected to provide a range of perspectives. GAO also visited three charter schools that had high discipline rates.",
"GAO also visited three charter schools that had high discipline rates."
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CRS_R44940
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{
"title": [
"",
"Introduction",
"Technology of Autonomous Vehicles",
"Federal Regulatory Issues",
"Guidelines",
"Model State Policy",
"Current Federal Regulatory Tools",
"Proposed New Regulatory Tools",
"Trump Administration Revises DOT Guidelines",
"State Concerns",
"Cybersecurity and Data Privacy",
"Educating Motorists and Pedestrians",
"Congressional Action",
"Controversy with the Legislation",
"Preemption of State and Local Laws",
"Vehicle Safety",
"Cybersecurity and Consumer Privacy"
],
"paragraphs": [
"",
"Autonomous vehicles, which would carry out many or all of their functions without the intervention of a driver, may bring sweeping social and economic changes in their wake. The elderly, disabled Americans, urban residents, and those who do not own a car may have new travel options. Travel on public roads and highways could become less congested. Highway travel could become safer as well: U.S. roadway fatalities rose in 2015 and 2016, the first annual increases in more than 50 years, and a study by the National Highway Traffic Safety Administration (NHTSA) has shown that 94% of crashes are due to human errors, which autonomous vehicles could reduce. As a U.S. Department of Transportation (DOT) report noted, highly automated vehicles \"hold a learning advantage over humans. While a human driver may repeat the same mistakes as millions before them, a [highly automated vehicle] can benefit from the data and experience drawn from thousands of other vehicles on the road.\"\nCongressional committees have held numerous hearings on federal policy regarding automated vehicles, and have debated changes in federal regulation to encourage vehicular innovation while protecting passenger safety. In July 2017, the House Energy and Commerce Committee unanimously ordered to be reported the first major legislation on autonomous vehicles ( H.R. 3388 ); the House of Representatives passed that legislation by voice vote on September 6, 2017. The Senate Committee on Commerce, Science, and Transportation reported S. 1885 on November 28, 2017. However, since the House vote and the Senate committee consideration, several accidents involving autonomous vehicles operating under test conditions have raised new questions about how federal and state governments should regulate vehicle testing and the introduction of new technologies into vehicles offered for sale.",
"The technologies used in autonomous vehicles are very different from the predominantly mechanical, driver-controlled technology of the 1960s, when the first federal vehicle safety laws were enacted. Increasingly, vehicles can be controlled through electronics with little human involvement. Performance can be altered via over-the-air software updates. A range of advanced driver assistance systems is being introduced to motor vehicles, many of them bringing automation to vehicular functions once performed only by the driver. These features automate lighting and braking, connect the car and driver to the Global Positioning System (GPS) and smartphones, and keep the vehicle in the correct lane. Three forces drive motor vehicle innovation\ntechnological advances enabled by new materials and more powerful, compact electronics; consumer demand for telecommunications connectivity and new types of vehicle ownership and ridesharing; and regulatory mandates pertaining to emissions, fuel efficiency, and safety.\nIncreasingly, such innovations are being combined as manufacturers produce vehicles with higher levels of automation. Vehicles do not fall neatly into the categories of \"automated\" or \"nonautomated,\" because all of today's motor vehicles have some element of automation.\nThe Society of Automotive Engineers International (SAE), an international standards-setting organization, has developed six categories of vehicle automation—ranging from a human driver doing everything to automated systems performing all the tasks once performed by a driver. This classification system ( Table 1 ) has been adopted by DOT to foster standardized nomenclature to aid clarity and consistency in discussions about vehicle automation and safety.\nVehicles sold today are in levels 1 and 2 of SAE's automation rating system. Views differ as to how long it may take for full automation to become standard. Some forecast market-ready autonomous vehicles at levels 3 to 5 within five years. Others argue that it will take much longer, as more testing, regulation, and policy work should be done before autonomous vehicles beyond level 2 are widely deployed.\nTechnologies that could guide an automated vehicle ( Figure 1 ) include a wide variety of electronic sensors that would determine the distance between the vehicle and obstacles; detect lane markings, pedestrians, and bicycles; park the vehicle; use GPS, inertial navigation, and a system of built-in maps to guide the vehicle direction and location; employ cameras that provide 360-degree views around the vehicle; and use dedicated short-range communication (DSRC) to monitor road conditions, congestion, crashes, and possible rerouting. These technologies are being offered in various combinations on vehicles currently on the market, as manufacturers study how to combine them in vehicles that could safely transport passengers without drivers.\nWhile private-sector development has focused on vehicle equipment, federal and academic researchers, along with industry, have spent over a decade developing complementary sensor technologies that could improve safety and vehicle performance. These include vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) capabilities—often referred to with the composite term V2X.\nV2X technology relies on communication of information to warn drivers about dangerous situations that could lead to a crash, using dedicated short-range communication to exchange messages about vehicles' speeds, braking status, stopped vehicles ahead, or blind spots to warn drivers so they can take evasive action. V2X messages have a range of 300 meters (a fifth of a mile)—up to twice the distance of onboard sensors—cameras, and radar. These radio messages can \"see\" around corners and through other vehicles.\nNHTSA has evaluated V2X applications and estimates that just two of them could reduce the number of crashes by 50%: intersection movement assist warns the driver when it is not safe to enter an intersection, and left turn assist warns a driver when there is a strong probability of colliding with an oncoming vehicle when making a left turn. V2V communications may also permit technologies such as forward collision warning, blind spot warning, and do-not-pass warnings. NHTSA estimated in 2014 that installing V2V communications capability will cost about $350 per vehicle.",
"DOT has issued two reports on federal regulatory issues with regard to autonomous vehicles, based on consultations with industry, technology and mobility experts, state governments, safety advocates, and others. DOT anticipates that it will continue to issue annual updates on federal regulatory guidance, in light of the pace of autonomous vehicle innovation.\nThe first report issued by DOT, Federal Automated Vehicles Policy , laid the foundation for regulation and legislation by clarifying DOT's thinking in four areas\na set of guidelines outlining best practices for autonomous vehicle design, testing, and deployment; a m odel s tate p olicy that identifies where new autonomous vehicle-related issues fit in the current federal and state regulatory structures; a streamlined review process to expedite requests for DOT regulatory interpretations to spur autonomous development; and identification of new tools and regulatory structures for NHTSA that could aid in autonomous deployment, such as expanded exemption authority and premarket testing to assure that autonomous vehicles will be safe.",
"The 2016 guidelines identified 15 practices and procedures that DOT expected manufacturers, suppliers, and service providers—such as Uber and Lyft ridesourcing companies—to follow in testing autonomous vehicles. It was expected that the data generated from this research would be widely shared with government and the public while still respecting competitive interests.\nManufacturers, researchers, and service providers were urged to ensure that their test vehicles meet applicable NHTSA safety standards and that their vehicles be tested through simulation, on test tracks, or on actual roadways. To assist in the regulatory oversight, NHTSA requested each entity testing autonomous vehicles to submit Safety Assessment letters that will outline how it is meeting the guidelines, addressing such issues as data recording, privacy, system safety, cybersecurity, and crashworthiness. DOT specified that vehicle software must be capable of being updated through over-the-air means (similar to how smartphones are currently updated), so improvements can be diffused quickly to vehicle owners.",
"Any vehicle operating on public roads is subject to dual regulation by the federal government and the states in which it is registered and driven. Traditionally, NHTSA has regulated auto safety, while states have licensed automobile drivers, established traffic regulations, and regulated automobile insurance. DOT's 2016 report clarified and restated that division of responsibilities for the transition to fully autonomous vehicles with the automobile itself being the driver.\nThe model state policy, developed by NHTSA in concert with the American Association of Motor Vehicle Administrators and other safety advocates, suggested state roles and procedures, including administrative issues (designating a lead state agency for autonomous vehicle testing), an application process for manufacturers that want to test vehicles on state roads, coordination with local law enforcement agencies, changes to vehicle registration and titling, and liability and insurance. Liability may change significantly with autonomous vehicles, as states will have to reconsider the extent to which vehicle owners, operators, passengers, vehicle manufacturers, and component suppliers bear responsibility for accidents when no one is actively driving the vehicle.",
"In addition to its existing authority to issue federal vehicle safety standards and order recalls of defective vehicles, NHTSA has other tools it can use to address the introduction of new technologies: letters of interpretation, exemptions from current standards, and rulemakings to issue new standards or amend existing standards.\nNHTSA uses letters of interpretation when it receives requests seeking clarifications of existing law. It may take NHTSA several months or even years to issue a letter of interpretation, which cannot make substantive changes to regulations.\nThe agency can grant exemptions from safety standards in certain circumstances. They are not granted indefinitely—an exemption may last for two or three years—or for a large number of vehicles. The approval process may take months or years. Rulemaking to adopt new standards or modify existing ones generally takes several years and requires extensive public comment periods.",
"Federal Automated Vehicles Policy identified potential new tools and authorities that could affect the way autonomous vehicles are regulated. These included the following:\nPremarket safety assurance tools such as premarket testing, data, and analyses reported by a manufacturer to demonstrate that a new vehicle met standards before being deployed on public roads. The report asserted that some of these tools could be used without new statutory authority. Premarket approval authority, as distinct from safety assurance as well as from the self-certification process used for the past 50 years. The report indicated this could be used to replace self-certification for autonomous vehicles, requiring NHTSA to test prototype vehicles to ensure that they met all federal motor vehicle safety standards. It said NHTSA would need new statutory authority and additional resources to take on certification procedures now handled by manufacturers. Imminent hazard authority to permit NHTSA to take immediate action to curtail serious safety risks that could harm the public. The Obama Administration unsuccessfully argued that this new tool be included in the 2015 surface transportation bill. Expanded exemption authority for autonomous vehicles. The report recommended raising the current limit of 2,500 vehicles that can be exempted from federal safety standards in order to provide a larger database of real-world experience for analyzing on-road safety readiness of exempted vehicles. The report described several alternative ways in which an expanded exemption could operate, and noted that \"it would be important to guard against overuse of the authority such that exemptions might displace rulemaking as the de facto primary method of regulating motor vehicles and equipment.\" Enhanced data collection tools allowing NHTSA to utilize the large amounts of data collected by autonomous vehicles. One example would be to employ event data recorders—now used in a limited way on nearly all motor vehicles to record vehicle and driver information in the seconds before a crash—for use in autonomous vehicles to identify safety-related defects. NHTSA said it has the statutory authority now for this tool.",
"The Trump Administration issued changes to Federal Automated Vehicles Policy on September 12, 2017, announcing at the same time that DOT plans to issue annual automated driving systems (ADS) policy updates in light of the pace of vehicle innovation. The latest voluntary guidance, Automated Driving Systems 2.0: A Vision for Safety , clarifies for manufacturers, service providers, and states some of the issues raised in the Obama Administration's predecessor report and replaces some parts of the earlier guidance; the new policy recommendations took effect immediately. In developing the revised autonomous vehicle policy, DOT evaluated comments, public meeting proceedings, recent congressional hearings, and state activities. Among the clarifications, which affect Level 3 through 5 vehicles, are the following:\nWhereas the 2016 DOT report listed 15 vehicle performance guidelines for testing practices and procedures, the 2017 DOT report cites 12, eliminating recommendations concerning privacy; registration and certification; and ethical considerations. A DOT web page notes that \"elements involving privacy, ethical considerations, registration, and the sharing of data beyond crash data remain important and are areas for further discussion and research.\"\nThese vehicle performance guidelines, and the manufacturers' compliance with them, which had to be reported to NHTSA in mandatory Safety Assessment letters under the 2016 policy, have now been made voluntary and no reports are required. Instead, organizations testing autonomous vehicles are encouraged to address the 12 procedures and processes by publishing voluntary self-assessments of how their testing procedures align with NHTSA's recommended procedures, and sharing them with consumers, governments, and the public so a better understanding of autonomous vehicle capabilities is developed.\nThe 2016 policy indicated that in the future NHTSA might make these guidelines mandatory through rulemaking. That language has been replaced with a statement that \"assessments are not subject to federal approval.\"\nThe 2017 report provides best practices recommended for state legislatures with regard to Level 3 and 4 vehicles, building on DOT's Model State Policy issued in 2016. DOT notes that it is not necessary that all state laws with regard to autonomous vehicles be uniform, but rather that they \"promote innovation and the swift, widespread, safe integration of ADSs.\" In the 2017 report, NHTSA recommends states adopt four safety-related types of legislation covering the following:\nA technology-neutral environment. Legislation proposed in some states would grant motor vehicle manufacturers special standing over other organizations in testing autonomous vehicles, but the 2017 report states that \"no data suggests that experience in vehicle manufacturing is an indicator of the ability to safely test or deploy vehicle technology,\" and DOT counsels that all organizations meeting federal and state \"law prerequisites\" should be able to test vehicles. Licensing and registration procedures. Reporting and communications methods for public safety officials. Review of traffic laws and regulations that could be barriers to ADS testing and deployment.\nAutomated Driving Systems 2.0: A Vision for Safety also includes best practices for state highway safety officials, including registration and titling and liability and insurance.",
"According to the National Conference of State Legislatures, 22 states plus the District of Columbia have enacted legislation related to autonomous vehicles ( Figure 2 ); related bills were introduced in 33 states in 2017; and governors in 10 states have issued executive orders dealing with autonomous vehicles. DOT's model state policy and H.R. 3388 , as passed by the House of Representatives, reflect concerns that the absence of federal regulation covering autonomous vehicles may encourage states to move forward on their own, potentially resulting in diverse and even conflicting state regulations.\nState laws with regard to autonomous vehicles vary widely. Florida was the first state to permit anyone with a valid driver's license to operate an autonomous vehicle on public roads, and it does not require an operator to be in the vehicle. In California, the regional Contra Costa Transportation Authority approved the testing on certain public roads of autonomous vehicles not equipped with a steering wheel, brake pedal, or accelerator. A Tennessee law bars local governments from prohibiting the use of autonomous vehicles. North Dakota and Utah enacted laws to study safety standards and report back to the legislature with recommendations. Michigan enacted several bills in 2016 that permit autonomous vehicles to be driven on public roads, address testing procedures, and establish the American Center for Mobility for testing vehicles.",
"The more automated vehicles become, the more sensors and computer components are employed to provide functions now handled by the driver. Many of these new automated components will generate large amounts of data about the vehicle, its location at precise moments in time, driver behavior, and vehicle performance, thereby opening new portals for possible unauthorized access to vehicle systems and the data generated by them.\nProtecting autonomous vehicles from hackers is of paramount concern to federal and state governments, manufacturers, and service providers. A well-publicized hacking of a conventional vehicle by professionals demonstrated to the public that such disruptions can occur. Hackers could use more than a dozen portals to enter even a conventional vehicle's electronic systems ( Figure 3 ), including seemingly innocuous entry points such as the airbag, lighting systems, and tire pressure monitoring system (TPMS). Requirements that automated vehicles accept remote software updates, so that owners do not need to take action each time software is revised, are in part a response to concerns that security weaknesses be rectified as quickly as possible.\nTo address these concerns, motor vehicle manufacturers established the Automotive Information Sharing and Analysis Center (Auto-ISAC), which released a set of cybersecurity principles in 2016. DOT's automated vehicle policies address cybersecurity, calling for a product development process that engineers into vehicle electronics a thorough cybersecurity threat mitigation system, and sharing of incidents, threats, and violations to the Auto-ISAC so that the broader vehicle industry can learn from them.\nAside from hackers, many legitimate entities would like to access vehicle data, including the manufacturer, the supplier providing the technology and sensors, the vehicle owner and occupants, urban planners, insurance companies, law enforcement, and first responders (in case of an accident). Relevant types of data include the following:\nVehicle testing crash data. DOT's autonomous vehicle policy reports address how data from vehicle crashes during a test should be handled, with entities conducting the testing adopting best practices established by standard-setting organizations such as the Institute of Electrical and Electronics Engineers (IEEE) and SAE. NHTSA recommended that the data from autonomous vehicle crashes be stored and made available for retrieval and shared with the government for crash reconstruction.\nData Ownership. Current law does not address ownership of most of the data collected by vehicle software and computers. Most new conventional vehicles on the road have an event data recorder (EDR), which captures a limited amount of information about a vehicle, the driver, and passengers in the few seconds before a crash (e.g., speed and use of seat belts). The most recent surface transportation legislation enacted the Driver Privacy Act of 2015 to address data ownership with regard to EDRs—establishing that EDR data is property of the vehicle owner—but it does not govern the other types of data that will be accumulated by autonomous vehicles. The National Association of City Transportation Officials has recommended that the federal government identify these data, their ownership, and instances where they should be shared.\nConsumer Privacy. The 2016 DOT report included a section on privacy, but the 2017 DOT report omits that discussion. In the earlier report, DOT discussed elements that testing organizations' policies should include, such as transparency for consumers and owner access to data. Separately, two motor vehicle trade associations have developed Privacy Principles for Vehicle Technologies and Services , which are similar to the practices discussed in the 2016 DOT report.",
"There may not be a consensus on when large numbers of autonomous vehicles will hit U.S. roads, but whenever that time comes, those vehicles will be a small segment of the more than 264 million passenger cars and light trucks now registered in the United States. With Americans keeping their cars for an average of more than 11 years, traditional vehicles are likely to have a highway presence for decades.\nSeveral recent studies and surveys reveal public skepticism about autonomous vehicles. A recent survey by IHS Markit, a market research firm, shows that motorists overwhelmingly approve of some Levels 1 and 2 automated vehicle technologies—such as blind spot detection and automatic emergency braking—but that fully autonomous vehicles are not as popular. A similar 2017 study by J.D. Power, a consumer research firm, found that most Americans are becoming more skeptical of self-driving motor vehicle technology, although strong interest exists in some of the elements of autonomy, such as collision protection and driving assistance technologies. The report noted that \"automated driving is a new and complex concept for many consumers; they'll have to experience it firsthand to fully understand it.\" The Governors Highway Safety Association also reported on three additional surveys with similar results.\nTo address the lack of understanding about autonomous vehicles, the 2017 DOT report calls for major consumer education and training as vehicles are tested and deployed. Organizations testing vehicles are encouraged to \"develop, document, and maintain employee dealer, distributor, and consumer education and training programs to address the anticipated differences in the use and operation of ADSs from those of the conventional vehicles that the public owns and operates today.\"\nDOT underscores the need for a wide range of potential autonomous-vehicle users to become familiar before vehicles are sold to consumers, using on- and off-road demonstrations, virtual reality, and onboard vehicle systems. Others have made suggestions for consumer education about autonomous vehicles, including the following:\nthe vehicle should let people on the road—including pedestrians—know when a vehicle is in self-driving mode; vehicle sales representatives should be trained about the technical aspects of the vehicle and the benefits and risks of such vehicles compared to conventional vehicles; and manufacturers should hold training seminars, including crashworthiness and fall back options (should a system fail), with updates as new levels of autonomy are introduced.",
"Committees in the House of Representatives and the Senate have held numerous hearings on the technology of autonomous vehicles and possible federal issues that could result from their deployment. On September 6, 2017, the House of Representatives passed by voice vote H.R. 3388 , the SELF DRIVE Act. A different Senate bill, S. 1885 , the AV START Act, was reported by the Committee on Commerce, Science, and Transportation on November 28, 2017. Prior to the committee markup, the chairman and ranking member issued a set of principles they view as central to new legislation\nprioritize safety , acknowledging that federal standards will eventually be as important for self-driving vehicles as they are for conventional vehicles; promote innovation and address the incompatibility of old regulations written before the advent of self-driving vehicles; remain technology - neutral , not favoring one business model over another; reinforce separate but complementary federal and state regulatory roles ; strengthen cybersecurity so that manufacturers address potential vulnerabilities before occupant safety is compromised; and educate the public through government and industry efforts so that the differences between conventional and self-driving vehicles are understood.\nThe House and Senate bills address concerns about state action replacing some federal regulation, while also empowering NHTSA to take unique regulatory actions to ensure safety and encouraging innovation in autonomous vehicles. They retain and seek to clarify the current arrangement of states controlling most driver-related functions and the federal government being responsible for vehicle safety. The major provisions of the House and Senate bills focus on the following:\nState Preemption. In H.R. 3388 , states would not be allowed to regulate the design, construction, or performance of highly automated vehicles, automated driving systems, or their components unless those laws are identical to federal law. The House-passed bill reiterates that vehicle registration, driver licensing, driving education, insurance, law enforcement, and crash investigations should remain in state jurisdiction as long as they do not restrict autonomous-vehicle development. H.R. 3388 provides that nothing in the preemption section should prohibit states from enforcing their laws and regulations on the sale and repair of motor vehicles.\nS. 1885 would also preempt states from adopting laws, regulations, and standards that would regulate many aspects of autonomous vehicles, but would omit some of the specific powers reserved to the states under the House-passed bill. States would be prohibited from issuing drivers licenses for autonomous-vehicle operations that discriminate based on a disability. The bill provides that state preemption would end when NHTSA establishes standards covering these vehicles.\nNew Safety Standards. Within two years of enactment, H.R. 3388 would require DOT to issue a final rule requiring each manufacturer to show how it is addressing safety in its autonomous vehicles, with updates every five years thereafter. DOT would not be allowed to condition vehicle deployment on review of these self-assessments, however. The regulation establishing the assessments would have to specify the 12 testing requirements and data necessary to demonstrate safety in the operation of the autonomous vehicle. In the interim, manufacturers would have to submit safety assessment letters.\nS. 1885 would not require a new NHTSA rule. Instead, it would require manufacturers and other vehicle developers to submit within 90 days of enactment a Safety Evaluation Report (SER) that would describe how they are addressing safety in nine issue areas. As in the House bill, vehicle deployment could not be conditioned on DOT review.\nSafety Priority Plan. The House-passed bill would require DOT to submit a safety priority plan rulemaking within a year of enactment, indicating which existing federal safety standards must be updated to accommodate autonomous vehicles, the need for new standards, and NHTSA's safety priorities for autonomous vehicles and other vehicles.\nS. 1885 would put in place a somewhat different system, basing action on a report that DOT's Volpe Center would submit within 180 days of enactment. NHTSA would be required to begin a rulemaking based on the report's recommendations and finalize it within a year.\nCybersecurity. Highly autonomous vehicles will rely on computers, sensors, and cameras to navigate, so cybersecurity protections will be necessary to ensure vehicle performance. The House-passed bill provides that no highly autonomous vehicle or vehicle with partial driving automation could be sold domestically unless a cybersecurity plan has been developed by the automaker. Such plans would have to be developed within six months of enactment and would include\na written policy on mitigation of cyberattacks, unauthorized intrusions, and malicious vehicle control commands; a point of contact at the automaker with cybersecurity responsibilities; a process for limiting access to automated driving systems; and the manufacturer's plans for employee training and for maintenance of the policies.\nThe Senate Commerce, Science, and Transportation Committee bill would require written cybersecurity plans to be issued within 18 months of enactment, including a process for identifying and protecting vehicle control systems, detection, and response to cybersecurity incidents, and methods for exchanging cybersecurity information. A cybersecurity point of contact at the manufacturer or vehicle developer would have to be named. Unlike the House-passed bill, S. 1885 would direct DOT to create incentives so that vehicle developers would share information about vulnerabilities, and would specify that all federal research on cybersecurity risks should be coordinated with DOT.\nIn addition, S. 1885 would establish a Highly Automated Vehicle Data Access Advisory Committee to provide Congress with recommendations on cybersecurity issues. Federal agencies would be prohibited from issuing regulations pertaining to the access or ownership of data stored in automated vehicles until the advisory committee's report is submitted.\nExemption Authority. As recommended in DOT's 2016 Federal Automated Vehicles Policy , H.R. 3388 would expand DOT's ability to issue exemptions from existing safety standards to encourage autonomous-vehicle testing. To qualify for an autonomous-vehicle exemption, a manufacturer would have to show that the safety level of the vehicle equals or exceeds the safety level of that standard for which an exemption is sought.\nWhereas current laws limit exemptions to 2,500 vehicles per manufacturer per year, the House-passed bill would phase in increases over four years of up 100,000 vehicles per manufacturer per year. The legislation provides constraints on the issuance of exemptions from crashworthiness and occupant protections standards. DOT would be directed to establish a publicly available and searchable database of motor vehicles that have been granted an exemption. Crashes of exempted vehicles would have to be reported to DOT.\nS. 1885 would establish a process administered by NHTSA for reviewing autonomous-vehicle exemption requests, and applicants would have to verify that the safety level of their vehicle is equal to that of nonexempt vehicles. It would establish a slightly different phase-in of caps on the number of exemptions that could be issued in the four years after enactment. The Senate Commerce, Science, and Transportation Committee bill does not address exemptions for crashworthiness and occupant protection standards. The establishment of a database of exempted vehicles is not required; reporting of exempt vehicle crashes would not be required.\nPrivacy. Before selling highly automated vehicles, the House-passed bill would require manufacturers to develop written privacy plans concerning the collection and storage of data generated by the vehicles, as well as a method of conveying that information to vehicle owners and occupants. However, a manufacturer would be allowed to exclude processes from its privacy policy that encrypt or make anonymous the sources of data. The Federal Trade Commission would be tasked with developing a report for Congress on a number of vehicle privacy issues.\nAlthough S. 1885 would not explicitly require privacy plans by developers and manufacturers, it would require NHTSA to establish an online, searchable motor vehicle privacy database that would include a description of the types of information, including personally identifiable information (PII), that are collected about individuals during operation of a motor vehicle. This database would cover all types of vehicles—not just autonomous vehicles—and would include the privacy policies of manufacturers. The database would also include an explanation about how PII would be collected, retained, and destroyed when no longer relevant.\nConsumer and Infrastructure Information. In H.R. 3388 , DOT would be directed to complete a research program within three years that would lay the groundwork for a consumer-education program about the capabilities and limitations of highly automated vehicles. DOT would be mandated to issue a regulation requiring manufacturers to explain the new systems to consumers.\nThe Senate Commerce, Science, and Transportation Committee bill would require NHTSA to develop a new regulation within three years that would provide information on autonomous vehicle capabilities and limitations at the point of sale of a vehicle.\nS. 1885 would establish a two-year working group comprising industry and consumer groups that would identify marketing strategies and educational outreach to consumers, including information about the comparative safety of autonomous vehicles and nonautonomous vehicles. The working group would submit a report to Congress on its findings; there is no requirement that DOT initiate a rulemaking to implement the report's recommendations.\nIn addition, S. 1885 would require DOT to convene a separate panel of transportation and environmental experts who would be required to submit a report about the impact of autonomous vehicles on transportation infrastructure, mobility, the environment, and fuel consumption.\nHighly Automated Vehicle Advisory Panels . H.R. 3388 would establish a new NHTSA advisory group with up to 30 members from business, academia, states and localities, and labor, environmental, and consumer groups to advise on mobility access for senior citizens and the disabled; cybersecurity; labor, employment, environmental, and privacy issues; and testing and information sharing among manufacturers. The council would end six years after enactment.\nS. 1885 would establish a Highly Automated Vehicles Technical Committee to advise DOT on rulemaking policy and vehicle safety. The 15 committee members would be selected from SAE, vehicle manufacturers, safety organizations, and state and local governments based on their technical knowledge of automated driving systems. The committee would function for five years.\nManufacturing Study . The Senate Commerce, Science, and Transportation Committee bill would require DOT to study ways in which autonomous vehicles and parts can be produced domestically, with recommendations on how to incentivize such manufacturing. H.R. 3388 does not address this issue.\nThe House and Senate bills also address several vehicle safety standards not directly related to autonomous vehicles:\nRear Seat Occupant Alert System. In an effort to reduce or eliminate infant fatalities, H.R. 3388 and S. 1885 would direct DOT to issue a final regulation within two years requiring all new passenger vehicles to be equipped with an alarm system to alert the driver to check the back seats after the vehicle's motor or engine is shut off.\nHeadlamps. In the House-passed bill, DOT would be directed to initiate research into updating motor vehicle safety standards to improve performance and safety, and to revise the standards if appropriate. If NHTSA chooses not to revise the standards, it must report to Congress on its reasoning. S. 1885 does not address this issue.",
"Since the Senate Commerce, Science, and Transportation Committee reported S. 1885 last year, several highly publicized crashes involving vehicles operating autonomously for testing purposes have prompted new concerns about how the federal government should regulate the new technologies. On March 18, 2018, a pedestrian was killed in Tempe, AZ, as she sought to cross the street: an Uber vehicle using automated control systems with a backup driver failed to detect her presence. Five days later, a driver of Tesla Model X with automated controls was killed when his vehicle hit a road barrier in Mountain View, CA. A Tesla Model S, which was reportedly using automated controls, was involved in a nonfatal crash with a stationary fire truck in Utah on May 11, 2018. The NTSB is investigating these accidents, as it did with a 2016 fatality in Florida involving a Tesla vehicle operating with automated controls.\nAlthough H.R. 3388 passed the House of Representatives without objection and its Senate counterpart, S. 1885 , was ordered reported by voice vote of the Commerce, Science, and Transportation Committee, these subsequent developments have delayed further action. Five Senators, including three members of the Senate Commerce, Science, and Transportation Committee, wrote to Senator John Thune, the committee's chairman, in March 2018 seeking changes to provisions governing state preemption, vehicle safety issues, cybersecurity, consumer privacy, and regulation of partially automated vehicles.",
"As there are currently few federal standards for autonomous vehicles, some states have begun enacting their own rules. This represents a departure from the traditional arrangement leaving regulation of vehicles to the federal government and authority over driver-related matters to the states. Both bills seek to identify a new regulatory arrangement by preempting new state and local safety standards for autonomous vehicles, but state and local governments have sought a role in federal advisory committees, notification of proposed exemptions from Federal Motor Vehicle Safety Standards, and clarification that traditional state and local authority over matters such as enforcing traffic laws will not be infringed.",
"Both H.R. 3388 and S. 1885 would allow large increases in the number of vehicles that could be exempted from NHTSA's Federal Motor Vehicle Safety Standards. The bills do not specify time limits on such exemptions and do not require that NHTSA review them after issuance, raising concerns that pedestrians and passengers in autonomous vehicles may not have the same level of protection as they do in conventional vehicles, current crashworthiness standards may be suspended for autonomous vehicles, and too many exempt vehicles will be allowed on the roads.",
"Although both pending bills contain cybersecurity provisions, these call for manufacturers to address cybersecurity without specific federal involvement. Some groups have called for the law to direct NHTSA to establish cybersecurity standards for all autonomous vehicles in Levels 2 through 5, as well as standards to require that backup drivers in test vehicles are fully engaged and not distracted. Another proposal would require NHTSA to establish a publicly available autonomous vehicle database that consumers and researchers could search by vehicle identification numbers (VINs)."
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"question": [
"What would H.R. 3388 and S. 1885 provide to the National Highway Traffic Safety Administration (NHTSA)?",
"Why are autonomous vehicles seen as a way to reduce motor vehicle crashes?",
"Why has this view been proven controversial?",
"What is the status quo of fully autonomous vehicles?",
"What have many new vehicles automated?",
"How would the vehicles with high levels of automation affect existing methods of safety oversight?",
"How do the federal government and the states share motor vehicle regulation?",
"What is the problem with NHTSA's traditional standard-setting process?",
"What is the result of the absence of NHTSA regulation of autonomous vehicles?",
"What would the legislation establish?",
"What legislation did the Senate Committee on Commerce, Science, and Transportation report on November 8, 2017?",
"What are the similarities between the two bills?"
],
"summary": [
"Legislation recently passed by the House of Representatives—H.R. 3388—and pending in the Senate—S. 1885—would provide new regulatory tools to the National Highway Traffic Safety Administration (NHTSA) to oversee autonomous vehicles.",
"Autonomous vehicles are seen as a way to reduce motor vehicle crashes; for example, there were 37,461 deaths from motor vehicle crashes in 2016 and nearly all of them were caused by driver error.",
"However, despite unanimous approval in House and Senate committees and on the House floor, the legislation has proven controversial in the wake of several high-profile accidents involving autonomous vehicles being tested on public roads.",
"At present, no fully autonomous vehicles are available for public use.",
"Many new vehicles have automated some driver functions, but all require a human to monitor the driving environment and control the vehicle.",
"However, rapid advances in technology have made it likely that vehicles with high levels of automation will be on the market within a few years, raising questions about the adequacy of existing methods of safety oversight.",
"The federal government and the states share motor vehicle regulation, with the federal government responsible for vehicle safety and states for driver-related aspects such as licensing and registration.",
"While NHTSA has the statutory authority to regulate all types of motor vehicles, its traditional standard-setting process would take many years at a time when vehicle innovation is changing rapidly; standards envisioned now could be obsolete by the time they took effect.",
"In the absence of NHTSA regulation of autonomous vehicles, nearly half the states have enacted laws on different aspects of autonomous vehicle deployment, resulting in a wide variety of state regulation.",
"The legislation would also establish an advisory committee, a new regulation for rear-seat occupant alerts (to reduce infant fatalities), and a review of headlamp standards.",
"On November 8, 2017, the Senate Committee on Commerce, Science, and Transportation reported S. 1885, legislation that is similar in many respects to the House-passed legislation.",
"Both bills address state preemption, safety standards, exemption authority, consumer information, cybersecurity, and privacy, but differ in their details."
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{
"title": [
"",
"Bringing Measures to the Floor in the Senate",
"Senators Who Offered Motions to Proceed",
"Method and Sources of Data",
"Frequency of Motions to Proceed",
"Motions Not Offered by Direction of the Majority Leader",
"Summary of Characteristics",
"Instances"
],
"paragraphs": [
"",
"In contemporary practice, bills and resolutions (collectively, \"measures\") normally reach the floor of the Senate for consideration either by unanimous consent or through agreement on a motion to proceed to consider (often called simply a \"motion to proceed\" or \"MTP\"). Most measures considered today reach the floor by unanimous consent; the motion to proceed is normally reserved for situations when unanimous consent cannot be obtained. In consequence, measures called up by motion are more likely to be controversial or highly contested than those considered by unanimous consent.\nUnanimous consent to consider a measure may be granted in the form of either (1) a simple request for unanimous consent that the Senate proceed to consider the measure, or (2) a broader unanimous consent agreement that typically also prescribes terms for consideration, such as limits on debate and amendments. If any Senator objects to such a request, in either form, a motion to proceed may then be offered. However, if the leadership is aware that objection would be raised to such a unanimous consent request, the majority leader (or a designee) may offer the motion to proceed without first seeking unanimous consent. In these instances, the majority leader often files a cloture petition at the time the motion to proceed is made.\nSenate Rule VIII, paragraph 2, which provides for the motion to proceed, places no restrictions on who may offer the motion. Nowadays, however, the Senate normally cedes to the majority leader the prerogative of calling up measures, either by motion or by unanimous consent. Absent this deference, it would be difficult for any majority leader to carry out his function of managing the schedule, and in recent decades a substantial majority of motions to proceed have been offered by the majority leader. Nevertheless, other Senators have made that motion as well, sometimes without direction from the majority leader. This report presents data on the total number of motions to proceed offered in each recent Congress, with particular attention to the small number of these motions not made by direction of the majority leader.",
"In contemporary Senate practice, both unanimous consent requests and motions to proceed to consider a measure are most often offered by the majority leader personally. Sometimes, however, they are offered by the majority whip, or by another Senator acting in coordination with and as the designee of the majority leader (for instance, the chair of the committee that reported the measure). Such actions also may be taken by a Senator not acting in coordination with the majority leader, most often by the minority leader. In such cases a Senator acting for the majority leader will typically take action to protect majority party control of the floor agenda. In the case of unanimous consent requests, this action will ordinarily consist of an objection to the request. In the case of motions to proceed, the Senate has often agreed to table the motion or defeat it outright.\nTable 1 below displays the number of motions to proceed to consider offered by the majority leader, the majority whip, other designees of the majority leader, and other Senators, in the 96 th through 113 th Congresses (1979-2014). For purposes of this report, motions to proceed offered by the majority whip were presumed to have been made in coordination with the majority leader. Other majority party Senators offering motions were also presumed to be acting as designees of the majority leader, unless the record of proceedings afforded positive evidence to the contrary. For most motions not offered by the majority leader or whip, the proceedings contained positive evidence that the motion was indeed offered by direction of the majority leader. Sometimes, for example, Senators offering these motions stated explicitly that they were doing so on the majority leader's behalf. In other cases, the Senator offering the motion also submitted a petition for cloture on that motion that included the majority leader among its signers. On other occasions, the Senator offering the motion did so during a course of actions normally carried out by the majority leader or his designee.",
"Table 1 identifies the number of motions to proceed to consider items of legislative business offered in each Congress from the 96 th (1979-1980) through the 113 th (2013-2014). From the 97 th Congress onward, motions to proceed were identified through an electronic search of legislative status information in the Legislative Information System (LIS) or, for more recent years, Congress.gov. For earlier Congresses, these databases contain only limited legislative status information; for this reason, motions to proceed in the 96 th Congress were identified instead through examination of the Journal of the Senate . For all Congresses, information about who offered the motions was obtained from the Congressional Record and the Journal of the Senate .\nThe data displayed in Table 1 reflect motions to proceed to the consideration of all forms of legislation. Items of executive business, which include nominations and treaties, are also brought to the floor by unanimous consent or a motion to proceed to consider, but this report does not address motions to proceed to executive business, and the figures in Table 1 exclude them.\nTable 1 includes both debatable and non-debatable motions to proceed. Under Senate Rules, motions to proceed generally are debatable, but a motion to proceed to consider a conference report is not debatable, and the same is true of a motion to proceed to a measure under a statutory expedited procedure. Finally, on any measure, a motion to proceed is non-debatable if offered during the \"morning hour.\" This proceeding, however, has seldom been used since the 1980s.\nSometimes more than one motion to proceed was offered on a single measure. This may occur if the Senate rejects the first motion. It may also occur if the Senate adopts the first motion, but lays the measure aside before a decision, and later proposes to take it up again. A third possibility is that the Senate adjourns while a motion to proceed is pending, for the adjournment causes the motion to \"fall,\" meaning that it is no longer pending. On a subsequent day, accordingly, the Senate could decide to take up the measure only if a new motion to proceed is offered. In these and similar cases, the table treats each motion to proceed separately; in other words, it shows the number of motions to proceed actually offered on bills and resolutions, not the number of bills and resolutions on which motions to proceed were offered.",
"As Table 1 shows, from the 96 th through the 113 th Congress (1979-2014), a total of 628 motions to proceed to consider measures were offered, 86% of them by the majority leader personally and 96% of them either by the majority leader or under his direction. On average, 35 motions to proceed per Congress were made during this period. Five Congresses exceeded this average, including three of the four most recent ones. The 113 th Congress reaches a high-water mark with 124 motions to proceed offered during that 2-year period.\nConsideration of several features of contemporary Senate practice permits conjectures about the reasons for the increase. One possible explanation may lie in the Senate's practice of not permitting a motion to proceed to be offered while another such motion is already pending. If, as suggested in the next section, the Senate has lately started to display less deference to the majority leader in offering motions to proceed, then it is possible that the majority leader has resorted more frequently to offering these motions as a means of precluding others from offering their own motions to proceed to other measures. By Senate precedent, only one motion to proceed to a measure may be pending before the chamber at any given time.\nAnother potential explanation might involve the procedural distinction between recessing and adjourning at the end of the day. In the earlier years of the period covered, it was common for the Senate to recess at the end of most daily sessions, whereas in more recent years the Senate usually adjourns at the end of each day. Accordingly, in previous decades it was often possible for the Senate to continue considering a single motion to proceed to a specific measure on several successive days, while today the Senate would need to renew the motion to proceed by offering it a second time. The Senate's shift toward daily adjournments, however, seems to predate the rise in motions to proceed by many years, making it less likely that this shift in practice accounts for the rise. Nevertheless, the use of daily adjournments creates conditions in which renewing motions to proceed may be required more often.\nIn recent times, perhaps reflecting the shift from recesses to adjournments as the preferred method of concluding business for the day, the Senate rarely considers motions to take up a specific measure over a period of several days. Instead, after offering a motion to proceed, the majority leader often immediately files for cloture on the motion and then withdraws it. Even if the Senate then adjourns at the end of the day, this proceeding makes it unnecessary to renew the motion to proceed on a following day, for the Senate instead pursues other business until the cloture vote occurs, and if the Senate invokes cloture, the original motion to proceed automatically returns as pending.\nThis report provides no overall data on how the Senate disposes of motions to proceed. Few such motions, however, are defeated outright, because a motion to proceed that was unlikely to command majority support usually would not be offered in the first place. Instead, most motions to proceed that are not adopted simply do not reach a final vote. Some, for example, fail to reach a vote because the Senate ultimately agrees to take up the measure by unanimous consent. In other cases, a filibuster prevents a vote from occurring, or the motion is either displaced by subsequent action or withdrawn. By contrast, as noted in the next section, many of the motions to proceed not offered by direction of the majority leader are defeated outright.",
"",
"During the 18 Congresses studied, 28 motions to proceed to consider could be identified as being offered other than by direction of the majority leader. Of these 28, 20 were offered by the minority leader, 7 by other minority party Senators, and the remaining 1 by a majority party Senator. Relevant details surrounding the consideration of each motion are provided in the next section.\nTwo of these 28 motions to proceed were adopted by the Senate. Of the remaining 26 motions, the Senate defeated 15 outright and tabled 5 more. In four cases, the Senate turned to other business after rejecting cloture on the motion to proceed. The final two were ruled out of order. Of the two motions adopted, one led to final passage of the measure in question, a joint resolution ( S.J.Res. 34 ) adopted in 2002 to approve a site for a permanent nuclear waste repository at Yucca Mountain, Nevada. Agreement to the other motion to proceed was vitiated by unanimous consent immediately after it was adopted. In addition, however, one of the measures on which the Senate tabled a motion to proceed, and one on which the motion to proceed was ruled out of order, were taken up by the Senate at a later date and agreed to.\nThirteen of these 28 motions were offered under the general rules of the Senate, under which they were debatable; the remaining 15 addressed matters that, under Senate practice, are considered privileged, meaning that motions to proceed to their consideration are not debatable. One of these 15 motions proposed to bring up a conference report; the remaining 14 were offered pursuant to statutory expedited procedures. Of those 14 motions, 6 addressed congressional budget resolutions under the Congressional Budget Act (\"CBA\"; P.L. 93-344 , codified as amended at 2 U.S.C. 601-688) or other measures governed by statutory procedures for budgetary measures; 7 concerned joint resolutions to disapprove proposed regulations under the Congressional Review Act (\"CRA\"; Title II of P.L. 104-121 , codified at 5 U.S.C. 801-808); and 1 concerned a disapproval resolution under the Nuclear Waste Policy Act of 1982 ( P.L. 97-425 ; codified at 42 U.S.C. 10101 et seq.).\nBoth the number and percentage of motions offered other than by direction of the majority leader exhibited a distinct increase in recent Congresses in comparison to previous periods. Eighteen of the 28 motions falling in this group were offered during the three most recent Congresses, suggesting a possible decline in the degree of deference the Senate accords to leadership scheduling efforts. The 18 motions offered during the last 3 Congresses include 14 of the 20 motions that were offered by the minority leader, to whom (at least in principle) the prerogative of making motions to proceed may be accorded. These 18 motions also encompass 12 of the 16 motions that the Senate has considered under unanimous consent agreements, which implicitly indicates at least some degree of acquiescence by, or prearrangement with, the majority leadership.\nThe recent increase in motions to proceed not offered by direction of the majority leader is partially accounted for by the rising number of motions to proceed that were non-debatable under expedited procedure statutes; 12 of the 18 such motions in the 111 th through 113 th Congresses fell into this group, compared with 2 of the 10 such motions in the earlier Congresses examined. To the degree that the purpose of expedited procedures is to protect the Senate's opportunity to consider the measures they govern, the presumption that only the majority leader will make the motion to proceed in these situations may be less strongly established.\nA common pattern distinguishes 7 of the 18 motions to proceed offered without direction from the majority leader in the 3 most recent Congresses. In these seven cases, a privileged motion to consider a disapproval resolution under the CRA was defeated outright by the Senate following a period of debate under the terms of a unanimous consent agreement. This pattern was not observed in any of the first six Congresses following enactment of the CRA: the 105 th -110 th Congresses (1997-2008).\nFinally, the increase in motions to proceed not offered by direction of the majority leader was accompanied by shifts in the ways the Senate disposed of these motions. The 18 motions of this kind in the 3 recent Congresses include all 15 of those that the Senate defeated outright. By contrast, 4 of the 5 motions that the Senate tabled, and the only 2 that the Senate adopted, occurred during the previous 15 Congresses (1979-2008). This shift, too, is accounted for at least in part by the number of motions to proceed offered under expedited procedure statutes. When a motion to proceed is non-debatable, no motion to table is necessary in order to bring the Senate quickly to a vote on it. Perhaps for this reason, the 15 motions to proceed that were defeated outright include all 12 of those offered pursuant to expedited procedure statutes in the last 3 Congresses.",
"The following paragraphs describe the 28 motions to proceed to consider that were offered other than by direction of the majority leader during the period under study. Each description identifies the measure number and subject, the Congress and date of action, and the disposition of the motion to proceed, with a citation to the Congressional Record and (where available) Senate Journal . Each description also notes any special circumstances surrounding the motion to proceed and any subsequent action on the measure. This additional information was drawn principally from the Record , LIS, Congress.gov, and Congressional Quarterly .\nS.Con.Res. 119 , 96 th Congress. On September 25, 1980, the Senate minority leader moved to proceed to consider S.Con.Res. 119 , revising the congressional budget resolution, which was subject to the expedited procedures of title III of the Congressional Budget Act (\"CBA\"; P.L. 93-344 , codified as amended at 2 U.S.C. 631-644). The motion was offered pursuant to a unanimous consent agreement previously secured by the Senate majority leader, which also provided limited time for debate on the motion. The Senate tabled the motion to proceed (55-36). ( Congressional Record , vol. 126, pp. 27211-27216; Senate Journal , p. 642.) The Senate later considered the resolution, ultimately adopting the House companion measure, H.Con.Res. 448 , which then went on to final congressional adoption.\nH.R. 5829 , 96 th Congress. Also on September 25, 1980, the Senate minority leader moved to proceed to consider H.R. 5829 , a tax-related measure that had been reported from the Senate Committee on Finance with an amendment reducing income tax rates. The minority leader did so immediately after the action just described, and pursuant to the same unanimous consent agreement, which also limited the time for debate on this motion. The Senate tabled the motion to proceed, 54-38, and the measure received no subsequent floor action. ( Congressional Record , vol. 126, pp. 27216-27221; Senate Journal , p. 642.)\nH.R. 4331 , 97 th Congress. On July 31, 1981, a minority party Senator moved to proceed to consider H.R. 4331 , to restore minimum Social Security benefits. The chair held the motion to proceed out of order on grounds that the measure was not yet on the Calendar. The Senator who had offered the motion to proceed appealed the ruling, but the Senate sustained the chair, 57-30. ( Congressional Record , vol. 127, p. 19148; Senate Journal , p. 426.) Subsequently, after the measure reached the Calendar, the Senate took it up by unanimous consent and passed it, and it became P.L. 97-123 .\nH.R. 1460 , 99 th Congress. On September 10, 1985, the Senate minority leader moved to proceed to consider the conference report on H.R. 1460 , for sanctions against apartheid. The minority leader withdrew the motion to proceed after filing a motion for cloture on it. ( Congressional Record , vol. 131, p. 23226; Senate Journal , p. 421.) At the time these proceedings occurred, the conference report had already been called up pursuant to action by the Senate majority leader; two cloture motions had been offered on it; and the first cloture motion had been rejected. Subsequently, the Senate rejected the second cloture motion on the conference report and the cloture motion on the motion to proceed to consider it. Thereafter, the Senate did not further consider either the conference report or a motion to proceed to consider it.\nS. 2944 , 101 st Congress. On October 27, 1990, a majority party Senator moved to proceed to consider S. 2944 , for aid to democratization in Eastern Europe. The Senate agreed to the motion by voice vote, but immediately thereafter vitiated its action by unanimous consent, \"in accordance with the customs of the Senate, and comity,\" upon request of the chair of the committee of jurisdiction, who was also the sponsor of the measure. ( Congressional Record , vol. 136, p. 36335; Senate Journal , p. 867.) The Senate did not subsequently consider the measure.\nH.R. 4250 , 105 th Congress. On October 9, 1998, the Senate minority leader moved to proceed to consider H.R. 4250 , on rights of medical patients under group health plans. The Senate tabled the motion to proceed, 50-47, and took no subsequent action on the measure. ( Congressional Record , vol. 144, p. 25070; Senate Journal , p. 807.)\nS.Res. 44 , 106 th Congress. On February 12, 1999, a minority party Senator moved to proceed to consider S.Res. 44 , to censure President Clinton. The chair held the motion to proceed out of order on grounds that the measure was not on the Calendar. Pursuant to the required prior notice, the same Senator then moved to suspend the rules to permit consideration of the motion to proceed. Adoption of a motion to suspend the rules requires a two-thirds vote. The Senate defeated a motion to postpone indefinitely consideration of the motion to suspend the rules, 43-56. Pursuant to a previous unanimous consent agreement, the motion to suspend the rules was deemed withdrawn because the motion to postpone had been defeated by less than a two-thirds vote. ( Congressional Record , vol. 145, p. 2380; Senate Journal , p. 151.) The resolution was subsequently referred to committee, and the Senate took no further action on it.\nS.J.Res. 34 , 107 th Congress. On July 9, 2002, the ranking minority Member of the Committee on Energy and Natural Resources moved to proceed to consider S.J.Res. 34 , to approve a site for a permanent nuclear waste repository at Yucca Mountain, Nevada. S.J.Res. 34 had been reported from that committee several weeks earlier. This joint resolution of approval was subject to expedited consideration under Section 115 of the Nuclear Waste Policy Act of 1982 ( P.L. 97-425 ; 42 U.S.C. 10135), and the motion to proceed was offered as privileged under that act. Although the act explicitly provides that \"any Member of the Senate\" may move to proceed to consider a resolution of repository siting approval, opponents of the measure had argued that the same deference should be granted to the majority leader in making this motion as in making motions to proceed under the Standing Rules. Although the act provides that this motion to proceed be privileged and non-debatable, a unanimous consent agreement was reached that (1) the motion be debatable for 4 hours and 30 minutes, and (2) if the motion were agreed to, the Senate would immediately vote, without further debate or amendment, on the companion measure already passed by the House, H.J.Res. 87 . Following the debate on the motion to proceed, the Senate agreed to it, 60-39, then adopted H.J.Res. 87 by voice vote, thereby clearing the measure for presentation to the President ( Congressional Record , vol. 148, pp. 12323-12372; Senate Journal , p. 523); it ultimately became P.L. 107-200 .\nS. 1162 , 108 th Congress. On July 9, 2003, the Senate minority leader moved to proceed to consider S. 1162 , to accelerate an increase in the refundability of the child tax credit, which had been introduced and placed directly on the Calendar early in the previous month. Shortly thereafter, the majority leader moved to lay on the table the motion to proceed, and the Senate agreed to this motion, 51-45. ( Congressional Record, vol. 149, pp. 17255-17261; Senate Journal , p. 643.) No further action occurred in relation to the measure.\nS. 2340 , 110 th Congress . On November 15, 2007, the Senate minority leader moved to proceed to consider S. 2340 , a supplemental appropriations bill for ongoing military operations in Iraq and Afghanistan, and filed cloture on the motion to proceed ( Congressional Record , vol. 153, p. 31547; Senate Journal , p. 1159-1160). After debate, the majority leader obtained unanimous consent that the Senate vote on the cloture motion on the following day, and later also that the motion to proceed be withdrawn. Cloture was not agreed to, 45-53, on the following day ( Congressional Record, vol. 153, p. 31855; Senate Journal , p. 1162), and the Senate took no further action on S. 2340 .\nS. 3153 , 111 th Congress . On March 25, 2010, the minority leader moved to proceed to consider S. 3153 and immediately moved for cloture on the motion to proceed. The bill contained short-term extensions of unemployment benefits and several other programs, with offsets to maintain deficit neutrality. It had been introduced by another minority party Senator two days previously and placed directly on the Calendar, as an alternative to H.R. 4851 , which contained similar program extensions without offsets. After remarks by a third minority party Senator, the Senate adopted, 59-40, a motion by the majority leader to table the motion to proceed. ( Congressional Record , daily ed., vol. 156, p. S2091-S2094; Senate Journal , p. 220.) No further action occurred on S. 3153 ; instead, later on the same day, the majority leader moved that the Senate proceed to consider H.R. 4851 . After subsequently invoking cloture both on this motion and on a Senate substitute for the House bill, the Senate passed its version of this bill; the measure ultimately became P.L. 111-157 .\nS.J.Res. 26 , 111 th Congress . On June 10, 2010, pursuant to a May 25 unanimous consent agreement, a minority party Senator moved to proceed to consider S.J.Res. 26 , to disapprove an Environmental Protection Agency finding that industrial emissions of greenhouse gases are hazardous. The measure was a resolution of disapproval subject to the expedited procedure of the Congressional Review Act (\"CRA\"; Title II of P.L. 104-121 , codified at 5 U.S.C. 801-808) for disapproving regulations. Pursuant to this expedited procedure, the committee of jurisdiction had previously been discharged from the joint resolution. Under the CRA, the motion to proceed was not debatable, but the consent agreement under which the motion was made provided for 5½ hours of debate. After this debate, the Senate defeated the motion to proceed, 47-53. ( Congressional Record , daily ed., vol. 156, pp. S4789-S4836; Senate Journal , p. 450.) Thereafter, in further pursuance of the consent agreement, the Senate took no further action on the disapproval resolution.\nS.J.Res. 30 , 111 th Congress . On September 23, 2010, under the terms of a September 21 unanimous consent agreement, a minority party Senator moved to proceed to consider S.J.Res. 30 , to disapprove a National Mediation Board rule under which votes in union representation elections in transportation industries would be counted in a way more favorable to unions. As in the previous case, the measure was a disapproval resolution under the CRA from which the committee of jurisdiction had previously been discharged. Under the act, the motion to proceed was non-debatable, but the consent agreement provided for two hours of debate, after which the Senate rejected the motion to proceed, 43-56. ( Congressional Record , daily ed., vol. 156, pp. S7370-S7383; Senate Journal , p. 709.) Pursuant to the consent agreement, the Senate subsequently took no further action on the disapproval resolution.\nS.J.Res. 39 , 111 th Congress . On September 29, 2010, pursuant to a unanimous consent order of the previous day, a minority party Senator moved to proceed to consider S.J.Res. 39 , to disapprove a rule of the Centers for Medicare and Medicaid Services requiring existing health insurance plans to meet coverage requirements established under the Patient Protection and Affordable Care Act ( P.L. 111-148 , 124 Stat. 119, as amended). This measure, again, was a disapproval resolution under the CRA from which the committee of jurisdiction had previously been discharged. Under the act, the motion to proceed was non-debatable, but again, the consent agreement provided for two hours of debate. After debate, the Senate defeated the motion to proceed, 40-59. ( Congressional Record , daily ed., vol. 156, pp. S7673-S7693; Senate Journal , p. 747.) Pursuant to the consent agreement, the Senate subsequently took no further action on the disapproval resolution.\nS. 1726 , 112 th Congress . On October 19, 2011, the minority leader moved to proceed to consider S. 1726 , to repeal a requirement for tax withholding on payments to government contractors. The minority leader had introduced the bill two days earlier and had it placed directly on the Calendar. After immediately moving for cloture on his motion to proceed, the minority leader withdrew the motion to proceed. ( Congressional Record , vol. 157, p. S6753; Senate Journal , p. 748.) On the following day, the Senate rejected cloture on the motion to proceed, 57-43. ( Congressional Record , vol. 157, p. S6840; Senate Journal , p. 753.) Thereafter, no further action occurred on the measure.\nS. 1786 , 112 th Congress . On November 3, 2011, pursuant to a unanimous consent order of the previous day, the minority leader moved to proceed to consider S. 1786 , a transportation and infrastructure jobs bill. The consent agreement provided for concurrent consideration of this motion to proceed and one by the majority leader to consider S. 1769 , addressing similar subjects, and required 60 votes to approve either motion. Both bills had been introduced within the previous few days and placed directly on the Calendar, S. 1769 by a majority party Senator and S. 1786 by a minority party Senator. After the Senate rejected the motion to consider S. 1769 , the motion to consider S. 1786 also failed when the Senate rejected it, 47-53. ( Congressional Record , vol. 157, p. S7095-S7113; Senate Journal , p. 782-783.) No further action occurred on either bill.\nS.J.Res. 6 , 112 th Congress . On November 9, 2011, under the terms of a November 3 unanimous consent agreement, the Senate minority leader moved to proceed to consider S.J.Res. 6 , to disapprove \"net neutrality\" rules from the Federal Communications Commission barring Internet service providers from discriminating against competing content. ( Congressional Record , daily ed., vol. 157, p. S7239; Senate Journal , p. 806.) The joint resolution was a disapproval resolution under the CRA, and the committee of jurisdiction had previously been discharged from its consideration pursuant to the expedited procedures of the act. Under the act, the motion to proceed was not debatable, but the consent agreement under which the motion was made provided for four hours of debate. After this debate, the Senate defeated the motion to proceed, 46-52, and took no further action on the disapproval resolution.\nS.J.Res. 27 , 112 th Congress . On November 10, 2011, pursuant to a unanimous consent agreement reached on November 3, the Senate minority leader moved to proceed to consider S.J.Res. 27 , to disapprove an Environmental Protection Agency rule designed to reduce interstate air pollution caused by emissions of sulfur dioxide and nitrogen oxide. ( Congressional Record , daily ed., vol. 157, p. S7310; Senate Journal , p. 811.) This measure was a disapproval resolution under the CRA, and the committee of jurisdiction had previously been discharged from its consideration. Under the act, the motion to proceed was not debatable, but the consent agreement under which the motion was made provided for two hours of debate. Following this period of debate, the Senate defeated the motion to proceed, 41-56, and took no subsequent action on the disapproval resolution.\nS. 1931 , 112 th Congress (tw o motions to proceed ) . On December 1, 2011, in accordance with a unanimous consent agreement reached earlier in the day, the minority leader was deemed to have moved to proceed to consider S. 1931 , to extend payroll tax cuts for one year, offset with reductions in and a pay freeze for the federal workforce. The consent agreement provided that a vote occur first on a motion (made on the previous day and withdrawn after a cloture motion was filed) to proceed to consider S. 1917 , which would have extended the payroll tax cuts without full offsets. S. 1917 , sponsored by Senators from the majority party, had been introduced on November 29, and S. 1931 had been introduced by a minority party Senator on November 30; each had been placed directly on the Calendar. The consent agreement provided that a cloture motion on the motion to proceed to S. 1917 be withdrawn, permitted brief debate on each motion to proceed, and required 60 votes to approve either motion. The Senate rejected both motions to proceed; on S. 1931 , the vote was 20-78. ( Congressional Record , vol. 158, pp. S8138-8139; Senate Journal , pp. 870-871.) On December 8, pursuant to a consent agreement with similar terms, but covering S. 1931 alone, the minority leader offered another motion to proceed to the bill, which the Senate again rejected, 22-76. ( Congressional Record , vol. 158, p. S8445; Senate Journal , pp. 884-885.) Thereafter, no further action occurred on either bill.\nS.Con.Res. 18 , 112 th Congress . On May 25, 2011, the Senate minority leader moved to proceed to consider S.Con.Res. 18 , a concurrent resolution reflecting the President's proposed budget for FY2012. ( Congressional Record , daily ed., vol. 157, p. S3332; Senate Journal , p. 370.) Pursuant to the expedited procedures of the CBA, the committee with jurisdiction over the resolution had previously been discharged from its consideration, and the motion to proceed was not debatable. The Senate rejected the motion to proceed the same day it was made, 0-97, and took no further action on the President's budget resolution.\nS.Con.Res. 21 , 112 th Congress . On May 25, 2011, shortly after the Senate defeated S.Con.Res. 18 , the Senate minority leader moved to proceed to consider S.Con.Res. 21 , a resolution sponsored by another minority party Senator, setting forth a congressional budget for FY2012. ( Congressional Record , daily ed., vol. 157, p. S3332; Senate Journal , p. 370.) As in the previous case, this resolution was subject to the expedited procedures of the CBA; the resolution had been discharged from the Senate Budget Committee and the motion to proceed to its consideration was not debatable. The Senate defeated the motion to proceed, 42-55, and no further action on the resolution was taken.\nS.Con.Res. 20 , 112 th Congress . On May 25, 2011, following Senate action on the previous two concurrent resolutions, the Senate minority leader moved to proceed to consider S.Con.Res. 20 , a resolution sponsored by a third minority party Senator, providing a congressional budget for FY2012. ( Congressional Record , daily ed., vol. 157, p. S3332; Senate Journal , p. 370.) As before, this resolution came to the floor under expedited procedures of the CBA; the resolution had been discharged from the Senate Budget Committee and the motion to proceed to its consideration was not debatable. The motion to proceed was rejected, 7-90, and the Senate took no subsequent action on this resolution.\nH.J.Res. 98 , 112 th Congress . On January 26, 2012, the minority leader moved to proceed to consider H.J.Res. 98 , to disapprove presidential action to raise the debt limit pursuant to the Budget Control Act ( P.L. 112-25 ). This resolution of disapproval was subject to expedited procedures under Section 301(a)(2) of the act (codified at 31 U.S.C. 3101A), pursuant to which it had been placed directly on the Calendar when received from the House, and under which the motion to proceed was not debatable. The Senate rejected the motion, 44-52, and no further action occurred on the joint resolution. ( Congressional Record , vol. 158, pp. S83-S95.)\nS.J.Res. 36 , 112 th Congress . On April 23, 2012, under the terms of a unanimous consent agreement reached on April 19, a minority party Senator designated by the minority leader moved to proceed to consider S.J.Res. 36 , to disapprove a National Labor Relations Board rule intended to expedite union elections by postponing lawsuits challenging voter eligibility until after the vote. ( Congressional Record , daily ed., vol. 158, p. S2568.) Similarly to several previous cases, this measure was a resolution of disapproval considered under the expedited procedures of the CRA, pursuant to which the committee of jurisdiction had been discharged. Under the act, the motion to proceed was not debatable, but the consent agreement under which the motion to proceed was offered provided for four hours of debate, after which the Senate defeated the motion, 45-54, and took no additional action on the disapproval resolution.\nS.J.Res. 37 , 112 th Congress . On June 20, 2012, in accordance with a unanimous consent agreement reached on June 18, the Senate minority leader moved to proceed to consider S.J.Res. 37 , to disapprove an Environmental Protection Agency rule requiring coal-fired power plants to use \"maximum available control technology\" on mercury and other air toxins. ( Congressional Record , daily ed., vol. 158, p. S4314.) This disapproval resolution was again subject to the expedited procedures of the CRA, pursuant to which the committee of jurisdiction had been discharged. Under the act, the motion to proceed was not debatable, but the consent agreement under which the motion to proceed was made provided for four hours of debate. After time expired, the Senate defeated the motion, 46-53, and took no further action on the disapproval resolution.\nS. 16 , 113 th Congress. On February 27, 2013, on the basis of a February 14 consent agreement, the Senate minority leader moved to proceed to consider S. 16 , a proposal to replace the sequestration of federal funding specified in the Budget Control Act ( P.L. 112-25 , 125 Stat. 240) with spending reductions in other areas of the budget. ( Congressional Record , daily ed., vol. 159, p. S790.) The minority leader immediately filed cloture on the motion to proceed, and the cloture vote was held the following day by unanimous consent. On a 38-62 vote, cloture was not invoked and the motion to proceed was subsequently withdrawn. No further action was taken on S. 16 . The sequestration of federal funds went ahead as scheduled under the terms of the Budget Control Act.\nS.J.Res. 26 , 113 th Congress. On October 29, 2013, in accordance with a unanimous consent agreement reached the previous day, the Senate minority leader offered a motion to proceed to consider S.J.Res. 26 , to disapprove of the President exercising his authority to raise the debt limit. ( Congressional Record , daily ed., vol. 159, p. S7580.) This disapproval resolution was subject to expedited procedures established in the Continuing Appropriations Act of 2014 ( P.L. 113-46 , 127 Stat. 558). Under that act, the motion to proceed was not debatable, but the consent agreement reached on October 28 provided three hours of debate prior to the vote. Following this period of debate, the Senate defeated the motion on a 45-54 vote and took no additional action on the disapproval resolution."
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{
"question": [
"What does the Senate generally cede to its majority leader in recent practice?",
"How are measures brought to the floor?",
"How is the motion offered?",
"What does this report examine?",
"What is the difference between debatable and non-debatable motions to proceed?",
"How do the data in this report distinguish between debatable and non-debatable motions to proceed?",
"How does the report consider each motion when more than one motion to proceed was offered on the same measure?",
"How were the motions to proceed to consider measures offered in the Senate from 1979 through 2014?",
"How has the number of motions to proceed offered per Congress been in the four most recent Congresses (2007-2014)?",
"What may be the reasons for this increase?",
"Why few of the motions to proceed are defeated outright?",
"How did the Senate respond to the 28 motions clearly not offered by direction of the majority leader?",
"How were some of the motions abandoned?",
"Why were 15 of the 28 motions non-debatable?",
"What motions of the 28 motions occurred in the 3 most recent Congresses (2009-2014)?",
"How were these 18 motions addressed?"
],
"summary": [
"In recent practice, the Senate generally cedes to its majority leader the prerogative of calling up items of business for floor consideration.",
"Most measures are brought to the floor by unanimous consent, but when this consent cannot be obtained, a motion to proceed to consider can be used to accomplish the same purpose.",
"Sometimes a Senator other than the majority leader offers this motion, but usually this occurs in coordination with the majority leader.",
"This report examines motions to proceed to consider items of legislative business (\"measures\"); it does not cover nominations or treaties (\"executive business\").",
"Motions to proceed to legislative business are normally debatable unless the underlying measure is \"privileged,\" which includes conference reports and measures subject to statutory expedited procedures.",
"The data in this report do not distinguish between debatable and non-debatable motions to proceed.",
"In some cases, as well, more than one motion to proceed was offered on the same measure; the report considers each motion as a separate unit for purposes of analysis.",
"Of 628 motions to proceed to consider measures in the Senate from 1979 through 2014, all but 28 were offered either by the majority leader or apparently at his direction.",
"In the four most recent Congresses (2007-2014), the number of motions to proceed offered per Congress has been significantly greater than before.",
"Reasons for this increase may relate to changes in (1) the use of daily adjournments rather than recesses, (2) the way cloture is used in relation to these motions, or (3) the degree of deference paid to the majority leader in the exercise of his scheduling function.",
"The report presents no overall data on the disposition of motions to proceed, but few are defeated outright, because those unlikely to command majority support are seldom offered, and those that are not adopted usually reach no final vote (for example, because they are withdrawn).",
"Of the 28 motions clearly not offered by direction of the majority leader, by contrast, the Senate adopted 2, defeated 15, and laid 5 on the table. Four were abandoned after the Senate rejected cloture and two were ruled out of order.",
"Four were abandoned after the Senate rejected cloture and two were ruled out of order.",
"Of these 28 motions, 15 were non-debatable because they addressed privileged matters (14 of them subject to expedited procedures under budgetary statutes or for congressional disapproval of executive actions).",
"Of the 28 motions, 18 occurred in the 3 most recent Congresses (2009-2014), including 12 of the 14 that were non-debatable under expedited procedure statutes.",
"These 18 motions also include 14 of the 20 offered by the minority leader, all 15 of those that the Senate defeated outright, and 12 of the 16 that the Senate considered under unanimous consent agreements."
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GAO_GAO-13-668
|
{
"title": [
"Background",
"NARA’s Inspector General Previously Reported on Federal Records Centers Challenges",
"Federal Records Are to Be Stored in Three Types of Facilities; NARA Does Not Have Reliable Data about All Agencies’ Use of Records Storage Facilities",
"NARA Federal Records Centers",
"NARA Has Approved Almost All of Its Federal Records Centers as Compliant with Applicable Standards, but It Has Not Inspected and Validated the Majority of Agency and Commercial Records Facilities",
"NARA Has Not Inspected and Validated Compliance for the Majority of Agency and Commercial Records Storage Facilities",
"NARA Has Taken Steps to Minimize Permanent Damage to Records in Federal Records Centers, but Does Not Always Track the Results of Its Efforts",
"Federal Record Centers Storage Fees Are Developed Annually and Are Comparable to Commercial Vendors’ Fees",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Comments from NARA",
"Appendix III: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"NARA’s mission is to safeguard and preserve the records of the U.S. government, ensuring that the people can discover, use, and learn from this documentary heritage. In this way, NARA is to ensure continuing access to the essential documentation of the rights of American citizens and the actions of their government.\nIn carrying out this mission, NARA (among other things) is to provide guidance and assistance to federal officials on the management of records; determine the retention and disposition of records; store agency records in federal records centers from which agencies can retrieve them; receive, preserve, and make available permanently valuable federal and presidential records in archives; and centrally file and publish federal laws and administrative regulations, the President’s official orders, and the structure, functions, and activities of federal agencies through the daily Federal Register. Table 1 summarizes NARA’s organizations, their missions, and the levels of staff in each (expressed as full-time equivalent—FTE).\nNARA’s Agency Services group includes the Federal Records Centers Program, with approximately 1,100 FTE. The placement of this program within the larger NARA organization is depicted in figure 1.\nIn carrying out its responsibilities to store and archive federal records under the Federal Records Act and its implementing regulations, the Federal Records Centers Program provides storage facilities for federal agencies. Specifically, chapters 21, 29, and 31 of title 44 of the United States Code, and Parts 1232 and 1234 of title 36 of the Code of Federal Regulations authorize NARA to establish, maintain, and operate records centers for federal agencies. Further, 36 C.F.R. Part 1234 Subparts B, C, and D describe facility standards related to quality, effectiveness, durability, and safety; the handling of deviations from NARA’s facility standards; and facility approval and inspection requirements. These standards are applicable to all records storage facilities that federal agencies use to store, service, and dispose of records. To carry out these responsibilities, NARA developed an internal policy directive that outlines the procedures its officials should use to ensure the compliance of records storage facilities. 36 C.F.R. Part 1234 also includes provisions allowing NARA to grant waivers from meeting the standards set forth in the regulations for records storage facilities. In these instances, waivers are allowed when the storage systems, methods, or devices are demonstrated to have facility standards that are equivalent or superior to 36 C.F.R. Part 1234 standards for quality, strength, fire resistance, effectiveness, durability, and safety, among other things. Underground facilities may obtain waivers from regulatory requirements that pertain to the roofs of aboveground facilities. Agencies can request a waiver by providing: a statement identifying the 36 C.F.R. Part 1234 provision for which the waiver is requested, in addition to a description of the proposed alternative, and an explanation of how it is equivalent or superior to the NARA requirement; and supporting documentation demonstrating that the alternative does not provide less protection for federal records than what is required by the 36 C.F.R. Part 1234 standard, which may include certifications from a licensed fire protection engineer or a structural or civil engineer, as appropriate; reports of independent testing; reports of computer modeling; and/or other relevant information.\nAccording to 36 C.F.R. Part 1234, NARA is to review the waiver request and supporting documentation, and in some circumstances, consult with the appropriate industry body or qualified experts, such as a fire- suppression specialist, before making a determination. If NARA is in agreement with the proposed waiver and the supporting documentation, it is to grant the waiver and notify the requesting agency. However, if NARA evaluates the waiver request and the supporting documentation unfavorably, it is not to approve the waiver.\nThe Federal Records Centers Program is financed through a revolving fund, which in fiscal year 2012 earned revenue totaling approximately $185 million. Revenues for the fund are generated from the fees that NARA charges federal agencies for storing, servicing, and ultimately disposing of temporary federal records on their behalf, based on a standard fee schedule. NARA develops the fees annually for the upcoming fiscal year.\nIn November 2011, a presidential memorandum on managing government records was issued to the heads of executive departments and agencies. The purpose of the memorandum was to begin an executive branch-wide effort to reform records management policies and practices and to develop a 21st-century framework for the management of government records. Specifically, the memorandum stated, among other things, that all agencies were required to designate a Senior Agency Official to oversee a review of their records management program. The Senior Agency Official would be responsible for coordinating with the Agency Records Officer and appropriate agency officials to ensure the agency’s compliance with records management statues and regulations.",
"In January 2012 and March 2012, NARA’s Inspector General reported on one of NARA’s federal records centers, the Washington National Records For example, the Center, and found that it had numerous weaknesses.Inspector General reported that formalized procedures were not in place to properly track and resolve problems with records received, stored, or removed from the center; documented procedures did not exist for many of the center’s operations; and periodic inventories of the records held at the center were not conducted. In order to address the weaknesses cited above, the Inspector General made recommendations, which included developing a problem resolution process and mechanism for tracking all problems at the center until they are resolved, ensuring a formal tracking mechanism is implemented for new records received, and ensuring a systematic and repeatable process is in place to perform periodic inventories of the records held at the Washington National Records Center.\nNARA concurred with these recommendations and began taking actions to address them. Specifically, the Archivist ordered all federal records centers operated by NARA to assess their operations during a 1-day stand down. In addition, NARA officials stated that they established a Washington National Records Center oversight group to ensure that the center leadership participated in plans, actions, and results related to resolving record storage issues. However, as of May 2013, NARA was in the process of addressing the recommendations.",
"Federal agencies are to store records in three types of facilities: federal records centers that are managed by NARA, agency records centers, and commercial records storage facilities. Each of these types of facilities is authorized by 36 C.F.R. Part 1234, which also requires agencies to notify NARA when they use agency records centers or commercial facilities to store federal records. While NARA is aware of the extent to which agencies use the federal records centers that it manages, its awareness of the extent to which agencies’ use their own and commercial records storage facilities is incomplete.",
"As of May 2013, NARA manages 18 federal records centers located across the United States. These centers consist of a total of 24 facilities where records are actually stored. Each facility includes storage areas, which NARA refers to as bays. (According to NARA, the typical bay is approximately the size of a football field.) Collectively, the facilities provide a total of 162 bays that are used by approximately 200 entities. Table 2 provides a listing of NARA’s federal records centers and their related facilities, and the number of bays at each facility.\nIn addition to the federal records centers that NARA operates, agencies also are authorized to establish and operate their own centers for storing records. As of May 2013, NARA had identified 18 records centers that were being operated by six federal agencies or offices: the Department of Energy, the Department of Veterans Affairs, the Federal Bureau of Investigation, the National Geospatial-Intelligence Agency, the National Reconnaissance Office, and the Transportation Security Administration’s Office of Law Enforcement – Federal Marshal Records Center. These agencies varied in the number of storage facilities that they operated— ranging from 7 at the Federal Bureau of Investigation to 1 facility at each of three other agencies (the Department of Veterans Affairs, the National Reconnaissance Office, and the Transportation Security Administration’s Office of Law Enforcement). Table 3 identifies the number of records storage facilities operated by each of the agencies.\nFederal agencies are also authorized to use private sector commercial facilities for records storage, retrieval, and disposition. As of May 2013, agencies reported to NARA that 22 such facilities, operated by 12 vendors, are under contract with and provide storage services for 11 federal agencies or entities. These federal agencies or offices are the Bureau of Public Debt, Centers for Medicare and Medicaid Services, Commodities Futures Trading Commission, Department of Veterans Affairs, Environmental Protection Agency, Federal Aviation Administration, Federal Energy Regulatory Commission, Federal Public Defender, Naval Sea Systems Command, United States Customs and Border Protection, and the United States International Trade Commission. Table 4 identifies each vendor and their facilities that provide records storage services to federal agencies.\nTo determine whether all agencies were storing their records in one of the three types of allowable facilities, NARA collected data and compiled a database of agencies and the records storage facilities that they use. Specifically, in 2008, NARA officials sent letters to agencies’ records managers that asked them to provide a list of all records storage facilities used. Subsequently, NARA sought to obtain information about where agencies were storing their records by sending follow-up letters and by including a question regarding the storage of federal records in a voluntary annual survey of agencies’ records management practices. However, the database was unreliable because it did not include complete, current, and valid data. Specifically, NARA’s database of agencies’ records storage facilities included a reporting status for about 260 agencies, but did not have a date associated for when 47 of these agencies reported. Additionally, the data were derived primarily from information agencies submitted to NARA in 2008 and 2009, thereby rendering it outdated. Also, the self-reported nature of agencies’ data raised questions about the validity of the data they provided.\nNARA officials responsible for determining where agencies store records acknowledged that the data about agencies’ and the records storage facilities they use are incomplete, outdated, and of questionable validity. The officials attributed this situation to agencies’ not reporting data to NARA because they were unfamiliar with the 36 C.F.R. Part 1234 requirement to notify NARA when they use agency records centers or commercial facilities to store federal records, as well as NARA having insufficient staff to ensure that all agencies report the required data, keep the data current, and verify the data agencies provide.\nNARA officials responsible for communicating records storage requirements to agencies stated that the Senior Agency Officials for records could provide NARA with points of contact that can help identify all the facilities where agencies store their records. Nevertheless, until NARA ensures that it has complete, current, and valid data on agencies’ records storage facilities, it cannot be certain that agencies are using one of the three types of authorized facilities.",
"In carrying out its responsibilities to store and archive federal records, Title 44 of the United States Code authorizes NARA to establish, maintain, and operate records centers for federal agencies; approve agency records centers; and promulgate standards, procedures, and guidelines to federal agencies with respect to the storage of their records in commercial records storage facilities. Regulations implementing the statute, at 36 C.F.R. Part 1234, specify the minimum structural, environmental, property, and life-safety standards that a records storage facility must meet when the facility is used for the storage of federal records. For example, facilities must be designed in accordance with the applicable national, regional, state, or local building codes to provide protection from building collapse or failure of essential equipment. Further, a floor load limit must be established for the records storage area by a licensed structural engineer, and the facility must be 5 feet above and 100 feet from any 100-year flood plain areas, or be protected by an appropriate flood wall that conforms to local or regional building codes. In addition, NARA’s Review of Records Storage Facilities policy directive outlines the procedures for NARA to ensure records centers comply with 36 C.F.R. Part 1234 specifications. Specifically, the directive requires NARA to conduct inspections of its federal records centers and agencies’ records centers to validate those facilities as compliant. In addition, 36 C.F.R. Part 1234 requires that agencies ensure that their own or NARA officials have the right to inspect commercial records storage facilities for compliance with the facility requirements. If a commercial facility fails an inspection, federal agencies that store records at the facility are required to bring the facility into compliance with the standards within 6 months or to transfer their documents to a compliant facility within 18 months. Standard practices in program management call for documenting the scope of a project as well as milestones and time frames for timely completion and implementation of repairs or transfers to ensure results are achieved.\nNARA conducted inspections of 23 of its 24 federal records center facilities from February 2005 through January 2013 and determined that 20 of the facilities were compliant with 36 C.F.R. Part 1234. It also determined that 2 facilities were partially compliant because they included at least 1 storage bay that did not satisfy the regulation. Specifically, NARA found that 2 of the 16 bays at the Lenexa, Kansas facility and 6 of the 17 bays at the Lee’s Summit, Missouri facility were noncompliant because they included shelves that were determined to be too weak to meet the load requirements for records storage shelving and racking systems. Further, it found that all 7 bays at the San Francisco, California records center were noncompliant because, contrary to the regulation, there were pipes (other than sprinkler pipes) that ran through the records storage areas which lacked supplemental protective measures such as The remaining facility consisting of 1 bay at the Anchorage, drip pans.Alaska center was not inspected; however, NARA had considered the facility to be noncompliant and had planned to relocate the records being stored there. Table 5 summarizes the compliance status of each federal records center facility.\nAs of July 2013, NARA indicated that it had plans to address the deficiencies at the noncompliant federal records centers, although it had not established schedules for doing so at the San Francisco and Anchorage facilities. For example, to correct the shelving at the Lenexa and Lee’s Summit facilities, NARA had plans to contract for a detailed inspection of the existing shelving, prepare a report identifying necessary repairs, and then conduct the repairs and/or replacement of the noncompliant shelves. It expected to award a contract for this work in August 2013 and to complete the work within the following 6 months. In addition, NARA officials responsible for facility compliance had developed a plan for corrective actions at the San Francisco facility. This plan calls for the installation of water sensing cables and protective drip pans and guttering to provide supplemental protection of pipes that run through records storage areas. However, the plan does not include a schedule for completing these tasks consistent with standard practices for program management. NARA officials responsible for facility compliance attributed the lack of a schedule to uncertainty about the availability of funding and personnel resources to execute the plan. Further, NARA facility managers developed plans to replace the existing Anchorage, Alaska facility with a newly constructed facility. However, NARA did not have a schedule for completing the construction because it had not secured funding to construct the new facility.\nWhile NARA has stated that it plans to bring all of its federal records center facilities into compliance with applicable regulations, the agency has not established a schedule for doing so at all facilities. Thus, although NARA has determined that the vast majority of the space (i.e., bays) in which its facilities store records is fully compliant with applicable standards, NARA has not established a basis for tracking and reporting progress toward resolving deficiencies at all of its facilities that do not yet fully meet the standards.",
"Agencies must obtain approval from NARA to store federal records at their own or a commercial records storage facility and, to do so, must provide documentation to show that the facility satisfies the requirements After a facility is approved, agencies are able to of 36 C.F.R. Part 1234.store federal records at the facility and an inspection may be conducted to ensure that the facility meets the requirements of the standard. According to NARA officials responsible for determining facility compliance, inspections have been an important means of determining whether facilities are in fact compliant with the requirements.\nNARA has approved 10 of the 18 agency facilities that agencies have reported using. According to NARA officials, the remaining 8 centers were not approved because the agencies that operate them did not provide NARA with sufficient documentation to support approval. NARA has approved all 22 identified commercial facilities.\nHowever, of the 10 approved agency records centers, 1 had been inspected; and of the 22 approved commercial facilities, 13 had been inspected (1 inspection was deemed unfavorable and the facility was removed from the approved list). For the 9 agency records centers and 10 commercial facilities that had not been inspected, NARA provided a schedule for doing so. According to this schedule, NARA plans to inspect 4 facilities per fiscal year from fiscal years 2014 through 2017, with the remaining 3 facilities scheduled for inspection in fiscal year 2018. For the commercial facilities, NARA had scheduled all 10 of the remaining facilities, with the last of these inspections planned in fiscal year 2017.\nUntil all facilities are inspected, NARA cannot be reasonably assured that agencies are storing federal records in facilities that comply with standards, thus increasing the risk that these records will be damaged.",
"In keeping with NARA’s mission to safeguard and preserve the records of the U.S. government, the agency has a process in place to handle incidents in which records could potentially become damaged at its federal records centers. In particular, NARA requires its federal records centers to follow the Emergency First Response for NARA Records checklist to facilitate the protection of federal records from further impact and/or permanent damage when an incident occurs. As part of the agency’s 1561 directive, the checklist requires (1) notification and immediate actions, such as notifying management; (2) an initial response, including steps to take if water damage occurs; and (3) damaged records response operations, including the requirement to document NARA’s immediate response to incidents in an after-action report and a general requirement to provide a report after completing follow-up activities. Additionally, internal control standards specify, among other things, the need for significant events to be clearly documented.\nIn addition to the checklist requirements, NARA’s Chief Operating Officer told us about specific steps NARA is to take when boxes of records get wet. For example, based on the volume of records that are involved and available resources, boxes are to be air dried and stored in an onsite freezer or in freezer trucks to minimize the growth of mold and prevent or reduce potential damage to records. Boxes of records are then to be individually removed, treated, and dried, or sent to a contractor that can freeze dry various types of records. NARA is also to use in-house restoration services, such as industrial fans, for incidents that are considered minor. For major incidents (where affected records are not expected to be available to the agency that owns them for more than 48 hours), NARA’s process indicates that it will work with a contractor for drying services.\nNARA generally followed its process to prevent damage to records when incidents occurred. Documentation that we reviewed for 55 incidents that NARA reported as occurring from January 2009 through March 2013 indicated that the agency had taken steps consistent with its Emergency First Response for NARA Records checklist. For example, NARA provided documentation of steps taken to handle incidents at the Washington National Records Center and at the National Personnel Records Center in Valmeyer, Illinois from March 2011 through August 2012.\nSpecifically, at the Washington National Records Center:\nA roof leak incident in March 2011 impacted 47 cubic feet of records stored at the center. According to NARA’s documentation, 2 cubic feet of records were placed on drying racks and dried, 3 cubic feet of records were reboxed, and the remaining records were air dried in their original boxes.\nDuring another roof leak at the center in May 2011, a large number of boxes of records became wet. NARA staff noted the locations of the leaks, notified management, and took steps to address the incident. The staff initiated triage efforts to relocate the records to another area to determine how the incident had affected the records. While some records were air dried, those that were substantially wet were placed in a freezer truck. After the records were held in the freezer truck for several days, NARA reassessed them, and removed and reboxed records that had dried. The remaining 252 cubic feet of wet records were freeze dried at an offsite facility. NARA documented the actions it took to address the wet records and the center director notified the affected agencies.\nA roof leak that occurred at the center in June 2011 affected 7 cubic feet of records. NARA documented the actions it took, noting that 5 cubic feet of records were reboxed, and the remaining records were air dried.\nAnother roof leak later that month resulted in a large number of boxes of records becoming wet. NARA staff noted the locations in which the leaks occurred, notified management, and took actions to address the records involved in the incident. The staff initiated triage efforts to relocate the records to another area and determine the level of severity for the affected records. Records that could be dried with minimal effort were removed from boxes and placed on pallets to begin the air-drying process onsite. Records that were found to be substantially wet were placed in a freezer truck. After the records were held in the freezer truck for several days, NARA reassessed them and determined that some of the records had dried. While the dry records were removed from the freezer truck and reboxed, 414 cubic feet of records were freeze dried at an offsite facility. NARA documented the actions it took to address the wet records and the center director notified the affected agencies.\nIn addition, at the National Personnel Records Center (Valmeyer):\nA sprinkler leak in August 2012 affected 27 cubic feet of records. Five of the 27 cubic feet of records were determined to not be wet and 18 cubic feet of records were removed from the location and dried. The remaining 4 cubic feet of records were reboxed.\nWhile NARA has taken steps to minimize damage to records, the agency has not tracked the results of its efforts in all cases. For example, of the 55 incidents, NARA provided documentation that verified that the actions it took in responding to 46 incidents resulted in no permanent damage to records. For the remaining 9 incidents, officials stated that NARA’s actions prevented permanent damage to records; however, the agency could not provide documentation that would allow us to verify this assertion. For example, NARA could not provide documentation that described the results of its efforts to prevent permanent damage to 6 cubic feet of records that became wet due to faulty floor and roof drains at the Chicago Federal Records Center in June 2011. A contributing factor is that while the NARA 1561 checklist provides generally defined requirements for final reporting, it does not require the federal records centers to document the results of the actions they have taken to prevent permanent damage to records that were at risk. As a result, NARA is not positioned to fully report on the effectiveness and outcome of its actions to minimize damage to records and does not have an institutional record that a third party can use to validate the results of its efforts.",
"The Treasury and General Government Appropriations Act, 2000, established a Records Centers Revolving Fund to pay for expenses and equipment necessary to provide storage and related services for federal records. Accordingly, the Federal Records Centers Program and NARA’s Office of the Chief Financial Officer are responsible for annually developing the fees charged to agencies for records storage and related services. These fees are to be developed for the upcoming fiscal year using the current fiscal year fee schedule, expense projections, and workload projections for NARA’s records centers. In determining the fees, it is to consider costs associated with full operation of the records storage facilities, taking into consideration expenses, such as reserves for accrued annual leave, worker’s compensation, depreciation of capitalized equipment and shelving, and amortization of IT software and systems. Annually, all federal records centers are required to submit expense and workload projections to the Federal Records Centers Program headquarters operation. The expense and workload projections are used to develop budget and revenue projections, which are then used as the basis to develop rates for the upcoming fiscal year. Factors such as inflation, customer impact, the frequency of rate change, and competitiveness with the private sector are then considered when developing new rates.\nThe fees developed for the upcoming fiscal year are approved by the Director of the Federal Records Centers Program, Executive for Agency Services, Chief Financial Officer, and Chief Operating Officer before receiving final approval from the Archivist. According to NARA officials responsible for managing the Federal Records Centers Program, the newly developed fees are then used at all federal records centers for the upcoming fiscal year.\nStorage fees charged by NARA in fiscal year 2013 were comparable to fees charged by commercial vendors on the GSA schedule in that same time frame. Specifically, of the 12 commercial vendors that provided storage services for 11 federal agencies, 5 had price lists that were posted on GSA’s Federal Acquisition Service webpage. Table 6 provides a comparison of storage fees for NARA and these 5 commercial vendors for fiscal year 2013.\nAs shown in the table, NARA’s fee of $0.23 per cubic foot was consistent regardless of the storage quantity. Specifically, NARA’s fee was higher than fees charged by vendors 1 and 2, although its fees were lower than those of vendors 3 and 5. In addition, NARA’s fees were lower than those of vendor 4 if storing less than 100,000 cubic feet and higher if storing 100,000 or more cubic feet. NARA also did not charge additional fees that certain vendors charged. Specifically, vendors 1, 3, and 4 applied a $65, $25, and $100 fee, respectively, to a customer’s account when the storage charges did not meet the customer’s contractual minimum storage requirement. In addition, vendor 4 charged an administration fee of $25.12 or $62.80 per account, respectively, for summary or detailed billing.",
"Although federal regulations call for records to be stored in one of three types of facilities—NARA-operated federal records centers, agency records centers, or commercial records storage facilities—the extent to which agency and commercial facilities are used to store records is uncertain because NARA does not know where all agencies store their records. NARA’s efforts to collect data from agencies about the facilities they use to store records have yielded data that are incomplete, outdated, and of questionable validity.\nNARA has determined that most of its federal records center facilities are fully compliant with the standards established in regulations, but that four facilities are partially or entirely noncompliant—a situation that increases the risk of damage to the records stored in the facilities. Although it has plans for bringing these four facilities into full compliance with the regulations, NARA has not established dates for completing its plans at two of the facilities. As a result, NARA does not have a basis for determining progress toward correcting deficiencies in those facilities that do not fully meet the standards Additionally, although NARA has taken steps to prevent permanent damage to records in their facilities on a total of 55 occasions over a recent 4-year time period, the federal records centers did not always keep track of the results of their efforts and were unable to provide documentation confirming they were successful in 9 cases. Therefore, NARA is not positioned to fully report on the effectiveness of its actions to minimize permanent damage to federal records.",
"To assist NARA in its responsibility to ensure that federal records are stored in compliant facilities, we recommend that the Archivist of the United States direct the Chief Operating Officer to take the following three actions:\nPlace increased priority on the collection of complete, current, and valid information from agencies about their use of agency and commercial records storage facilities.\nDevelop a schedule for executing plans to resolve issues at each of the federal records centers that is not fully compliant with 36 C.F.R Part 1234.\nClarify NARA’s checklist for handling incidents that may involve permanent damage to records by including a requirement to document the results of the steps taken to minimize permanent damage to records.",
"NARA provided written comments on a draft of this report, which are reprinted in app. II. In its comments, the agency concurred with all three of our recommendations for executive action regarding facility inspections and other areas related to safe storage of federal records. In addition, we received technical comments via email from NARA, which we have incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees; the Archivist of the United States; and other interested parties. This report also is available at no charge on the GAO website at http://www.gao.gov.\nShould you or your staffs have any questions on information discussed in this report, please contact me at (202) 512-6304 or melvinv@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.",
"Our objectives were to (1) determine the types of facilities agencies use to store federal records and the extent to which NARA’s data on agencies’ use of storage facilities are complete, (2) evaluate the extent to which NARA has determined these facilities to be compliant with standards in 36 C.F.R. Part 1234, (3) determine what actions NARA has taken to minimize damage to records in federal records centers and the extent to which it documents such efforts, and (4) determine how NARA determines storage fees and whether fees differ among facilities.\nTo accomplish the first objective, we reviewed 36 C.F.R. Part 1234 and developed a thorough understanding of the regulation through discussions with NARA officials who are responsible for administering it. We then obtained lists of NARA, agency, and commercial records storage facilities from NARA. These lists included NARA’s central registry of approved facilities. We corroborated the lists by comparing them with other documentation such as facility approval memoranda and inspection schedules, as well as through interviews with agency officials. Additionally, we obtained NARA’s database of agencies’ records storage facilities and discussed NARA’s methods for populating the database with responsible NARA officials. We determined the database to be unreliable because it was incomplete, outdated, and largely reliant on self-reported data from agencies.\nFor the second objective, we obtained and reviewed memoranda from NARA that indicated approval of NARA, agency, and commercial records storage facilities and the facilities’ compliance with 36 C.F.R. Part 1234. We then used additional documentation, including detailed facility inspection checklists, fire inspection reports, and structural engineering reports to determine the existence of support for NARA’s approval determinations. We also discussed NARA’s method for approving and inspecting facilities, in addition to plans for conducting future facility inspections with the officials who are responsible for performing the inspections.\nTo accomplish the third objective, we reviewed NARA policies and procedures for the storage and management of federal records and compared them with applicable internal control standards. We also reviewed procedures for handling records damage in NARA records centers and documentation relative to records emergency planning and training. We collected and analyzed documentation on 55 incidents that occurred at NARA records centers from January 2009 through March 2013, including reports that described NARA’s actions to mitigate or reduce records damage. We also compared requirements in NARA’s 1561 checklist to the documentation described above. Further, we interviewed NARA officials to determine the actions taken to minimize records damage in federal records centers and corroborated the officials’ statements with aforementioned documentation.\nTo accomplish the fourth objective, we obtained and analyzed documentation from the NARA Federal Records Centers Program and General Services Administration (GSA) schedules that identified and discussed records storage fees and then compared fees among records storage facilities. To determine the reliability of the data provided from NARA, we performed basic steps to ensure the data provided were valid, and reviewed relevant information describing the data. We reviewed documentation related to the data sources, including NARA’s fiscal year 2013 fee schedule, fee determination process description documents, and workload and expense projections. Although we could not independently verify the reliability of all this information, we compared the data with other available supporting documents to determine data consistency and reasonableness. We also obtained price lists from GSA’s website for commercial vendors that listed facilities that are compliant with 36 C.F.R. Part 1234. We did not determine whether individual agencies had negotiated lower prices than those listed in the price lists. We compared storage fees for NARA and commercial vendors by extracting fee data from NARA’s fee schedule and commercial vendor price lists. For our comparison, we reviewed the publicly available price lists for five commercial vendors (referred to as vendors 1-5 in our analysis). Four of the five vendors’ price lists charged storage fees based on cubic feet of storage per month and the fifth vendor charged based on the number of boxes stored. In order to directly compare fees established by NARA and the five vendors, we converted boxes to cubic feet for vendor 5. Storage fees were then arranged in order from lowest to highest.\nWe supplemented our analyses with interviews of NARA officials who are knowledgeable about the Federal Records Centers Program, including NARA’s Chief Operating Officer, the program director, and assistant director. We also interviewed representatives of private sector record storage companies that were relevant to our study.\nWe conducted this performance audit from November 2012 to September 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
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"In addition to the contact name above, the following staff also made key contributions to this report: Mark Bird, Assistant Director; Sharhonda Deloach; Elena Epps; Rebecca Eyler; Jacqueline Mai; and Constantine Papanastasiou."
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"question": [
"What does NARA know about the agencies use of records storage facilities?",
"Why does NARA not know where all agencies are storing records?",
"What are the results of missing and outdated data?",
"What data has NARA solicited from agencies?",
"Why were some of the federal records center facilities not fully compliant with 36 C.F.R. Part 1234?",
"How did NARA deal with the 4 facilities' lack of full compliance as of July 2013?",
"What is the result of a lack of schedule for completing the plans?",
"What is NARA's progress on the inspections of all facilities?",
"What is the result of incomplete planned inspections of all remaining facilities?",
"How are storage fees determined?",
"How did the storage fees charged by NARA compare to those charged by commercial vendors in fiscal year 2013?",
"In what ways were the storage fees charged by NARA comparable to fees charged by commercial vendors?",
"What was GAO requested to do with the program?",
"What are the GAO's objectives?",
"How did GAO achieve its objectives?"
],
"summary": [
"These facilities notwithstanding, NARA does not know where all agencies are storing records.",
"NARA has solicited data from agencies about their use of agency records centers and commercial records storage facilities, but not all agencies have submitted data. Further, the data agencies submitted--mostly from 2008 and 2009--are now outdated.",
"As a result, NARA cannot be assured that all agencies are using one of the three types of authorized facilities.",
"NARA has solicited data from agencies about their use of agency records centers and commercial records storage facilities, but not all agencies have submitted data.",
"NARA determined that 20 of its 24 federal records center facilities were fully compliant with 36 C.F.R. Part 1234 because all of their bays satisfied the regulation; of the remaining 4, 2 facilities with inadequate shelving were partially compliant, 1 facility with insufficient protections against pipe leaks was not compliant, and the remaining facility was to be replaced.",
"As of July 2013, NARA had plans to bring these 4 facilities into full compliance, but did not have a schedule for completing the plans at 2 of the facilities.",
"As a result, NARA does not have a basis for determining progress toward correcting deficiencies in those facilities that do not yet fully meet the standards.",
"Also, while NARA had approved 10 agency records centers and 22 commercial records storage facilities, it has inspected 1 of 18 agency records centers and 13 commercial records storage facilities.",
"Until NARA completes planned inspections of all remaining facilities, it cannot be reasonably assured that agencies are storing records in facilities that meet standards.",
"Storage fees are determined by NARA's Federal Records Centers Program and the Office of the Chief Financial Officer using the existing fee schedule, expense projections, and workload projections.",
"The storage fees charged by NARA in fiscal year 2013 were comparable to fees charged by commercial vendors in that same time frame.",
"For example, NARA's fee of $0.23 per cubic foot was higher than fees charged by two vendors and lower than fees charged by two other vendors.",
"GAO was requested to conduct a study of key aspects of the program.",
"GAO's objectives were to (1) determine the types of facilities agencies use to store federal records and the extent to which NARA's data on agencies' use of storage facilities are complete, (2) evaluate the extent to which NARA has determined these facilities to be compliant with standards in 36 C.F.R. Part 1234, (3) determine what actions NARA has taken to minimize damage to records in federal records centers and the extent to which it documents such efforts, and (4) determine how NARA determines storage fees and whether fees differ among facilities.",
"To do so, GAO obtained, analyzed, and corroborated documentation on records storage facilities, identified and compared records storage fees, and interviewed NARA officials."
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{
"title": [
"Background",
"Quality Scores Were Generally Lower for Safety Net Hospitals Compared to All Hospitals, while Small Rural and Urban Hospitals Generally Had Higher Quality and Efficiency Scores",
"HVBP Payment Adjustments Have Varied over Time, but Safety Net Hospitals Generally Had Lower Payment Adjustments Compared to the Other Hospital Types",
"Since Fiscal Year 2015, High Efficiency Scores Have Resulted in Bonuses for Some Lower Quality Hospitals",
"About 20 Percent of All Hospitals Receiving Bonuses Had Composite Quality Scores below the Median and Received Bonuses Because of High Efficiency Scores",
"Efficiency Scores Carry More Weight for Hospitals with Missing Quality Domain Scores, and Hospitals with Missing Domains Are More Likely to Receive a Bonus",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments",
"Appendix I: Quality and Efficiency Measures in the Hospital Value-based Purchasing Program, Fiscal Years 2013 through 2017",
"Appendix II: Hospital Types Participating in the Hospital Value-based Purchasing Program",
"Appendix III: Comments from the Department of Health & Human Services",
"Appendix IV: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments",
"Related GAO Products"
],
"paragraphs": [
"Each year, CMS evaluates approximately 3,000 acute care hospitals participating in HVBP on their performance in prior years on a series of quality and efficiency measures. Prior to the HVBP program, hospitals received slightly higher Medicare payments for submitting data on measures within CMS’s public Inpatient Quality Reporting (IQR). Beginning in fiscal year 2013, the HVBP program provided new bonuses and penalties that were based on each hospital’s performance on a subset of these measures.\nEach individual hospital’s performance is calculated for each measure within a domain using a baseline period and a performance period, both of which are in prior years. For each of the HVBP measures, CMS considers both the results of a hospital’s absolute performance— awarding achievement points if performance on a measure was at or above the median for all participating hospitals—and improvements in its performance over time—awarding improvement points if current performance had improved. CMS uses the higher of these points as the hospital’s score on each measure. Related measures are grouped into specific performance categories, called domains. The domain scores are weighted to develop a total performance score for each hospital. The measures that constitute each domain, the number of domains, and the weighting of the domain scores have changed over the years of the program (see table 1). In fiscal year 2013, HVBP had two quality domains—clinical processes and patient experience; by 2017, two additional quality domains—patient outcomes and safety—and one efficiency domain were added to the program.\nBy law, the HVBP program is budget neutral, which means that the total amount of payment increases, or bonuses, awarded to hospitals deemed to provide higher quality of care must equal the total amount of payment reductions, or penalties, applied to hospitals deemed to provide lower quality of care. To fund the HVBP program, CMS first applies an initial fixed percentage reduction to the amount of each hospital’s Medicare reimbursements for its patients that fiscal year. The initial percentage reduction was 1 percent in fiscal year 2013 and has grown by 0.25 percent each year to the maximum of 2 percent for fiscal year 2017 and beyond, as specified in PPACA.\nCMS determines each hospital’s payment adjustment based on the hospital’s total performance score relative to all participating hospitals. Hospitals with payment adjustments that exceed the initial reduction receive a net increase, or bonus. Hospitals with a payment adjustment less than the initial reduction have a net decrease, or a penalty. (For two hypothetical examples using the initial percentage reduction for fiscal year 2017, see fig. 1.) These payment adjustments are applied to the inpatient Medicare payment for each discharged patient throughout the upcoming fiscal year.\nIn October 2015, we reported on certain HVBP performance measures prior to and after the implementation of the HVBP program. We found that trends in performance for many of these measures were unchanged since the implementation of the HVBP program. This report included information from interviews with officials from selected hospitals who noted that the HVBP program reinforced ongoing quality improvement efforts but did not lead to major changes in focus. Hospital officials also indicated that there were patient population and community barriers to their quality improvement efforts. In a related report on the HVBP program, HHS noted challenges that rural hospitals face that affect their performance on quality measures and the reliability of their outcome measurements, including lower occupancy rates, higher percentages of uncompensated care, and lower operating margins than urban hospitals.",
"Safety net hospitals generally had lower median quality domain scores in comparison to all hospitals, while small rural and small urban hospitals generally scored higher on quality and efficiency domains during fiscal years 2013 through 2017. Median scores for each of the separate quality domains—clinical processes, patient experience, patient outcomes, and safety—were consistently lower for safety net hospitals and were generally higher for small rural and small urban hospitals than for hospitals overall during fiscal years 2013 through 2017. Specifically, for the four quality domains, we found the following:\nClinical processes: The clinical processes median domain scores— which summarize measures for preventive or routine care—were lower for safety net hospitals and generally higher for small urban hospitals than for all hospitals during fiscal years 2013 through 2017. Median clinical processes scores for small rural hospitals were generally lower—between 4 and 9 percent—than for hospitals overall in fiscal years 2013 through 2015 (see fig. 2).\nPatient experience: Small hospitals consistently had higher patient experience scores—which consist of measures for communication and responsiveness—than hospitals overall, while safety net hospitals had the lowest scores of any of the hospital types (see fig. 3).\nPatient outcomes: Median scores for the patient outcomes domain— which comprises measures for mortality rates and other results and was added in fiscal year 2014—were generally lowest for small rural hospitals in each year of our analysis, except for fiscal year 2016, when compared to hospitals overall (see fig. 4). Safety net hospitals and small urban hospitals—with the exception of fiscal year 2016— also did not perform as well as all hospitals in the years of our analysis.\nSafety: Safety scores—which were added in fiscal year 2017 and include measures for infection rates and other complications—were lowest for safety net hospitals and higher for small rural and small urban hospitals than the median scores for hospitals overall. The median score for the safety net hospitals was about 11 percent lower than the median score for all hospitals. Small rural hospitals had the highest median score and small urban hospitals also had a higher median score than hospitals overall. However, 21 percent of all hospitals were missing scores for this new domain in fiscal year 2017.\nTrends for the efficiency domain, which contains the single cost measure—Medicare spending per beneficiary—were similar to the quality domains in that small hospitals tended to perform better than safety net hospitals and better than hospitals overall from fiscal year 2015, when the domain was added, through fiscal year 2017 (see fig. 5). Safety net hospitals have had the same median efficiency scores as for hospitals overall during the 3 years it has been included in the program. However, over 40 percent of all hospitals had an efficiency score of 0 during these years due to CMS’s methodology for calculating scores. This methodology resulted in a low median score of 10 for all hospitals, though many hospitals had considerably higher efficiency scores.\nHospitals’ total performance scores were consistent with the trends in the quality and efficiency domain scores. Specifically, when compared to all hospitals, total performance scores were lowest for safety net hospitals and generally highest for small urban hospitals during fiscal years 2013 through 2017 (see fig. 6).",
"Median payment adjustments generally have varied for all hospitals, and small rural and small urban hospitals, since the program began; however, in most years, the median payment adjustment for safety net hospitals has been a penalty—that is, a negative payment adjustment. In contrast, the small hospitals, as well as hospitals overall, generally had positive payment adjustments, indicating a bonus, with the exception of fiscal year 2014. Small urban hospitals consistently received higher payment adjustments than all hospitals—between 0.03 and 0.36 percentage points higher—every fiscal year. (See table 2.)\nThe majority of all hospitals received a bonus or a penalty of less than 0.5 percent each year of the program (see fig. 7). However, over time, an increasing percentage of hospitals received bonuses of more than 0.5 percent, and by fiscal year 2016, more than one-quarter of all participating hospitals received a bonus of more than 0.5 percent. Compared to all hospitals, a higher percentage of small rural and small urban hospitals received bonuses of more than 0.5 percent, and this disparity has grown as the program continues. An increasing percentage of hospitals have also received penalties of greater than 0.5 percent over time, and safety net hospitals consistently had the highest percentage of penalties of 0.5 percent or more when compared to all hospitals, small rural hospitals, and small urban hospitals.\nIn part, the size of the bonuses and penalties, in dollar terms, has been increasing due to the increase in the initial reduction from 1 percent in fiscal year 2013 to 2 percent in fiscal year 2017 (see table 3). In addition, as more hospitals receive bonuses in excess of 0.5 percent, the difference between the bonuses and penalties has been increasing. For example, in fiscal year 2013, the median bonus and penalty for all hospitals was nearly identical. Over the years, the median bonus has more than doubled, but the median penalty has nearly tripled. For most hospitals, the annual bonus or penalty is less than $100,000, and by the end of the fiscal year 2017, over $690 million will have been redistributed from hospitals that received penalties to hospitals that received bonuses.\nSafety net hospitals received a smaller percentage of the bonuses and paid a greater share of the penalties than small rural and small urban hospitals. For example, safety net hospitals have received about 5 percent of the bonus dollars and paid approximately 10 percent of the penalty dollars each year. In contrast, small rural and urban hospitals have received an average of about 9 and 12 percent of the bonus dollars, respectively, and both groups of these small hospitals paid about 5 percent or less of the penalties dollars during fiscal years 2013 through 2017.",
"",
"Since the efficiency score was added to the HVBP program in fiscal year 2015, about 20 percent of the hospitals that received bonuses each year had weighted composite quality scores below the median for all hospitals in fiscal years 2015 through 2017 (see table 4). For each fiscal year, a higher percentage of safety net and small rural hospitals received bonuses (between 26 and 36 percent) when compared to all hospitals, despite having quality scores below the median score for all hospitals. The median payment adjustments for the hospitals that received a bonus with lower quality scores were less than median bonuses overall. For example, in fiscal year 2015, the median bonus for all hospitals was 0.32 percent, and the median bonus for the hospitals that received a bonus with composite quality scores below the median was 0.17 percent.\nHospitals that received a bonus despite having composite quality scores below the median for all hospitals had sufficiently high efficiency scores to achieve total performance scores that made them eligible for bonuses. Across all hospital types and years, the median efficiency scores for these hospitals ranged from 1.50 and 6.00 times higher than the median efficiency scores for hospitals overall. For example, in fiscal year 2017, the overall median efficiency score for small rural hospitals was 30.00. In contrast, the median efficiency score for small rural hospitals that received a bonus with a composite quality score below the all-hospital median was more than twice as high at 70.00. Table 5 compares two actual hospitals—both of which received a bonus—with similar total performance scores but different composite quality scores. Hospital A outperformed Hospital B in every quality domain except safety and received a composite quality score of 40.00, well above the median of 29.03. While both hospitals had an efficiency score above the median of 10.00, Hospital B’s high efficiency score results in a total performance score above that of the higher quality Hospital A.\nAccording to CMS documentation, the agency developed the weighting formula to ensure that the Medicare spending per beneficiary measure— the sole measure in the efficiency domain—would make up only a portion of the total performance score and that the remainder would be based on hospitals’ performance on the other measures. The same documentation stated that the distinct measure of cost, independent of quality, would enable the agency to identify—and subsequently reward through payment adjustments—hospitals involved in the provision of high- quality care at a lower cost to Medicare. However, CMS’s formula for weighting the domain scores to determine a total performance score has created a system that, in some cases, rewards lower quality hospitals that provide care at a lower cost. In a November 2016 report to Congress, CMS indicated that it was aware of reports that the added efficiency metric resulted in some lower quality hospitals receiving bonus HVBP payments in 2015. However, in the report CMS reiterated that its scoring methodology—the weighting of quality domains at 75 percent and the efficiency domain at 25—provided balanced consideration for quality and efficiency and would ensure that high-quality hospitals were being rewarded. Our work shows that CMS has not achieved this balanced consideration as it intended, thereby rewarding some lower quality hospitals due to their high efficiency scores.",
"CMS did not require a complete set of domain scores to participate in the HVBP program after 2015, but instead proportionately redistributed the missing scores’ domain weights to the other domains, including efficiency. As a result, the efficiency score can carry even more than its assigned weight, and hospitals with missing domain scores had efficiency scores that were weighted higher than those of the other participating hospitals. This amplified the contribution of the efficiency domain to hospitals’ total performance scores. The assigned weight for the efficiency score was 20 percent in fiscal year 2015 and 25 percent in fiscal years 2016 and 2017. However, due to the proportional redistribution, a hospital’s efficiency score could be weighted between 25 and 50 percent—rather than the original 20 percent—in fiscal year 2015 and between 26 and 71 percent—rather than the original 25 percent—in fiscal years 2016 and 2017, depending on how many and which domains were missing.\nTable 6 illustrates the impact of redistributed domain weights on hospitals in fiscal year 2017. Hospital A, the same hospital noted in table 5, is considered a higher quality hospital, with a composite quality score well above the median of 29.03 for all hospitals in 2017. Three other actual hospitals—hospitals C through E—show how the proportional redistribution of weights can dramatically increase the effect that a hospital’s efficiency score can have on its total performance score. Hospital C is missing two domains, together worth 45 percent of the total performance score. The 45 percent is then proportionally redistributed to the other domains so that the clinical processes domain weight increases from 5.00 percent to 9.10 percent and the weights of the patient experience and efficiency domains each increase from 25 percent to 45.45 percent.\nWe also found that hospitals with missing domain scores were more likely to receive a bonus than hospitals with all domain scores. Specifically, in fiscal year 2017, 68 percent of hospitals with missing domain scores received a bonus, compared to 50 percent of hospitals with all domain scores. Of the approximately 20 percent of hospitals that received a bonus with a quality score below the median described earlier, many were also missing domain scores. For example, in fiscal year 2017, 182 of the 345 lower quality hospitals that received a bonus (53 percent) were missing at least one quality domain score.\nHospitals with missing domain scores had bonuses that grew to exceed the median bonus payment adjustment for all hospitals. In fiscal 2015, the median bonus adjustment for all hospitals was 0.32 percent. For lower quality hospitals with missing domain scores, the median bonus adjustment that year was slightly lower at 0.31 percent. However, by fiscal year 2017, lower quality hospitals with missing domain scores that received bonuses had a bonus adjustment of 0.74 percent, considerably higher than the median bonus adjustment of 0.54 percent for hospitals overall.\nCMS decided to proportionally redistribute missing domain scores in order to maintain the relative weights of each remaining domain and reliably score hospitals on their performance. However, the issues we identified with the weighting formula—in that it results in some lower quality hospitals receiving bonuses—are exacerbated for hospitals with missing domain scores. As a result, hospitals with missing domain scores are more likely to get a bonus, and, in some cases, those bonuses are greater than median bonuses overall. Additionally, while CMS intended to keep the efficiency metric independent of quality, the effective weight of the efficiency measure depends on the extent to which hospitals report quality measures. As a result, the balance the agency tried to achieve in the total performance score—allocating 75 percent of the score to the quality domains and 25 percent of the score to the efficiency domain—is no longer achieved.",
"The aim of the HVBP program is to improve hospital quality and efficiency by providing incentives for hospitals to improve their quality of care and to become more cost efficient. Throughout the 5 years of the program, CMS has made modifications to meet these goals by changing quality performance domains and domain weighting from year to year. With the addition of the efficiency domain in fiscal year 2015, CMS signaled the importance of hospitals’ providing care at a lower cost to Medicare, and, in its weighting formula, the agency tried to find balanced consideration for quality and cost. Rather than achieving this balance—which would have allowed the agency to identify and reward higher quality and lower cost hospitals—CMS’s weighting formula has resulted in bonuses for some lower quality hospitals, solely due to their cost efficiency. Because the program is budget neutral, bonuses for lower quality hospitals may result in smaller bonuses for hospitals that are performing well across all domains. The issue is especially stark for between 10 and 25 percent of the hospitals that were missing domain scores in fiscal years 2015 through 2017, which has also contributed to the awarding of bonuses to lower quality hospitals. If CMS continues to use the current formula, it will continue to reward hospitals that do not score well on quality and efficiency metrics.",
"To ensure that the HVBP program accomplishes its goal to balance quality and efficiency and to ensure that it minimizes the payment of bonuses to hospitals with lower quality scores, we recommend that the Administrator of CMS take the following two actions:\nRevise the formula for the calculation of hospitals’ total performance score or take other actions so that the efficiency score does not have a disproportionate effect on the total performance score.\nRevise the practice of proportional redistribution used to correct for missing domain scores so that it no longer facilitates the awarding of bonuses to hospitals with lower quality scores.",
"We provided a draft of this report to HHS for comment, and its written comments are reprinted in appendix III. The department indicated that it would examine the formula used for calculating hospitals’ total performance scores and would explore alternatives to the practice of proportional redistribution. While HHS stated it would consider revisions to these practices, it indicated that any changes to the weights of the domains, or the distribution of weights for missing domains, would be evaluated for potential negative impacts and would be subject to notice and comment rulemaking. HHS also provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, the CMS Administrator, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staffs have any questions about this report, please contact me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.",
"Table 7 lists the Inpatient Quality Reporting program measures that the Centers for Medicare & Medicaid Services (CMS) used to analyze hospitals’ performance in the Hospital Value-based Purchasing program during fiscal years 2013 through 2017. This table identifies the domain associated with each measure, which measures were used to calculate domain scores each year, the measure code, and a description of each measure.",
"",
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"",
"In addition to the contact named above, Martin T. Gahart (Assistant Director), Erin C. Henderson (Analyst-in-Charge), Zhi Boon, Kye Briesath, and Elizabeth Morrison made key contributions to this report. Also contributing were Muriel Brown and Jacquelyn Hamilton.",
"Medicare Value-based Payment Models: Participation Challenges and Available Assistance for Small and Rural Practices. GAO-17-55. Washington, D.C.: December 9, 2016.\nHealth Care Quality: HHS Should Set Priorities and Comprehensively Plan Its Efforts to Better Align Health Quality Measures. GAO-17-5. Washington, D.C.: October 13, 2016.\nPatient Safety: Hospitals Face Challenges Implementing Evidence-based Practices. GAO-16-308. Washington, D.C.: February 25, 2016.\nHospital Value-based Purchasing: Initial Results Show Modest Effects on Medicare Payments and No Apparent Change in Quality-of-Care Trends. GAO-16-9. Washington, D.C.: October 1, 2015.\nHealth Care Transparency: Actions Needed to Improve Cost and Quality Information for Consumers. GAO-15-11. Washington, D.C.: October 20, 2014.\nElectronic Health Record Programs: Participation Has Increased, but Action Needed to Achieve Goals, Including Improved Quality of Care. GAO-14-207. Washington, D.C.: March 6, 2014.\nHealth Care Quality Measurement: HHS Should Address Contractor Performance and Plan for Needed Measures. GAO-12-136. Washington, D.C.: January 13, 2012.\nHospital Quality Data: Issues and Challenges Related to How Hospitals Submit Data and How CMS Ensures Data Reliability. GAO-08-555T. Washington, D.C.: March 6, 2008."
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"question": [
"What is the aim of the Hospital Value-based Purchasing (HVBP) program?",
"How was the performance on quality and efficiency measures from fiscal years 2013 through 2017?",
"How did the performance vary by hospital type?",
"How did safety net hospitals score in quality compared to all participating hospitals?",
"How did small rural and small urban hospitals score in quality compared to all participating hospitals?",
"How were payment adjustments for all hospitals?",
"How did payment adjustments vary over time for all hospitals?",
"What are the percentages of hospitals receiving a bonus or a penalty?",
"What is the maximum bonus or penalty received by most hospitals in dollar terms?",
"What kind of hospitals received bonuses despite having relatively low quality scores?",
"What is the scoring advantage of hospitals that were missing one or more quality scores?",
"How did the methodology used by CMS help those hospitals with their scores?",
"What is the consequence of this issue?"
],
"summary": [
"The Hospital Value-based Purchasing (HVBP) program aims to improve quality of care and efficiency by creating financial incentives for about 3,000 participating hospitals.",
"From fiscal years 2013 through 2017, performance on quality and efficiency measures varied by hospital type.",
"Safety net hospitals—those that serve a high proportion of low-income patients—generally scored lower in quality compared to all participating hospitals. In contrast, small rural and small urban hospitals—those with 100 or fewer acute care beds—scored higher on efficiency compared to all hospitals.",
"Safety net hospitals—those that serve a high proportion of low-income patients—generally scored lower in quality compared to all participating hospitals.",
"In contrast, small rural and small urban hospitals—those with 100 or fewer acute care beds—scored higher on efficiency compared to all hospitals.",
"Payment adjustments—bonuses or penalties, announced prior to each fiscal year—have varied over time for all hospitals.",
"In four out of the five years of GAO's analysis, small rural and small urban hospitals were more likely to receive a bonus compared to all participating hospitals, while safety net hospitals were more likely to receive a penalty.",
"While a majority of all hospitals received a bonus or a penalty of less than 0.5 percent each year, the percentage of hospitals receiving a bonus greater than 0.5 percent increased from 4 percent to 29 percent from fiscal year 2013 to 2017.",
"In dollar terms, most hospitals had a bonus or penalty of less than $100,000 in fiscal year 2017.",
"Some hospitals with high efficiency scores received bonuses, despite having relatively low quality scores, which contradicts the Centers for Medicare & Medicaid Service's (CMS) stated intention to reward hospitals providing high-quality care at a lower cost.",
"Further, among hospitals that were missing one or more quality scores, the efficiency score had a greater effect on the total performance score because of the methodology used by CMS.",
"This methodology compensated for the missing scores by increasing the weights of all of the non-missing scores.",
"Consequently, hospitals with missing scores were more likely to receive bonuses than hospitals with complete scores."
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CRS_R40344
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{
"title": [
"",
"The United Arab Emirates: Background and U.S. Relations1",
"The United Arab Emirates Nuclear Program",
"Rationale",
"Development Plans",
"Current Infrastructure and Regulatory Regime",
"U.S.-UAE Nuclear Cooperation",
"Memorandum of Understanding",
"Proposed Bilateral Agreement Pursuant to Section 123 of the Atomic Energy Act of 1954",
"Nuclear Cooperation Agreements, Approval Process, and Proposed Changes",
"Issues for Congress",
"Congressional Concerns",
"Export Control Concerns",
"Nonproliferation Concerns",
"Human Rights Concerns",
"Possible Diplomatic Implications",
"Shaping Nonproliferation Standards and Best Practices",
"Commercial Opportunities",
"Bilateral Relations and UAE Cooperation in Nonproliferation Activities",
"Legislative Developments in the 110th and 111th Congress",
"Appendix. Provisions in U.S. Nuclear Cooperation Agreements with the UAE and Egypt Relevant to Establishing Standards for other Such Agreements"
],
"paragraphs": [
"",
"The United Arab Emirates (UAE) is a federation of seven emirates (principalities): Abu Dhabi, Dubai, Sharjah, Ajman, Fujayrah, Umm Al Qawayn, and Ras Al Khaymah. National authority rests in the hands of a Federal Supreme Council, which is composed of the hereditary rulers of the country's constituent emirates and elects the national president from among its members. Sheikh Khalifa bin Zayed Al Nahyan, the ruler of Abu Dhabi, was elected UAE president in 2004 following the death of his father Sheikh Zayed bin Sultan Al Nahyan, who had ruled Abu Dhabi since 1966 and served as UAE president since 1971. Sheikh Khalifa was reelected for a second five-year term in November 2009. In practice, the wealthier and more powerful emirates of Abu Dhabi and Dubai exercise the strongest influence over the country's affairs; under current convention, the ruler of oil-rich Abu Dhabi serves as the UAE president, and the ruler of the UAE's commercial hub, Dubai, serves as vice president. The Supreme Council appoints the Prime Minister and the Council of Ministers (cabinet), which initiates legislation for ratification by the Supreme Council and the president.\nThe United States and the UAE have enjoyed close and cooperative relations in recent years, in spite of periodic differences with regard to political reform, the Israel-Palestinian conflict, counterterrorism, and U.S. policies regarding Iraq and Iran. Military cooperation and arms sales form a key pillar of U.S.-UAE relations. The UAE hosts frequent port calls and shore visits for U.S. naval vessels and allows the U.S. military to use Al Dhafra air base in support of a variety of missions in the U.S. Central Command (CENTCOM) area of operations. In 2007 and 2008, the Bush Administration notified Congress of over $19.4 billion in potential arms sales to the UAE, including what would be the first overseas sale of the Terminal High Altitude Air Defense system. In 2009 and 2010, the Obama Administration notified Congress of a further $8.8 billion in potential sales, including the potential sale of 60 remanufactured and new AH-64D Block III APACHE helicopters.\nBilateral trade has increased in recent years, with 2009 U.S. exports valued at over $12.2 billion, making the UAE the largest U.S. export market in the Middle East. The Bush Administration began negotiating a free trade agreement with the UAE in 2004, but did not conclude the negotiations. The United States does not import a significant amount of oil from the UAE. However, the UAE exports over 2 million barrels of oil per day, making it a key global energy producer.",
"The government of the United Arab Emirates (UAE), like others in the Middle East, has announced plans to acquire nuclear energy production technology as a means of meeting projected national energy consumption needs. Renewed global interest in nuclear power has led some experts and observers to express concern that the projected spread of nuclear technology in coming years could contribute to nuclear proliferation. In the Middle East, added scrutiny is often applied to the motives and choices of regional actors regarding nuclear technology because of concern that Iran's nuclear program and Israel's presumed nuclear weapons may motivate other regional governments to seek nuclear technology for strategic or military purposes. Other concerns about nuclear safety relate to potential terrorist attacks or political instability, both of which have threatened some regional countries in recent years. UAE officials report that they have considered these potential risks carefully, and have announced plans and measures intended to address proliferation and security concerns. Most prominently, the UAE has based its nuclear program on a decision to forgo domestic uranium enrichment or fuel reprocessing and to rely on international market sources for its nuclear fuel services. This decision has significantly reduced proliferation concerns among many observers, including some members of Congress.\nPolicymakers and advisers in the government of Abu Dhabi, in consultation with representatives from the other six emirates, have set out an ambitious agenda for the program and are guiding its implementation. In April 2008, the UAE government issued a policy statement that provides a rationale for the country's perceived need for nuclear energy and states guiding principles for the nuclear energy program. Operating and regulatory bodies have been formed and have begun their formal work. The end goal of the program, according to officials and related documents, is to build and operate a \"fleet\" of nuclear power plants to generate electricity for the UAE, supported by advanced, indigenously managed safety, regulatory, and security agencies.\nIn January 2010, the UAE announced that it had chosen the Korea Electric Power Corporation (KEPCO of South Korea) to construct the first of four APR1400 nuclear reactors that would sell electricity to the Abu Dhabi Water and Electricity Authority. During 2010, the UAE's administrative preparations have continued apace, including site selection, environmental surveys, and security planning. The plant construction is to take place at Baraka, near Abu Dhabi's western border with Saudi Arabia (see Figure 1 below). All four plants are scheduled to be online by 2020. South Korea's export financing bank Kexim has agreed to supply $10 billion in financing to support the KEPCO project in Abu Dhabi. In November 2010, KEPCO was invited to purchase shares in the Emirates Nuclear Energy Corporation (ENEC) that is to operate the plants.",
"UAE officials estimate that their country must expand its power generation and transmission capacity from the current level of 16 gigawatts to 40 gigawatts by 2020 in order to meet projected demand increases, which they estimate will continue growing at a 9% annual rate. In spite of the recent slowdown in global and domestic economic activity, representatives of the UAE nuclear program believe that the energy demand projections they are using to justify and plan the acquisition of nuclear plants remain accurate, particularly in light of planned industrial and commercial projects in energy-intensive sectors in the emirate of Abu Dhabi. To date, UAE officials and representatives have not publicly shared economic cost and energy use data referred to in briefings on their nuclear program.\nIn arguing for nuclear energy as a solution to the country's projected energy needs, the UAE government policy statement concludes that \"known volumes of natural gas that could be made available to the nation's electricity sector would be insufficient to meet future demand.\" The UAE currently exports roughly 600 million standard cubic feet per day of natural gas to Japan under long-term supply arrangements and imports roughly 2 billion cubic feet of natural gas from Qatar via the underwater Dolphin pipeline system. Similarly, UAE officials believe that crude oil and diesel could be \"logistically viable\" sources of energy, but would impose high economic opportunity costs (as a result of lost export revenue) and environmental costs. Officials determined that coal could be a more economical solution, but would have even greater environmental costs and, as an import, also would raise concerns for the UAE about the security of supply. UAE officials believe that solar and wind energy sources could supply \"only 6-7% of peak electricity demand by 2020,\" even after \"aggressive development.\"",
"The end goal of the program, according to officials and related documents, is to build and operate a \"fleet\" of nuclear power plants to generate electricity for the UAE, supported by advanced, indigenously managed safety, regulatory, and security agencies that will be developed over time and with outside assistance. The UAE government is seeking to bring its first nuclear power plant online by 2017 along with required facilities and equipment for safety, storage, and system management. Under current plans, capacity would expand thereafter to three further nuclear power plants. A contract bidding and award process concluded in late 2009, and UAE officials chose South Korea's Korea Electric Power Corporation (KEPCO) as the primary engineering, procurement, and construction contractor. A number of U.S. and European firms have secured administrative and financial advisory contracts with the program. No specific decisions have been made regarding the source of nuclear fuel for the planned nuclear reactor or on handling spent reactor fuel.",
"The UAE currently has no nuclear material under IAEA safeguards. It signed the NPT in 1995 and completed a Small Quantities Protocol in 2003. Non-nuclear weapons states without significant nuclear programs or nuclear material are permitted to conclude such Protocols. The UAE also has undertaken Technical Cooperation projects with the Agency, some of which are directly related to nuclear electricity generation. For example, a project begun in 1977 advised the government \"on the establishment of a nuclear energy administration.\" A 1984 project focused on uranium exploration. More recently, a Technical Cooperation project approved in 2005 was designed to assess the \"technical and economic feasibility\" of a nuclear power and desalination plant. Active IAEA Technical Cooperation projects with the UAE focus on human resources development for atomic energy, feasibility studies for waste management, environmental monitoring, and nuclear accident early warning preparedness and response.\nA national law authorizing the program was adopted by the Federal Supreme Council in early October 2009. According to the State Department, the law, Federal Law 6 of 2009, \"prohibits uranium enrichment and spent fuel reprocessing, creates a Federal Authority for Nuclear Regulation (FANR), and develops a nuclear material licensing and control system.\" UAE government representatives report that the UAE sought and received input on its draft nuclear law from the United States, United Kingdom, Japan, Korea, and France. In conjunction with the issuance of the law, a Board of Management for the FANR was announced, and the board named former U.S. Nuclear Regulatory Commission Executive Director for Operations Dr. William Travers as the FANR's first Director General. A nuclear energy policy advisory board reportedly has been formed, and UAE officials report that its members, though unnamed, include leading international nuclear energy industry officials. The UAE has also adopted a law governing export controls, but has not yet issued implementing regulations (see section on \" Export Control Concerns \"). The UAE has also stated that it intends to establish a \"separate nuclear liability regime for third-party compensation modeled on the four as-yet un-ratified IAEA instruments on nuclear liability.\"\nConsulting and contracting between U.S. firms and the UAE related to the UAE's nuclear program has already taken place. In August 2008, Virginia's Thorium Power Ltd. signed two consulting and advisory services contracts related to the establishment of the Abu Dhabi-based Emirates Nuclear Energy Corporation (ENEC) and the FANR. In October 2008, ENEC announced that Colorado's CH2M Hill, Inc. was selected for a 10-year contract as the managing agent for the evaluation and design stage of the nuclear energy program. Pennsylvania-based Rizzo and Associates Inc., has been hired to survey potential nuclear plant sites in the UAE. The contracts were signed with the government of Abu Dhabi.",
"During 2008 and early 2009, the Bush Administration and the UAE government negotiated and signed a Memorandum of Understanding (MOU) (see below) and a proposed bilateral agreement on peaceful nuclear cooperation pursuant to Section 123 of the Atomic Energy Act (AEA) of 1954. The nuclear cooperation agreement entered into force after the two governments exchanged the relevant diplomatic notes on December 17, 2009.",
"On April 21, 2008, the United States and the UAE signed a MOU \"Concerning Cooperation in Peaceful Uses of Nuclear Energy.\" The MOU states that the two countries \"intend to cooperate, subject to their respective national laws,\" in a variety of nuclear activities. The MOU is a statement of intent regarding future cooperation, but is not legally binding. Although such memoranda are not prerequisites for concluding future nuclear cooperation agreements, the State Department has argued that they are useful tools for cooperating with countries which are interested in the responsible use of nuclear energy because they create opportunities to solicit specific commitments with regard to safeguards and technology choices. An April 21, 2008, State Department press release described the U.S.-UAE MOU as a \"tangible expression of the United States' desire to cooperate with states in the Middle East, and elsewhere, that want to develop peaceful nuclear power in a manner consistent with the highest standards of safety, security and nonproliferation.\" The United States has concluded similar MOUs with Bahrain, Jordan, and Saudi Arabia in May 2008.",
"On May 21, 2009, Deputy Secretary of State James Steinberg and UAE Ambassador to the United States Yousef Al Otaiba signed the text of a bilateral agreement on peaceful nuclear cooperation. Although then-Secretary of State Condoleezza Rice and UAE Foreign Minister Abdullah bin Zayed Al Nahyan signed a similar agreement in January 2009, the two governments reopened the text for negotiation after the Obama Administration took office.\nUnder the Atomic Energy Act of 1954 (AEA), all significant nuclear cooperation with other countries requires a peaceful nuclear cooperation agreement. Such agreements, which require congressional approval, are \"framework\" agreements which set the terms of reference and provide authorization for cooperation. The AEA includes requirements for an agreement's content, presidential determinations, and other supporting information to be submitted to Congress, conditions affecting the implementation of an agreement once it takes effect, as well as procedures for Congress to consider and approve the agreement (see \" Nuclear Cooperation Agreements, Approval Process, and Proposed Changes \" below). The agreement would enter into force on the date when the two governments \"exchange diplomatic notes informing each other that they have completed all applicable requirements.\" As noted, the two governments exchanged these notes December 17, 2009.\nAccording to the proposed U.S.-UAE agreement, the two countries \"intend to cooperate\" on a variety of nuclear activities, including\nDeveloping \"requirements for grid-appropriate power reactors and fuel service arrangements;\" Promoting the \"establishment of a reliable source of nuclear fuel for future civil light water nuclear reactors;\" \"Civil nuclear energy training, human resource and infrastructure development;\" Cooperating on nuclear security and nonproliferation, \"including physical protection, export control and border security;\" Developing the UAE's \"civil nuclear energy use in a manner that supports global efforts to prevent nuclear proliferation, including, for example, the Global Nuclear Energy Partnership;\" Applying \"radioisotopes and radiation in industry, agriculture, medicine and the environment;\" Managing \"radioactive waste and spent fuel;\" and Identifying \"uranium mining and milling resources.\"\nAccording to the agreement, cooperation could include\n\"Exchange of scientific and technical information and documentation;\" \"Exchange and training of personnel;\" \"Organization of symposia and seminars;\" \"Provision of relevant technical assistance and services;\" Transfers of \"material, equipment and components.\"\nThe agreement contains a variety of provisions which are required by the AEA and are designed to ensure that the UAE's nuclear program remains exclusively for peaceful purposes. It also includes two provisions which are not found in any other U.S. nuclear cooperation agreement. First, the agreement provides that the UAE bring into force its Additional Protocol to its IAEA safeguards agreement before the United States licenses \"exports of nuclear material, equipment, components, or technology\" pursuant to the agreement. The IAEA Board of Governors approved the Protocol March 3, 2009. The UAE signed it April 8, 2009, and brought it into force on December 20, 2010. Such protocols give IAEA officials greater access to an NPT state's nuclear-related facilities and information.\nSecond, the agreement states that the UAE\nshall not possess sensitive nuclear facilities within its territory or otherwise engage in activities within its territory for, or relating to, the enrichment or reprocessing of material, or for the alternation in form or content (except by irradiation or further irradiation or, if agreed by the Parties, post-irradiation examination) of plutonium, uranium 233, high enriched uranium, or irradiated source or special fissionable material.\nA May 21, 2009, letter to Congress, which President Obama submitted along with the agreement, described this provision as a \"legally binding obligation.\" According to the Nuclear Proliferation Assessment Statement submitted with the agreement, this provision \"survives any termination of the Agreement so long as nuclear items subject to the Agreement remain in the territory of the UAE or under its jurisdiction or control anywhere.\" Furthermore, the agreement provides the United States with the right to terminate nuclear cooperation and to require the return of any nuclear \"material, equipment or components ... and any special fissionable material produced through their use\" if, after the agreement's entry into force, the UAE \"possesses sensitive nuclear facilities within its territory or otherwise engages in activities within its territory relating to enrichment of uranium or reprocessing of nuclear fuel.\"\nAnother provision, which is not typically included in nuclear cooperation agreements, requires both parties to give \"due consideration ... to non-proliferation and physical protection aspects\" when selecting a storage facility for special fissionable material.\nAccording to the agreement, the United States may also require that any special fissionable material that has been transferred to the UAE or \"used in or produced through the use of any material or equipment\" transferred pursuant to the agreement be transferred to either the United States or an unspecified \"third country\" if Washington \"considers that exceptional circumstances of concern from a nonproliferation standpoint so require.\" A 1981 U.S. nuclear cooperation agreement with Egypt contains a similar restriction.\nIt is worth noting that an Agreed Minute to the U.S.-UAE agreement includes a provision which establishes its conditions as minimum standards for future such U.S. agreements in the Middle East. Stating that \"the fields of cooperation, terms and conditions\" accorded by the U.S.-UAE agreement \"shall be no less favorable in scope and effect than those which may be accorded, from time to time, to any other non-nuclear-weapon State in the Middle East in a peaceful nuclear cooperation agreement,\" the Minute explains that, in the event that Washington concludes a more-favorable agreement with another regional government, the United States will, at the UAE's request, consult with the UAE \"regarding the possibility of amending\" the agreement in order to make its terms equally favorable to the new agreement.\nA similar provision in the U.S.-Egypt agreement meant that the United States had to ensure that the agreement with the UAE would be at least as stringent. Since the latter agreement is more stringent, it has established a higher standard for future such U.S. agreements in the region. (See the Appendix .)\nAdditionally, the U.S.-UAE agreement provides a potential way for the UAE to transfer spent nuclear fuel to other countries. The Agreed Minute states that the UAE may transfer spent nuclear fuel to France or the United Kingdom for storage or reprocessing. In the past, such advance U.S. consent has been given only to Japan, Switzerland, and Norway. The transferred material is to be held within EURATOM, and any separated plutonium cannot be returned to the UAE without additional U.S. consent. According to the agreement, approval for such UAE spent fuel transfers would be subject to several conditions, including the UAE's adherence to its declared policy of refraining from enrichment and reprocessing. The UAE may also not engage in fabricating nuclear fuel containing plutonium. Additionally, the United States can terminate an agreement regarding spent fuel transfers if Washington decides that the UAE has not met one of the relevant conditions or if the United States \"considers that exceptional circumstances of concern from a non-proliferation or security standpoint so require.\" The agreement explains that \"[s]uch circumstances include, but are not limited to, a determination ... that the approval cannot be continued without a significant increase of the risk of proliferation or without jeopardizing its national security.\"",
"As noted, all significant nuclear cooperation with other countries requires a peaceful nuclear cooperation agreement. Section 123 of the Atomic Energy Act (AEA) specifies that proposed nuclear cooperation agreements are to include the terms, conditions, duration, nature, and scope of cooperation. It also requires that any such agreement meet a series of nonproliferation criteria and that the President submit any such agreement to the House Committee on Foreign Affairs and the Senate Committee on Foreign Relations. The Department of State is required to provide the President an unclassified Nuclear Proliferation Assessment Statement (NPAS), which the President is to submit to the committees of referral along with the agreement. The State Department also is required to provide a classified annex to the NPAS, prepared in consultation with the Director of National Intelligence. The NPAS is meant to explain how a proposed agreement would meet the aforementioned nonproliferation criteria. The President also must make a written determination \"that the performance of the proposed agreement will promote and will not constitute an unreasonable risk to, the common defense and security.\" President Bush issued such a determination November 14, 2008. President Obama issued an identical determination May 19, 2009, and submitted the agreement, along with the unclassified NPAS, May 21. President Obama also submitted the classified NPAS.\nUnder the AEA, Congress has the opportunity to review a 123 agreement for two time periods totaling 90 days of continuous session. The President must submit the text of the proposed nuclear cooperation agreement, along with required supporting documents (including the unclassified NPAS) to the House Foreign Affairs Committee and the Senate Foreign Relations Committee. The President is to consult with the committees \"for a period of not less than 30 days of continuous session.\" After this period of consultation, the President is to submit the agreement to Congress, along with the classified annex to the NPAS and a statement of his approval of the agreement and determination that it will not damage the national security interests of the United States. This action begins the second period, which spans 60 days of continuous session. In practice, the President has submitted the agreement to Congress, along with the unclassified NPAS, its classified annex, and his approval and determination, at the beginning of the full 90-day period. The 60-day period has been considered as following immediately upon the expiration of the 30-day period. If the President has not exempted the agreement from any requirements of Section 123(a), it becomes effective at the end of the 60-day period unless, during that time, Congress adopts a joint resolution disapproving the agreement and the resolution becomes law. The agreement with the UAE was not an exempt agreement.\nIn the 110 th Congress, some members of Congress proposed several amendments to the AEA that would have changed the AEA's procedures for the negotiation and approval of peaceful nuclear cooperation agreements. For example, H.R. 7316 , which Representative Ileana Ros-Lehtinen introduced in December 2008, would have required Congress to enact a joint resolution of approval before any peaceful nuclear cooperation agreement could become effective. As noted above, such agreements currently become effective unless Congress enacts a joint resolution of disapproval. The bill also proposed adding a section to the AEA which would have required the President to keep the House Foreign Affairs Committee and the Senate Foreign Relations Committee \"fully and currently informed of any initiative or negotiations relating to a new or amended agreement for peaceful nuclear cooperation ... prior to the President's announcement of such initiative or negotiations.\" The proposed section also would have mandated periodic presidential consultation with the committees about the progress of negotiations concerning such agreements. In the 111 th Congress, H.R. 547 , which Representative Ros-Lehtinen introduced January 15, 2009, contains the same language.",
"Although the final text of the proposed U.S.-UAE nuclear agreement was agreed in early November 2008, the Bush Administration, reportedly at the UAE's request, did not submit the agreement to the 110 th Congress. After the Obama Administration took office, the UAE agreed to reopen the text for negotiation. On May 21, 2009, the Administration submitted the agreement to Congress to begin the consultation periods required under the AEA. Some members of Congress welcomed the UAE government's stated commitments to foreswear proliferation-sensitive nuclear capabilities, such as uranium enrichment or spent fuel reprocessing. Other members signaled their intention to evaluate the proposed bilateral agreement in light of parallel and specific concerns about the UAE's cooperation with international efforts to prevent Iran from developing nuclear weapons and the potential proliferation or safety risks inherent to exporting U.S. nuclear technology. Broader diplomatic implications of the proposed agreement also were being weighed by concerned parties on all sides. The agreement, however, entered into force following the December 17, 2009 exchange of diplomatic notes because the 90 days of continuous session expired on October 17, 2009. State Department spokesperson Ian Kelly told reporters October 22 that the United States has \"completed all ... internal procedures\" for the agreement to enter into force. The UAE cabinet approved the agreement October 26.",
"",
"Since 2001, the UAE has been under increased U.S. scrutiny as an alleged transshipment point for military and dual-use exports to Iran, as an alleged hub of operations for weapons proliferators, and as an alleged transit zone and financial conduit for terrorists and money launderers. At present, particular attention remains focused on U.S. concerns about the UAE government's willingness and ability to halt transfers of militarily sensitive technology to Iran. Some members of Congress have claimed that the UAE has not acted sufficiently to halt transfers of militarily sensitive technology to Iran and argued that the UAE should not have been able to conclude a nuclear cooperation agreement with the United States until the UAE government had taken additional measures against Iranian procurement activities of concern.\nThe United States government has stated publicly that some UAE-based entities have been involved in Iranian weapons procurement, nuclear, and ballistic missile program activities. The Department of the Treasury designated two such entities under Executive Order 13382, which freezes assets under U.S. jurisdiction belonging to designated foreign entities engaged in activities related to the proliferation of Weapons of Mass Destruction (WMD). The Treasury Department has also designated other UAE-based entities under the same executive order because of their ties to Iranian banks which, according to the United States, are involved in proliferation activities. The UAE has not been the only conduit for suspicious goods destined for Iran; Tehran has also used a network based in Malaysia for procuring dual-use items.\nAdministration and UAE officials have highlighted steps taken by the UAE in recent years to strengthen export controls and to take action against entities suspected of illicit proliferation activities, including targets associated with Iran. Concerns about suspicious transfers to Iran prompted U.S. action in 2007 to encourage the UAE to improve its national export control system. In February 2007, the U.S. Department of Commerce released an advanced notice of proposed rule-making that would have created a new export control designation known as \"Country Group C\" that would have established license requirements on exports and re-exports to countries that represent a diversion or transshipment risk for goods subject to the Export Administration Regulations. Although no countries were mentioned in the notice, the proposal was widely considered to be directed at the UAE.\nIn August 2007, the UAE adopted a stronger national export control law, but, as of July 2010, the government had yet to issue implementing regulations for the law or to fully staff a national export control body to enforce it. In the interim, export control enforcement functions remain the responsibility of authorities in the UAE's individual emirates, and are being carried out in coordination with a national interagency Committee on Commodities Subject to Import and Export Control. UAE Minister of State for Foreign Affairs Dr. Anwar Mohammed Gargash said in a statement released in conjunction with the April 2009 inaugural meeting of the committee that, \"We will not compromise on issues of security and our export control reflects our intention to ensure tough safeguards over the movement of sensitive materials.\" UAE Ambassador to the United States Yousef Al Otaiba described the law as a \"work in progress\" during a June 3, 2009, briefing. On July 22, 2010, Acting Assistant Secretary of State for International Security and Nonproliferation Vann Van Diepen stated in testimony before the House Foreign Affairs Subcommittee on Terrorism, Nonproliferation and Trade:\nthey're continuing to staff up the implementation office that would oversee implementation of the law. Now, it's not the enforcement arm. That already exists. It's being enforced by the existing customs and law enforcement services, intelligence services and so on and so forth. But the people who would oversee the implementation of the law, that office is still being staffed up.\nU.S. cooperation with national and emirate level officials on proliferation issues appears to be strong. A bilateral nonproliferation working group meets annually to review and discuss nonproliferation issues of shared concern. In a September 2008 letter to then-U.S. Secretary of Commerce Carlos Gutierrez, Ambassador Otaiba detailed six joint and unilateral interdictions on Iran-bound ships completed since June 2008. In 2009, the UAE seized \"arms and related materials\" from a ship en route to Iran, according to Australian officials. The UAE conducted the seizure, which reportedly took place in late July or early August 2009, pursuant to U.N. Security Council resolution 1874. According to U.S. Permanent Representative to the United Nations Ambassador Susan Rice, the U.N. committee charged with monitoring implementation of the sanctions is investigating the matter.\nOtaiba's letter further stated that \"the UAE fully supports and has vigorously enforced United Nations resolutions barring the shipment of sensitive materials and technologies to Iran.\" The UAE also has \"closed dozens of international and local companies involved in the transshipment of dual-use and controlled materials,\" according to the letter, which also highlighted the government's participation in several U.S. security initiatives, including the Container Security Initiative, the Proliferation Security Initiative, and the Department of Energy Megaports Initiative. UAE officials report they remain committed to fully implementing the 2007 law at the national level, including clarifying roles and responsibilities for export control enforcement. Acting Assistant Secretary Van Diepen confirmed the Administration's shared view of the UAE's commitment to export control enforcement in July 2010, stating:\nit's very clear to us that the UAE government at the highest levels and also broadly throughout their interagency, you know, has internalized and understands the importance of nonproliferation and of dealing with the proliferation problems through effective action. And the UAE has taken a lot of very important steps, not just passing legislation but in terms of stopping specific shipments, shutting down companies, dealing with specific individuals. So a lot of concrete real world activities have been engaged in by the UAE to really do things in the real world that matter.",
"The most proliferation-sensitive part of a nuclear power program is the capability to produce fuel for nuclear reactors, either by enriching uranium or reprocessing spent nuclear fuel to obtain plutonium. Low-enriched uranium is used as fuel for nuclear reactors. Both highly enriched uranium and plutonium can be used as fuel in some types of nuclear reactors but are also used as fissile material in nuclear weapons. The dual-use nature of nuclear fuel facilities frequently generates concern that ostensibly peaceful facilities may aid nuclear weapons programs.\nThe 2008 MOU states that the UAE has agreed to the policy commitments described earlier in its April 2008 policy statement, which are designed to boost confidence that the state's nuclear program is exclusively for peaceful purposes. For example, the statement indicates that the UAE will forgo \"domestic enrichment and reprocessing capabilities in favor of long-term commitments of the secure external supply of nuclear fuel.\" Moreover, as noted above, the nuclear cooperation agreement's text states that the United States can end nuclear cooperation with the UAE if it acquires enrichment or reprocessing facilities. Without such capabilities, a nuclear program poses little proliferation risk. IAEA Director-General Mohamed ElBaradei explained in an August 2007 interview:\nOne nuclear reactor by itself means nothing, you are still far from having an atom bomb. I am more worried when a country has a plant for industrial-scale uranium enrichment… In this case it can make a nuclear bomb within a few months.\nAs noted above, the U.S. State Department reports that the UAE's new nuclear regulatory law (Federal Law 6 of 2009) prohibits domestic enrichment and reprocessing.\nAs a party to the nuclear Nonproliferation Treaty (NPT), any future UAE nuclear facilities would be subject to IAEA safeguards. Additionally, the UAE agreed to conclude an Additional Protocol to its safeguards agreement. As noted, such protocols give IAEA officials greater access to an NPT state's nuclear-related facilities and information. The UAE currently has a Small Quantities Protocol to its safeguards agreement, but, according to the nuclear cooperation agreement, will terminate that Protocol before the United States issues export licenses for the export of \"nuclear material, equipment, components, or technology\" pursuant to the cooperation agreement.\nIt is also worth noting that the UAE's 2008 policy statement on its nuclear program states that the government plans to rely on light-water reactors, which are considered among the most proliferation-resistant, partly because of the difficultly in producing and obtaining weapons-grade plutonium without detection. Moreover, a May 2008 International Institute for Strategic Studies report points out that \"no successful nuclear-weapons program has ever relied on commercial reactors.\" Although a civilian nuclear power program could provide cover for a country's procurement of dual-use items that could aid a nuclear weapons program, such a program would need to include some covert facilities.",
"A video depicting the torture of an Afghan grain merchant named Muhammad Shah Poor by Abu Dhabi ruling family member Sheikh Issa bin Zayed al Nahayan and uniformed security officers has drawn widespread condemnation following its publication by ABC News in April 2009. In response, some members of Congress and congressional staff raised questions about the appropriateness of moving forward with the proposed U.S.-UAE nuclear cooperation agreement, pending UAE action on the case. The U.S. State Department has indicated that the Obama Administration's review of the proposed nuclear cooperation agreement and concerns the Administration may have about the torture depicted on the video \"are two separate issues.\" Abu Dhabi authorities announced on May 11, 2009, that \"the Public Prosecution Office has officially launched a criminal investigation into the events depicted on video, and detained Sheikh Issa bin Zayed Al Nahyan pending the outcome of this investigation.\"\nIn January 2010, Sheikh Issa was acquitted following trial in which the court heard testimony that he had been drugged by Lebanese business associates who sought to use the video to blackmail him. The business partners were convicted in absentia and, along with others depicted in the tape, sentenced to serve terms ranging from one to five years. The victim reportedly settled out of court. In the wake of the acquittal, H.R. 5378 (introduced May 25, 2010) sought to make members of the royal families of the UAE and employees of the UAE government ineligible for non-immigrant visas to enter the United States until the Secretary of State \"has determined that Sheikh Issa bin Zayed al Nahyan has been tried, in accordance with what the Secretary determines to be appropriate international legal norms and human rights standards.\" The bill would provide national interest waiver authority for the Secretary of State.",
"",
"The Bush Administration argued that nuclear cooperation with the UAE could set a useful precedent for mitigating the dangers of nuclear proliferation as an increasing number of countries consider developing nuclear power. The State Department stated in April 2008 that the UAE's choice to forgo enrichment and reprocessing \"serves as a model for the economical and responsible pursuit of nuclear power.\" Similarly, President Obama's May 21, 2009, letter of transmittal argued that the agreement \"has the potential to serve as a model for other countries in the region that wish to pursue responsible nuclear energy development.\" As noted, the proposed U.S.-UAE agreement includes a provision which apparently intends to establish the agreement's conditions as minimum standards for future such agreements in the Middle East. On July 8, 2009, Under Secretary of State for Arms Control and International Security Ellen Tauscher testified before the House Foreign Affairs Committee on the proposed agreement and argued that\nIn addition to being indicative of our strong partnership with the UAE, the proposed Agreement is a tangible expression of the United States' desire to cooperate with states in the Middle East, and elsewhere, that want to develop peaceful nuclear power in a manner consistent with the highest nonproliferation, safety, and security standards…. U.S. cooperation with the UAE will also serve as a distinct counterpoint to those countries that have chosen a different path, in particular Iran.\nHowever, the standard set by the UAE may not be preferred by other governments in the region seeking to develop nuclear energy programs of their own. Negotiations over a U.S.-Jordanian nuclear cooperation agreement were delayed during 2009 and 2010 as Jordanian officials debated the relative merits of adopting the UAE model or preserving their ability to pursue domestic uranium enrichment at some point in the future. In July 2010, Representative Howard Berman stated in a letter to the New York Times about Jordan that \"the more states that forswear enrichment, the safer the whole region.\"",
"Licensed nuclear technology contracts with the UAE provide commercial benefits to the U.S. nuclear industry or its international competitors. While Emirati officials have stated their strong desire for nuclear cooperation with the United States and have incorporated former U.S. government officials and U.S. contractors into their early plans and activities, the UAE has similar cooperation from other international sources and awarded the main engineering and construction contracts (worth tens of billions of dollars) to South Korea's KEPCO. The UAE and France signed a nuclear cooperation agreement in with France in January 2008 and a similar agreement with South Korea June 22, 2009. The UAE signed a nuclear cooperation agreement with Japan in January 2009 and approved a nuclear cooperation agreement with the United Kingdom in December 2010.\nUAE officials explained during a June 3, 2009, briefing that the government's nuclear cooperation agreement with France contains preambulary language describing the UAE's commitment to refrain from enrichment and reprocessing. However, the agreement does not explicitly refer to that commitment. Transferring such technologies is not within the agreement's scope, the officials said, adding that all future UAE nuclear cooperation agreements with other countries will reflect the government's policy regarding enrichment and reprocessing.",
"As noted above, the United States and the UAE have enjoyed close and cooperative relations in recent years, in spite of periodic differences over some issues. Prior to the approval of the 123 agreement, some observers speculated that a failure to conclude the proposed nuclear cooperation agreement would have been viewed by officials and influential figures in the UAE as an indication of a lack of faith and commitment by the United States government in the UAE, which could have had negative implications for other aspects of the bilateral relationship. These fears appear to have been based largely on the perceived repercussions of Dubai Ports World's failed 2006 bid to acquire and operate U.S. port terminals. However, others believed that while the Dubai Ports World incident had undermined feelings of mutual trust and had set back some planned commercial ties, the failed initiative did not otherwise damage U.S.-Emirati political or military relations in any tangible, lasting way.\nEmirati authorities continue to move forward with the implementation of their nuclear development plans and, while they appear to strongly desire U.S. technical assistance and advice, they have not chosen the United States as their main contracting partner for the program. To date, the U.S. government has not signaled that there has been any negative change in their view of the bilateral relationship because of the UAE government's decision to partner with South Korea. As noted above, other international parties are providing technical assistance on a commercial basis and others continue to seek contracts to support the implementation of the program. Some observers have argued that without U.S. involvement, the UAE program could adopt technology or systems more vulnerable to proliferation or security concerns. UAE representatives state that their commitment to forgo domestic enrichment or reprocessing is fundamental and applies under cooperative arrangements with non-U.S. suppliers.",
"In the 110 th Congress, Representative Ros-Lehtinen introduced H.R. 7316 , the \"Limitation on Nuclear Cooperation with the United Arab Emirates Act of 2008.\" The bill would have prohibited the proposed U.S.-UAE agreement from coming into effect without presidential certification that the UAE had taken specific steps to improve its export controls and to limit the transfer of certain items to Iran. As noted above, H.R. 7316 also sought to change the procedures for the negotiation and approval of peaceful nuclear cooperation agreements by amending the Atomic Energy Act. (See \" Nuclear Cooperation Agreements, Approval Process, and Proposed Changes \" above.)\nIn the 111 th Congress, Representative Markey introduced a joint resolution of disapproval on May 21, 2009 ( H.J.Res. 55 ). House and Senate joint resolutions of approval were introduced on July 13, 2009 ( S.J.Res. 18 and H.J.Res. 60 ). Representative Ros-Lehtinen is an original co-sponsor of H.J.Res. 60 , although she had previously introduced two pieces of legislation to establish conditions on U.S.-UAE nuclear cooperation and to change negotiation and approval procedures for nuclear cooperation agreements:\nH.R. 364 , the \"Limitation on Nuclear Cooperation with the United Arab Emirates Act of 2009\" was introduced and referred to the House Foreign Affairs Committee on January 9, 2009. The bill states that a U.S. civil nuclear cooperation agreement with the UAE may not enter into force \"unless not less than 30 legislative days prior to such entry into force the President certifies\" to the House Foreign Affairs Committee and the Senate Foreign Relations Committee that the UAE has improved its export control system and halted UAE-based entities' transfers of technology relating to Weapons of Mass Destruction programs, particularly to Iran. The bill also requires the UAE to stop the transfer of certain conventional weapons and related components to Iran. H.R. 364 also states that, if the United States and the UAE do conclude a nuclear cooperation agreement, the United States may not grant an export license for \"nuclear material, equipment, or technology\" to the UAE unless the President certifies within 30 legislative days that the UAE has met the above requirements. H.R. 547 , was introduced and referred to the House Foreign Affairs Committee January 15, 2009. It contains the language from H.R. 7316 relating to procedural changes for nuclear cooperation agreements pursuant to the Atomic Energy Act.",
"UAE\nThe Government of the United States of America confirms that the fields of cooperation, terms and conditions accorded by the United States of America to the United Arab Emirates for cooperation in the peaceful uses of nuclear energy shall be no less favorable in scope and effect than those which may be accorded, from time to time, to any other non-nuclear-weapon State in the Middle East in a peaceful nuclear cooperation agreement. If this is, at any time, not the case, at the request of the Government of the United Arab Emirates the Government of the United States of America will provide full details of the improved terms agreed with another non-nuclear-weapon State in the Middle East, to the extent consistent with its national legislation and regulations and any relevant agreements with such other non-nuclear weapon State, and if requested by the Government of the United Arab Emirates, will consult with the Government of the United Arab Emirates regarding the possibility of amending this Agreement so that the position described above is restored.\nEGYPT\nThe Government of the United States confirms that fields of cooperation, terms and conditions accorded by the United States to the Arab Republic of Egypt for cooperation in the peaceful uses of nuclear energy shall be no less favorable in scope and effect than those which may be accorded by the United States to any other non-nuclear weapon state in the Middle East in a peaceful nuclear cooperation agreement. In this connection it is understood that the safeguards required by this agreement shall be no more restrictive than those which may be required in any peaceful nuclear cooperation agreement between the United States and any other state in the region. By entering into this agreement the United States confirms its recognition of the importance of the Arab Republic of Egypt's adherence to the NPT, and its longstanding support of international non-proliferation measures, including establishment of a nuclear weapon free zone in the Middle East. If any situation arises which could increase the risk of proliferation of nuclear weapons, the United States and the Arab Republic of Egypt, at the request of either, shall enter into consultations with respect thereto with a view to maintaining the objectives of the NPT."
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"question": [
"What program has the United Arab Emirates started?",
"What did the 111th Congress approve?",
"What did Condoleezza Rice sign?",
"What did James Steinberg do with the new version of the nuclear cooperation agreement?",
"What process was followed for the agreement to come into effect?",
"What does the agreement contain?",
"What progress has UAE made in 2010?",
"What modification to the IAEA Safeguards agreement did UAE make in 2010?",
"What did the legislation that was introduced in the 111th Congress require?",
"What steps did UAE complete as of 2010?",
"How has the UAE functioned without a fully staffed national export control body?",
"What happened as a result of cooperation with the United States?"
],
"summary": [
"The United Arab Emirates (UAE) has embarked on a program to build civilian nuclear power plants and is seeking cooperation and technical assistance from the United States and others.",
"The 111th Congress approved a U.S.-UAE bilateral agreement on peaceful nuclear cooperation pursuant to Section 123 of the Atomic Energy Act (AEA) of 1954.",
"Then-U.S. Secretary of State Condoleezza Rice signed the proposed agreement on peaceful nuclear cooperation with the UAE January 15, 2009.",
"Deputy Secretary of State James Steinberg signed a new version of the agreement May 21, 2009; the Obama Administration submitted the proposed agreement to Congress the same day.",
"Congress had the opportunity to review the proposed agreement for 90 days of continuous session, a period which ended on October 17, 2009. The UAE cabinet approved the agreement on October 26. The agreement entered into force after the two governments exchanged diplomatic notes on December 17, 2009.",
"The agreement text states the intent of both governments to cooperate in a number of areas including, but not limited to, the development of the UAE's \"civilian nuclear energy use in a manner that contributes to global efforts to prevent nuclear proliferation\" and, \"the establishment of reliable sources of nuclear fuel for future civilian light water reactors deployed\" in the UAE.",
"In January 2010, the UAE announced that it had chosen the Korea Electric Power Corporation (KEPCO of South Korea) to construct four APR1400 reactors. During 2010, the UAE's administrative preparations have continued apace, including site selection, environmental surveys, and security planning. All four plants are scheduled to be online by 2020.",
"The UAE brought into force the Additional Protocol to its IAEA Safeguards agreement on December 20, 2010.",
"In the 111th Congress, legislation was introduced that would have required President Obama to certify that the UAE had taken a number of steps to strengthen its export controls and stem illicit trade with Iran before any agreement could come into effect or related U.S. exports of nuclear technology to the UAE could be approved.",
"In 2007, the UAE adopted a stronger export control law, but as of mid-2010 had not issued implementing regulations for the law or fully staffed a national export control body to enforce it.",
"In the interim, export control enforcement functions remain the responsibility of authorities in the UAE's individual emirates, in coordination with a new national interagency Committee on Commodities Subject to Import and Export Control established in April 2009.",
"According to UAE officials, cooperation with the United States has resulted in a number of joint interdiction operations."
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CRS_R44636
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{
"title": [
"",
"Background",
"Full Text Versus Formulaic Continuing Appropriations",
"Limitations that Continuing Resolutions May Impose",
"Anomalies",
"How Agencies Implement a CR",
"Unique Implementation Challenges Faced by DOD",
"Prohibitions on Certain Contracting Actions",
"Misalignments in CR-Provided Funding",
"Timing of the NDAA",
"DOD Management Challenges Under a CR",
"Managing with an Expectation of a CR"
],
"paragraphs": [
"",
"Congress uses an annual appropriations process to fund the routine activities of most federal agencies. This process anticipates the enactment of 12 regular appropriations bills to fund these activities before the beginning of the fiscal year. When this process is delayed beyond the start of the fiscal year, one or more continuing appropriations acts (commonly known as continuing resolutions or CRs) can be used to provide funding until action on regular appropriations is completed.\nAn interim continuing resolution (CR) typically provides that budget authority is available at a certain rate of operations or funding rate for the covered projects and activities, and for a specified period of time. The funding rate for a project or activity is based on the total amount of budget authority that would be available annually at the referenced funding level , and is prorated based on the fraction of a year for which the interim CR is in effect.\nIn recent fiscal years, the referenced funding level has been the amount of budget authority that was available under specified appropriations acts from the previous fiscal year. For example, the first CR for FY2018 ( H.R. 601 \\ P.L. 115-56 ) provided, \"... such amounts as may be necessary, at a rate of operations as provided in the applicable appropriations Acts for fiscal year 2017.\"\nWhile a blanket continuation of the prior year's spending levels is one option for establishing the CR's funding rate, other funding levels also have been used to provide the funding rate. For example, H.R. 601 stipulated that funding be continued at the rate provided in the applicable FY2017 appropriations bill, minus 0.6791%. While recent CRs have provided that the funding rates for certain accounts are to be calculated with reference to the funding rates in the previous year, Congress could establish a CR funding rate on any basis (e.g., the President's pending budget request, the appropriations bill for the pending year as passed by the House or Senate, or the bill for the pending year as reported by a committee of either chamber).",
"CRs have sometimes provided budget authority for some or all covered activities by incorporating the text of one or more regular appropriations bills for the current fiscal year. When this form of funding is provided in a CR or other type of annual appropriations act, it is often referred to as full text appropriations .\nWhen full text appropriations are provided, those covered activities are not funded by a rate for operations, but by the amounts specified in the incorporated text. This full text approach is functionally equivalent to enacting regular appropriations for those activities, regardless of whether that text is enacted as part of a CR. The \"Department of Defense and Full-Year Continuing Appropriations Act, FY2011\" ( P.L. 112-10 ) is one recent example. For DOD, the text of a regular appropriations bill was included in Division A, thus funding those covered activities via full text appropriations. In contrast, a formula based on the previous fiscal year's appropriations laws was used to provide full-year continuing appropriations for the other projects and activities that normally would have been funded in the remaining 11 FY2011 regular appropriations bills ( P.L. 112-10 , Division B).\nIf formulaic interim or full-year continuing appropriations were to be enacted for DOD, the funding levels for both base defense appropriations and Overseas Contingency Operations (OCO) spending could be determined in a variety of ways. A separate formula could be established for defense spending, or the defense and nondefense spending activities could be funded under the same formula. Likewise, the level of OCO spending under a CR could be established by the general formula that applies to covered activities (as discussed above), or by providing an alternative rate or amount for such spending. For example, the first CR for FY2013 ( P.L. 112-175 ) provided the following with regard to OCO funding:\nWhenever an amount designated for Overseas Contingency Operations/Global War on Terrorism pursuant to Section 251(b)(2)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985 (in this section referred to as an \"OCO/GWOT amount\") in an Act described in paragraph (3) or (10) of subsection (a) that would be made available for a project or activity is different from the amount requested in the President's fiscal year 2013 budget request, the project or activity shall be continued at a rate for operations that would be permitted by ... the amount in the President's fiscal year 2013 budget request.",
"CRs may contain limitations that are generally written to allow execution of funds in a manner that provides for minimal continuation of projects and activities in order to preserve congressional prerogatives prior to the time a full appropriation is enacted. As an example, an interim CR may prohibit an agency from initiating or resuming any project or activity for which funds were not available in the previous fiscal year. Congress has, in practice, included a specific section (usually Section 102) in the CR to expressly prohibit DOD from starting production on a program that was not funded in prior years (i.e., a new start ), and from increasing production rates above levels provided in the prior year. Congress may also limit certain contractual actions such as multiyear procurement contracts. Such prohibitions are typically only applied to the Department of Defense.\nAn interim CR may provide funds at the rate of the prior year's appropriation and, as a result, may provide funds in a manner that differs from an agency's budget request. For example, if a CR is based on the prior year's enacted appropriation, a mismatch could occur at the account level between the agency's request and the CR funding level. The Antideficiency Act prohibits a federal employee from making or authorizing \"an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation\" unless authorized by law. A mismatch at account level between the agency's request and the CR funding level is sometimes referred to as an issue with the color of money .",
"Even though CRs typically provide funds at a particular rate, CRs may also include provisions that enumerate exceptions to the duration, amount, or purposes for which those funds may be used for certain appropriations accounts or activities. Such provisions are commonly referred to as anomalies . The purpose of anomalies is to insulate some operations from potential adverse effects of a CR while providing time for Congress and the President to agree on full-year appropriations and avoiding a government shutdown.\nA number of factors could influence the extent to which Congress decides to include such additional authority or flexibility for DOD under a CR. Consideration may be given to the degree to which funding allocations in full-year appropriations differ from what would be provided by the CR. Prior actions concerning flexibility delegated by Congress to DOD may also influence the future decisions of Congress for providing additional authority to DOD under a longer-term CR. In many cases, the degree of a CR's impact can be directly related to the length of time that DOD operates under a CR. While some mitigation measures (anomalies) might not be needed under a short-term CR, extended delays in passing a full-year defense appropriations bill may increase management challenges and risks for DOD.\nAn anomaly might be included to stipulate a set rate of operations for a specific activity, or to extend an expiring authority for the period of the CR. For example, the second CR for FY2017 ( H.R. 2028 \\ P.L. 114-254 ) granted three anomalies for DOD:\nSection 155 funded the Columbia Class Ballistic Missile Submarine Program ( Ohio Replacement) at a specific rate for operations of $773,138,000. Section 156 allowed funding to be made available for multiyear procurement contracts, including advance procurement, for the AH–64E Attack Helicopter and the UH–60M Black Hawk Helicopter. Section 157 provided funding for the Air Force's KC–46A Tanker, up to the rate for operations necessary to support the production rate specified in the President's FY2017 budget request (allowing procurement of 15 aircraft, rather the FY2016 rate of 12 aircraft).\nIn anticipation of an FY2018 CR, DOD submitted a list of programs that would be affected under a CR to the Office of Management and Budget (OMB). This \"consolidated anomalies list\" included approximately 75 programs that would be delayed by a prohibition on new starts and nearly 40 programs that would be negatively affected by a limitation on production quantity increases.\nOMB may or may not forward such a list to Congress as a formal request for consideration. Some analysts contend that OMB rarely supports inclusion of anomalies in a CR because anomalies generally reduce the impetus for Congress to reach a budget agreement. According to Mark Cancian, a defense budget analyst at the Center for Strategic and International Studies, \"a CR with too many anomalies starts looking like an appropriations bill and takes the pressure off.\"\nH.R. 601 ( P.L. 115-56 ), the initial FY2018 CR, did not include any anomalies to address the programmatic issues included on the DOD list. H.R. 601 was extended through March 23, 2018, by four measures. The fourth measure ( P.L. 115-123 ) included an anomaly to address concerns raised by the Air Force regarding the effects of the CR on certain FY2018 construction requirements.",
"After enactment of a CR, OMB provides detailed directions to executive agencies on the availability of funds and how to proceed with budget execution. OMB will typically issue a bulletin that includes an announcement of an automatic apportionment of funds that will be made available for obligation, as a percentage of the annualized amount provided by the CR. Funds usually are apportioned either in proportion to the time period of the fiscal year covered by the CR, or according to the historical, seasonal rate of obligations for the period of the year covered by the CR, whichever is lower. A 30-day CR might, therefore, provide 30 days' worth of funding, derived either from a certain annualized amount that is set by formula or from a historical spending pattern. In an interim CR, Congress also may provide authority for OMB to mitigate furloughs of federal employees by apportioning funds for personnel compensation and benefits at a higher rate for operations, albeit with some restrictions.",
"CRs essentially lock DOD funding accounts at the levels appropriated the previous year and prevent scheduled activities. Funding needs typically change from year to year across DOD accounts due to a variety of factors―including emerging or increasing threats to national security―and accounts that are funded below their budgeted level under a CR cannot obligate funds at the anticipated rate. This can restrict planned personnel actions, maintenance and training activities, and a wide variety of contracted support actions. Delaying or deferring such actions can also cause a ripple effect, generating personnel shortages, equipment maintenance backlogs, oversubscribed training courses, and a surge in end-of-year contract spending.",
"As discussed, a CR typically includes a provision prohibiting DOD from initiating new programs or increasing production quantities beyond the prior year's rate. DOD is typically the only federal agency limited in this manner. These DOD-unique prohibitions can directly result in delayed development, production, testing, and fielding of DOD weapon systems. An inability to execute funding as planned can induce costly delays and repercussions in the complex schedules of weapons system development programs. Under a CR, DOD's ability to enter into planned long-term contracts is also typically restricted, thus forfeiting the program stability and efficiencies that can be gained by such contracts.",
"DOD may also encounter significant color of money issues under a CR, meaning money is available but it is in the wrong appropriations account. Many defense acquisition programs may face challenges if they were going through a transitional period in the acquisition process amid a CR. For example, a weapons program ramping down development activities and transitioning into production could be allocated research, development, test and evaluation (RDT&E) funding under a CR (i.e. based on the prior year's appropriation) when the program is presently in need of procurement funding.\nOne example of a program affected by limitations on the color of money is the Columbia class Ballistic Missile Submarine Program, which received funding exclusively for RDT&E in years prior to FY2017. In FY2017, however, the budget request for the Columbia class program included not only RDT&E funding, but also advance procurement (AP) funding. With no anomaly there could be no AP funding available for the program under a CR.\nSimilar to generating issues with the color of money, a CR can result in problems specific to the apportionment of funding in the Navy's shipbuilding account, known formally as the Shipbuilding and Conversion, Navy (SCN) appropriation account. SCN appropriations are specifically annotated at the line-item level in the DOD annual appropriations bill. As a consequence, under a CR, SCN funding is managed not at the appropriations account level, but at the line-item level. For the SCN account—uniquely among DOD acquisition accounts—this can lead to misalignments (i.e., excesses and shortfalls) in funding under a CR for SCN-funded programs, compared to the amounts those programs received in the prior year. The shortfalls in particular can lead to program execution challenges under an extended or full-year CR.",
"Along with specific authorization for military construction projects, the National Defense Authorization Act (NDAA) provides additional authorities that DOD needs to conduct its mission. These authorities range from authorization of end strengths for active and reserve military forces to authorization for specific training activities with allied forces in contingency operations. Some such authorities are slated to expire at the start of the fiscal year, while others, such as certain authorities for special pay and bonuses, expire at the end of the calendar year. Should final action on the NDAA be delayed, Congress may consider addressing expiring authorities or the need for specific authorizations through the inclusion of relevant policy anomalies in a CR.\nWhile there are many examples of the effects of a CR on the military, many are difficult to quantify. For instance, DOD prioritized funding for readiness activities such as training, equipment maintenance, logistics, and civilian personnel pay in its FY2018 budget request. The budget request included $188.6 billion for the Operation and Maintenance (O&M) account, which funds many of these activities―a $21 billion increase from FY2017. The rate for operations provided under the FY2018 CR is 13% below the President's budget request for O&M. The resulting lack of availability of O&M funding at or near the planned level―combined with the uncertainty of the CR's duration―results in decisions to prioritize the use of available funding to meet urgent and critical needs. The consequent deferral of annual and routine training, preventative maintenance actions, and routine supply activities can erode the readiness of the force.",
"In testimony before the Senate Subcommittee on Federal Spending Oversight and Emergency Management, Committee on Homeland Security and Governmental Affairs, a senior Government Accountability Office (GAO) analyst remarked that CRs can create budget uncertainty and disruptions, complicating agency operations and causing inefficiencies. Director of Strategic Issues Heather Krause asserts that \"this presents challenges for federal agencies continuing to carry out their missions and plan for the future. Moreover, during a CR, agencies are often required to take the most limited funding actions.\" Krause testified that agency officials report taking a variety of actions to manage inefficiencies resulting from CRs, including shifting contract and grant cycles to later in the fiscal year to avoid repetitive work, and providing guidance on spending rather than allotting specific dollar amounts during CRs, to provide more flexibility and reduce the workload associated with changes in funding levels.\nWhen operating under a CR, agencies encounter consequences that can be difficult to quantify, including additional obligatory paperwork, need for additional short-term contracting actions, and other managerial complications as the affected agencies work to implement funding restrictions and other limitations that the CR imposes. For example, the government can normally save money by buying in bulk under annual appropriations lasting a full fiscal year or enter into new contracts (or extend their options on existing agreements) to lock in discounts and exploit the government's purchasing power. These advantages may be lost when operating under a CR.\nAll federal agencies face management challenges under a CR, but DOD faces unique challenges in providing the military forces needed to deter war and defend the country. In a letter to the leaders of the armed services committees dated September 8, 2017, Secretary of Defense James Mattis asserted that \"longer term CRs impact the readiness of our forces and their equipment at a time when security threats are extraordinarily high. The longer the CR, the greater the consequences for our force.\" DOD officials argue that the department depends heavily on stable but flexible funding patterns and new start activities to maintain a modernized force ready to meet future threats. Former Defense Secretary Ashton Carter posited that CRs put commanders in a \"straight-jacket\" that limits their ability to adapt, or keep pace with complex national security challenges around the world while responding to rapidly evolving threats like the Islamic State.",
"In all but 4 of the past 40 years, Congress has passed CRs to enable agencies to continue operating when annual appropriation bills have not been enacted before the start of the fiscal year. DOD has started the fiscal year under a CR for 13 of the past 17 years (FY2002-FY2018) and every year since FY2010. The average number of days of operation under a CR has increased over that same period. DOD has operated under a CR for an average of 125 days per year during the period FY2010-FY2017 compared to an average of 32 days per year during the period FY2002-FY2009 (see Figure 1 ).\nSince 2010, DOD has spent over 38 months operating under a CR, compared to less than 9 months during the preceding 8 years. Senior defense officials have stated that the military services and defense agencies have consequently come to expect that a full-year appropriations bill will not be completed by the start of the fiscal year. According to Admiral John Richardson, Chief of Naval Operations, \"The services are essentially operating in three fiscal quarters per year now. Nobody schedules anything important in the first quarter.\"\nGiven the frequency of CRs in recent years, many DOD program managers and senior leaders work well in advance of the outcome of annual decisions on appropriations to minimize contracting actions planned for the first quarter of the fiscal year. The Defense Acquisition University, DOD's education service for acquisition program management, imparts that, \"Members of the OSD, the Services and the acquisition community must consider late enactment to be the norm [emphasis in original] rather than the exception and, therefore, plan their acquisition strategy and obligation plans accordingly.\" Replanning and executing short-term contracting actions can be reduced by building a program schedule in which planned contracting actions are pushed to later in the fiscal year when it is more likely that a full appropriation would be enacted. Additionally, managers can take steps to defer hiring actions, restrict travel policies, or cancel nonessential education and training events for personnel.\nThese efforts by defense officials to prepare for the potential of a CR appear to have reduced some of the need to request that specific anomalies be included in the CR. However, former Defense Department Comptroller Mike McCord also held that no matter how the Pentagon responds to these repeated cycles of CRs, \"there is no question that short-term funding creates enormous inefficiency.... \""
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{
"question": [
"What is a CR?",
"How can the funding period be extended?",
"How has the referenced funding level been calculated in recent fiscal years?",
"What is a consequence of the temporary nature of a CR?",
"What challenges does DOD face?",
"What challenges did DOD identify as a result of the FY2018 CR's prohibition on new starts?"
],
"summary": [
"Under current practice, a CR is an appropriation that provides either interim or full-year funding by referencing a set of established funding levels for the projects and activities that it funds (or covers).",
"Such funding may be provided for a period of days, weeks, or months and may be extended through further continuing appropriations until regular appropriations are enacted, or until the fiscal year ends.",
"In recent fiscal years, the referenced funding level on which interim or full-year continuing appropriations has been based was the amount of budget authority that was available under specified appropriations acts from the previous fiscal year.",
"The lack of a full-year appropriation and the uncertainty associated with the temporary nature of a CR can create management challenges for federal agencies.",
"DOD faces unique challenges operating under a CR while providing the military forces needed to deter war and defend the country. For example, an interim CR may prohibit an agency from initiating or resuming any project or activity for which funds were not available in the previous fiscal year (i.e., prohibit new starts). Such limitations in recent CRs have affected a large number of DOD programs.",
"Before the beginning of FY2018, DOD identified approximately 75 weapons programs that would be delayed by the FY2018 CR's prohibition on new starts and nearly 40 programs that would be affected by a restriction on production quantity."
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GAO_GAO-12-517
|
{
"title": [
"Background",
"DOJ Grant Programs Overlap, Contributing to the Risk of Unnecessarily Duplicative Grant Awards for the Same or Similar Purposes",
"DOJ’s Grant Solicitations Overlap across 10 Key Justice Areas",
"In Some Instances, DOJ Awarded Grant Funding from Overlapping Programs to the Same Applicants for the Same or Similar Purposes",
"DOJ Has Taken Actions That Address Overlap in Grant Programs but Could Further Reduce the Risk of Unnecessary Duplication in Grant Funding",
"DOJ Has Taken Some Action to Consolidate and Coordinate Similar Grant Programs",
"DOJ Has Not Assessed Its Grant Programs to Identify and Reduce Overlap",
"DOJ’s Granting Agencies Do Not Have Policies and Procedures to Ensure Coordination to Limit the Risk of Unnecessary Duplication",
"DOJ Uses Separate Grant Management Systems, a Fact That Limits Award Coordination",
"DOJ Does Not Timely Submit Grant Data to USASpending.gov and Is Not Fully Leveraging the Website’s Subgrant Award Information before Making Grant Award Decisions",
"DOJ Could Benefit from Examining Its Programmatic Grant Monitoring and Assessment Functions and Considering Expansion of OAAM’s Authorities",
"OAAM Uses Programmatic Grant Monitoring and Program Assessment for Grant Oversight, but Program Assessments Yield Richer Information",
"Not Including OVW in OAAM’s Oversight Has Resulted in Inconsistent Assessment of the Effectiveness of DOJ Grant Programs",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: DOJ Granting Agencies’ Organizational Structure",
"Appendix III: Structure, Purpose, and Funding of DOJ Granting Agencies",
"Appendix IV: Consolidated, Braided, and Blended Grant Program Solicitations",
"Appendix V: Office of Audit Assessment and Management Structure",
"Audit and Review Division",
"Program Assessment Division",
"Grants Management Division",
"Appendix VI: Comments from the Department of Justice",
"Appendix VII: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"DOJ awards federal financial assistance to state and local governments, for-profit and nonprofit organizations, tribal jurisdictions, and educational institutions to help prevent crime, assist victims of crime, and promote innovative law enforcement efforts. Federal financial assistance can take the form of discretionary grants, formula grants, cooperative agreements, and payment programs, which all are generally referred to as grants. Grant programs are generally created by statute and funded through annual appropriations. As such, Congress has a central role in determining the scope and nature of federal financial assistance programs. In addition, the Office of Management and Budget (OMB) establishes general guidance which governs administration of all such federal financial assistance and DOJ has flexibility in how to administer assistance that is discretionary in nature.\nIn fiscal year 2010, DOJ provided direct grant funding to nearly 11,000 grantees.assistance.",
"",
"We reviewed all 253 of the fiscal year 2010 grant solicitations that OJP, OVW, and the COPS Office published on their respective websites and found overlap across 10 justice areas—as table 2 illustrates. These solicitations announced funding available to grantees for criminal and juvenile justice activities, including direct assistance for crime victims and the hiring of police officers. These solicitations also announced funding available for grantees to collect criminal justice data, conduct research, or provide related training and technical assistance. We developed these 10 categories of justice areas after reviewing comparable justice areas identified within OJP’s CrimeSolutions.gov website, which OJP officials stated covers a variety of justice topics, including some topic areas that OVW and the COPS Office fund; OJP’s Fiscal Year 2010 Program Plan; and other materials from OVW and the COPS Office, such as justice program themes from their respective websites. Within the justice areas, a variety of activities—including research, direct service provision, or technical assistance—can be conducted. We examined the purpose areas of the 253 grant solicitations and then categorized them by justice area.\nIn conducting this analysis, we recognize that overlapping grant programs across common programmatic areas result in part from authorizing statutes, and that overlap itself may not be problematic. However, the existence of overlapping grant programs is an indication that agencies should increase their visibility of where their funds are going and coordinate to ensure that any resulting duplication in grant award funding is purposeful rather than unnecessary. Overlap and the associated risk of unnecessary duplication occur throughout the government, as we have reported previously, and are not isolated to DOJ. However, when coupled with consistent programmatic coordination, the risk of unnecessary duplication can be diminished.\nAs table 2 illustrates, we found overlap across the various DOJ grant programs. For example, 56 of DOJ’s 253 grant solicitations—or more than 20 percent—were providing grant funds available for activities related to victim assistance or to support the research and prevention of violence against women. Eighteen of these 56 programs were administered by offices other than OVW and OJP’s Office for Victims of Crime. In addition, more than 50 percent of all grant solicitations provided funding that could be used in support of the same three justice areas—victim assistance, technology and forensics, and juvenile justice— indicating concentrated and overlapping efforts. The justice area with the least overlap was juvenile justice, with 30 of 33 grant programs administered by the Office of Juvenile Justice and Delinquency Prevention.\nThere are some instances in which overlap occurs because of the statute that established programs. Further, we recognize that overlap among DOJ’s grant programs may be desirable because such overlap can enable DOJ’s granting agencies to leverage multiple funding streams to serve a single justice purpose. However, coordination across the administering granting agencies is critical for such leveraging to occur. In the section below, we discuss the ways in which overlapping grant programs increase the risk of unnecessarily duplicative grant awards for the same or similar purposes. In subsequent sections, we discuss the steps DOJ has taken to enhance coordination and some ways in which DOJ’s efforts can be improved.",
"We found that in some instances, DOJ’s granting agencies awarded multiple grants to the same grantees for the same or similar purposes. Applicants can apply directly to DOJ for funding through a variety of grant programs that DOJ announces annually. Recipients of such grant awards are referred to as prime grantees. Since many of DOJ’s grant programs allow prime grantees to award subgrants, applicants also can apply directly to a prime grantee for award funding. As a result, prime grantees receiving money from DOJ through one funding stream also can be subgrantees receiving money from a prime grantee through another funding stream. If an applicant, either as a prime grantee or as a subgrantee, receives multiple grant awards from overlapping programs, the risk of unnecessary duplication increases since the applicant may receive funding from more than one source for the same or similar purpose without DOJ being aware that this situation exists. Such duplication may be unnecessary if, for example, the total funding received exceeds the applicant’s need, or if neither granting agency was aware of the original funding decision.\nAfter reviewing a sample of 26 grant applications from recipients who received funds from grant programs we identified as having similar purpose areas, we found instances where applicants used the same or similar language to apply for multiple streams of funding. For example, one grant recipient applied for funding to reduce child endangerment through cyber investigations from both the COPS Office’s Child Sexual and OJP’s Internet Crimes Against Children Predator (CSPP) Program(ICAC) program. In both of these applications, the applicant stated that it planned to use the grants to increase the number of investigations in the state, provide training for cyber crime investigations, serve as a forensic resource for the state, and establish an Internet safety program. Further, included in this applicant’s proposed budgets for both funding streams were plans to purchase equipment, such as forensic computers and the same specialized software to investigate Internet crimes against children. Another grant recipient from a different jurisdiction also applied for funding from OJP and the COPS Office programs to support the same types of investigations. In a third instance, an applicant received fiscal year 2010 grant funding for planned sexual assault victim services from both OJP’s Office for Victims of Crime and OVW. The applicant used similar language in both applications, noting that it intended to use the funding to support child victim services through its child advocacy center.\nAfter we shared these examples with DOJ, DOJ officials followed up with the grant recipients involved and reported to us that the grantees were not using awarded funds for duplicative purposes—which DOJ defines as grantees using funds to pay for the exact same item. However, such follow-up for the purpose of assessing duplication is not a routine practice for DOJ. Further, DOJ’s narrow definition of duplication curtails it from assessing the use of funds for the same or a similar overall purpose on a grant project.\nIn fiscal year 2010, DOJ’s three granting agencies awarded nearly 11,000 prime grant awards, but officials told us that they do not consider the flow of grant funds to subgrantees when making grant award decisions. Because DOJ does not have visibility of the flow of funds to these recipients, agency officials were not positioned to tell us what activities, or for what purposes, the subgrantees were spending their federal funds. Thus, to obtain more information, we surveyed JAG SAAs, who are responsible for managing the subgrants they make, to obtain information related to the purpose areas of their funding.\nIn our survey, we asked the JAG SAAs if they or their subgrantees used grant funding in fiscal year 2010 for key justice areas such as funding sex offender registry notification systems; correctional officer salaries, and sexual assault services; purchasing bullet-resistant vests; and hiring police officers. DOJ supports all of these areas through JAG, as well as through targeted grant programs specifically addressing each of these topics. On the basis of survey responses, we found several instances where SAAs reported that JAG funds were used to support activities that could have been funded through other DOJ grants. For instance, 11 of 50 responding SAAs, or 22 percent, reported that they or their subgrantees used JAG funding to support correctional officer salaries. Further, 23 of the 50 SAAs, or nearly 50 percent, reported that they or their subgrantees used JAG funding to hire police officers, even though a separate DOJ program dedicates funding exclusively to hiring law enforcement personnel.\nThe COPS Office hiring grant awarded to this county was for fiscal year 2009. COPS Office hiring grants last up to 3 years, and the county used the grant in fiscal years 2010 and 2011 as well. These grants support the hiring or the rehiring of career law enforcement officers to increase community policing and crime prevention strategies. received funding for drug court–assisted substance abuse treatment and mental health counseling through both a JAG program subaward and a grant directly from OJP’s Adult Drug Court Grant Program. Officials from one of these counties informed us that they received so much DOJ funding from the two grant programs that it exceeded the county’s need and they planned to return a portion to DOJ.\nThe IG has previously identified the risk of OJP and the COPS Office funding duplicative grant awards. For example, in 2003, the IG identified duplication between the COPS Office Hiring Program and the Local Law Enforcement Block Grant Program, the predecessor to the JAG grant program. The IG reported that while the COPS Hiring Grant program is required to advance community policing, the Local Law Enforcement Block Grant Program grants are sometimes used for the same or similar purposes. According to the IG, in such cases the grants are duplicative. In 2010, the IG reported that it had identified potential overlap between the COPS Office Hiring Recovery Program and OJP’s JAG Formula Program and Edward Byrne Competitive Grant Program. As a result, the IG recommended that the COPS Office work with OJP to avoid duplication of future funding by coordinating closely on grantee selection decisions, as discussed later in this report.\nU.S. Department of Justice Office of the Inspector General, Audit Division, Streamlining of Administrative Activities and Federal Financial Assistance Functions in the Office of Justice Programs and the Office of Community Oriented Policing Services, Audit Report 03-27 (Washington D.C.: Aug. 2003).",
"",
"According to DOJ officials, the statutory creation of grant programs with similar purposes requires grant design coordination within and among DOJ’s granting agencies to limit the risk of unnecessary duplication from overlapping programs. The primary purpose of consolidation or coordination may not be to limit this risk, but officials reported that reducing the risk may be a secondary benefit. Officials from all three granting agencies stated that they meet with one another to coordinate the goals and objectives of their grant programs, especially joint grant programs that they believe are complementary. For example, the Bureau of Justice Assistance and the Office for Victims of Crime issued a joint solicitation for anti-human trafficking programs where each office issued separate awards based on coordinated proposals from collaborating police departments and community-based victim service organizations. Further, according to officials, DOJ recently launched the Coordinated Tribal Assistance Solicitation to provide a single application for most of DOJ’s tribal grant programs.\nConsolidating two programs with similar purposes into one, with unified management, is the most comprehensive way to reduce overlap, according to DOJ officials. However, they stated that the statutory creation of grant programs with similar purposes can create administrative challenges because in many cases, DOJ must seek statutory authorization to discontinue or consolidate enacted programs that DOJ believes may be overlapping. Officials told us they have sought congressional action in a few instances for these purposes and will continue to do so, but because the process is complex, they have also taken administrative steps on an ad hoc basis to mitigate overlap of purpose areas as illustrated in table 3.\nOfficials stated that they meet with one another when they determine it is needed to coordinate the goals and objectives of their grant programs, especially those programs that they believe are complementary. In addition, an OJP official told us that in 2010 the office prioritized coordination as 1 of its 10 management goals and cited benefits that resulted from this focus, including reduced administrative costs, fewer grant solicitations, and a reduced number of competitive grant peer reviews. However, these officials told us that these coordination and consolidation efforts, as well as those illustrated in table 3, do not occur routinely.",
"Even with efforts to coordinate its programs, DOJ officials told us they have not conducted a formal assessment or study of their grant programs to determine if and to what extent they overlap and where opportunities exist to more consistently pursue consolidation or better coordinate grant programs. Further, we found that coordination among granting agencies occurred on an ad hoc basis and that without an assessment of its overlapping programs, DOJ was not well positioned to identify and describe areas of potential for unnecessary duplication across its grant programs.\nA senior OJP official told us that the department had not formally assessed or studied its grant programs to determine the extent of overlap because of the significant investment of time and staff resources that it would require. DOJ officials emphasized that since these programs were statutorily established as distinct programs, they are not certain that any attempt at harmonization—beyond what they have already done—would be viable. For example, they said that in some cases, statutes creating what may appear to be similar programs also create very different eligibility criteria for grant applicants. Thus, the officials stated, some programs may not be easily merged through administrative efforts such as announcing similar grant programs in a single solicitation. We agree that similar grant programs may have unique features that could render grant consolidation or coordination impractical, but DOJ has not taken the steps to catalogue all of its programs across each of the three granting agencies, and then determine which have the potential to be consolidated or coordinated and what barriers might exist to achieve such changes.\nThe IG continues to include DOJ’s grants management among its list of top challenges affecting the department, and in previous reports, has identified fragmentation and duplication among DOJ’s granting agencies as an area of concern. Further, developing agency procedures to avoid grant duplication is one of the promising practices that the federal Domestic Working Group Grant Accountability Project suggested in its Given the Guide to Opportunities for Improving Grant Accountability.specific knowledge of these grant programs’ statutory authorities, their histories of funding certain types of activities, and the nuances related to their administration, officials within OJP, OVW, and the COPS Office are uniquely positioned to assess their programs for overlap. Doing so could yield positive dividends for the granting agencies and the department over the longer term. Specifically, such assessments could include understanding the areas in which individual granting agencies may be awarding funds for the same or similar purposes, determining whether these grant programs appropriately channel the department’s resources across the justice areas it funds, and determining whether any existing overlap is desirable. By conducting an assessment of its grant programs of this kind, DOJ would be better positioned to take action, such as through consolidation and coordination of its programs, in a more systematic way to limit overlap and mitigate the risk of unnecessary duplication.",
"OJP, OVW, and the COPS Office do not routinely share lists of current and potential awardees to consider both the current and planned dispersion and purposes of all DOJ grant funding before finalizing new award decisions. Not having routine coordination in the pre-award phase limits each of DOJ’s granting agencies’ visibility of the funds each respectively awards rather than to the overall flow of department dollars. Thus, in the instances where DOJ made multiple grant awards to applicants for the same or similar purposes, officials made these awards without always being aware of the potential for unnecessary duplication or whether funding from multiple streams was warranted. DOJ officials stated that their annual process to formulate budgets for grant administration, OJP’s annual planning process to develop solicitations, and the department’s overall grant oversight functions address the risks of unnecessary duplication in grant awards. However, these activities do not specifically relate to the pre-award phase when any potential for unnecessary duplication can best be avoided. DOJ officials also stated that they meet bi-monthly to discuss grantees on DOJ’s High Risk List to avoid funding grantees who in the past have demonstrated deficiencies in However, the purpose of these properly managing their federal awards.discussions is not to prevent or reduce duplication. Developing agency policies and procedures to avoid unnecessary grant duplication in the awarding of funds is one of the promising practices that the federal Domestic Working Group Grant Accountability Project suggested in its Guide to Opportunities for Improving Grant Accountability.\nAs a result of our work, OJP officials informed us that as of March 2012, they had begun to pilot solicitation language in two of its grant programs requiring grant applicants to disclose any pending applications submitted in the last 12 months for other federally funded assistance to support the same costs associated with the same projects outlined in applicants’ budgets. Additionally, officials stated they are currently developing a grant special condition for all fiscal year 2012 grant awards that would require grantees to report to OJP if they receive any funding for a specific project cost that is duplicative of the funding OJP provides. OJP officials told us that if grantees report duplicative funding for a specific project cost, OJP staff will work with the grantees to ensure return of the OJP funds. We believe this requirement will improve OJP’s ability to limit the risks of duplicative funding for single items; however, OJP continues to take a more narrow view of the term “duplication.” OJP defines duplicative funding to include only instances where grantees are using federal money for the same exact item. In doing so, OJP excludes from its purview all federal funding that grant applicants have been awarded to carry out the same or similar activities within a proposed project. Thus, in making funding decisions without asking for information about and considering other sources of an applicant’s federal funding to carry out the same or similar activities, OJP may be awarding funds for proposed projects that are already partially or fully funded. It may also be doing so at the expense of other applicants who, in the absence of other funding sources, may demonstrate to OJP greater financial need for their proposals. Further, DOJ’s new approach—while an important step—relies solely on grantee reporting. By independently assessing its own lists of actual and prospective grantees prior to awarding funds, DOJ could have additional assurance that it is taking actions to mitigate the risk of unnecessary duplication.\nIn addition, OVW officials stated that for fiscal year 2013, they intend to require those applying to four of its grant programs to identify in their grant applications all federal funding that they recently applied for or have received. By enhancing visibility over various sources of grant funding, OVW would be better positioned to avoid unnecessary duplication in awarding grants for these four programs. It could also provide OVW with opportunities to best leverage OVW funding in a manner that complements other funding streams the applicant already has available or may soon receive. For example, if an applicant reports to OVW that it already receives money through a non-OVW grant to provide counseling services to victims, OVW can ensure that OVW funds are available for other project-related activities such as providing training to counselors who serve victims. However, beyond what OJP is piloting and what OVW has proposed for four of its programs, DOJ generally does not require grant applicants to identify other funding that they have received or any pending funding yet to be awarded, including funding received through a subgrant. Further, while the COPS Office’s grants management system automatically includes information on other COPS Office funding a COPS Office applicant may already be receiving, it does not identify other DOJ grant funding or any other federal funding sources. As a result, DOJ’s three granting agencies could take additional steps to increase their visibility over what applicants may already be receiving before awarding new funds.\nOJP, OVW, and the COPS Office have not established policies and procedures requiring consistent coordination and information sharing among its granting agencies. Having such policies and procedures would provide guidance to DOJ granting agencies to help ensure they take action to mitigate the risks of unnecessary duplication before finalizing award decisions. By routinely coordinating to ensure the sharing of grant applications and potential grant awards among DOJ granting agencies prior to finalizing grant award decisions and documenting its methods for doing so, DOJ could also improve its oversight and better leverage information already at its disposal.\nThe IG recommended in August 2003 that OJP and the COPS Office establish procedures to coordinate to ensure that grantees do not receive funds for the same purpose from both agencies.the COPS Office signed a memorandum of understanding to establish procedures for avoiding duplication by coordinating grants and grant programs that were identified by the IG and grant programs where the In response, OJP and potential for duplication exists. Further, the agencies committed to reviewing any new guidance affecting grants or grant programs where the potential for duplication exists. Specifically, for grants and grant programs identified as having potential for duplication, OJP and the COPS Office agreed to minimize potential duplicative grant awards in a manner consistent with statutory provisions, and include a grant award special condition requiring that grantees not use OJP and COPS Office grant funds to pay for the same expenses. During the course of our audit work, we asked COPS Office and OJP officials for examples of the type of coordination they have been engaging in since the IG’s recommendations. Officials provided evidence from fiscal year 2009, when they coordinated funding decisions with OJP prior to awarding grants for two similar grant programs funded under the Recovery Act.\nHowever, in some cases, granting agencies continue to provide funding for the same or similar purposes without each being aware of the others’ actions. Further, we examined grant special conditions for the COPS Office CSP program and OJP’s ICAC grant program and neither agency included special conditions in the grant awards requiring grantees to identify and report duplication. However, the 2010 COPS Child Sexual Predator Program Grant Owner’s Manual did include a requirement that grantees inform the COPS Office if they receive other funding for the same cost or service already funded by the COPS Office while their grant is underway. The Grant Manager’s Manual used by OJP lists grant award special conditions, and except for the duplication condition that specifically applies to CTAS, there were no other grant duplication special conditions listed.\nOfficials from OJP and the COPS Office told us that state and local communities have expansive criminal justice needs and therefore they encourage applicants to seek out as much DOJ grant funding as possible, including from grant programs that may have similar objectives or allow for similar activities. In some instances, DOJ may deem it appropriate for distinct grant programs to serve the same goal, or for one community or grantee to benefit from multiple streams of grant funding. For example, if DOJ granting officials are coordinating their activities across overlapping grant programs and are aware that a grantee is receiving funds from more than one DOJ program, making funding decisions of this kind may be warranted. However, DOJ’s granting agencies are not routinely engaging in such coordination. Unless DOJ improves granting agencies’ coordination, and considers information available on current, past, and prospective funding, it cannot know where all of its funding goes, how it is being or will be used, and whether it is awarding grant dollars in the most efficient way possible. Further, if the granting agencies are not aware of which recipients are receiving funds from multiple grants, they may be inadvertently awarding multiple grants that exceed the demonstrated need of a recipient or community at the expense of another applicant or community with similar demonstrated needs. In addition, they may be missing opportunities to award grants to recipients who may use funding in a complementary way, whereby funding may be leveraged by a grantee or a community to accomplish a single goal. With the exception of OVW’s plan to have four grant program recipients identify all federal funding they receive and OJP’s solicitation pilot and plan to have applicants identify duplicative cost items, DOJ does not have policies and procedures that require grant applicants to identify all sources of current or pending DOJ funding in their grant applications in a manner that provides DOJ a complete picture of DOJ grant project funding. If DOJ had (1) a coordinated approach to share applicants’ funding intentions, and (2) policies and procedures to share lists of applicants that each granting agency plans to fund, DOJ could improve its understanding in the pre- award phase as to whether its funding would complement or unnecessarily duplicate other federal funding.\nDOJ officials told us that the timeline for reviewing applications, making recommendations, and processing awards each year is compressed and that it would be difficult to build in the extra time and level of coordination required to complete an intradepartmental review for potentially unnecessary duplication of funding prior to making awards. The officials added that it would take even more time if granting agencies were to attempt a pre-award duplication review at the subgrantee level. Thus, officials told us that they rely upon post-award activities through grant monitoring, Single Grant Audits, and IG audits to determine if duplicative expenses have occurred after grants are under way. However, relying upon monitoring and external audits to identify duplication after it has occurred should not substitute for the mitigation of potential unnecessary duplication in the pre-award phase. We acknowledge that the time necessary to complete annual grant awards makes such a review process more difficult; however, actions to make coordination more consistent and efficient as well as the leveraging of grant award information, including subgrants, could help overcome this challenge. Moreover, using tools such as existing grant data available on USASpending.gov, which we address later in this report, could aid DOJ in validating other grant funding that grant applicants report and allow for an expedient way to search for subgrant funding. In addition, DOJ could limit its pre-award coordination to those grant programs that DOJ identifies as overlapping with other DOJ grant programs. For certain grant programs, OJP and OVW have taken important first steps to require grant applicants to report other sources of funding, but expanding this requirement to all grant programs across all granting agencies, such that every applicant would report both past and prospective sources of DOJ grant funding, could provide broader coverage and help DOJ better mitigate the risk of unnecessary duplication.",
"While OJP and OVW use a single grants management system called GMS, the COPS Office uses a separate grants management system— CMS—which limits the sharing of grant award information across the granting agencies. Specifically, OJP, OVW, and the COPS Office use GMS and CMS to track and manage awards throughout the grant life cycle. For example, agency grant staff in OJP, OVW, and the COPS Office use their grant management systems to review and approve applications and to plan and document grant monitoring activities. Grantees use the grant management systems to submit financial status reports that include summary information on grant expenditures and program income as well as progress or performance reports. DOJ has spent about $36 million from 2008 through 2010 to maintain and upgrade these two separate grants management systems, including about $8 million for CMS and $28 million for GMS.\nDOJ’s continued use of two systems to manage grant programs impedes coordination because GMS and CMS are not linked with each other, and the agencies’ access is limited to the grants management systems they utilize. OJP and OVW can access information through GMS about grants awarded by each other, but they cannot access CMS to see the grantees that have received COPS Office funds. As a result, these granting agencies cannot use these grants management systems to inform themselves of all of the funding DOJ has awarded or is preparing to award to a recipient and consider this information before making additional awards. According to an OJP official, over the long term, it would be helpful if GMS could connect to CMS. Pursuant to the statute establishing OAAM—the office overseeing programmatic grant monitoring and assessment across OJP and COPS Office programs—the Director of OAAM was required to establish and maintain a modern, automated system for managing all information relating to grants made under programs within its purview. grant management systems in the department.\nSee 42 U.S.C. § 3712h(g) (providing that the OAAM Director shall establish and maintain such a system in consultation with the chief information officer of the office). and monitoring, such as through remote access to CMS. The IG concluded that oversight agencies should have direct, instant, and complete access to grant information, which is not provided using the current system, which relies on hard copies of documents. In response, COPS Office officials reported that they would provide OJP with real-time hard copy reports necessary to carry out oversight work and that CMS could be accessed only by employees using remote access to the COPS Office or through a COPS Office laptop.\nDOJ contractors completed a gap analysis of CMS and GMS in 2006 to outline the differences—or gaps—between the two systems and propose solutions for reconciling them. At the time, the contractor found key gaps between the two systems related to business processes—in particular, programmatic grant monitoring, financial monitoring, and progress- reporting capabilities. Thus, the contractor recommended either building a new single grants system or maintaining the status quo because in the analysis, business process differences between OJP and the COPS Office were reportedly obstacles that made using either one of the two grants systems for both agencies untenable. Since 2007, OJP has upgraded GMS, which has closed some of the system gaps that the contractor initially identified, but the two systems remain distinct and unlinked.\nAccording to COPS Office officials, CMS continues to better meet their needs than GMS could because CMS captures and stores data in such a way that it can be more easily queried than data in GMS and CMS uniquely aligns with COPS Office grant processes. This is helpful to the officials when the COPS Office is evaluating grant applications for its largest program, the COPS Hiring Program. Rather than evaluating qualitative grant project narratives through external peer review, the COPS Office considers quantitative data related to applicant fiscal distress, reported crime statistics, and community policing strategies when determining where to award COPS Hiring Program grants. Because COPS Hiring Program grant applicants use CMS to upload their data, COPS officials are positioned to use CMS for automated aggregation and analysis of applicant responses.\nIn contrast, OJP officials said that because of recent upgrades, GMS could be used or modified in order to query individual searchable elements. They also stated that variation in the information required by individual grant programs would not present an insurmountable barrier to unifying systems. In addition, GMS has served multiple agencies in the past and can be modified when circumstances warrant. For example, in 2010 and 2011, COPS Office officials successfully used GMS for awarding purposes under CTAS. According to OJP officials, the initial coordination with the COPS Office for CTAS purposes required additional modifications to GMS, but these were not onerous or costly. The officials said that with relative ease, after the modifications, OJP, OVW, and COPS Office grant managers all accessed GMS to perform some of the phases of the CTAS grant process. For example, GMS supports the management of CTAS by storing all applications, managing peer review comments, and registering awards once decisions are final. Besides OVW’s use of GMS to award and manage its grants, the Department of Homeland Security’s (DHS) Federal Emergency Management Agency (FEMA) also uses GMS to award and manage grants, though it has future Further, OJP officials stated that plans to use a DHS grants system.GMS has a current storage capacity well in excess of what it currently uses. They also emphasized that OVW and FEMA have grant business processes that do not completely align with OJP’s, but with small investments, OJP has been able to adjust GMS to accommodate OVW and FEMA.\nIn June 2012, DOJ officials informed us they had engaged a contractor to assess whether a single grants management system, among a range of other options, can best serve DOJ’s granting agencies. They plan for the contractor to report back within 6 months of beginning the analysis and said that they envision the assessment including an evaluation of costs, benefits, and technical requirements, such as those needed to harmonize business processes. Engaging a contractor for this purpose is an important first step, and doing so could help DOJ make better investment decisions about the most efficient way to manage its grants systems, especially when it considers the costs and benefits of having fragmented grants systems. In the interim, however, DOJ could take a more immediate solution to foster information sharing across GMS and CMS by providing system access to appropriate OJP, OVW, and COPS Office staff—for example, through common login names and passwords, just as department staff have done in limited instances such as the CTAS Program.",
"DOJ’s granting agencies are not submitting grant award information to USASpending.gov in a timely way. In accordance with the Federal Funding and Transparency Act of 2006 (FFATA), USASpending.gov was created to increase the transparency and accountability for federal funding awarded through contracts, loans, grants, and other awards. OMB issued guidance on reporting the receipt and use of federal funds. OMB also launched USASpending.gov in December 2007 to allow the public to view federal spending and engaged the General Services Administration (GSA) to build and maintain USASpending.gov, among other FFATA-related websites.guidelines for agencies related to the requirement for prime grantees to report all subgrants over $25,000 in fiscal year 2011. The USASpending.gov website includes the subgrantees’ names, geographical locations of funded activities, specific subgrant amounts, and the funded purposes. A GSA official told us that the FFATA reporting infrastructure is the first time that comprehensive federal grant and subgrant information, including DOJ grant information, has been made widely available on a single website. Through the steps that granting agencies, as well as the grantees, take to supply this website’s content, the public and DOJ’s granting agencies can better track the flow of funds and identify communities receiving funds from multiple streams.\nIn August 2010, OMB established OMB’s FFATA guidance requires agencies to submit grant award data by the 5th of each month. USASpending.gov contains validation software used to validate agency data submissions, and if data are rejected, agencies receive automated notification. OMB guidance then requires agencies to resubmit the corrected data to USASpending.gov within 5 working days of the rejection notification. OJP manages submissions to USASpending.gov for all of DOJ—that is for OJP, OVW, and the COPS Office—and an OJP official reported that DOJ submits grant award information to USASpending.gov twice per month. However, more than a quarter of the grant award information that DOJ submitted to USASpending.gov in fiscal year 2011 was rejected and resubmission took Figure 3 illustrates the more than 80 days after the fiscal year ended.flow of grant award information from both DOJ and grantees and some issues we identified related to DOJ’s fiscal year 2011 reporting.\nAgency reporting of prime grant award information in USASpending.gov is a critical step in the FFATA reporting process because prime grantees cannot upload their subgrant award information until it occurs. For fiscal year 2011, DOJ submitted 4,346 distinct prime grant award records to USASpending.gov; however, GSA rejected 1,152 of these because of incomplete or inaccurate data associated with some of these grant files, and DOJ did not resubmit the records within 5 working days as required under OMB guidance. Specifically, DOJ did not correct and resubmit the rejected records until December 22, 2011, which was after we raised this issue with DOJ and 83 days after the end of the fiscal year. Five out of 11 DOJ prime grantees we interviewed who had awarded subgrants indicated that, after searching, they could not view their prime DOJ grant awards on FSRS.gov or USASpending.gov and indicated that DOJ had not uploaded the information to the websites. Further, another prime grantee among the 11 with whom we spoke indicated that it was unaware that subgrant reporting was a requirement. As a result, these prime grantees were unable to submit their subgrant award information and thus were unable to comply with OMB subgrant reporting requirements. DOJ has taken action to help ensure that prime grantees and DOJ grants staff are aware of FFATA reporting requirements. For example, OJP offered FFATA reporting training for all DOJ grants staff and grantees, and all three granting agencies required a special condition in grant awards that included FFATA reporting requirements. These steps may have informed grantees of their FFATA responsibilities, but DOJ’s untimely submission of grant award information to USASpending.gov led to prime grantees being unable to access their grant awards to submit their subgrant award information as required by OMB.\nOJP officials stated that since 2007 they have been coordinating with OMB, other federal agencies, and contractors on issues related to reporting guidelines and other technical requirements related to subgrant reporting, but that it was not until August 2010 that OMB established guidelines for the collection and reporting of subgrant information. Nevertheless, OJP officials stated that the current allotment of 5 days for agencies to review and resubmit data that GSA originally rejected is an unreasonable time frame given the time-intensive nature of checking and correcting errors. Officials also noted that OJP would like to see GSA allow for the posting of individual records that pass system validation rather than waiting for entire blocks to be corrected at once before GSA will post award information to USASpending.gov. In addition, OJP officials indicated that the information prime grantees ultimately posted about their subgrantees was limited and in most cases very brief. As a result, the officials said they were not considering such information before making new awards.\nWe recognize that 5 days may not be adequate to correct errors in grant award information, but we also believe that timely submission of grant award information on USASpending.gov is key to transparency and the overall utility of the system for grant decision makers, the criminal justice community, Congress, and taxpayers. By DOJ ensuring that it submits its grant award information to USASpending.gov in as timely a manner as is possible, prime grantees’ abilities to report their subgrant activities would likely improve. As a result, DOJ could have greater visibility over which subgrantees were using its money and for what purposes before DOJ makes its grant award decisions. Further, even if DOJ does not believe that the information that prime grantees ultimately post about their subgrantees is ideally descriptive in every instance, the information could provide DOJ with important details—that it currently does not consider or otherwise have access to before finalizing award decisions—related to how subgrantees are using their funds.",
"",
"The statute establishing OAAM tasked the OAAM Director with selecting and carrying out program assessments of not less than 10 percent of the aggregate amount of grant funding awarded annually by OJP, the COPS Office, and any other grant programs carried out by DOJ that the Attorney OAAM officials told us that to meet the General considers appropriate.directive to conduct program assessments, and in recognition of its own resource constraints, OAAM relies on the programmatic grant monitoring that OJP’s and the COPS Office’s grant staff already conduct. To oversee and track these monitoring efforts, OAAM develops and implements standards and protocols, including a framework and methodology for OAAM also tracks OJP’s systematically identifying high-risk grantees.and the COPS Office’s monitoring progress and compares it against an established annual monitoring plan. For example, in its fiscal year 2010 annual report—the latest available—on both OJP and the COPS Office’s monitoring goals and activities, OAAM found that both offices exceeded their goals of monitoring 10 percent of total award funding. OJP monitored 1,447 grantees with awards totaling $3.05 billion, and the COPS Office monitored 185 grantees with awards totaling $234.74 million. In addition to overseeing monitoring activities, OAAM also conducts program assessments of OJP and COPS Office grant programs. OAAM considers monitoring—and its oversight of it—as responsive to its originating statute’s intent, but it also recognizes that assessments have utility and serve a separate but important function in helping the office improve grant management. Table 4 illustrates the distinction between OJP’s and the COPS Office’s monitoring and OAAM’s assessment functions.\nIn general, both monitoring and assessment are important and complementary tools for grant oversight. Nevertheless, we found that OAAM’s program assessments yield richer information to enhance grant programs than either OJP’s or the COPS Office’s individual monitoring reports or the summary reports that OAAM’s Program Assessment Division (PAD) compiles because the program assessments are more analytical and broader in perspective. OAAM’s PAD Standard Operating Procedures define a program assessment as “a systematic review and evaluation of programs to gauge effectiveness, identify promising practices, document impediments, and when necessary, make recommendations for improvement.” OAAM reported to us that from 2008 through mid-February, 2012, its staff had produced 28 products; however, when we reviewed the 28, we found that 7 met OAAM’s definition for a program assessment.assessment report on the COPS Office Methamphetamine Initiative. In 2011, it completed one on BJA payment programs, and in 2010, it assessed the ICAC Training and Technical Assistance Program. The other 21 publications were user guides; summaries of monitoring reports, such as those described earlier; or Recovery Act risk indicator reports, which identify potentially high-risk grantees so that the program offices can work with those grantees to resolve issues and prevent potential problems. According to OJP, all of OAAM’s publications contribute to improving OJP’s grant programs and operations by strengthening internal controls, streamlining processes to be more efficient, or reporting on how well programs and policies are meeting their objectives.\nFor example, in 2012, OAAM completed an Of the 7 publications meeting OAAM’s definition for program assessments, 2 reviewed a single aspect of the grant cycle—program awarding—within a particular grant program rather than the grant program overall.thorough review of the extent to which a grant program is meeting its intended purpose. Moreover, each recommended specific actions to address identified program deficiencies, and implementation of these recommendations has helped DOJ enhance its grant programs. For example, the 2010 ICAC assessment report contained 11 recommendations related to the collection and use of performance measurement data, financial management, fair and open competition for awards, and improving grant management and oversight. In our review of the six monitoring reports that the ICAC grant manager completed for the ICAC program’s sole grantee, there was no mention of the same deficiencies. In particular, none of the six monitoring reports identified the unallowable costs, conflict of interest, or inadequate oversight and documentation of grant activity that the OAAM assessment report identified. Instead, the monitoring reports showed that the grantee was progressing as expected on implementation of the program, and was on schedule with no problems noted.\nNevertheless, all 7 were based on a much more OAAM also assessed BJA’s payment programs, which otherwise are not subject to BJA grant monitoring. In the November 2011 report, OAAM assessed the processes that BJA used to verify the eligibility and accuracy of reimbursement requests submitted by grantees. The assessment concluded that BJA is administering its payment programs appropriately to verify the eligibility and accuracy of payments, but it also determined that additional internal controls were necessary and that procedures were not sufficient to identify duplicate payment requests from grantees. As a result of the assessment, OAAM made six recommendations to BJA, including implementing additional procedures to identify duplicate requests for payments of detention expenses. In particular, one of OAAM’s recommendations was that BJA implement a process to identify overlapping requests for reimbursement between two of the programs for expenses related to detention of criminal aliens. In response, BJA compared all of those programs’ applications for reimbursement for fiscal year 2011 to identify whether jurisdictions were requesting reimbursement for the detention of the same individuals over the same period of time. BJA’s review led to the removal of approximately $5.8 million in requests for reimbursement prior to generating the final reimbursement awards.\nStandards for Internal Control in the Federal Government calls for managers to compare actual performance with planned or expected results throughout the organization and analyze significant differences. These standards also identify that program managers need both operational and financial data to determine whether they are meeting their agencies’ strategic and annual performance plans and meeting their goals for accountability for effective and efficient use of resources. The programmatic grant monitoring reports that each of the granting agencies compile contribute to meeting these standards at the grantee level by tracking the progress and, when necessary, providing assistance to individual grant recipients. OAAM’s summaries of these reports then roll up the statistics and ensure the compliance monitoring occurs as required. However, OAAM’s program assessments are more comprehensive than both the individual grant monitoring reports and the summary reports OAAM prepares because their broader perspective allows for reporting on program successes, impediments, and potential areas for improvement. While monitoring 10 percent or more of the aggregate amount of grant funding awarded annually is important and beneficial to the grant management process, the 7 program assessment reports that OAAM has issued since 2008 have led to more than 50 recommendations for the improvement of OJP and COPS Office grant programs.\nAccording to OAAM officials, additional program assessments would be beneficial; however, they told us that OAAM does not have sufficient resources to conduct more. They said that conducting program assessments on 10 percent of the aggregate amount of grant funds awarded annually would not be possible given current resources, but they also noted that the department has not conducted a feasibility analysis that considers the costs and benefits of having OAAM conduct assessments on a larger number of grant programs. Further, OJP officials stated that since the establishment of OAAM, the administration has never requested, and the department has not received, the full amount authorized for appropriation under OAAM’s governing statute. DOJ officials did not explain the rationale for the administration’s budget proposals and officials did not report any plans to increase OAAM’s resources. As of December 2011, out of a total of 49 staff (26 federal staff authorized by DOJ and 23 contractors) spread across OAAM’s three divisions, OAAM had 8 staff (5 federal staff authorized by DOJ and 3 contractors)—or less than 20 percent—in its PAD dedicated to performing program assessments in addition to overseeing OJP and COPS Office programmatic monitoring. OAAM also has 18 staff (10 federal staff authorized by DOJ and 8 contractors)—or more than 30 percent— working in its Audit and Review Division to coordinate IG, GAO, and Single Grant Audit resolutions, and to conduct A-123 reviews—activities that are not specifically addressed in OAAM’s authorizing statute. Appendix V contains further discussion of the different activities of OAAM’s three divisions. Because DOJ considers its resources to be limited, it is important that OAAM’s resources be used as efficiently as possible to maximize the investment in grant programs. Thus, given the different roles that grant monitoring and program assessment play in assessing the overall effectiveness of grant programs, considering whether it employs an appropriate mix of monitoring and program assessments could aid DOJ in awarding grant funds in the most efficient and effective way possible.",
"Consistent with the 2000 reauthorization of the Violence Against Women Act, the Attorney General submits a biennial report to Congress on the effectiveness of VAWA-funded grant programs. OVW uses the VAWA Measuring Effectiveness Initiative, conducted under a noncompetitive cooperative agreement with a university to develop and implement reporting tools, as the primary way it meets statutory requirements to report on the effectiveness of VAWA-funded programs. Staff from the university also provide data collection training to grantees to ensure that they use the forms and database properly, and then use the information collected to summarize grantee performance in semiannual summary data reports. The results of this initiative are summary data reports that university staff compile from the semiannual or annual progress reports that grantees submit to OVW. OVW then uses these summaries to meet biennial reporting requirements for its discretionary grant programs under VAWA and, for example, the Services, Training, Officers, Prosecutors (STOP) Violence Against Women Formula Grant Program (STOP Program). The STOP Program promotes a coordinated, multidisciplinary approach to improving the criminal justice system’s response to violent crimes against women and increasing the availability of victim services.\nOVW’s biennial reports are composed of three main components: a literature review of research showing (where available) the effectiveness of grant-funded activities and (when such research is not available) information on promising or best practices in the field of victims services; a summary of performance measure data, such as the number of grant-funded staff, the number of people trained, and the number of victims/survivors seeking services that are served, partially served, and not served, as reported by the grantees to OVW through OJP’s GMS; and anecdotal evidence from grantees on the benefit of what they are able to do with grant funds.\nThe statute establishing OAAM did not give it oversight authority for OVW programs. Provisions in the authorizing statute, however, provide the Attorney General with discretion to expand OAAM’s scope beyond OJP and COPS Office programs, which the Attorney General has not undertaken. As a result, while OVW uses its data collection and analysis to report on grant program effectiveness, in accordance with the VAWA requirement, by providing information on activities carried out with grant funds and the number of persons served using those funds, it does not benefit from the monitoring oversight and grant program assessments that OAAM provides. Such assessments could provide OVW with more substantive information on its grant programs.\nTable 5 contains a comparison of the analytical approaches that OVW uses when it reports to Congress on the effectiveness of its grant programs against those that OAAM uses in its program assessments. On the basis of a review of seven OVW reports and seven OAAM grant program assessment reports, we found that OVW’s reports contain less analysis than the OAAM reports do. Specifically, these OVW reports summarized performance measurement data rather than analyzed it. Further, these OVW reports did not address grant program operations and management. OAAM, in contrast, used more varied approaches to analyze grant programs, which provided information on both grant program performance and operations, identified areas for improvement, and resulted in specific recommendations to OJP’s bureaus and program offices, and the COPS Office.\nUnlike the OAAM analysts who conduct assessments of OJP and COPS Office grant programs, the university staff responsible for the Measuring Effectiveness Initiative do not have access to grant program financial data or OVW grant monitoring reports. Additionally, university staff involved in the initiative do not conduct site visits to validate the data provided by grant recipients and the work they perform. Instead, OVW staff in each program area review the results of the biennial reports and the semiannual summary data reports compiled from grantee progress reports to identify priority areas where there is an unmet need. The OVW reports contain sections on “remaining areas of need” identified by grant recipients. However, the areas of need that OVW identified are based on comments grant recipients provided on gaps in service, rather than being based on an independent assessment that OVW conducted on the overall grant programs. Moreover, unlike the grant program assessments that OAAM conducts, beyond identifying areas of need, the biennial reports do not result in concrete recommendations for improving OVW’s grant programs. OVW officials told us that for the upcoming 2012 biennial report, they plan to focus more attention to the discussion of remaining areas of need.\nAccording to OVW’s 2010 Biennial Report to Congress on the Effectiveness of Grant Programs Under the Violence Against Women Act, demonstrating the effectiveness of services provided by agencies funded under OVW presents a challenge for those charged with meeting the reporting mandate of VAWA 2000. An OVW official told us that it is difficult to discern between output and outcomes when dealing with the grant programs in OVW and that it is difficult to measure outcomes with service grant programs. For example, OVW might consider whether an abuse victim not only gets a protective order but also receives additional services. Additionally, according to OVW officials, it would be difficult to track how many victims received different types of services in multiple areas, because OVW service provider grantees only track the first instance in which a victim receives services and do not follow up on related services.\nAccording to the federal Domestic Working Group Grant Accountability Project’s Guide to Opportunities for Improving Grant Accountability, agencies need a process for managing performance once grants are awarded, and the ability to assess grant results and use those results when awarding future grants. The Working Group identified engaging outside experts to assess program performance, inspecting projects after completion, and conducting evaluations to identify factors affecting results among its promising practices to improve program performance. These activities are not part of OVW’s current approach to program oversight.\nOVW conducts its grant program monitoring as well as IG audit follow-up. Additionally, OVW has a Grant Assessment Tool (GAT)—designed by the same company that produced the GAT for OJP.conducts Single Audit follow-ups; manages the high-risk grantee list; and oversees DOJ’s combined programmatic and financial monitoring plan, which is the combined monitoring list of all the sites that OJP, OVW, and the COPS Office plan to visit for the year. In a March 2011 audit, the IG found that OVW and the COPS Office perform certain monitoring and oversight services that are duplicative of the services available through OJP and recommended that DOJ standardize the oversight services OAAM currently provided to OVW and the COPS Office to eliminate such duplication and provide uniformity in oversight among DOJ granting agencies. OAAM provides certain administrative services that facilitate grant program management, but DOJ officials told us the reason OAAM does not have oversight over OVW is because the Attorney General has not extended OAAM’s purview. OJP officials told us that they have not been provided the scope of work that OVW oversight may encompass and, as such, OAAM has not conducted any analyses using a workforce model to determine the staffing levels, associated resources, and other possible impacts (i.e., costs and benefits) of having OVW under its purview on OAAM operations.\nOVW officials expressed concern that OAAM staff would not have any expertise in violence against women issues. However, OAAM currently has oversight over specialized bureaus and offices such as the Office for Victims of Crime and the Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking. Additionally, OVW officials stated that OAAM does not perform data collection and analysis activities, which are the primary activities of the Measuring Effectiveness Initiative. However, as a part of its assessments, OAAM has collected performance measures and conducted analysis. For example, in its assessment of the ICAC Training and Technical Assistance Program, OAAM collected and analyzed national performance metrics related to training. Given the nature of OAAM assessments, along with the other oversight services it provides to OJP and the COPS Office, the information resulting from OAAM assessments of OVW grant programs could better inform OVW about its grant programs and funding to assist with future program design and award decisions while also providing Congress with a more complete picture on the effectiveness of programs funded under VAWA. Accordingly, DOJ could benefit from assessing the feasibility, costs, and benefits of OAAM providing grant program assessments for OVW.",
"The statutory design of DOJ’s grant programs has contributed to overlap across a number of justice areas. We recognize that even when programs overlap, there may be meaningful differences in their eligibility criteria or objectives, or they may be providing similar types of services in different ways. We also recognize that a number of grant programs are formula- driven and therefore grantees’ eligibility is predetermined. However, because DOJ exercises independent judgment when making discretionary awards and therefore has full responsibility for how it conducts its pre-award reviews, it will be important for the department to maximize visibility over how grantees plan to spend the funds they receive from multiple funding streams. In some instances, DOJ may deem it appropriate for large numbers of distinct grant programs to serve one goal, or for the same communities to benefit from multiple streams of its grant funding. In these cases, duplication may be warranted. However, because we found routine coordination and consistent policies and procedures for sharing information across the granting agencies during DOJ’s pre-award phase limited, we do not believe DOJ knows with certainty if such duplication is always necessary.\nDOJ’s three granting agencies have taken some steps to coordinate their grant-related activities and have sought congressional approval in some instances for grant program consolidation. Further, they have initiated other, limited actions to ensure that grantees report additional streams of funding. However, DOJ limits its view of duplication to instances where grant applicants apply for and receive multiple streams of funding, including DOJ funding, to support single costs associated with a single grant project. Using this definition, DOJ believes that any unnecessary duplication can be identified through monitoring grantees post-award. We take a broader view of duplication and consider it potentially unnecessary when DOJ is unaware that grantees have applied for and are receiving funding for potentially the very same or similar purposes. Therefore, we believe it is incumbent that DOJ take steps in the pre-award phase to make purposeful judgments about funding necessity before finalizing the awards. Doing so would help the department better mitigate this risk for potential, unnecessary duplication. Specifically, by conducting a broad examination of all DOJ grant programs to systematically identify justice areas for which funding overlaps, DOJ would have greater visibility over how its funding can be used and whether it is awarding grant dollars in the most efficient way possible. Further, developing and implementing policies and procedures to require granting agencies to routinely share and consider information each may have about past or prospective grantee funding could provide DOJ with more strategic visibility over its awarding decisions. In addition, requiring all grantees to report current or prospective federal funding sources when applying for DOJ grants could provide DOJ with more information to better target its limited financial resources before it finalizes new grant awards.\nAdditionally, by taking interim steps to expand access to the two distinct grant management systems—CMS and GMS—DOJ could better ensure that grant managers and decision makers can leverage all existing tools while a longer-term study to consider the feasibility, costs, and benefits of potential options for DOJ grant management systems is underway. Such options could include unifying the systems, creating a DOJ-wide system, or using off-the-shelf software to bridge information gaps. Related, DOJ can have greater confidence that any variation in how the granting agencies are currently managing their portfolios does not hinder any potential unification by ensuring that its planned study include an assessment of the steps needed to harmonize DOJ grant processes. Further, with additional steps to ensure that DOJ is submitting grant award information to USASpending.gov in the most timely manner possible, the department could facilitate prime grantees’ uploading of information on subgrantees’ use of funds and therefore make the website a more useful resource to DOJ’s own grant decision makers. Finally, recognizing the value of OAAM’s role, assessing whether the office relies on an appropriate mix of programmatic grant monitoring and program assessment—as well as considering expansion of OAAM’s coverage to include OVW—could improve the overall operation of grant programs departmentwide.",
"To ensure that DOJ can identify overlapping grant programs to either consolidate or coordinate similar programs, mitigate the risk of unnecessary grant award duplication in its programs, and enhance DOJ’s ability to gauge grant program effectiveness, we recommend that the Attorney General take the following eight actions: 1. Conduct an assessment to better understand the extent to which the department’s grant programs overlap with one another and determine if grant programs may be consolidated to mitigate the risk of unnecessary duplication. To the extent that DOJ identifies any statutory obstacles to consolidating its grant programs, it should work with Congress to address them, as needed. 2. Coordinate within and among granting agencies on a consistent basis to review potential or recent grant awards from grant programs that DOJ identifies as overlapping, including subgrant awards reported by prime grant awardees, to the extent possible, before awarding grants. DOJ should also take steps to establish written policies and procedures to govern this coordination and help ensure that it occurs. 3. Require its grant applicants to report all federal grant funding, including all DOJ funding, that they are currently receiving or have recently applied for in their grant applications. 4. Provide appropriate OJP and COPS Office staff with access to both GMS and CMS and appropriate OVW staff with access to CMS. 5. As part of DOJ’s evaluation of its grant management systems, DOJ should ensure that it assesses the feasibility, costs, and benefits of moving to a single grants management system, including the steps needed to harmonize DOJ grant processes, so that any variation in how the granting agencies manage their portfolios is not an encumbrance to potential system unification. 6. Ensure the most timely reporting possible of grant award information to USASpending.gov according to OMB guidelines, which would enable its grantees to comply with their reporting responsibilities according to the same guidelines. 7. Assess whether OAAM relies on an appropriate mix of programmatic grant monitoring and program assessment, and determine whether the office could support additional program assessments. 8. Assess the feasibility, costs, and benefits of OAAM providing assessments for OVW, in addition to OJP and the COPS Office. If DOJ determines that OAAM assessments of OVW grant programs would be more cost-effective and provide greater insight into the effectiveness of OVW grant programs than OVW’s current approach, then the Attorney General should extend OAAM’s oversight to include OVW.",
"We provided a draft of this report to DOJ for comment. DOJ provided written comments, which are reproduced in full in appendix VI, and concurred with all eight of the recommendations. DOJ also described actions it has underway or plans to take to address the recommendations.\nDOJ agreed with the first recommendation that it conduct an assessment to better understand the extent to which the department’s grant programs overlap with one another. DOJ stated it will explore options for carrying out such an assessment in an effort to reduce the risk associated with unnecessary or inappropriate program duplication. For example, DOJ stated it is considering tasking OAAM to conduct such an assessment. Since DOJ is developing options for how it will implement this recommendation, it is too soon to know what specific actions DOJ will take, when they will be completed, and whether they will fully address the intent of the recommendation.\nDOJ agreed with the second recommendation that it coordinate within and among granting agencies, to the extent possible, before awarding grants. DOJ stated that its grant-making agencies will continue to closely collaborate and share information prior to making grant awards. DOJ also stated it plans to use the results of the assessment referenced in the first recommendation to develop a targeted and strategic approach for reviewing grant applications during the pre- award process. Since DOJ is considering how it will implement this recommendation, it is too soon to know what specific actions DOJ will take, when they will be completed, and whether they will fully address the intent of the recommendation.\nDOJ agreed with the third recommendation that DOJ require its grant applicants to report all federal grant funding, including all DOJ funding, that they are currently receiving or have recently applied for in their grant applications. DOJ stated it plans to use a risk-based approach to implement this recommendation, using the results from its assessment in response to the first recommendation. This is a positive step toward ensuring that DOJ has a more complete picture of an applicant’s access to other federal funding. However, since DOJ has not yet developed its approach, it is too soon to tell whether DOJ’s actions will address the intent of the recommendation.\nDOJ agreed with the fourth recommendation that DOJ provide appropriate OJP and COPS Office staff with access to both GMS and CMS and appropriate OVW staff with access to CMS. DOJ noted that OJP will provide read-only GMS access to COPS Office staff and that the COPS Office will provide reports to OJP and OVW from CMS, given the technological barriers to providing external system access. These actions, when implemented, should address the intent of this recommendation.\nDOJ agreed with the fifth recommendation that as part of its evaluation of its grant management systems, DOJ should ensure it assesses the feasibility, costs, and benefits of moving to a single grants management system. DOJ stated that it had initiated such a study and plans to complete it within the next six months. When effectively completed, this study, along with any actions taken to implement its findings, should address the intent of this recommendation.\nDOJ agreed with the sixth recommendation that DOJ ensure the most timely reporting possible of grant award information to USASpending.gov. DOJ committed to doing its best to ensure timely reporting, but did not provide specific actions or plans to address the intent of the recommendation.\nDOJ agreed with the seventh recommendation that DOJ assess whether OAAM relies on an appropriate mix of programmatic grant monitoring and program assessment, and whether the office could support additional program assessments. DOJ stated that additional program assessments would be beneficial and contribute to the improvement of grant programs and operations. DOJ also stated it would explore ways to conduct more program assessments, but did not provide specific actions or plans to address the intent of the recommendation.\nDOJ agreed with the eighth recommendation that DOJ assess the feasibility, costs, and benefits of OAAM providing assessments for OVW, in addition to OJP and the COPS Office. DOJ stated that discussions have been initiated between OAAM and OVW related to this recommendation. This is a positive first step, but it is too soon to know whether the results of these discussions and any resulting potential future actions will address the intent of the recommendation.\nIn addition, DOJ raised concerns about the methodology we used to identify overlap in DOJ’s fiscal year 2010 grant program solicitations across 10 broad justice themes. DOJ stated that our analysis of potential overlap between DOJ funding solicitations substantially overstated the number of programs that might be duplicative. DOJ commented that the table we used to show the overlap was an indication that DOJ was involved in “wasteful duplication.” Our analysis, as summarized in table 2 of this report, demonstrates overlap in the justice areas that DOJ’s grant programs aim to support. Having several overlapping grant programs within individual justice areas requires greater visibility and pre-award coordination on the part of DOJ to diminish the risk of unnecessary duplication at the grant project level. As such, our analysis does not, on its own, indicate unnecessary duplication among DOJ grant programs, but instead identifies the potential risk of unnecessary duplication. Implementing the recommendations in this report that DOJ assess grant program overlap and coordinate grant award decisions will help DOJ identify areas of overlap and mitigate the risk of unnecessary duplication in grants. DOJ also considered the categories we developed for our analysis such as “community crime prevention strategies” as too broad and exclusive of specialized programs such as community policing. We developed our 10 broad justice areas based mainly on programmatic information contained on DOJ granting agency websites and other DOJ literature and believe they fairly demonstrate overlap among DOJ’s various grant programs. We recognize that the more detailed analysis we recommended and DOJ agreed to undertake is necessary to determine the extent of any unnecessary duplication.\nDOJ also commented that our sample size of grant applications was too small in number and was not generalizable. As discussed in this report, our sample size was not intended to be generalizable across the entire scope of DOJ grant program awards, but instead was meant to illustrate the potential for unnecessary duplication. DOJ further commented that their investigation of the examples of unnecessary duplication we provided proved that no duplication actually existed in the grant programs. DOJ conducted its review after we provided our examples and focused on how grantees were using the funds they had received. Our analysis of potential duplication focused on grant applications—how applicants proposed to spend federal grant dollars—and not on the verification of activities grantees carried out once DOJ funded them. DOJ’s plans to improve pre-award coordination are positive steps and we believe that by doing so, DOJ will be better positioned to make better informed decisions about the financial needs of grantees and communities for their proposed projects.\nFinally, DOJ expressed concern that the report implies that DOJ is not tracking subgrantees’ activities. Our analysis focused on pre-award coordination, not DOJ’s efforts to track subgrantee activities. As such, we recommended that DOJ use the subgrant award information it does have to help inform DOJ’s grant award decision making. We believe that subgrant award information could provide DOJ decision makers with a more complete financial picture of applicants and the projects they propose to be funded by DOJ.\nWe are sending copies of this report to the Attorney General, selected congressional committees, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-9627 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix VII.",
"This report answers the following questions: (1) To what extent does overlap across Department of Justice (DOJ) grant programs exist and contribute to the risk of unnecessary duplication in grant awards? (2) To what extent has DOJ taken steps to reduce overlap in its grant programs and the potential for unnecessary duplication in grant awards? (3) To what extent does DOJ use programmatic grant monitoring and assessment to determine grant program effectiveness and use the results to enhance its grant programs?\nTo examine the extent to which overlap across DOJ grant programs exists, we identified the total number of DOJ grant solicitations for fiscal year 2010. To do this, we reviewed the lists posted on the Office of Justice Programs (OJP), Office on Violence Against Women (OWV), and Community Oriented Policing Services (COPS) Office websites and confirmed the currency of the information with DOJ officials. To determine whether these solicitations were announcing grant funding available for similar or overlapping purposes, we first established 10 categories of criminal justice areas. We developed these 10 categories after reviewing comparable justice areas identified within OJP’s CrimeSolutions.gov website, which OJP officials stated includes themes addressed through OVW and COPS Office programs; OJP’s Fiscal Year 2010 Program Plan; and other materials from OVW and the COPS Office, such as justice program themes from their respective websites. Next, through analyst consensus, we sorted the grant solicitations according to the 10 justice categories. After identifying solicitations with similar scopes, we then reviewed 26 successful grant applications that were awarded under similar solicitations to identify and assess specific examples of how the recipients planned to use funds from multiple programs in the same or similar manner. The sample we reviewed is not generalizable to all DOJ grant programs because we did not review all of the more than 11,000 grant applications that DOJ funded in fiscal year 2011, but it illustrates the potential for unnecessary duplication. To determine if DOJ could take more action to avoid program overlap that can lead to unnecessary duplication, we applied the Domestic Working Group Grant Accountability Project’s Guide to Opportunities for Improving Grant Accountability.\nTo examine the extent to which DOJ has taken steps to reduce overlap in its grant programs and the potential for unnecessary duplication in grant awards, we reviewed agency policies, procedures, and guidance on grant program design and award, such as the COPS Office Program Development Team charter and template, and the OJP Grant Manager’s Manual. Further, we interviewed DOJ officials from the three granting agencies to obtain additional information on grant program design and award processes, and the extent to which the three agencies coordinate and share information. We also visited or conducted phone interviews with officials from 11 states, including the five largest and five smallest state recipients of Edward Byrne Memorial Justice Assistance Grant (JAG) funding. These officials represent the state administering agencies (SAA) responsible for distributing JAG and other DOJ formula block grant funds to subrecipients in California, Florida, New York, North Dakota, Pennsylvania, South Dakota, Rhode Island, Tennessee, Texas, Vermont, and Wyoming. These officials provided their views regarding the type and timeliness of information on grant awards and subawards they provide to and receive from DOJ. We selected these 11 states based on the amount of JAG funding they receive and the existence of other recipients in their communities receiving DOJ discretionary grants for potentially similar purposes. The results of these contacts are not generalizable to all states, but provided insight into how DOJ grant funds are used locally and into the communication between states and DOJ. To determine if JAG recipients expended grant funds in fiscal year 2010 on sexual assault services, bullet and stab-resistant vests, sex offender registry and notification systems, Internet crime against children task forces, hiring police officers, and correctional officer salaries, we conducted a web- based survey of all recipients of DOJ JAG grant funding who received an award from fiscal years 2005 through 2010. The survey response rate related to SAAs was 89 percent, with 50 out of 56 SAAs answering the questionnaire. We compared agency grant design and award practices against Standards for Internal Control in the Federal Government and promising practices identified in the Domestic Working Group Grant Accountability Project’s Guide to Opportunities for Improving Grant Accountability.\nTo analyze the extent to which DOJ uses programmatic grant monitoring and assessment to determine grant program effectiveness and uses the results to enhance its grant programs, we analyzed DOJ documentation, such as assessments DOJ conducted of its own programs and specific programmatic grant monitoring reports. We also interviewed DOJ officials from the granting agencies, including those tasked with assessment, as well as contractors responsible for assessing grant programs for OVW. This report focuses solely on the types of assessment conducted by DOJ granting agencies on its grant programs. Training and technical assistance provided by the department and its program offices and bureaus to grantees to support the evaluation of individual grant projects, such as the Bureau of Justice Assistance (BJA) Center for Program Evaluation and Performance Measurement, is not included in this report. Also excluded from this report are the outcome evaluations of the impact of grant programs such as those funded by the National Institute of Justice (NIJ).",
"",
"OVW Following the enactment of the Violence Against Women Act of 1994, the department established the Violence Against Women Office, which later became OVW under OJP. OVW now functions as a separate and distinct office within DOJ and is headed by a presidentially appointed, Senate- confirmed Director.\nCOPS Office The Attorney General established the COPS Office in October 1994 to administer community policing grants authorized under the Violent Crime Control and Law Enforcement Act of 1994. The Attorney General appoints a Director to head the COPS Office.\nBureau of Justice Assistance Bureau of Justice Statistics\nNational Institute of Justice\nOffice of Juvenile Justice\nOffice for Victims of Crime\nOffice of Sex Offender Sentencing, Monitoring, Apprehending, Registering and Tracking OJP provides grants to various organizations, including state and local governments, universities, and private foundations, which are intended to develop the nation’s capacity to prevent and control crime, administer justice, and assist crime victims.\nOVW administers financial and technical assistance to local, state, and tribal governments; courts; nonprofit organizations; community-based organizations; secondary schools; institutions of higher education; and state and tribal coalitions. OVW provides grants for developing programs, policies, and practices aimed at ending domestic violence, dating violence, sexual assault, and stalking.\nThe COPS Office provides grants to and shares information with the state, local, territory, and tribal law enforcement agencies to advance community policing.\nFrom fiscal years 2005 to 2012, OJP received approximately $24 billion for OJP grant programs. In 2010, almost 3 billion was available to OJP to fund grants, and OJP issued 223 solicitations for grants.ª According to OJP, it awarded nearly 5,000 grants in 2010.\nFrom fiscal years 2005 to 2012, OVW received approximately $3.4 billion for OVW grant programs. In 2010, OVW received $418.5 million for OVW grant programs, and OVW issued 19 solicitations for grants.\nFrom fiscal years 2005 to 2012, the COPS Office received approximately $5.3 billion to fund COPS Office grant programs. In 2010, the COPS Office received $791.6 million to fund COPS Office grants, and the COPS Office issued nine solicitations for grants.\nSolicitations are announcements of new grant funding available and explain areas for which funding can be used. These numbers reflect solicitations provided by each individual office and do not reflect any joint solicitations, which are those offered in tandem with other program offices, either within or external to DOJ (e.g., other DOJ components or federal agencies).",
"According to DOJ officials, there are three ways in which DOJ grant programs can be merged or better coordinated—through consolidation, braiding, and blending. Figures 4,5, and 6 explain these mechanisms.",
"",
"coordinates audits, such as Single Audits that independent nongovernmental auditors conduct, as well as those that the Inspector General (IG) and GAO conduct, reviews internal control processes (A-123), and manages DOJ’s High Risk Grantee Program, which applies criteria to identify grantees most at risk of fraud, waste, or abuse in use of their grant funds.",
"oversees OJP and COPS Office programmatic monitoring, including development and implementation of standards and protocols, and assesses grant programs and initiatives of OJP and the COPS Office, as well as operational activities.",
"serves as the primary resource for OJP grants management policies and procedures by producing authoritative guidance, develops and facilitates grants related training to staff and grantees, manages Grants Management System (GMS) and other tools and facilitates OJP’s business process improvement efforts.",
"",
"",
"",
"In addition to the contact named above, Joy Booth, Assistant Director, and Christian Montz, Analyst-in-Charge, managed this assignment. Julie E. Silvers, Marya Link, Caitlin Carlberg, and Michael Sweet made significant contributions to the work. Michele Fejfar assisted with design and methodology. Janet Temko and Tom Lombardi provided legal support. Lara Miklozek provided assistance in report preparation."
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{
"question": [
"What is the result of the DOJ's overlapping grant programs?",
"What did GAO find in their review?",
"What instances did GAO find where applicants got funding from overlapping programs?",
"Why are overlapping grant programs generally bad for the DOJ?",
"How has DOJ addressed overlap in its grant programs?",
"How would DOJ benefit from conducting an assessment of its grant programs?",
"How does OJP and OVW using separate grant management systems from COPS affect the overlap in grants awarded?",
"What is COPS's justification for using a separate system?",
"What is the purpose of the study DOJ has initiated?",
"What effects could the study have?",
"What is the purpose of DOJ's Office of Audit, Assessment, and Management?",
"Why do OAAM's program assessments yield richer information than its monitoring reports?",
"What have OAAM officials said about additional assessments?",
"How can OAAM ensure continuous improvement in grant programs?",
"Why has $33 billion been appropriated to DOJ?",
"What does the report address?",
"What steps did GAO take to assess DOJ?",
"What information did the interviews that GAO conducted provide?"
],
"summary": [
"The Department of Justice’s (DOJ) grant programs overlap across 10 justice areas contributing to the risk of unnecessarily duplicative grant awards for the same or similar purposes.",
"For example, GAO reviewed all 253 grant award announcements that DOJ’s Office of Justice Programs (OJP), the Office on Violence Against Women (OVW), and the Community Oriented Policing Services (COPS) Office published on their websites for fiscal year 2010 and found overlap across the justice areas.",
"For example, 56 of DOJ’s 253 grant solicitations—or more than 20 percent—were providing grant funds for victim assistance and related research. GAO also found instances where applicants used the same or similar language to apply for funding from these overlapping programs. In one example, a grant recipient applied for, and received, funding from both OJP’s Internet Crimes Against Children program and the COPS Office’s Child Sexual Predator Program to provide training for cyber crime investigations and establish an Internet safety program.",
"In some instances, DOJ may deem it appropriate for distinct grant programs to serve one goal, or for one community or grantee to benefit from multiple streams of grant funding. However, DOJ generally lacks visibility over the extent to which its grant programs overlap and thus is not positioned to minimize the risk of potential, unnecessary duplication before making grant awards.",
"DOJ has taken some actions that address overlap in its grant programs; for example, by requesting statutory authorization in some instances to consolidate programs that are similar.",
"Doing so would enable DOJ to identify program areas where overlap may be desirable and where a consolidation of programs may be more efficient.",
"Further, OJP and OVW use a separate grants management system than the COPS Office uses, limiting their ability to share information on the funding they have awarded or are preparing to award to a recipient.",
"According to COPS Office officials, its mission and grant management processes are unique enough to necessitate a separate system.",
"DOJ has initiated a study to assess the feasibility, costs, and benefits of unifying the systems among other options.",
"By ensuring that such a study accounts for the effort necessary to harmonize departmental grant processes, DOJ could ensure that variations in such processes do not encumber system unification.",
"DOJ’s Office of Audit, Assessment, and Management (OAAM) oversees monitoring of grantees’ compliance and conducts grant program assessments to gauge program effectiveness.",
"GAO found that OAAM’s program assessments yield richer information than its monitoring reports because they identify improvement areas.",
"OAAM officials believe additional assessments could be beneficial. They also said they lacked resources to conduct more, but had not conducted a feasibility analysis to confirm this.",
"By OAAM examining its mix of monitoring and assessment activities, including the costs and benefits of current resource allocations, it could better ensure continuous improvement in grant programs.",
"Since fiscal year 2005, approximately $33 billion has been appropriated to DOJ for the administration of more than 200 federal financial assistance solicitations, such as grants, that support criminal justice activities at the state and local levels.",
"Pursuant to section 21 of Public Law 111-139, this report addresses the extent to which (1) overlap exists across DOJ grant programs and if it contributes to the risk of unnecessary duplication in grant awards, (2) DOJ has taken steps to reduce overlap and the potential for unnecessary duplication in its grants awards, and (3) DOJ uses monitoring and assessment to determine grant program effectiveness and uses the results to enhance its grant programs.",
"GAO assessed DOJ’s fiscal year 2010 announcements of grant award funding; categorized them according to key justice areas to identify any overlap; and interviewed DOJ officials about their grant making practices, systems, and assessment methods. Further, GAO interviewed officials from 11 states receiving DOJ grants, selected for the levels and types of funding received.",
"Though not generalizable, the interviews provided their perspectives on funding."
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CRS_RL34473
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{
"title": [
"",
"Most Recent Developments",
"Economic Stimulus Funding, DOD",
"Overview of the Administration FY2009 Request",
"Comparison and Context",
"Status of Legislation",
"Is the Budget Too Small? The 4% of GDP Debate",
"Potential Issues in the FY2009 Base Budget Request",
"Military Pay Raise",
"Army and Marine Corps End-Strength Increases",
"TRICARE Fees and Co-pays",
"Projected Navy Strike Fighter Shortfall",
"LPD-17-Class Ship Procurement",
"Funding for DDG-1000 Destroyers versus Other Ships",
"Littoral Combat Ship Funding",
"CG-X Design",
"Reliable Replacement Warhead",
"Missile Defense",
"Long-Range Non-Nuclear Prompt Global Strike",
"Future Combat Systems",
"F-35 Joint Strike Fighter Alternate Engine",
"F-22 Fighter",
"Mid-Air Refueling Tanker",
"C-17 Cargo Jet",
"\"Soft\" Power Functions and Interagency Burden-Sharing27",
"War Funding Issues in the FY2009 DOD Bridge Fund28",
"FY2009 War Costs",
"FY2009 Bridge Fund",
"Resolution of Issues",
"Funding for Iraq Security Forces (ISFF)",
"Strict Monitoring of Joint Improvised Explosive Device Defeat Fund (JIEDDO)",
"Commanders Emergency Response Program Funding",
"Section 1206 Training and Equipping of Foreign Military Forces",
"MRAP Vehicle Funding",
"Separating Iraq and Afghanistan Funding",
"Caps on Transfers",
"Bill-by-Bill Synopsis of Congressional Action to Date",
"Congressional Budget Resolution",
"FY2009 Defense Authorization: Highlights of the House Bill",
"Pay Raise, Tricare, and Other Personnel Issues",
"Tanker, Cargo, and Patrol Planes",
"Fighter Planes",
"Future Combat Systems (FCS)",
"Anti-Missile Defense",
"Shipbuilding",
"Prepositioning Ships",
"Civilian Response Corps",
"Iraq Policy Provisions",
"Other Highlights",
"Defense Authorization: Highlights of House Floor Action",
"Agreements with Iraq",
"Long-term Cost of Operations in Iraq",
"Detainee Interrogations",
"Intelligence on Iran",
"Contracting Regulations",
"FY2009 Defense Authorization: Highlights of the Senate Bill",
"End-Strength, Tricare, and Other Personnel Issues",
"Shipbuilding",
"Fighter Aircraft",
"UAVs and Surveillance Planes",
"Helicopters",
"Anti-Missile Defenses",
"Other Highlights",
"Highlights of the Final Version of the FY2009 Defense Authorization Bill (S. 3001)",
"Veto Threats Avoided",
"Weapons Program Issues",
"Littoral Combat Ship",
"F-22 Fighter",
"White House Helicopters",
"Missile Defense Program Issues",
"Military Personnel Issues",
"Health Care",
"Acquisition Policy",
"Comparison of Iraq-Related Policy Provisions in House and Senate Versions of the FY2009 Defense Authorization Bill56",
"FY2009 Defense Appropriations Bill: House and Senate Defense Appropriations Subcommittee Markups",
"House Defense Appropriations Subcommittee Markup",
"Senate Defense Appropriations Markup",
"Appendix. Highlights of Compromise Final Version of FY2009 Defense Appropriations in the FY2009 Consolidated Security, Disaster Assistance and Continuing Appropriations Act (H.R. 2638)"
],
"paragraphs": [
"",
"Soon after the 111 th Congress convened, it began drafting H.R. 1 , the American Recovery and Reinvestment Act of 2009, generally referred to as the \"economic stimulus\" bill. On January 28, the House passed a version of the bill which would have provided, in Title III, $4.9 billion for accounts funded by the regular FY2009 DOD appropriations provided by Division D of the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act for FY2009, generally referred to as the \"continuing resolution,\" which President George W. Bush signed into law on September 30, 2008. The House version of the economic stimulus bill also provided in Title X of the economic stimulus bill $6.0 billion for accounts funded by the regular military construction appropriations provided by Division E of the continuing resolution.\nThe Senate passed an amended version of H.R. 1 on February 10, which would have provided an additional $3.7 billion for DOD accounts other than military construction in FY2009 and 3.4 billion for military construction.\nHouse-Senate conferees on the economic stimulus bill agreed February 10 on a compromise version that added $4.6 billion to the non-construction DOD accounts and funded by the FY2009 Defense Appropriations Act and $2.9 billion for military construction accounts(see Table 1 ). The House and Senate each adopted the conference report on H.R. 1 on February 13, 2009, with the House approving it by a vote of 246-183 and the Senate approving it by a vote of 60-38. Provisions of H.R. 1 relevant to accounts funded in the FY2009 defense appropriations bill are analyzed in pp, 3-5, below. (Provisions of the economic stimulus relevant to military construction accounts are analyzed in CRS Report RL34558, Military Construction, Veterans Affairs, and Related Agencies: FY2009 Appropriations , by [author name scrubbed], [author name scrubbed], and [author name scrubbed] (pdf).)\nThe balance of this report analyzes the FY2009 defense appropriations bill that was incorporated into the FY2009 Consolidated Security, Disaster Assistance and Continuing Appropriations Act ( P.L. 110-329 ), which the President signed September 30, 2008. That bill provided $477.6 billion in discretionary defense appropriations for the so-called \"base budget\" of the Department of Defense, that is, for regular operations other than combat operations in Iraq and Afghanistan.\nThe House Defense Appropriations Subcommittee had marked up its version of the FY2009 Defense Appropriations Bill on July 30, recommending a total of $477.6 billion, which the panel said was $4 billion less than the President requested for that bill. The Senate Defense Appropriations Subcommittee marked up its version of the appropriations Bill on September 10, also recommending $477.6 billion.\nNeither chamber held full committee markups of a FY2009 defense appropriations bill, and neither chamber considered a defense appropriations bill on the floor. Instead, a compromise version of the two subcommittee bills—in effect, a conference agreement on FY2009 defense appropriations—was negotiated informally by members of the House and Senate Appropriations committees and was incorporated into the FY2009 continuing resolution, along with full-year versions of the FY2009 homeland security and military construction/veterans affairs appropriations bills. The bill was passed by the House September 24, 2008 and by the Senate September 27, 2008 and was signed by the President September 30 (See Table A-2 in the Appendix to this report.).\nTogether with defense funds appropriated in other acts for military construction and emergency war costs and the permanent appropriation for accrual payments to the Tricare for Life fund for military retirees, the defense appropriations act brought the total for DOD appropriations in FY2009 to $578.9 billion, as of December 31, 2008 (see Table 1 ).\nIn a related action, the President signed into law on October 14, 2008 the FY2009 defense authorization bill ( S. 3001 ) authorizing $611.1 billion for national defense, including $68.6 billion for war-related programs (see Table A-1 in the Appendix to this report).\nThe House had passed its version of the FY2009 defense authorization bill ( H.R. 5658 ) on May 22, 2008, by a vote of 384-23. The House version of the bill authorized $612.4 billion, including $542.4 billion for national defense-related activities of DOD and other federal agencies and an additional $70 billion for costs related to military operations in Iraq and Afghanistan.\nOn April 30, the Senate Armed Services Committee marked up its version of the FY2009 authorization bill, which it reported to the floor on May 12 as S. 3001 . It also authorized the appropriation of $612.5 billion in new budget authority for national security programs, including $542.5 billion for the base budget and an additional $70 billion allowance for war-related costs.\nControversies over various issues—including a provision that would incorporate into the legislation hundreds of earmarks listed in the committee's report on the bill and an unrelated dispute over offshore oil drilling—delayed Senate action on the measure until September 8. Because of the controversy over the earmarks provision, the Senate acted on only four of the several dozen amendments to the bill that were proposed before it passed the bill on September 17, 2008 by a vote of 88-8.\nAnother result of the earmark dispute was that the Senate did not request a conference with the House to reconcile the two versions of the defense bill. Instead, members of the House and Senate Armed Services committees negotiated informally a final version of the bill authorizing $611.1 billion, a reduction of $1.4 billion from the Administration's request as re-estimated by the Congressional Budget Office. All but a very small amount of the authorization bill's reduction was taken from the $70 billion requested for military operations in Iraq and Afghanistan.\nOn September 24, the House passed the compromise version of the authorization bill as an amended version of the Senate-passed S. 3001 . The bill was passed by a vote of 392-39 under suspension of the rules, a procedure which did not permit amendments but which required approval by a two-thirds vote. The Senate passed the amended version of S. 3001 by voice vote on September 27, thus clearing the measure for the President who signed it on October 14, 2008.\nSince neither the defense authorization bill nor the defense appropriations bill was the result of a formal conference committee, neither was accompanied by a traditional conference report. However, explanatory statements associated with the compromise version of each measure, fleshing out the details of the final legislation, were published in the Congressional Record .",
"H.R. 1 , the American Recovery and Reinvestment Act of 2009, also known as the \"economic stimulus,\" added $4.6 billion to DOD accounts funded in the regular FY2009 defense appropriations bill enacted September 30, 2008 as Division D of the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act for FY2009.\nThe additional DOD funds provided by the economic stimulus bill were aimed largely at programs that would serve one of two goals. A total of $4.24 billion was for maintenance of DOD facilities of which $400 million is for medical facilities, $153.5 million is for renovation of barracks, and the remaining $3.69 billion is for repair and maintenance of other facilities and for projects that would improve the energy efficiency of DOD facilities. An additional $300 million is for research and development projects that would improve DOD's energy efficiency.\nRepresentative David R. Obey, chair of the House Committee on Appropriations, introduced the bill on January 26, 2009, three weeks after the 111 th Congress convened. Following referral to the Committees on Appropriations and Budget, the bill was brought up for consideration on the floor on January 27 ( Congressional Record , pp. H557-H583, H620-H749). After debate and amendment, H.R. 1 was passed by the Yeas and Nays, 244-188 (Roll no. 46). As passed by the House, the bill would have added $4.9 billion to the DOD accounts funded by the regular FY2009 Defense Appropriations Act that comprised Division D of the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act for FY2009. (see Table 2 )\nThe Senate received the economic stimulus bill on January 29. It was laid before the Senate by Unanimous Consent on February 2, when Sen. Harry Reid, the Majority Leader, proposed on behalf of Sen. Daniel K. Inouye, chair of the Senate Committee on Appropriations, to amend H.R. 1 by substituting the text of S. 336 , the chamber's own version of the bill ( Congressional Record S 1237-S1243, S1266-S1273). The Senate adopted several floor amendments before passing the bill Feb. 10 by a vote of 61-37. As passed by the Senate, the bill would have added $3.7 billion to the accounts funded by the regular FY2009 DOD appropriations act. (see Table 2 )\nA conference report on the economic stimulus bill, adopted by both the House and the Senate on February 13, 2009 increased accounts funded by the regular FY2009 DOD appropriations bill by a total of $4.6 billion. President Obama signed the bill into law on February 17, 2009. (see Table 2 )",
"On February 4, 2008, the Administration released its federal budget request for FY2009 which included $606.8 billion in discretionary budget authority for national defense. This included $515.4 billion for the so-called base budget of the Department of Defense (DOD)—the cost of routine activities excluding U.S. operations in Iraq and Afghanistan. It also included a lump-sum request for $70 billion to cover war costs in the first part of the year.\nThe total national defense request also included $16.1 billion for nuclear weapons and other defense-related programs of the Department of Energy and $5.2 billion for the defense-related activities of other agencies.\nBecause it did not submit a request for funds to cover the full anticipated costs of operations associated with Iraq and Afghanistan, the Administration was not in compliance with a provision of the FY2007 John Warner National Defense Authorization Act ( P.L. 109-364 , Section 1008) which requires the President to include in future annual budget requests funds to cover the anticipated cost of operations in Iraq and Afghanistan. Last year, the Administration's DOD budget request for FY2008 included a request for $141.7 billion (subsequently increased to $189.3 billion) to cover anticipated war costs for the entire fiscal year.\nWhen the FY2009 defense request was submitted in February 2008, administration officials contended that there was too much uncertainty about future troop levels in Iraq to enable them to provide a funding request for war costs for the entire year.\nPressed by Senate Armed Services Committee Chairman Carl Levin during a February 5 hearing to provide an estimate of war costs for all of FY2009, Defense Secretary Robert M. Gates observed that a simple extrapolation of the FY2008 costs would amount to $170 billion, but he added that he had no confidence in that projection because of the uncertainties concerning U.S. combat operations.\nOn May 2, 2008, the Administration submitted an amended budget request that specified funding levels by account in the FY2009 war costs bridge fund, including a total of $66 billion for DOD and $4 billion for foreign aid.\nCongress incorporated action on the FY2009 war costs request into H.R. 2642 ( P.L. 110-252 ), a bill making supplemental appropriations for FY2008 and FY2009 for military operations in Iraq and Afghanistan and for other purposes. On June 30, President Bush signed the bill providing $96.1 billion for military operations in Iraq, Afghanistan and elsewhere in FY2008 and $65.9 billion for those purposes in FY2009.",
"The President's $515.4 billion request for DOD's FY2009 base budget is $35.9 billion more than Congress appropriated for the FY2008 base budget, a nominal increase of 7.5 %. Adjusting for the cost of inflation, the FY2009 request would provide a real increase of 5.4 %. Roughly two-thirds of the proposed increase would go to the accounts that pay for current operations: funding for military personnel would increase by $8.8 billion over the FY2008 appropriation, to $125.2 billion; operations and maintenance funding would increase by $15.6 billion, to $179.8 billion (see Table 3 ).\nThe FY2009 base budget request is $3.3 billion larger than the base budget request for that year the Administration had projected in February 2007. However, compared with the earlier projection, the actual request for procurement was lower by $6.3 billion and the military construction request was lower by $2.7 billion. On the other hand, the operations and maintenance request was $5.4 billion higher and the R&D request $2.4 billion higher than had been forecast in February 2007.",
"Congress began action on the annual defense authorization bill with the Senate Armed Services Committee approving its version ( S. 3001 ) on April 30 and the Senate passing it September 17. The House Armed Services Committee marked up its version of the bill ( H.R. 5658 ) on May 14 and passed the bill May 22. Instead of convening a House-Senate conference committee to reconcile the two versions of the bill, House and Senate negotiators worked out a compromise version, which the House passed September 24 as an amended version of the Senate-passed bill. The Senate passed the compromise version September 27 and the President signed in October 14 ( P.L. 110-417 ).\nThe House Defense Appropriations Subcommittee marked up an unnumbered version of the FY2009 defense appropriations bill on July 30. The Senate Defense Appropriations Subcommittee marked up its own unnumbered bill on September 10. But in neither chamber did the full Appropriations Committee markup the bills drafted by the two defense subcommittee. Nor was a defense appropriations bill brought to the floor of either the House or Senate. Instead, House and Senate negotiators worked out a compromise version which was incorporated into the FY2009 Consolidated Security, Disaster Assistance and Continuing Appropriations Act ( H.R. 2638 ) which included the compromise defense appropriations bill as Division C. The House passed that bill on September 24. The Senate passed it September 27 and the President signed in September 30 ( P.L. 110-329 ).",
"For several months leading up to action on the FY2009 defense funding legislation, a number of senior military officers, as well as research groups and advocacy organizations, argued that defense spending needs to be substantially higher in the next few years to avoid drastic cuts in major weapons programs or in the size of the force. Many have called for a baseline defense budget, not including war-related costs, pegged to about 4% of Gross Domestic Product—an amount that would be anywhere from $70 to $180 billion per year higher over the next few years than the Administration plan.\nSenior leaders of the military services were particularly vocal in arguing for substantial increases in the defense budget. The Chairman of the Joint Chiefs, Admiral Michael Mullen, has, for some time, urged 4% of GDP for defense. For the previous two years, the Chief of Staff and Secretary of the Air Force argued that the Air Force needs an average of $20 billion more each year for the next several years in weapons acquisition accounts. Senior Army officials pointed out that the Army budget, including war costs, has grown to over $230 billion. Though it may come down some, they say, if forces in Iraq and elsewhere are brought home, several more years of spending at near that level will be needed to repair, replace, and upgrade equipment consumed by the war-time pace of operations. For their part, Navy leaders now calculate that the long-term shipbuilding plan they have proposed for the past few years will, in the future, cost an average of $20 billion a year in FY2007 prices, an increase of about 40% over earlier estimates.\nThese arguments for a substantial increase in the defense budget, however, come at a time when, by historical standards, military spending appears to be very robust. Between FY1998, when the post-Cold War decline in defense spending reached its zenith, and FY2008, the baseline Department of Defense budget, not including war costs, increased by almost 40% above inflation (see Table 6 ). After adjusting for inflation, the requested FY2009 baseline DOD budget was more than $100 billion, or about 20%, greater than the average during the Cold War (measured from the end of the Korean War in FY1954 through FY1990). Requested funding for weapons acquisition (procurement plus R&D) in FY2009 was more than $45 billion—or about one-third—higher than the annual Cold War average.\nThe disconnection between the size of the budget and the appeals for more money appears even more striking when amounts that have been appropriated for war costs are added to the equation. On top of a baseline DOD budget that grew from $255 billion in FY1998, in current year prices not adjusted for inflation, to almost $520 billion in FY2008, supplemental appropriations for war-related costs climbed from $19.4 billion in FY2001, as an initial response to the 9/11 attacks, to $63 billion in FY2003, the year of the Iraq invasion, to an estimated $189 billion in FY2008. While large portions of the supplementals have been consumed by war-related operating costs, substantial amounts have also been devoted to buying new equipment, particularly for the Army and the Marine Corps. Although the bulk of this acquisition has been for force protection, communications, and transportation, the effect has been to modernize much of the basic equipment stock of both services, in effect augmenting their baseline budgets.\nThe fact that so large a level of spending appears to the military services to be so inadequate has several explanations—and the policy implications are, accordingly matters of varying interpretation. Reasons include the following.\nFuture baseline budgets are widely expected to decline: The Administration plan to balance the federal budget by FY2012 includes limits on defense as well as non-defense spending. White House budget projections accommodate an increase of about 5% above inflation in the FY2009 DOD budget, but project a cumulative decline of about 3% between FY2009 and FY2012. Many unofficial projections of the deficit situation are less sanguine than the Administration's, so many analysts expect, at best, a flat baseline defense budget for the foreseeable future. Increased costs in part of the budget, therefore, will necessarily come at the expense of resources available in other areas. Supplemental appropriations are expected to decline as well: Although plans to withdraw from Iraq are uncertain, the military services expect that supplemental appropriations will come down within a few years. Costs for training and equipment maintenance that have been covered in supplementals, then, will migrate back into the baseline budget at the expense of other programs, and money to further upgrade ground forces will have to be found elsewhere. Costs of military personnel have grown dramatically in recent years: Since the end of the 1990s, Congress has approved substantial increases in military pay and benefits, including pay increases of ½ percent above civilian pay indices in seven of the past eight years, three rounds of \"pay table reform\" that gave larger raises to personnel in the middle grades, increased housing allowances to eliminate on-base and off-base disparities, DOD-provided health insurance for Medicare-eligible military retirees (known as \"TRICARE\" for Life), concurrent receipt of military retired pay and veterans disability benefits that had earlier been offset, elimination of a reduction in retiree survivor benefits that had occurred at age 62, and large increases in enlistment and reenlistment bonuses and special pays. Although bonuses and some other payments may decline in the future, most of the past increases in pay and benefits have been built into the basic cost of personnel. CRS calculates that uniformed personnel now cost 40% more, after adjusting for inflation, than in FY1999. Operating costs continue to grow above base inflation: Historically, military operation and maintenance budgets, which pay for everything from personnel training, to weapons repairs, to facility operations, to health care, have increased relative to the size of the force by about 2.5% per year above inflation. These increases are not as large as in some areas of the civilian economy, such as health care, but they do not reflect gains in productivity that are common in other sectors of the economy. Continued growth in operating costs, which is now widely seen as a fact of life in defense planning, erodes the availability of resources for weapons modernization and other priorities. Increasing generational cost growth in major weapons programs: It is generally expected that new generations of weapons will be more expensive than the systems they replace as weapons technology advances. The rate of generational cost growth, however, is becoming a matter of increasing concern within the Defense Department. New stealthy aircraft, multi-mission ships, advanced space systems, and networked missiles, guns, and vehicles appear to be getting more expensive than their predecessors at a greater rate than in the past. Unless budgets increase more rapidly than costs, trade-offs between the costs of new weapons and the size of the force may be required. Poor cost estimates: The difficulties engendered by accelerating inter-generational weapons cost growth are exacerbated by poor cost estimation. The Government Accountability Office has documented frequent, substantial increases in costs of major defense systems compared to original development estimates. A side-effect of inaccurate cost projections is to exacerbate instability in the overall defense budget, which entails inefficient production rates for major weapons programs and increased costs due to changing production plans. New requirements based on the lessons of Iraq and Afghanistan: The wars in Iraq and Afghanistan have led to very large increases in equipment requirements for ground forces, particularly for force protection, communications, and transportation. National Guard combat units that earlier were equipped with older systems cascaded from active units are now seen as part of the rotation base that require equally modern equipment. And full sets of current equipment are also expected to be available not only for next-to-deploy units, but also for units as they begin to reset from overseas rotations. A key lesson of the war is that what used to be called \"minor procurement\" for ground forces was substantially under-capitalized. A broader range of national security challenges: A common presumption before 9/11 was that forces trained and equipped for traditional conflicts between national armies would be able to cope with what were seen as less demanding other challenges such as stability operations. Now the view is that forces must be designed not only for traditional conflicts, but for insurgencies and other irregular wars, support of allies, threats of catastrophic attacks by non-state actors with weapons of mass destruction, and entirely new kinds of disruptive attacks on specific U.S. and allied vulnerabilities. The effect has been to broaden requirements without, necessarily, an attendant offsetting reduction in older force goals.\nWhen these factors are taken as a whole, it is not so surprising that military planners discover some shortfalls. But, for Congress, it may not be so obvious that the principle answer is simply to provide more money for defense. As a practical matter, the arguments for more money that senior military leaders have begun to lay out appear most likely to become matters of debate in Congress once the next Administration takes office. The next Secretary of Defense, and the 111 th Congress, may, very early on, face a contentious debate about defense resources.\nMore money is one alternative. Other alternatives may include backing away from plans to add 92,000 active duty troops to the Army and Marine Corps; shifting resources among the military services to reflect new challenges rather than allocating them roughly the same proportions every year; reviewing requirements for expensive new technologies in view of the presence or absence of technologically peer or near peer competitors; and shifting resources from military responses to global threats toward non-military means of prevention. The defense budget environment, however, appears likely to be troubling enough that it will force some attention to these matters earlier in the term of the next President rather than much later.",
"Following is a brief summary of some of the other issues that may emerge during congressional action on the FY2009 defense authorization and appropriations bills, based on congressional action in prior years and early debate surrounding the President's pending request.",
"The budget includes $2 billion to give military personnel a 3.4% pay raise effective January 1, 2009, an increase that would keep pace with the average increase in private-sector wages as measured by the Labor Department's Employment Cost Index (ECI), as required by law. For several years, some have contended that service members' pay should increase at a faster rate than the annual increase in the ECI in order to compensate for a lag in military pay resulting from budget-constrained pay hikes in the 1990s. DOD officials deny that any such pay-gap exists, but Congress typically has sided with the advocates of larger increases. For every fiscal year but one since FY2000, Congress has mandated a military pay increase one-half percent higher than the rate of increase in the ECI.",
"The budget includes $20.5 billion to pay for the costs in FY2009 of the $112 billion multi-year plan to increase active-duty end-strength by a total of 92,000 Army and Marine Corps personnel. Most of the additional personnel are slated for assignment to newly created combat units—Army brigade combat teams and Marine regiments—which would enlarge the pool of units available for overseas deployment. This would make it easier for the services to sustain overseas roughly the number of troops currently deployed in Iraq and Afghanistan while allowing soldiers and Marines to spend more time between deployments at their home bases for rest and retraining. The plan has been challenged by some who note that, after the initial investment costs have been covered, the additional units would cost about $13 billion annually, in a time when the total DOD budget is expected to be relatively flat. It also has been criticized by some who contend that the Army in particular needs more units organized and trained especially for counter-insurgency and advisory missions more than it needs additional traditional combat units.",
"For the third consecutive year, the Administration's budget assumes that part of the cost of the Defense Health program—$1.2 billion in the pending FY2009 request—will be covered by an increase in fees, co-payments and deductibles charged to retirees under the age of 65 who participate in TRICARE, DOD's medical insurance program for active and retired service members and their dependents. The increases are intended partly to restrain the rapid growth of DOD's annual health-care budget—projected to reach $64 billion by FY2015—and partly to compensate for the fact that TRICARE fees have not been increased since 1995. This year, as in the two previous years, the proposed fee increases are vehemently opposed by organizations representing service members and military retirees who argue that giving medical care to retirees on favorable terms is appropriate given the unique hardships of a military career. Congress rejected the proposed fee hikes in the FY2007 and FY2008 budget proposals, and the Senate Armed Services Committee has done so in drafting its version of the FY2009 defense authorization bill.",
"Some analyses of the number of F-18 strike fighters available to the Navy show a substantial shortfall of aircraft from about the middle of the next decade until about 2025, when the full planned number of F-35 Joint Strike Fighters becomes available. The number of available aircraft, however, depends on assumptions about the number of hours that current aircraft can fly, and at what cost for maintenance, upgrades, and overhauls. Boeing has recently offered to sell additional F/A-18E/F versions of the aircraft to the Navy for about $50 million apiece, as much as 10% cheaper than planned for additional aircraft, if the Navy agrees to buy 170 aircraft in a multiyear contract that would have early termination penalties. Several Members of Congress have expressed concerns about the potential shortfall and may propose that the FY2009 authorization approve a new multiyear deal. Future funding for the additional aircraft, however, might compete with funds for other projects, particularly if defense budgets level off in the 2010s.",
"For the past two years, the Marine Corps has included a request for an additional LPD-17-class amphibious ship, which would be the 10 th to be bought, at the top of its unfunded priorities list. There has been some support in Congress for adding a 10 th LPD, but funding might have to come at the cost of financing for surface combatant ships such as the DOG-1000 destroyer. Support for shifting money from the DOG-1000 to LPDs or other ships that have been in production for some time comes partly from advocates of the Marine Corps and from legislators who represent the Gulf coast, where the ship would be built. In addition, there has been some support for a shift because the cost and design of the LPD-17—as for TAKE auxiliary ships and DOG-51 destroyers—has been stable for some time.",
"A directly related issue is whether Congress will agree to continue funding DDG-1000 acquisition. The Administration's FY2009 request includes $2.6 billion for a third DDG-1000. Several legislators on the defense committees have proposed eliminating the funds and using the money instead to buy a mix of LPD-17, TAKE auxiliary ships, and DDG-51 destroyers. This would spread available shipbuilding money more widely to sustain the industrial base, provide funding to programs in which costs are stable and more predictable, and also allocate funds to less expensive ships that might be built, in the long run, in larger numbers to sustain the Navy's 313 ship fleet.",
"The Administration has also requested $920 million for two Littoral Combat Ships (LCS). This is a relatively small, lower cost ship with a common hull to support modular designs for several purposes. It is intended to be bought in large numbers over time for operations in relatively close-to-shore waters. The program has suffered significant cost growth, however, raising questions about the number of ships that can be afforded. Last year, Congress cut funding for all but one ship and shifted the savings to purchase other ships. This year may again be a test of congressional support for the ship in view of continuing cost issues.",
"The CG-X is the current designation for a new ship dedicated to missile defense missions. Its design was, for many years, expected to be based on the DDG-1000. Now, however, it appears that the Navy is inclined to build a substantially larger ship. Some defense committee members have raised questions about the status of the Navy's design and about the affordability of the program. There has also been some support in Congress for building a nuclear powered cruiser.",
"There has been a great deal of controversy in Congress in recent years about the Energy Department's plans to design a new nuclear warhead intended, according to its advocates, to take advantage of new technologies to improve safety and reliability in a new warhead to replace deteriorating older systems. In the past, Congress has provided funding only for conceptual design of the Reliable Replacement Warhead (RRW), but it has not permitted funds to be used for engineering development. The FY2008 consolidated appropriations act, P.L. 110-161 , which included energy and water appropriations, provided no DOE funds for the RRW. In the FY2009 budget, DOE has requested $10 million for RRW design, and the Navy has requested $23 million.",
"The Administration requested $9.3 billion for missile defense R&D in FY2009. While Congress has generally supported about the level of spending the Administration has requested in recent years, it has frequently reduced funding for technologically more challenging systems such as the kinetic energy interceptor program to intercept missiles in the boost phase, and it has increased funding for currently deployed systems, mainly the Patriot PAC III theater defense system. For the past two years, Congress has also eliminated money to begin construction at missile defense sites in Europe, saying in various reports that the funding was premature because there was no firm agreement with Poland and the Czech Republic where deployment is planned. The FY2009 request includes $132.6 million for military construction at an interceptor site in Europe, which is planned in Poland, and $108.5 million for military construction at a radar site, which is planned in the Czech Republic.",
"For the past several years, the Administration has pursued programs that might permit it to deploy conventional warheads on long-range missiles that now carry nuclear warheads. In recent years, this effort has focused on the possible deployment of conventional warheads on Trident submarine-launched ballistic missiles. The funding requests sought to continue R&D on the reentry vehicle that would carry the warhead, and have sought to begin modifying and equipping Trident missiles and submarines to carry the new reentry vehicles. Congress has not approved this funding. In FY2007, it permitted the continuing R&D on the reentry vehicle, but did not fund the programs that would modify the missiles and submarines. In FY2008, Congress again rejected all funding for the conventional Trident modification, and aggregated the funding for research on the reentry vehicle with other DOD funding for research on prompt global strike technologies. It directed that DOD explore all options for achieving the PGS mission, and not focus on the near-term Trident option. Congress has objected to the Trident option in part because of doubts that the capability is needed immediately, and in part because of concerns that other nations might mistake the nature of a U.S. Trident missile launch. Congress appropriated $100 million for this combined program in FY2008; the Administration has requested $117 million for FY2009.",
"The FY2009 budget request includes $3.6 billion to continue development and begin production of the Army's Future Combat Systems (FCS). FCS is a computer-networked array of 14 types of manned and unmanned ground and aerial vehicles intended to replace the Army's current fleet of combat vehicles, including M-1 Abrams tanks and M-2 Bradley infantry vehicles, beginning in 2015. The Army has estimated that the entire program could cost $230 billion over many years and the Defense Department's Cost Analysis Improvement Group (CAIG) projects the cost to be $300 billion. Critics have assailed the program on several grounds: some argue that it is unaffordable; some contend that it is optimized to fight the sort of conventional battles at which the U.S. Army already excels rather than the insurgencies, such as those in Iraq and Afghanistan, that it may be more likely to confront; and some object that the program as currently scheduled will take too long to get more effective weapons into the hands of the troops. In FY2006-08, Congress cut a total of $789 million from the Army's FCS budget requests. This year, House Defense Appropriations Subcommittee Chairman John P. Murtha has suggested that near-term funding for the program be increased by $20 billion to accelerate deployment of those elements of FCS nearest completion, at the expense of cancelling or delaying other elements of the program.",
"For the third consecutive year, the Administration has proposed cancellation of the effort to develop the General Electric F-136 engine as a potential alternative to the Pratt & Whitney F-135 currently slated to power the F-35 Joint Strike Fighter. The $6.7 billion requested for the F-35 program in FY2009 includes $3.1 billion to continue development of the plane and $3.7 billion to buy 16 aircraft, but no funds to continue development of the alternative engine. DOD has argued that the alternative engine is a needless expense because the process of designing and developing high-performance jet engines has become much less uncertain than it once was. But Congress has backed development of the alternate engine since 1996, likening the current situation to the case of the F-15 fighter in the late 1970s which was handicapped by problems with its Pratt&Whitney-built engines until Congress mandated development of an alternative (GE-built) engine. To keep the F-35 alternative engine program going, Congress added $340 million to the FY2007 budget and $480 million to the FY2008 budget.",
"Congress may want to consider whether to add funds to the Air Force's F-22 fighter program either to shut down production or to continue it. Although Air Force officials have argued vigorously for purchase of 381 of the planes, DOD plans to buy only 183, with the last 20 paid for by $3.4 billion included in the FY2009 budget. However, the request includes no funds to pay for closing the F-22 production line in an orderly way that would facilitate its resuscitation at a later date. Reportedly, the shut down could cost as much as $500 million. DOD officials have said they may include in the FY2009 war cost supplemental request—not yet sent to Congress—funds to buy four additional F-22s which, they contend, would defer the necessity of a shut down decision until the next Administration had time to decide whether to continue production or end it. However others deny that funding for four planes would delay the need for a decision long enough to make a difference.",
"The FY2009 budget request includes $832 million to continue developing a new mid-air refueling tanker (designated KC-X) and $62 million for components that would be used to begin building the planes. On February 29, 2008, the Air Force selected a consortium consisting of Northrop Grumman and the European Aeronautic Defense and Space Company (EADS)—the parent company of Airbus—over Boeing to build the new tankers. But on June 18, the Government Accountability Office (GAO) upheld Boeing's protest of the Air Force decision and DOD announced that it would re-compete the award. With the initial contract for 179 aircraft worth $12.1 billion (and the final cost of the purchase estimated to reach approximately $35 billion) proponents of the competing bidders may try to tilt the second competition toward one firm or the other.\nOn September 10, Defense Secretary Robert Gates cancelled the second competition to select a new tanker. In a statement, Gates said there was not enough time for DOD to complete the selection process by next January, when a new Administration will take office and that, accordingly, he had decided to allow the next Administration to define the requirements budget allocation for the new plane. During a House Armed Services Committee hearing on September 10, Gates said DOD soon would recommend to Congress how to allocate the tanker funds requested for FY2009. On September 15, Air Force Chief of Staff Gen. Norton Schwartz, reportedly said in a press conference that it could take the next Administration between eight months and four years to conduct a new tanker competition.",
"As with the F-22 fighter program, so with the C-17 long-range cargo plane. The Administration's FY2009 budget request includes neither funds to buy components to continue C-17 production, as many have urged, nor the funds that would be needed to terminate production. As with the case of the F-22, the Administration has said that the next President should decide the future of the C-17 program. While some DOD studies have concluded that the 190 C-17s previously funded will suffice, critics challenge that assessment on several grounds. While some in Congress favor production of additional C-17s, others favor upgrades to older C-5 cargo planes DOD plans to retire.",
"Policymakers are debating the appropriate balance between military and civilian personnel in operations and activities involving \"soft\" power functions, i.e., building and strengthening government institutions and economic systems abroad, as well has providing humanitarian assistance. As demands have increased on military personnel to perform such functions over the past several years, especially in Iraq and Afghanistan, Congress has granted DOD new authorities and funded expanded DOD activities in areas where civilian agencies were traditionally in the lead. For some policymakers, the expanded use of the defense budget to fund, and military personnel to perform, \"stabilization and reconstruction\" activities reflects shortfalls in civilian agency budgets and in civilian personnel that should be remedied. Nevertheless, there is no consensus on an optimal division of labor, authorities, and funding sources for such functions, or how to achieve that balance, nor on appropriate interim arrangements.\nAmong the DOD programs of most concern:\nThe Commander's Emergency Response Program (CERP) provides funds for commanding officers in Iraq and Afghanistan to carry out small-scale reconstruction programs, to fund state-building activities such as supporting local militias such as the Sons of Iraq, and to provide urgent humanitarian relief. In early 2008, the Administration requested Congress make CERP authority permanent and extend its use to other developing countries where U.S. forces are operating. \"Section 1206\" Global Train and Equip authority allows the Secretary of Defense to fund, with the concurrence of the Secretary of State, the training and equipping of foreign military forces for counterterrorism operations and to participate in or to support military and stability operations in which U.S. armed forces participate. In early 2008, the Bush Administration asked Congress to codify an expanded version of Section 1206 to increase the annual authorization from $300 to $750 million and to permit DOD to train and equip a broad array of security forces in addition to military forces. It asked for an FY2009 appropriation of $500 million. The Combatant Commander Initiative Fund (CCIF) has traditionally been used to fund foreign participation in military exercises and the military education and training of foreign personnel, and certain humanitarian and civil assistance. In 2006 Congress also added to the permitted categories, \"civic assistance, including urgent and unanticipated humanitarian relief and reconstruction assistance.\" For FY2009, the Administration requested $100 million for the CCIF specifically to meet those needs. \"Section 1207\" Security and Stabilization funding authorizes DOD to transfer defense articles, services and other support to assist civilian agency responses to critical situations, in particular stabilization activities and operations planned and coordinated by the State Department's Office of the Coordinator for Reconstruction and Stabilization (S/CRS). The Administration requested authority to transfer $200 million for this purpose in FY2009. The Administration has requested $389 million in FY2009 to create U.S. Africa Command (AFRICOM) to give a senior general unified command over activities related to Africa that, previously, had been distributed among three regional DOD commands. Although the new organization is intended to have a large non-military staff and to cooperate extensively with the State Department, Agency for International Development and other civilian agencies, some question the wisdom of giving DOD such a prominent leadership role in U.S. policy toward Africa.",
"To get a more complete picture of war funding, the John Warner FY2007 National Defense Authorization Act requires the Administration to request a full year's war cost in the February budget. Despite this requirement, the Administration included in its FY2009 budget request only a placeholder figure of $70 billion for bridge funding, with no details, that was intended to cover the gap between the beginning of the fiscal year and passage of a supplemental. In their spring markups, the authorization committees used the original $70 billion placeholder figure.\nOn May 2, 2008, the Administration filled in the details by submitting an amended emergency war request with $66 billion for the Department of Defense (DOD) and $4 billion for State/USAID programs; however, these materials arrived too late to be taken into account in the authorization markup this spring.\nSince FY2004, the Defense Department has generally received war funding in two appropriations acts—a bridge fund included as a separate title in DOD's baseline appropriations bill to cover the first part of the same fiscal year, and a separate supplemental appropriation provided after the fiscal year has begun.\nIn the spring of 2008, however, Congress passed H.R. 2642 , the FY2008 Supplemental Appropriations Act ( P.L. 110-252 ) with funding to cover war costs for the rest of FY2008, and a bridge fund to cover part of the following fiscal year, FY2009. Coupled with DOD's regular appropriations for FY2009, this bridge fund is expected to last until June or July 2009, leaving it to a new Administration to decide how much funding to request for the remainder of the year.\nLike the members of the House and Senate Appropriations committees, the members of the House and Senate Armed Services committees, which draft the defense authorization bill, did not address full-year war costs for FY2009. Instead, the authorizing committees included in their respective bills funding levels for the FY2009 bridge fund, along with various policy restrictions. The House passed its bill ( H.R. 5658 ) on May 22, 2008 and the Senate passed its bill ( S. 3001 ) on September 17, 2008, including levels that differed from funding already included in for FY2009 in the already enacted supplemental ( P.L. 110-252 , see Table 7 ).\nDropping funding levels proposed in the House and Senate bills, the conference version of the authorization, S. 3001 , adopts the funding levels included for FY2009 bridge fund already enacted in the FY2008 Supplemental except for a $2.1 billion addition for six more C-17 transport aircraft. Thus, S. 3001 includes a total of $68 billion for war funding compared to the $66 billion appropriated in the FY2009 bridge fund ( H.R. 2642 / P.L. 110-252 ). The conference authorization bill does, however, include different restrictions on funding and reporting requirements for the Iraq Security Forces Fund and the Commanders Emergency Response Program (see Table 7 ).",
"With passage of the FY2008 Supplemental ( P.L. 110-252 ), CRS estimates that the total amount of DOD war funding for this fiscal year is $176 billion excluding funding that is not related to the wars in Iraq and Afghanistan. In February 2008 testimony, Secretary of Defense Gates suggested that war costs in FY2009 could total $170 billion, which would be about the same level as the FY2008 request excluding certain one-time costs for Mine Resistant Ambush Protected (MRAP) vehicles. The Administration said it had not submitted a full-year budget because of the uncertainty of predicting future troop levels in Iraq.\nIn later testimony in May 2008, Secretary Gates suggested that \"further reductions in the [U.S.] presence in Iraq during the course of 2009 and, perhaps, later this year\" would contribute to DOD's ability to return to 12-month tour lengths to which the President committed the Administration. General Petraeus, former Commander of Multinational Forces, Iraq, and now head of Central Command, has been assessing troop levels since completion in July 2008 of the withdrawal of five combat brigades sent to Iraq in 2007 in the \"surge.\"\nWith the departure from Iraq of these five additional combat brigades, and the completion of MRAP purchases funded last year, war costs in FY2009 will be below FY2008's level. On September 9, 2008, the President announced a modest additional cut below surge levels of 8,000 troops in Iraq by January 2009 that would be coupled with an increase of troops in Afghanistan to meet requests from commanders on the ground for additional troops. Those additional troops could offset some if not all of the savings that would result from further troop reductions in Iraq.\nWorking from the Administration's original request, the House and Senate-passed versions of the FY2009 National Defense Authorization bills ( H.R. 5658 and S. 3001 ) both proposed $70 billion in emergency bridge funds for DOD. Those bills were $5.8 billion above the amended request and the amount appropriated in the recently passed FY2008 Supplemental, H.R. 2642 / P.L. 110-252 .",
"Prior to calendar year 2008, Congress has funded war costs by including a so-called \"bridge fund\" in the regular DOD appropriations bill for the pending year to cover part of that year's war costs and then funding war costs for the balance of that year through a supplemental appropriations bill the following spring. But the FY2008 war cost supplemental ( P.L. 110-252 ) enacted June 30, 2008 includes not only the war costs for the balance of FY2008 but also a $65.9 billion bridge fund for FY2009 to cover DOD war costs until a new Administration submits and a new Congress approves a FY2009 supplemental. Expected to last until June or July 2009, the FY2009 bridge fund was intended to give time to a new Administration to determine the future course in Iraq and Afghanistan.\nLike previous bridge funds, over 70% of the appropriated FY2009 bridge fund in P.L. 110-252 is dedicated to operation and maintenance funding to ensure that funding for operations is available well into the fiscal year (see Table 7 below). This appropriations act includes relatively small amounts for procurement—$4 billion compared to the $67 billion requested by DOD for all of FY2008—selecting those items that may be more urgently needed such as force protection upgrades or more uparmored HMMWVs for the Army.\nThis leaves potentially controversial decisions about whether it is appropriate to cast as war costs service requests for major weapon systems such as EA-18 G electronic warfare aircraft or V-22 Osprey tilt rotor aircraft for the Navy, C-17 transport aircraft for the Air Force, or substantial upgrades to Army Abrams tanks or Bradley fighting vehicles, which some observers argue are more appropriately considered in the baseline budget as part of ongoing modernization programs.\nCongress halved DOD's procurement request in the FY2008 supplemental appropriations act passed in late May ( P.L. 110-252 ) reflecting in part on DOD's informal proposals this spring to withdraw procurement requests for $6.7 billion in order to pay for higher fuel costs and other unanticipated needs. This may indicate that congressional scepticism about war-related procurement funding requests may be growing. Although the House and Senate authorizers initially included funding for major weapons systems recommended such as F-22 aircraft for the Air Force, all but the C-17 aircraft were dropped in the conference version that, instead, adopted funding levels for the FY2009 bridge already enacted in the FY2008 Supplemental ( P.L. 110-252 ).",
"Although the conference version of S. 3001 , the FY2009 NDAA generally adopts the funding levels in the already enacted FY2008 Supplemental (HG.R. 2642/ P.L. 110-252 ), it adds $2.1 billion for six more C-17 aircraft that is not included in that enacted bridge appropriations act. This brings the authorization total for the FY2009 bridge fund to $68 billion compared to the $66 billion appropriated (see Table 7 ). The conference bill also resolves most of the outstanding differences between the two houses and P.L. 110-232 , the enacted supplemental.\nThe FY2009 NDAA conference bill, does, however, add various restrictions and reporting requirements on the use of funds for several high-interest programs—the Iraq Security Forces Fund, Commanders Emergency Response Program, and the Joint Improvised Explosive Device Defeat Organization (JIEDDO). The conference bill:\nauthorizes $1 billion, half the request, for the Iraq Security Forces Fund (ISFF) but prohibits using these funds for infrastructure; authorizes $1.5 billion, $200 million less than requested and $300 million more than appropriated for the Commanders' Emergency Response program with a prohibition on projects over $2 million unless waived by the Secretary of Defense; authorizes $350 million for Section 1206 authority to build and equip foreign militaries for counter-terror operations; adopts the appropriated funding level for Mine Resistant Ambush Protected (MRAP) vehicles transfer fund; and adopts the Senate proposal to require separate budget displays for Iraq and Afghanistan.\nNeither of the two authorizing bills, nor the already passed FY2009 bridge fund address the overall funding for the full year's war costs for FY2009. That will be decided by the next Administration. The current Administration did not submit a request for a full year's war funding in part because of the uncertainty about future troop levels in Iraq and Afghanistan. With the conference bill, differences between House and Senate authorizers and amounts already appropriated are largely resolved (see Table 7 ).",
"The halving of DOD's request for the ISFF from $2 billion to $1 billion in the enacted version of the FY2009 authorization bill reflects broad and growing sentiment to push the Iraqis to pay more of the cost of reconstituting their security forces in reaction to large and growing Iraqi oil revenues that are documented in a recent GAO report. In addition to the funding cut, the authorizers prohibit funding for any facilities used by Iraqi forces, limiting funding to equipment, supplies, services, training and facility repair (see Sec. 1508 , S. 3001 ).\nThis prohibition adopts the stricter House version rather than limiting infrastructure funding to smaller projects as proposed by the Senate. Senate authorizers argued that \"the Iraqi Government is well able to afford to finance its own infrastructure needs at this point.\" The strict prohibition on funding infrastructure in the authorization conference would presumably supersede report language in the appropriations act that required \"equal cost-sharing\" for all reconstruction projects above $750,000. These changes set new standards that increase Iraqi \"burden-sharing\" of the cost to rebuild its security forces and reconstruction.",
"Reflecting oversight concerns, the final version of the authorization bill provides $2.2 billion rather than the $3 billion requested, and requires that the Director of JIEDDO develop a science and technology investment strategy for countering Improvised Explosive Devices (IEDs), as well as annual reporting. In addition, the final bill requires five-day advance notification of obligations and 15-day notice of transfers (Sec. 1503-1505, S. 3001 ).",
"Another high visibility and rapidly growing program where the $1.5 billion authorization cap in the final authorization bill is below the request is the Commanders Emergency Response Program (CERP), which allows individual commanding officers to dispense funds for small-scale reconstruction projects, or to pay local militias such as the Sons of Iraq. The CERP program has grown from $180 million in FY2004, its first year, to $956 million in FY2007 to $1.7 billion in FY2008.\nInstead of adopting the House-proposed restrictions limiting U.S. funding for CERP) to no more than twice Iraqi funding, the authorization bill requires reporting of all projects over $500,000 and certifications for projects over $1 million. The bill also requires detailed reporting, including for Iraqi government contributions, and prohibits funding for projects above $2 million unless there are contributions from other countries, the Iraqi government, or private organizations or the Secretary of Defense submits a waiver (Sec. 1214, S. 3001 ).\nThe final version of the authorization bill does, however, exempt CERP projects from the overall prohibition on infrastructure spending (Sec.1508) as was proposed in the Senate version. In addition, the appropriations act requires equal cost sharing of all reconstruction projects over $750,000 in report language as the \"necessary first step in decreasing the Government of Iraq's reliance on U.S. funds for reconstruction.\"",
"In its FY2009 request, the Administration proposed a broadening of Sec.1206 authority to include training of foreign and border police as well as military forces, an increase in the current funding cap from $300 million to $750 million, and $500 million in designated funding rather than the current practice where funds are transferred from other programs.\nAs recommended by both houses, the final version of the authorization bill rejects most of the Administration's proposals and limits Section 1206 authority to train and equip foreign militaries for counter-terror operations, reflecting congressional concerns about the foreign policy implications of expanding DOD authority. The bill extends authorization for the Section 1206 program for three years. It also raises the annual cap to $350 rather than the $750 million requested (Sec. 1206, S. 3001 ). The FY2008 Supplemental sets a limit of $150 million for FY2008 but did not include a FY2009 cap.\nReflecting action by both houses, the final authorization bill raises the limit for Sec. 1208 authority to fund foreign irregular forces from $25 million to $35 million until FY2013 and also specifies that the irregular forces would work with U.S. special forces.",
"In its amended submission, DOD requested $2.6 billion in the Mine Resistant Ambush Protected (MRAP) vehicle transfer fund to buy additional vehicles for as yet undefined requirements. The conference bill adopts the $1.7 billion funding level appropriated in the FY2008 supplemental ( P.L. 110-252 ) rather than setting a cap with funds drawn from other accounts as was in the House bill or the $600 million level funding in the Senate bill. According to DOD, the current requirement for 12,000 MRAP vehicles is already funded while the House authorizers suggest that more funding is needed to buy additional V-shaped heavy-duty trucks for training purposes.",
"Currently, funding for Iraq and Afghanistan is provided in standard appropriation accounts, which mix funds for the two operations and the funds for DOD's baseline and war appropriations. While the final version of the authorization bill does not specify separate amounts for Iraq and Afghanistan in FY2009 as the Senate bill did, it requires DOD to present separate budget displays for each operation at the appropriation level and by program, project or activity level in the next submission (Sec. 1502).\nIn addition, the conference version requires that DOD provide a \"detailed description of the assumptions underlying the funding for the period covered by the budget request, including the anticipated troop levels, the operations intended to be carried out, the equipment reset requirements necessary to support such operations,\" as proposed by the House.\nThis requirement for separate budget displays would not necessarily require that DOD to set up individual accounts for war spending for each operation. Although separate war funding by operation would improve transparency and help Congress to see the relative cost of the two operations, DOD is likely to object to designating funds by operation in order to preserve its flexibility. According to the Senate report, separate funding displays would help prevent confusion between the two missions, a concern of both Secretary of Defense Gates and the committee.",
"Finally, the final version of the authorization bill sets a $4 billion cap on transfer authority for FY2009 funds, which limits the overall amount that DOD can transfer between accounts as requested by DOD and adopted by the appropriations act (Sec. 1507, S. 3001 ). The level of transfer authority is of considerable concern to DOD because it provides flexibility to adjust funding levels during execution.",
"",
"The Concurrent Resolution on the Budget for FY2009 ( S.Con.Res. 70 ), adopted by the Senate on June 4 and by the House on June 5, set an overall target for national defense budget authority of $612.5 billion. This is essentially identical to the President's request ($611.1 billion) with the difference reflecting recalculation by the Congressional Budget Office (CBO) on the basis of slightly different technical assumptions. This total covers the so-called 050 function of the budget, which includes funding for DOD, defense-related nuclear-energy spending by the Department of Energy, and defense-related programs in other agencies.\nThe same defense total had been included in both the House version of the budget resolution ( H.Con.Res. 312 ), adopted March 13, and original version of S.Con.Res. 70 , adopted March 14 by the Senate.\nThe $612.5 billion total cap on defense budget authority set by the final version of S.Con.Res. 70 , as in the House-passed resolution, was the sum of two ceilings set by the resolution: For national defense activities other than military operations in Iraq and Afghanistan (budget function 050), the ceiling is $542.5 billion; operations in Iraq and Afghanistan are covered by a separate ceiling of $70 billion (budget function 970), which is the amount of the placeholder funding request included in the President's FY2009 budget.\nSubsequently, the Appropriations Committees of the House and Senate, under the so-called \"302b allocation\" process gave their respective defense subcommittees a budget authority allowance for FY2009 of $487.7 billion—which, in practice, is the ceiling for the FY2009 defense appropriations bill.",
"The House passed H.R. 5658 , the Duncan Hunter National Defense Authorization Act for FY2009, on May 22 by a vote of 384-23. The bill would authorize $531.4 billion for national defense-related activities of DOD and other federal agencies and an additional $70 billion for costs related to military operations in Iraq and Afghanistan.\nThe Administration's initial FY2009 budget request included a lump-sum of $70 billion as an initial increment of funding for DOD and other agency costs related to combat operations in Iraq and Afghanistan. On May 2, five days before the House Armed Services Committee (HASC) subcommittees began marking up H.R. 5658 , the Administration issued a budget amendment formally allocating the $70 billion request among appropriations accounts. However HASC, which also authorized the $70 billion by accounts in H.R. 5658 , acknowledged only a handful of the specific allocations included in the May 2 amendment. The bill authorizes $2.0 billion of the $3.7 billion requested to support Afghan Security Forces and $1.4 billion of the $2.0 billion requested for support of Iraqi Security Forces.\nWithin the $70 billion authorized for operations in Iraq and Afghanistan, the House bill also allocates nearly $4.9 billion for aircraft procurement programs not included in the Administration's budget request:\n$3.9 billion to buy 15 C-17 cargo planes; $523 million for components that would be needed to fund an additional 10 F-22 Air Force fighters in FY2010; $448 million to repair worn out wing structures on Navy P-3C patrol planes, which have been used extensively for reconnaissance in Iraq and Afghanistan.\nCongress has incorporated the Administration's $70 billion FY2009 costs related to operations in Iraq and Afghanistan into H.R. 2642 , the Second FY2008 Supplemental Appropriations Bill.\nThe House version of the FY2009 defense authorization bill also included a provision (Sec. 1431) that would exempt it from the President's Executive Order 13457, which prohibits agencies from complying with congressional earmarks not specified in statutory language. As is customary, the more than 500 earmarks associated with H.R. 5658 are specified in the HASC report accompanying the bill ( H.Rept. 110-652 ), which it reported to the House on May 16.\nIn a Statement of Administration Policy issued May 22, the Office of Management and Budget (OMB) cited the provision exempting the bill from the executive order dealing with earmarks as one of many provisions which, if included in the final version of the bill, would cause the President's advisors to recommend a veto. Other provisions of H.R. 5658 cited by OMB as potential reasons for a veto are reductions totaling more than $700 million in the $10.8 billion requested for missile defense programs, a prohibition of proposed increases in health care fees and copays paid by some military retirees, and a provision requiring that any agreement with the Iraqi government concerning the legal status of U.S. military personnel in that country include a requirement that Iraq pay some of the costs of those forces.",
"H.R. 5658 authorizes a military pay raise of 3.9 percent, rather than 3.4 percent as requested, and bars during FY2009 a proposed increase in TRICARE health insurance and pharmacy fees charged to some military retirees. Congress had prohibited proposed health care fee increases in each of the two previous budgets. To offset the lost revenue the proposed fee increases had been expected to generate, the bill would authorize, subject to appropriation, the transfer to the Defense Health Program of $1.3 billion from the unobligated balances of the National Defense Stockpile Transaction Fund.\nAs requested, the bill would authorize increases in the active-duty end-strength of the Army (by 7,000) and Marine Corps (by 5,000), in line with the Administration's plan to increase the active-duty end-strength of the two services by 92,000 personnel over their end-strength in FY2007. It also would add a total 1,431 personnel to the requested end-strength of the Navy and Air Force (at a cost of $101 million). The Administration had proposed to substitute civilians for this number of Navy and Air Force military personnel in medical care positions. But the House bill reaffirms a provision of the FY2008 National Defense Authorization Act ( P.L. 110-181 ) prohibiting such military-to-civilian conversions of medical personnel.\nThe bill also includes a provision that would allow a limited number of service members to take sabbaticals from active service for up to three years and return with no loss of rank or time-in-service.",
"The bill denies authorization of $62 billion requested for long lead-time components to begin procurement of the Northrop Grumman KC-45A refueling tanker, but approved the request for $832 million to continue development of the aircraft. Some members have objected to the Air Force's selection of the Northrop Grumman system, based on a European-designed Airbus for this mission, rather than a tanker version of the Boeing 767. According to the committee, denial of the long lead-time funding would not delay the program.\nThe bill includes a provision (Section 134) requiring the Secretary of the Air Force to submit to the congressional defense committees a report on the process by which the requirements were established that were the basis for selecting a new tanker. Another provision (Section 801) requires the Secretary of the Air Force to review the impact on the decision to buy the European-designed tanker of any subsidies by European governments that are illegal under the agreement reached in Uruguay round of the General Agreement on Tariffs and Trade.\nAlthough the budget request included no funds either to continue production of the C-17 cargo plane or to shut down the production line, the bill allocates $3.9 billion of the $70 billion requested for operations in Iraq and Afghanistan to buy an additional 15 C-17s. It also includes a provision (Section 131) that would allow the Air Force to retire C-5A cargo planes and replace them with additional C-17s only if a federally funded research and development center concludes that this would be more prudent than upgrading the engines and electronics on the C-5As.",
"The bill authorizes $3 billion requested for 20 F-22 fighters. However, it also adds to the bill authorization of $523 million for long lead-time components that would be used to build an additional 20 F-22s in FY2010. The Administration's request includes neither the funds that would be needed to continue production of the F-22 beyond FY2009 nor the funds that would be needed to close down the production line.\nThe bill authorizes the requests for $3.1 billion to continue development of the F-35 Joint Strike Fighter (JSF) and $3.7 billion to buy 16 of the planes. But it would add to the Administration request $525 million to continue development of an alternative engine for the JSF.",
"The bill cuts $200 million from the $3.6 billion requested for the Army's FCS program. Armed Services Air and Land Forces Subcommittee chair Neil Abercrombie said these cuts were targeted to slow production of some components until they were more thoroughly tested. If the proposal were enacted, it would mark the fourth consecutive budget in which Congress trimmed the funding request for FCS.\nThe bill also includes several legislative restrictions on the FCS program, including a requirement for annual reports to Congress on cost growth in the program's eight types of manned ground vehicles (Section 213), an independent report on potential vulnerabilities of the digital communications web intended to link FCS components (Section 212), and a provision that would bar the program's lead system integrators, Boeing and SAIC, from producing major components of the program (Section 112).",
"The bill authorizes a total of $10.1 billion for missile defense programs, which would be $719 million less than the President requested, but $213 million more than Congress appropriated for these programs in FY2008 (see Table A-3 ). It cuts the amounts requested for several programs intended to deal with long-range missiles and added to the amounts requested for defenses against short-range and medium-range missiles which, HASC said in its report, are the more pervasive threat.\nAmong the reductions were cuts totaling $372 million from the $954 million requested to begin deploying in Poland and the Czech Republic an anti-missile system intended to deal with long-range missiles launched from Iran. The bill also includes a provision (Section 222) that would bar the proposed European deployment until (1) the governments of Poland and the Czech Republic have ratified agreements to accept the stationing of U.S. personnel and equipment on their territories; and (2) the Secretary of Defense has certified to Congress that the interceptor missiles intended for the European site—a modified variant of the interceptors currently deployed in Alaska and California—has passed operationally realistic flight tests.\nThe bill cut $100 million from the $386 million requested to develop a new, high-speed interceptor missile (designated the Kinetic Energy Interceptor (or KEI) and it cut $43 million from the $421 million requested to develop an anti-missile laser carried in a Boeing 747. The KEI and Airborne Laser both are intended to destroy attacking missiles while in their \"boost phase,\" that is while they still are accelerating away from their launchers and, thus, are relatively easy to detect. The bill included a provision (Section 221) requiring a detailed analysis by a federally funded research and development center of the technical feasibility and cost-effectiveness of such boost-phase defenses, compared with various anti-missile systems already deployed or nearing production.\nThe bill cuts from the request $100 million of the $354 million to develop a multiple-warhead interceptor able to hit several attacking missiles. It also cuts $10 million, the entire amount requested for the Space Test Bed, an experiment to test the feasibility of space-based anti-missile interceptors.",
"In its report, HASC criticized the Navy's shipbuilding plan as both unaffordable and unwise—the latter in that it would end production of proven ship classes while investing large amounts in expensive, new, unproven designs: the DDG-1000 destroyer and the Littoral Combat Ship. Compared with the Administration's request, H.R. 5658 significantly increases or decreases funding for most major shipbuilding programs.\nThe bill denies the $2.5 billion requested in FY2009 to build a third ship of the DDG-1000 class. Instead, it adds to the budget a tenth ship of the LPD-17 class of amphibious landing transports ($1.7 billion) and $278 million to buy long lead-time components for use in two additional T-AGE-class supply ships, designed to replenish warships in mid-ocean, that would be funded in FY2009. It also authorizes $400 million, which the Navy could use either to buy components that could be used to build an additional DDG-1000 or to resume production of the much less expensive DDG-51-class destroyers. HASC Seapower Subcommittee chair Gene Taylor has urged the Navy to use the funds to continue DDG-51 procurement.\nTo buy two additional Littoral Combat Ships, the bill authorized $840 million rather than the $920 million requested, on grounds that the contractors could use components previously purchased for ships of this class that had been cancelled.\nThe bill authorizes $722 million more than the $3.4 billion requested for acquisition of Virginia -class submarines. The request would buy one sub in FY2009 and long lead-time components (including a nuclear powerplant) to be used in another sub slated for purchase in FY2010. The bill's addition would let the Navy buy enough long lead-time components in FY2009 to allow the purchase of two subs in FY2010, thus accelerating by one year the time when the Navy could begin buying subs at the rate of two per year.\nReflecting SASC's concern that the Administration's shipbuilding plan shows little progress toward meeting its avowed goal of increasing the size of the fleet to 313 ships, the bill did not grant the Administration's request that Congress waive a provision of law (10 U.S.C. § 5062) that requires the Navy to maintain 11 aircraft carriers in service. To avoid the cost of refueling the nuclear-powered carrier Enterprise , the Navy wants to retire that ship in 2013, which would cause the carrier force to drop to 10 ships for four years or more, until the carrier George H. W. Bush , which was funded in FY2005, enters service. Instead of including the requested waiver in the bill, HASC directed the Secretary of the Navy to report how much it would cost and how long it would take to return to service the recently retired carrier John F. Kennedy and to retain in service the carrier Kitty Hawk , which is slated for retirement.\nHASC also directed the Navy secretary to report on the cost and feasibility of extending the service life of existing Los Angeles -class submarines, many of which are nearing their scheduled retirement dates.",
"The bill denies the $348 million requested for long lead-time components to be used in a modified version of the LHA-class helicopter carriers used to carry Marine combat units. The ship—for which the projected total cost is $3.5 billion—would be the first of a new Maritime Prepositioning Force (Future) (or MPF(F)) comprising 10-12 ships from which a Marine Expeditionary Brigade (typically numbering 20,000 troops with several dozen supporting helicopters and combat jets) could be put ashore.\nUnlike the currently deployed maritime prepositioning force, which consists of container ships and vehicle-carrying \"roll-on, roll-off\" (or RO-RO) vessels, the proposed MPF(F) would include three modified versions of the big helicopter carriers that are part of the Navy's amphibious warfare fleet. However, like the current prepositioning ships, the MPF(F) is not intended to land a force that would have to fight its way ashore. Such so-called \"assault\" landings are to remain the province of the amphibious landing ships. Accordingly, MPF(F) vessels based on amphibious ship designs—such as the helicopter carriers—will be built without some of the communications equipment and damage-control features found in their combat-equipped counterparts.\nIn its report, HASC challenged the idea of using non-combatant ships—like those envisioned for the MPF(F)—rather than amphibious landing ships designed as combat vessels. It directed the Navy to report the number and types of amphibious ships that would be needed to carry out the MPF(F) mission.\nThe bill also includes a provision (Section 1013) requiring that helicopter carriers and other large amphibious landing ships be nuclear-powered. A similar provision requirement covering aircraft carriers, large surface warships and submarines was included in the FY2008 defense authorization bill.",
"The bill incorporates the text of the Reconstruction and Stabilization Civilian Management Act of 2008, H.R. 1084 , as passed by the House on March 5, 2008. The provisions of this act would authorize the President to furnish, after notifying Congress, up to $100 million in assistance annually from FY2008 through FY2010, for stabilizing and reconstructing a country or region in conflict or civil strife, or in transition from that status. It also would codify the establishment of the State Department Office of the Coordinator for Reconstruction and Stabilization (S/CRS), authorize the Secretary of State to establish a response readiness corps, including a civilian reserve corps, and authorize the appropriation of funds for through FY2010 to cover personnel, education, training, equipment, travel, and deployment costs.",
"The bill authorizes $1 billion of the $2 billion requested for training and support of Iraqi Security Forces and $1.5 billion for the Commanders Emergency Response Program (CERP), a fund available to U.S. commanders in Iraq to pay for reconstruction projects. However, the bill also includes a provision (Section 1214b) requiring that Iraq obligate one dollar on similar reconstruction projects for every two dollars spent by CERP. The Secretary of Defense may waive the requirement under certain circumstances.\nThe bill includes provisions requiring that future budget requests list separately those items related to operations in Afghanistan (Section 1002) and Iraq (Section 1003). It also would continue an existing prohibition on the use of funds either to establish permanent bases in Iraq or to control Iraqi oil revenues (Section 1211).\nThe bill also would require\na report by the President on any agreement with the Iraqi government concerning the legal status of U.S. personnel in Iraq, U.S. rights of access to bases in that country, the rules of engagement governing U.S. units in Iraq, or any U.S. security commitment to Iraq (Section 1212); periodic reports by the President on the strategy and performance of U.S.-led Provincial Reconstruction Teams in Iraq (Section 1213); establishment of a performance monitoring system for Provincial Reconstruction Teams in Afghanistan (Section 1215); a report by the Secretary of Defense on the command and control structure for U.S. and NATO-led military forces in Afghanistan (Section 1216); and a report by the Secretary of Defense on (1) the number of police training teams needed to staff a majority of the 1,100 police stations in Iraq; (2) the cost of staffing such an effort; and (3) the feasibility of transferring responsibility for Iraqi police training from DOD to the Department of State (Section 1218).",
"Among other provisions of H.R. 5658 as passed by the House are the following:\nDenial of authorization for the $10 million requested to develop a new nuclear weapon, the Reliable Replacement Warhead, intended to replace some currently deployed warheads on Trident submarine-launched ballistic missiles; Authorization of $118 million, as requested, for development of a long-range, conventionally armed missile for \"prompt global strike.\" No funds had been requested to develop a conventionally armed version of the Navy's Trident submarine-launched, nuclear-armed missile, which Congress has refused to fund in prior budgets; Authorization of $1 billion as requested to continue development of the VH-71, a new fleet of White House helicopters. Citing cost overruns in the Lockheed Martin program, which is based on a European-designed aircraft, HASC directed DOD to report alternatives for future production; Prohibition for one year of so-called \"A-76\" competitions in which private contractors bid to take over work currently performed by federal employees (Section 325); A requirement that the Office of Management and Budget (OMB) draft a government-wide definition of \"inherently governmental functions\" that should be performed by federal employees rather than by contractors (Section 322).",
"The House passed H.R. 5658 May 22 by a vote of 384-23 after two days of debate, during which it adopted several amendments bearing the U.S. military posture in the Middle East and a wide-ranging amendment to federal contracting law.",
"An amendment by Representative Barbara Lee, adopted by a vote of 234-183, denies legal effect to any agreement obligating the United States to defend Iraq unless the agreement is a treaty ratified with the advice and consent of the Senate or is specifically authorized by Congress.",
"An amendment by Representative Braley, adopted by a vote of 245-168, requires the President to submit to Congress a report on the long-term cost (through FY2068) of U.S. operations in Iraq and Afghanistan , including the costs of operations, reconstruction and health care and disability benefits.",
"An amendment by Representative Holt, adopted by a vote of 218-192, requires recording by videotape or other electronic method of any interrogation of a detainee under the jurisdiction or effective control of DOD.\nAn amendment by Representative David Price, adopted by a vote of 240-168, would prohibit the interrogation of detainees by contractors, although it would allow the use of contractors as interpreters.",
"An amendment by Representative Spratt, adopted by voice vote, would require the Director of National Intelligence to submit to Congress an annual update of the November 2007 National Intelligence Estimate on Iran's nuclear weapons program. The amendment also requires the President to notify Congress within 15 days of determining that Iran has accelerated, decelerated or ceased work on any significant element of its nuclear weapons program or that Iran has met any major milestone in its effort to develop nuclear weapons.",
"The House also adopted by voice vote an amendment by Representative Waxman incorporating several provisions intended to reduce the federal government's use of sole-source and cost-reimbursement contracts, establish government-wide conflict-of-interest rules governing contractor employees working in government contracting offices, and create a government-wide database of any judicial proceeding, contract suspension or disbarment of any federal contractor.\nAmong the other amendments to H.R. 5658 acted on by the House were the following:\nAn amendment by Representative Akin that would have restored $193 million of the $200 million the bill would cut from the $3.6 billion request for the Army's Future Combat Systems (FCS) program, was rejected 128-287. An amendment by Representative Franks that would have restored $719 million the bill cuts from the Administration's $10.1 billion request for anti-missile programs was rejected 186-229. An amendment by Representative Tierney that would have cut an additional $966 million from the anti-missile budget was rejected 122-292. An amendment by Representative Pearce that would have restored the $10 million requested to continue development of the Reliable Replacement Warhead, a request the bill denies in its entirety, was rejected 145-271. An amendment by Representative McGovern requiring the Secretary of Defense to make public, on request, the names, ranks and countries of origin of students and instructors at the Western Hemisphere Institute for Security Cooperation, was adopted 220-180. An amendment by Representative Hodes, adopted by voice vote, requires the DOD Inspector General and the General Accounting Office to report on whether a prohibition on the use of appropriated funds for domestic propaganda was violated by a Pentagon program to provide special briefings for military analysts who are frequent press commentators.",
"The Senate Armed Services Committee (SASC) approved S. 3001 , the National Defense Authorization Act for FY2009, on April 30 and reported the bill to the Senate on May 12 ( S.Rept. 110-335 ). The Senate passed the bill September 17 by a vote of 88-8.\nThe bill authorizes a total of $612.5 billion in new budget authority, including $542.5 billion for the base budget and a $70 billion placeholder allowance for war-related costs. This is essentially the amount requested by the President except for minor differences that reflect score-keeping adjustments by the Congressional Budget Office (CBO).\nDuring floor debate on the bill, the Senate adopted three amendments:\nBy Senator Kyl and others, directing that $89 million of the total appropriated for missile defense research be used to deploy an X-band, long-range missile-detection radar in a secret location; Adopted by voice vote; By Senator Leahy and others, extending from three years to five years the period following the end of a war during which the statute of limitations on contractor fraud would be suspended; Adopted by voice vote; By Senator Bill Nelson, repealing the requirement that military survivors' benefits paid from DOD's Survivor Benefit Plan be reduced by the amount of any benefits received under the dependency and indemnity compensation program of the Department of Veterans Affairs; Adopted 94-2.\nThe Senate rejected by a vote of 39-57 an amendment by Senator Vitter and others that would have increased by a total of $358 million the amounts authorized for three missile defense programs.\nThe bill incorporates $2.0 billion worth of reductions to the Administration's budget requests for military personnel and operation and maintenance which, according to SASC, would have no adverse impact on DOD operations. This includes cuts of $1.1 billion from military personnel accounts and $212 million from operations and maintenance accounts based on an historic pattern of DOD requesting for those amounts than it spent in a given year, reductions totalling $198 million based on what the committee said was an erroneously high request for civilian pay, and a reduction of $497 million in the amount requested for depot maintenance of Air Force planes.\nThe $497 million the bill cuts from the Air Force maintenance account was requested to repair a weak section of the structure of older F-15 fighters, after one of the planes broke apart in mid-air during a training flight. In its report, SASC said a much smaller number of planes had been found to need reconstruction than had been assumed in the budget request.\nPresident Bush's Executive Order 13457 prohibits agencies from complying with congressional earmarks not specified in statutory language; S. 3001 includes a provision (Section 1002) that would incorporate into the bill the detailed funding tables in the accompanying committee report, which would circumvent E.O. 13457. These funding tables spell out how the Senate intends DOD and the services to allocate the lump sums authorized for each appropriations account—for instance, the accounts for procurement of aircraft for the Army and for research and development for the Navy. Member's earmarks, which are listed at the end of the report in a separate table by sponsor, amount authorized, and intended beneficiary, also are listed in the funding tables but are described there in more general terms (rather than in terms of the specific entity intended to receive the authorized funding).",
"On several important military personnel questions, S. 3001 agrees with the House-passed FY2009 authorization bill ( H.R. 5658 ). Both bills approve the requested addition of 12,000 troops to the active-duty end-strength of the Army and Marine Corps, as a step toward a planned increase of 92,000 troops over the FY2007 level. Similarly, both bills authorize a 3.9% raise in military pay effective January 1, 2009, rather than the 3.4% raise in the budget request, an increase that costs an additional $316 million.\nLike the House bill, S. 3001 prohibits the Administration's proposed increase in fees, co-payments, and pharmacy prices charged some military retirees by DOD's TRICARE health insurance system. The bill adds to the budget request $1.2 billion to make up for the loss of anticipated revenue from the proposed fee increases. Unlike the House bill, however, and pursuant to an Administration request, the SASC bill repeals a provision of the FY2008 Defense Authorization Act (Section 721 of P.L. 110-181 ) that prohibits replacing military medical personnel with civilians, as the Administration has proposed.",
"Unlike the House bill, S. 3001 authorizes $2.5 billion requested for a third DDG-1000 class destroyer. However, the Senate bill also would expand the Administration's shipbuilding plan, rejecting the request for $103 million to shut down production of LPD-17 class amphibious landing transports and adding to the bill $273 million for long lead-time components that would allow the Navy to budget for an additional LPD-17 in FY2010. It also adds $79 million to the $1.3 billion requested for long lead-time components to allow the Navy to begin budgeting for two submarines per year starting in FY2011.\nNoting delays in the construction of helicopter carriers at the Northrop Grumman shipyard in Pascagoula, MS, that was damaged by Hurricane Katrina, SASC concluded that the contractor was unlikely to proceed as quickly as the budget assumed to assemble long lead-time components for an LHA(R) class helicopter carrier slated to be part of the planned Maritime Prepositioning Force (Future). Accordingly, the bill authorizes $178 million of the $348 million requested for that purpose. It also includes a provision (Section 1432) requiring the Navy to fund that ship—and others slated for the MPF(F) that are basically amphibious landing ships—through its ship construction account instead of through a revolving fund for sealift ships, which gives the service more leeway to reallocate funds.\nThe bill adds $25 million to the $165 million requested to begin a $10 billion, long-term program to modernize the 61 Arleigh Burke-class destroyers—its most numerous class of warships—so they can operate for 40 years, rather than the 20 years that the committee cited as the norm for vessels of that size. But the committee also directed the Navy to provide detailed justification of its decision to have the ships upgraded in several stages by shipyards near their homeports instead of having each one get a full upgrade from either the Northrop Grumman yard in Pascagoula or the General Dynamics-owned Bath Iron Works in Bath, ME, the two yards where all the ships were built.\nCiting delays in finalizing the design of a new class of cruisers (designated CG(X) that would replace the 22 Aegis cruisers in the anti-aircraft and missile defense mission, the bill cut $121 million from the $313 million requested to prepare to begin building the first CG(X) in FY2011.",
"In addition to authorizing $3.1 billion, as requested, to buy 20 F-22 fighters, the bill authorizes $497 million to be used either to shut down the F-22 production line or to buy long lead-time components that would allow the Air Force to buy 20 additional planes in FY2010.\nThe bill also authorizes, as requested, $3.1 billion to continue development of the F-35 Joint Strike Fighter, $3.3 billion to buy 16 of the planes, and $396 million for long lead-time components to support future purchases. But it also adds to the budget request $500 million to continue congressional effort to make DOD fund development of a General Electric engine that could replace the Pratt & Whitney engine currently used in the F-35. The added funds include $430 million to continue developing the alternate engine, $35 million to develop improvements in the Pratt & Whitney powerplant—to \"level the playing field,\" in the words of the SASC report—and an additional $35 million to buy long lead-time components that would be needed in future production of the alternate engine.\nCiting warnings by the Navy, Marine Corps, and Air Force that the retirement of older fighter planes combined with delays in fielding the F-22 and F-35 could leave the services short of planes to equip their squadrons, the committee included in the bill a provision (Section 171) requiring DOD to give Congress annually a 30-year plan detailing projected changes in its inventory of all major types of aircraft. The committee also urged the Navy to prepare to sign a multi-year contract for more F/A-18E/F strike fighters than it currently plans to buy, as a hedge against delays in the acquisition of F-35s.",
"The bill authorizes $1.3 billion requested to buy 52 Global Hawk and Predator unmanned aerial vehicles (UAVs), some of which would be armed but all of which are equipped for surveillance missions. It trims $48 million from the $480 million requested to develop a long-range UAV for maritime surveillance. But it authorizes $371 million requested for shorter-range Army and Navy UAVs.\nThe bill adds to the budget request $98 million to develop an improved ground-surveillance radar (designated R-TIP) which the committee urged the Air Force to consider backfitting on the existing E-8 J-STARS planes. It authorizes $111 million requested for long lead-time components that would be used to begin production of a modified Boeing 737 (designated P-8) that the Navy will use as a long-range sub-hunter and reconnaissance plane and it authorizes $160 million, not requested, to repair aging P-3 patrol planes that the P-8 is intended to replace.",
"Because the losing contractors have filed an official protest of the Air Force's selection of the Boeing Chinook as its new search and rescue helicopter (designated CSAR-X) intended to retrieve downed pilots from enemy territory, the bill authorizes $265 million of the $305 million requested to develop the aircraft and none of the $15 million requested to buy long lead-time components in preparation for manufacture. The bill authorizes the $1.0 billion requested to continue development of the VH-71, intended to replace the aging helicopters that serve the White House. But in its report, the committee cited a rash of problems besetting the program which, it said, might experience of 70% cost overrun. The report directs the Navy to submit to Congress a detailed report on the status of the program.",
"Following the same general approach as the companion House bill, S. 3001 would authorize less for anti-ballistic missile defenses than the administration requested. Of the $10.9 million requested, the House bill would authorize $9.9 billion and the Senate bill $10.2 billion. .\nMoreover, within those overall totals, both bills authorize more than was requested for systems that are ready, or nearly ready, for deployment to deal with existing short-range and medium-range missiles. On the other hand, both bills authorize less than requested for programs that would not enter production that soon, many of which are intended to deal with intercontinental-range missiles.\nIn its report, SASC places great emphasis on an analysis by the Joint Staff—the body of officers that provide technical expertise to the Joint Chiefs of Staff—which concludes that, to meet the needs of combatant commanders around the globe, DOD needs about twice as many of the Army's THAAD interceptors and the Navy's SM-3 interceptors missiles than it currently plans to buy. Both systems are designed to knock down medium-range missiles, which fly much slower than intercontinental ballistic missiles (ICBMs). S. 3001 would add to the budget request $135 million to field additional THAAD and SM-3 missiles and THAAD radars and an additional $80 million to improve the anti-missile capability of the Navy's Aegis system, which uses the SM-3 missile.\nAmong the reductions the bill would make in anti-missile programs are cuts of:\n$269 million (undistributed) from the Missile Defense Agency; $10 million, the entire amount requested, for the Space Test Bed; and $50 million of $354 million requested for the Multiple Kill Vehicle, intended to let one interceptor knock out several attacking warheads.\nS. 3001 authorizes the funds requested to begin deploying in Europe a variant of the defense against intercontinental-range missiles currently deployed in Alaska and California. However, the bill includes a provision (Section 232) that would bar use of the funds to buy interceptor missiles for that deployment or to begin construction on-site until (1) Poland and the Czech Republic have formally ratified agreements to allow the American sites on their territory and (2) the Secretary of Defense certifies to Congress that the interceptor slated for deployment at the European site—which is a considerably modified variant of the version already deployed—has been successfully tested in operationally realistic flight tests.",
"Among other provisions of S. 3001 are the following:\nauthorizes the services to let a limited number of personnel leave active service for up to three years and return with no loss of rank or time-in-service to test the feasibility of allowing service members more flexibility in pursuing their careers, requires DOD to conduct a comprehensive study of the risk that critical installations could be cut off from their current sources of energy; requires DOD to establish ethics standards to prohibit conflicts of interest on the part of contractor employees who perform acquisition functions for the Department; bars private security contractors from performing in an area of combat operations any \"inherently governmental functions,\" which are defined to include \"security operations if they will be performed in highly hazardous public areas where the risks are uncertain and could reasonably be expected to require deadly force that is more likely to be initiated by contractor personnel than by others; prohibits contractor employees from interrogating detainees during or in the aftermath of hostilities, a restriction that would take effect one year after enactment of the bill; requires the armed services to ensure that field commanders \"urgent requirements\" for specific equipment be presented to senior service officials for review within 60 days of submission; adds $350 million to the $843 million requested to develop the Transformational Satellite (TSAT), which would be a key node in a planned, high-volume, global laser-communication network; authorizes the $10 million requested in the Energy Department's defense-related budget for research on the Reliable Replacement Warhead, but denies authorization for the $23 million in the Navy's budget request for that proposed new nuclear warhead; prohibits, with a few exceptions, the use of funds authorized by the bill to pay for infrastructure projects in Iraq costing more than $2 million.",
"Although the House and Senate both passed versions of the FY2009 defense authorization bill through the usual procedures, the Senate's final action on its version ( S. 3001 ) was delayed until September by various controversies. One issue contributing to the delay was a provision of the defense bill (Section 1002) that would incorporate into the legislation hundreds of earmarks listed in the committee's report on the measure. Another issue was an unrelated dispute over offshore oil drilling, which held up Senate action on most legislation. The Senate passed the bill September 17 after acting on only four amendments.\nThe Senate did not request a conference with the House to reconcile S. 3001 with the House-passed H.R. 5658 . Instead, members of the House and Senate Armed Services committees negotiated informally the compromise version of S. 3001 that was cleared for the President.\nAlthough the Administration objected to the provision that incorporated into the Senate-passed bill the earmarks listed in the Senate Armed Services Committee's report on the bill, a substantially identical provision (Section 1005) was included in the compromise version of S. 3001 , that incorporated into that measure the hundreds of earmarks listed in summary tables in the \"explanatory statement\" that was, for all practical purposes, equivalent to the explanatory statement in a formal conference report.",
"The compromise version of S. 3001 did not include any of several provisions in either the House or Senate versions of the authorization bill that had been singled out by Administration officials as grounds for a veto, if they had been included in the version of the bill sent to President Bush.\nFollowing is a summary of provisions of the House or Senate versions of the authorization bill that Deputy Defense Secretary Gordon England had cited as grounds for a veto in a September 19 letter to leaders of the House and Senate Armed Services committees:\na ban on the government's use of private security contractors in combat zones; Section 832 of the compromise bill expresses a sense of Congress that security missions in combat zones should be performed by U.S. military personnel. a ban on the use of contractor employees to interrogate detainees; Section 1057 of the compromise expresses a sense of Congress that contractors should not conduct interrogations. a requirement that detainee interrogations be videotaped. Section1058 of the compromise expresses a sense of Congress that such interrogations be videotaped or otherwise electronically recorded. a requirement that Congress approve, either as a treaty or by legislation and agreement governing the legal status of U.S. forces in Iraq. The compromise included no such requirement but retained in Section 1212 a requirement in the House bill that DOD provide Congress with a detailed report on such an agreement, should it be reached. a requirement that the Davis-Bacon Act, requiring the payment of locally prevailing wages on federal construction projects, apply to military construction projects on Guam, to which Marine Corps units currently stationed on Okinawa, are being moved. The provision was dropped. provisions that would bar or inhibit DOD from outsourcing on the basis of a \"public-private competition\" jobs currently performed by military or federal civilian personnel. No such provisions were included in the compromise bill. provisions that would halt the construction of facilities to replace Walter Reed Army Medical Center in Washington, D.C., pending a review, and would prohibit the use of an independent commission to draw up recommendations for any future rounds of military base closures. No such provisions were included in the final bill. several provisions in the Senate bill relating to the management of intelligence activities in DOD. All such provisions were dropped. four provisions in the House bill—added in the wake of the Air Force's now-cancelled selection of a European-designed mid-air refueling tanker—three of which the Administration said would require DOD to discriminate against foreign manufacturers and one of which it said would require disclosure of contractors' proprietary information. The provisions were dropped or greatly diluted in their impact. funding cuts \"below acceptable levels\" to the $657 million requested for research and development and facilities construction associated with deployment of an anti-missile system in Poland and the Czech Republic. While the Administration did not specify an \"acceptable level,\" the compromise bill cut $208 million compared with the $421 million that had been cut by the House version.",
"The bill requires the Secretary of Defense to submit annually an aircraft procurement plan for the Navy, Marine Corps and Air Force that would project procurements, retirements and losses over the following 30 years for all types of combat and support aircraft (Section 141). The services have warned Congress in recent years of coming shortfalls in combat planes as planned retirements outstrip the acquisition of replacement craft.\nThe amounts authorized for particular programs were generally consistent with (and largely superseded by) the amounts actually appropriated by the companion defense appropriations bill. But the authorization measure included significant policy provisions bearing on some high profile programs:",
"The bill would defer until FY2010 application to the Navy's Littoral Combat Ship (LCS) program of a cost cap set by Congress in the FY2007 John Warner National Defense Authorization Act (Section 122). The cap limits the cost of each LCS to $460 million with the proviso that the cost would be allowed to exceed that cap by up to $10 million because of inflation.",
"To buy long lead-time components that would allow the procurement of additional F-22 fighters in FY2009, the bill authorizes $523 million not requested by the Administration (funds that also were included in the companion FY2009 defense appropriations bill). However, the bill would allow DOD to expend only $140 million of that amount until the next President decides whether to buy additional F-22s or shut down the program.",
"The bill would authorize $835 million to continue development of a new fleet of helicopters for the White House, a reduction of $213 million from the request. The companion FY2009 defense appropriations bill provides the same amount. Although the project is based on an existing helicopter of European design, costs have increased significantly, in part because of the high-tech communications equipment being installed in the aircraft. The authorization bill would require the Secretary of Defense to submit to Congress several reports called for by the House and Senate versions of the measure, including one that would analyze the advantages and disadvantages of re-competing the helicopter contract, which was won in 2005 by Lockheed Martin.",
"In an explanatory statement accompanying the compromise version of S. 3001 , the House and Senate members who negotiated the bill objected to the frequency with which the Missile Defense Agency (MDA) had cancelled scheduled flight tests. They directed MDA to consult with certain other DOD agencies before cancelling future tests and to report to the congressional defense committees on the reasons for any future test cancellations and MDA's plan to meet the objectives of the cancelled test.\nThe bill would also require the National Academy of Sciences to analyze the feasibility of the proposed systems that are intended to destroy missiles in their \"boost-phase\"—the period immediately after launch when their rocket motors are firing (Section 232) One of the boost-phase defenses covered by that section is the Airborne Laser—a Boeing 747 armed with a huge laser . Another section of the bill (Section 235) would require DOD's director of operational testing to report on the operational effectiveness, survivability and affordability of the Airborne Laser.\nWhile the bill authorized $449 million of the $667 million requested to begin deploying anti-missile interceptors in Poland and their associated radar in the Czech Republic, the bill also would bar expenditure of the funds until after the two host countries have signed and ratified the agreements necessary for the deployments and 45 days have elapsed from the time Congress receives an independent assessment of the proposed European deployment conducted by a federally funded research and development corporation (Section 233). That review was mandated by the FY2008 National Defense Authorization Act.",
"The bill would authorize a military pay raise of 3.9 percent, which is one-half of 1 percent higher than the President requested. But it does not include a provision in the House-passed bill that would have required military pay raises in FY2010-FY2013 that would be one-half of 1 percent above the annual increase in the Labor Department's Employment Cost Index (ECI), which is a measure of changes in employee compensation in the private sector.\nThe bill would mandate, for male service members whose spouse gives birth to a child, 10 days paternity leave in addition to any other leave to which the service member is entitled. It also would authorize a pilot program to test the value of allowing a small number of military personnel to leave active duty for a period of up to three years to focus on personal or professional goals. Participating members would return to active duty at the same rank and seniority they held when the left active duty, but the time spent in the program would not could toward the 20 years of service required to retire.\nThe bill does not include a Senate-passed provision which would have repealed an existing legal requirement that, if the survivor of a deceased service member is eligible both a DOD annuity from the Survivor Benefit Plan (SBP) and an annuity from the Dependency and Indemnity Compensation program (DIC) of the Department of Veterans Affairs, the SBP payment would be reduced by the amount of the DIC payment.",
"For the third year in a row, the authorization bill reject's Administration proposals to increase fees and copayments for military retirees participating in DOD's Tricare health care program.\nThe bill also includes several provisions intended to encourage service members and Tricare beneficiaries to take steps designed to prevent health problems, such as controlling their weight, abstaining from smoking and exercising. These include a provision that would waive Tricare copayments for preventive services (Section 711), authorize a demonstration program testing the effectiveness of monetary and other incentives to participate in a program to monitor health risk factors, such as weight and blood pressure (Section 712) and establish a smoking cessation program under Tricare (Section 713).",
"The compromise bill dropped a House-passed provision that would have prohibited the award of any contract for a contractor to act as lead systems integrator (LSI) on a major acquisition program.\nIt includes a provision requiring the creation of a career path for military personnel who specialize in the acquisition field, and it requires the creation of five additional positions for general officers serving in acquisition jobs.\nIt requires establishment for all major acquisition programs of a Configuration Steering Board intended to control costs by controlling proposed changes in the design of the system (Section 814).\nAmong the bill's other significant provisions relating to DOD's acquisition process are the following:\nauthorization of a streamlined hiring process to fill acquisition jobs in DOD (Section 833); requirement to establish a government-wide policy (codified in standard contract clauses) to prevent conflicts of interest for contractor employees who are managing DOD acquisitions (Section 841); and extension from three years to five years of the period after the end of a congressionally authorized conflict during which no statute of limitation applies for contractor fraud (Section 855).",
"The House and Senate versions of the FY2009 National Defense Authorization Act (NDAA) each included a variety of Iraq policy provisions. Some of them required reports to the Congress from the President or from the Secretary of Defense, while others were designed to have a more direct impact on activities in Iraq. The only point of overlap was language in both drafts that would extend a prohibition from the FY2008 National Defense Authorization Act, P.L. 110-181 , prohibiting the use of funding to support permanent stationing of U.S. military forces in Iraq or to exercise control over Iraqi oil resources. Table 8 , below, provides a side-by-side summary of selected Iraq policy provisions in each bill and the resolution of each issue in the final version of S. 3001 .",
"The House Defense Appropriations Subcommittee marked up its version of the FY2009 Defense Appropriations Bill on July 30, recommending a total of $477.6 billion, $4 billion less than the President requested for that bill. The Senate Defense Appropriations Subcommittee marked up its version of the appropriations Bill on September 10, also recommending $477.6 billion.\nNeither chamber held full committee markups of a FY2009 defense appropriations bill, and neither chamber considered a bill on the floor. Instead, a compromise version of the two subcommittee bills—in effect, a conference agreement on FY2009 defense appropriations—was incorporated into H.R. 2638 , the FY2009 Consolidated Security, Disaster Assistance and Continuing Appropriations Act, which the House passed September 24 by a vote of 370-58. The Senate passed the bill September 27 by a vote of 78-12 and the President signed it September 30 ( P.L. 110-329 ).",
"The House Defense Appropriations Subcommittee marked up its version of the FY2009 Defense Appropriations Bill on July 30, recommending a total of $477.6 billion. In addition to funding a military pay raise of 3.9% (0.5% higher than the President's request), the bill would provide, for service members who were retained on active duty involuntarily by a so-called \"Stop Loss\" action, an additional $500 per month for each month their service was extended from October 2001 onward.\nThe subcommittee bill denied the $2.5 billion requested for a third ship of the DDG-1000 class of destroyers, but this action was revised in the final version of the appropriations bill.\nOn other key weapons systems, the unnumbered House subcommittee bill would appropriate:\n$6.7 billion, as requested, for development and production of the F-35 Joint Strike Fighter, but with a $785 million cut from production funding that is nearly offset by increases in the development program to continue work on an alternative engine ($430 million) and to increase the amount of testing, partly by purchasing two more prototypes ($320 million); $523 million not requested to buy components to permit continued production in FY2010 of the F-22 Raptor, in addition to approving the funds requested to buy 20 of the aircraft in FY2009 ; $3.6 billion for the Army's Future Combat Systems (FCS) program, including an increase of $33 million to accelerate the development of unmanned ground and aerial vehicles; Additions to the request of $1.6 billion for an LPD-17 amphibious landing transport, $450 million for components to be used in the DDG-1000 program, and $941 million for two T-AGE cargo ships. $398 million for components to be used in a future Virginia-class submarine, thus allowing the Navy to begin in 2010—a year earlier than currently planned—funding two subs per year instead of one; $835 million, which is $212 million less than the budget request, to continue development of a fleet of new helicopters for use by the White House;\nThe subcommittee also approved $893 million, as requested, to develop a new aerial refueling tanker for the Air Force to replace existing KC-135 tankers built by Boeing in the 1950s. In addition, the subcommittee directed that, as DOD conducts a new competition to choose between a tanker offered by Northrop Grumman and one offered by Boeing, it comply with findings made by Government Accountability Office (GAO) in its ruling that a previous competition, won by Northrop Grumman, was invalid.\nOn September 10, Defense Secretary Robert Gates cancelled the second competition to select a new tanker. In a statement, Gates said there was not enough time for DOD to complete the selection process by next January, when a new Administration will take office and that, accordingly, he had decided to allow the next Administration to define the requirements budget allocation for the new plane. During a House Armed Services Committee hearing on September 10, Gates said DOD soon would recommend to Congress how to allocate the tanker funds requested for FY2009. On September 15, Air Force Chief of Staff Gen. Norton Schwartz, reportedly said in a press conference that it could take the next Administration between eight months and four years to conduct a new tanker competition.\nThe House subcommittee bill also would require the Administration to include in future annual defense budget requests funding to cover the cost for the year of ongoing operations in Iraq and Afghanistan.\nThe bill would provide $80.6 million of the $389 million requested to stand up a new U.S. Africa Command. According to press accounts, subcommittee's draft report to accompany the defense bill contended that a high-profile military command was not the appropriate basis for organizing U.S. government efforts, carried out by many agencies, to promote security stability in Africa.\nAction on the subcommittee draft by the full House Appropriations Committee, which had been scheduled for September 9, was postponed.",
"The Senate Defense Appropriations Subcommittee marked up its version of the FY2009 Defense Appropriations Bill on September 10. Like its counterpart House panel, the Senate subcommittee recommended a total of $477.6 billion.\nThe subcommittee accepted by voice vote an amendment by Senator Domenici that would continue a nuclear nonproliferation agreement under which Russia is converting 500 metric tons of weapons-grade uranium to a less potent form of uranium that can be used to fuel nuclear powerplants. To protect U.S. producers of nuclear reactor fuel, the amendment limits the amount of uranium fuel Russia can sell to U.S. powerplants.\nAn amendment by Senator Dorgan that would have rescinded funds appropriated for reconstruction in Iraq and for training and equipping Iraqi security forces, was rejected by a vote of 10-9.\nThe bill would fund a military pay raise of 3.9% (0.5% higher than the President's request).\nThe bill would fund procurement of 14 of the 16 requested F-35 Joint Strike Fighters and would add to the request $495 million to continue developing an alternative engine for the F-35.\nIt also would fund, as requested, procurement of a third destroyer of the DDG-1000 class. It would add funds to buy components that would enable the purchase in a future budget of a DDG-51 class destroyer ($397 million), an LPD-17 class amphibious landing transport ($273 million), and an LHA(R) class helicopter carrier ($178 million).\nThe bill would provide $362 million of the $893 million the Air Force requested for the replacement mid-air refueling tanker. The Senate subcommittee marked up its bill on the same day that DOD cancelled the second competition to select the new tanker.\nIt would deny all funds requested for procurement of the Stryker Mobile Gun System, a version of the Stryker armored car armed with a tank-like cannon. It also would deny funds requested to integrate with the Navy's Trident submarine-launched ballistic missile a proposed new nuclear warhead designated the Reliable Replacement Warhead.",
"Neither the House nor the Senate ever held full committee markups of an FY2009 defense appropriations bill, neither committee issued a report on the bill, and neither chamber considered a bill on the floor and debated amendments. Instead, what is in effect a conference agreement on FY2009 defense appropriations, along with agreements on military construction/VA and homeland security appropriations, was considered as Division C of H.R. 2638 , the FY2009 Consolidated Security, Disaster Assistance and Continuing Appropriations Act.\nIn all, the FY2009 defense appropriations bill provides $477.6 billion in new appropriations for the Department of Defense and related agencies, which is $4.0 billion below the Administration request, and which, in turn, reflects the House and Senate Appropriations Committees' allocations of funds to the each chamber's defense subcommittees under Section 302(b) of the Congressional Budget Act (see below for a discussion of the annual budget resolution and Section 302 allocations).\nFor most programs, the defense appropriations bill ultimately determines the level of funding Congress provides. The defense authorization bill recommends amounts to be appropriated, but, with few exceptions, the final amount of new budget authority actually made available is determined in appropriations bills. Appropriations bills may provide more or less than amounts in the authorization, may eliminate funds for programs approved in the authorization, and may provide funds for \"new start\" programs not approved in an authorization bill. The main exception is that defense authorization bills generally include statutory language that (1) establishes end-strength levels for uniformed personnel in each of the military services and reserve components and (2) sets amounts for pay and benefits of uniformed personnel. The appropriations bills, therefore, do not usually determine the amount of a military pay raise, though they normally include funds for military personnel accounts based on pay rates, bonuses, benefits, and end-strength established in the annual defense authorization.\nOn military personnel matters, the House-Senate agreement on the FY2009 defense appropriations bill provides funds for a 3.9% increase in base pay for uniformed personnel, reduces funding to reflect lower-than planned strength levels in some of the services, and establishes a new health professionals scholarship program. The bill also includes a general provision, Section 8116, that provides $72 million in FY2009 for a program to provide up to $500 per month in additional compensation to personnel kept on active duty beyond the end of their normal enlistment periods under a \"Stop Loss\" order. The provision does not, however, require that a specific amount be paid.\nOn major weapon programs,\nThe agreement provides $1.5 billion of the $2.5 billion requested for a third Navy destroyer of the DDG-1000 class. The House and Senate negotiators directed the Navy to use the funds as an initial increment of funding for the ship and to request the remaining $1 billion increment in the FY2010 budget. The agreement also requires the DOD Joint Requirements Oversight Council, comprised of Deputy Chiefs of the military services, to review the Navy's decision to reduce DDG-1000 acquisition and resume production of smaller DDG-51 destroyers. The measure eliminates $59 million in advance procurement for the DDG-1000 program and adds $200 million in advance procurement to preserve the option to build additional, DDG-51s. In effect, the bill keeps both the DDG-1000 and DDG-51 production lines open, for now, deferring a decision as to how to proceed. On other shipbuilding issues, the bill adds $830 million as the first half of split funding to procure an additional, 10 th of the class, LPD-17 amphibious ship; provides $1.02 billion, $100 million more than requested, for the Littoral Combat Ship (LCS) program, rescinds $337 million in earlier LCS funding, and directs that funding be allocated to two ships with contract awards as soon as possible; cuts $170 million from the $348 million requested for a replacement for LHA class amphibious ships and shifts funds from the National Defense Sealift Fund (NDSF) to the Navy shipbuilding account, where the ability to reallocate funds is more constrained; and adds $79 million to the $1.3 billion requested in advance procurement for Virginia-class attack submarines in order to facilitate production of two boats per year beginning in FY2010. The agreement provides $6.3 billion, the amount requested, to the Navy and the Air Force for the F-35 Joint Strike Fighter program, but trims procurement from 16 to 14 aircraft and allocates $430 million for alternate engine development—a perennial congressional addition to the Administration request. The bill provides $2.9 billion, as requested, to purchase 20 Air Force F-22 fighters and adds $523 million for advance procurement of an additional 20 aircraft in future years. The additional amount is to keep the production line open and allow the next Administration to decide whether to purchase more than the 181 aircraft now planned. The bill shifts $62 million requested in procurement and $832 million requested in R&D for the KC-X tanker replacement program into an already established \"Tanker Replacement Fund,\" which is a no-year transfer account which sets no limit on the number of years for which funds remain available and from which funds can be shifted as needed to other accounts. The bill also rescinds $72 million in previously appropriated funds for the tanker program from Air Force R&D and $239.8 million from the Tanker Replacement Fund. The bill provides $3.6 billion for the Army's Future Combat System, adding $26 million to accelerate unmanned air and ground vehicle acquisition, and moving funds between programs to reflect recent Army adjustments to the program to accelerate near term elements. On satellite and other space programs, many of which have suffered long delays and large cost growth in recent years, the bill adds $150 million for a fourth, current-generation Advanced EHF communications satellite, cuts $75 million from the $843 million requested for the Transformational Communications Satellite (T-SAT) program, transfers $152 million into the Evolved Expendable Launch Vehicle program, and cuts $163.5 million from launch vehicle for a second Navy MUOS fleet communications satellite program to reflect delays. These are fewer changes than in past years, when the Space-Based Radar and T-SAT programs were often cut substantially. The imposition of fewer congressional cuts on space programs may reflect efforts by the services to be less technically ambitious in pursuing new space systems. The bill adds $750 million for intelligence, surveillance, and reconnaissance (ISR) programs, including $360 million for 24 C-21 aircraft equipped with sensor suites, $20 million for MQ-9 UAVs for special operations forces, and $13 million for additional medium UAVs. Secretary of Defense Gates has acknowledged disputes with the Air Force, in particular, in allocating sufficient ISR resources to operations in Iraq and Afghanistan.\nOn other matters\nThe agreement provides $350 million, $150 million less than requested, for the \"Global Train and Equip\" program, originally established by Section 1206 of the FY2006 national defense authorization act (and still commonly referred to as Section 1206 authority). The Secretary of Defense, with the concurrence of the Secretary of State, may use Section 1206/Global Train and Equip funding to provide a wide range of security and other assistance to foreign nations. The joint explanatory statement accompanying the bill asserts bluntly that the State Department, rather than the Department of Defense should be responsible for training and equipping foreign military forces and that the Administration should request future funds in the State Department budget. The bill also trims $123 million from the $389 million requested in military personnel and operation and maintenance accounts for the newly established Africa Command (AFRICOM). The cut in AFRICOM funding reflects the same sentiment as the reduction in Global Train and Equip funding. While the AFRICOM reduction is not as steep as in the House Defense Appropriations Subcommittee version of the bill, and the joint explanatory statement expresses support for AFRICOM, the statement also insists that the State Department and the U.S. Agency for International Development (USAID) should \"play a more important role in this new organization supported with the appropriate manpower and funding required.\" The joint explanatory statement includes a critique of Air Force management of major acquisition programs, citing in particular recent numerous breaches of limits on cost growth under the Nunn-McCurdy amendment, a provision of law first enacted in 1981 (10 U.S.C. § 2433) which requires notification of Congress when major acquisition programs exceed specific cost thresholds. The statement requires the Secretary of Defense to report by March 31, 2009, on steps to reform Air Force practices. The joint explanatory statement also cites inaccurate cost estimates in many other major programs and requires the Defense Department to report on which programs since 2004 did not use cost estimates by the independent DOD Cost Analysis Improvement Group (CAIG) and to explain why. The bill also directs the Defense Department to provide funding for the Acquisition Workforce Development Fund, established by the FY2008 defense authorization act, in the regular appropriations process."
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{
"question": [
"What did the 111th Congress do soon after it convened?",
"What was the purpose of the \"economic stimulus\" bill?",
"Into what initiatives were the funds allocated?",
"What does the balance of the report discuss?",
"What was included in the President's FY2009 budget request?",
"How was the budget distributed across national agencies?",
"What was the purpose of the $70 billion placeholder?",
"What bill did the House pass?",
"What did the bill deny?",
"What compromise was necessary in the passing of the bill?",
"How did the House Defense Appropriations Subcommittee and the Senate Defense Appropriations Subcommittee work together to craft a new bill?",
"What was included in the bill?"
],
"summary": [
"Soon after the 111th Congress convened, it began drafting H.R. 1, the American Recovery and Reinvestment Act of 2009, generally referred to as the \"economic stimulus\" bill.",
"This bill added a total of $8.5 billion to amount previously appropriated for DOD in FY2009.",
"Of the additional funds provided by H.R. 1, $4.6 billion was for accounts funded by the regular FY2009 DOD appropriations provided by Division D of the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act for FY2009, generally referred to as the \"continuing resolution,\" which President George W. Bush signed into law on Sept. 30, 2008. The economic stimulus bill also provided an additional $2.9 billion for accounts funded by the regular military construction appropriations provided by Division E of the continuing resolution.",
"The balance of the report discusses the President's regular DOD budget request for FY2009 and Congress' disposition of that request in the regular defense authorization and appropriations legislation.",
"The President's FY2009 budget request, released February 4, 2008, included $611.1 billion in new budget authority for national defense.",
"This total included $515.4 billion in discretionary budget authority for the base budget of the Department of Defense (DOD)—i.e., activities not associated with operations in Iraq and Afghanistan—$2.9 billion in mandatory spending for the DOD base budget, and $22.8 billion for defense costs of the Department of Energy and other agencies.",
"It also included a placeholder of $70 billion for war costs in the first part of FY2009.",
"The House passed its version of the defense authorization bill (H.R. 5658) on May 22, authorizing $612.5 billion for national defense, including $70 billion for war-related costs. The Senate passed the bill September 27 by voice vote and the President signed it on October 14 (P.L. 110-417).",
"The bill denied authorization of the $2.5 billion requested for a third destroyer of the DDG-1000 class, allocating those funds instead to buy several other ships.",
"A compromise between the House and Senate bills authorizing $611.1 billion, worked out informally, was passed by the House September 24 as an amended version of the Senate-passed S. 3001 by a vote of 392-39.",
"The House Defense Appropriations Subcommittee marked up its version of the FY2009 Defense Appropriations Bill on July 30, recommending a total of $477.6 billion, $4 billion less than the President requested for that bill. The Senate Defense Appropriations Subcommittee marked up its version of the appropriations bill on September 10, also recommending $477.6 billion. Neither chamber held full committee markups of a FY2009 defense appropriations bill, and neither chamber considered a bill on the floor. Instead, a compromise version of the subcommittee bills was incorporated into H.R. 2638, the FY2009 Consolidated Security, Disaster Assistance and Continuing Appropriations Act.",
"The bill included $477.6 billion in regular FY2009 defense appropriations and $25.0 billion in military construction appropriations."
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{
"title": [
"",
"Introduction",
"The Electoral College in Brief: A Primer",
"The Electoral College in Principle: The Founders' \"Original Intent\"",
"The Electoral College in Form: The System's Components as They Exist Today",
"The Electoral College in Function: How It Works in Contemporary Presidential Elections",
"The Electoral College in Survey Research Findings: Trends in Public Opinion",
"Electoral College Issues",
"Philosophical Criticism: The Electoral College Provides Indirect Election of the President",
"Structural Criticisms of the Electoral College System",
"Constitutional Issues",
"The Minority President: An Electoral College \"Misfire\"",
"Failure to Gain an Electoral College Majority: Contingent Election",
"The Decennial Census Issue",
"The Faithless Elector",
"Legislative and Political Issues",
"The General Ticket System—\"Winner Take All\"",
"Alleged Biases of the Electoral College System",
"The \"Electoral College Lock\"",
"Electoral College Reform Options: End It? Mend It? Leave It Alone?",
"End It—Direct Popular Election Replaces the Electoral College",
"Direct Election—Discussion",
"Mend It—Reform the Electoral College",
"Electoral College Reform—Discussion",
"Leave It Alone",
"Trends in Congressional Electoral College Reform Proposals",
"Action at the State Level Since 2008",
"NGO Proposal: The National Popular Vote Initiative",
"Concluding Observations"
],
"paragraphs": [
"",
"The United States is unusual among contemporary presidential republics by providing for the indirect election of its President and Vice President. Election of these two officers by a group of electors, known collectively as the electoral college, was established in Article II, Section 1 of the U.S. Constitution. The states were given blanket authority to appoint these electors \"in such Manner as the Legislature[s] thereof\" may direct. The original constitutional provisions, under which electors cast two votes for different candidates for President, but none for Vice President, proved unworkable after only two contested elections, resulting in a constitutional crisis during the deadlocked election of 1800. Following this significant event, Congress proposed the Twelfth Amendment, which provides for separate electoral vote ballots in Congress for the President and Vice President, and which was ratified by the states in time for the 1804 election. The constitutional presidential election provisions of Article II, Section 1 and the Twelfth Amendment have remained unchanged since that time.\nAs with other provisions of the Constitution, Article II, Section 1 and the Twelfth Amendment established a basic framework for presidential elections but it extended considerable latitude to the states concerning its implementation. Arguably the most important related power reserved to the states was their right to appoint electors \"in such Manner as the Legislature thereof may direct.... \" In the years following ratification of the Twelfth Amendment, this right was exercised in various ways as state laws and political party procedures added a range of now-familiar additional elements to the system. These include such practices as\npopular election of electors by the voters; joint tickets for presidential and vice presidential candidates—the voter casts a single ballot for both candidates; the predominance of the general ticket, or winner-take-all, system or method, which awards all of a state's electoral votes to the ticket that wins the most popular votes statewide; a range of differing nomination procedures for elector candidates in the states; and, an enduring tradition that electors are expected, but not constitutionally required, to vote for the candidates to whom they are pledged.\nThe electoral college system has proved to be durable: 54 presidential elections have been held under this arrangement since the Twelfth Amendment was implemented in 1804. In 53 of these, it delivered a majority of electoral votes for President and Vice President, and in 49 instances it delivered the presidency to \"the people's choice,\" the candidates who won the most popular votes. When measured by the first factor, it delivered an electoral vote majority to one candidate or ticket 98.2% of the times; when measured by whether it has delivered the presidency to \"the people's choice,\" the candidate who won the most popular votes, it did so 90.7% of the times. The electoral college has almost always been the subject of some criticism, however. Proposals to reform its alleged failings, or to replace it with something completely different, have been offered since the earliest days of the republic.",
"",
"Few questions so vexed the Constitutional Convention of 1787 as that of presidential election. During the convention, the delegates voted successively for election by Congress; direct popular election by the people; selection by the governors of the several states; election by electors chosen by the state legislatures; and even election by a group of Members of Congress chosen by lot. At length, the matter was referred to a committee on \"postponed matters,\" which reported a compromise plan near the close of the convention. The committee considered a range of generally agreed-upon principles for choice of the chief executive. Proceeding from the lengthy convention debate on choosing the chief executive, they contrived a mode of election designed to\nbe free of undue influence by Congress, thus ensuring greater independence in the executive and separation of powers; provide a fundamental role for the states by establishing the election as a federal, as well as a national, process; allocate electors by a formula that provided a certain degree of advantage to less populous states, to avoid complete domination of the election process by the more populous ones; give the state legislatures broad authority over the choice of electors: at the legislatures' discretion, electors could be picked by popular vote, by the legislature itself, or by another body altogether; and, ultimately temper popular enthusiasms and partisan and sectional attachments by giving the actual vote to the electors, who, it was hoped, would be prominent citizens of their states and communities—well-informed and educated persons who would make a balanced and measured selection.\nNotwithstanding the Founders' intentions, from the very beginning, the electoral college began to change, evolving through constitutional amendment, state laws, and political party practices. The growth of political parties and the spread of voting rights and democratic principles overtook the Founders' vision that the President would be chosen by the nation's most distinguished citizens. Within two decades, the electoral college evolved into the compound system that continues to govern U.S. presidential elections two centuries later.",
"As noted previously, the U.S. Constitution's minimal electoral college provisions have been complemented over the past two centuries by a range of federal and state laws, political party procedures, and enduring political traditions, resulting in the system as it exists today. The salient features of the contemporary arrangement, a mixture of these elements, are detailed below.\nThe electors are collectively known as the electoral college; although this phrase does not appear in the Constitution, it gained currency in the early days of the republic, and was recognized in federal law in 1845. The electoral college has no continuing existence. Its sole purpose is to elect the President and Vice President; electors convene in the state capitals, vote, and adjourn. Each state is allocated a number of electors equal to the combined total of its U.S. Senate and House of Representatives delegations; in addition, the District of Columbia is also allocated three electors. At present, the total is 538, reflecting the combined membership of the Senate (100 Members), the House (435 Members), and the District of Columbia electors. Any person may serve as an elector, except Senators and Representatives, or any other person holding an office of \"trust or profit\" under the United States. As noted previously, the state legislatures select the method by which electors are chosen. In practice, all states currently provide for popular election of their electoral college delegations. Candidates for the office of elector are nominated by political parties and other groups eligible to be on the ballot in each state. In most cases, the elector candidates are nominated by the state party committee or the party's state convention. The winning presidential and vice presidential candidates must gain a majority of electoral votes (270 of 538) to be elected. If no ticket of candidates attains a majority, then the House of Representatives elects the President and the Senate elects the Vice President, in a procedure known as contingent election.",
"The assorted components of the electoral college system come into operation before, during, and after presidential election day, once every four years. Aside from the period of several months when electors are nominated, elected, and cast their votes, the college has no permanent or continuing existence.\nPresidential election day is set by federal law for Tuesday after the first Monday in November every fourth year succeeding the election of President and Vice President; one-third of U.S. Senators, all Members of the House of Representatives, and many state and local officials are also chosen on election day, which falls on November 3 in 2020. On election day, voters across the country cast one vote for the team of presidential and vice presidential candidates they support. When they do so, they are actually voting for the political party \"ticket\" of candidates for the office of elector who support, and pledge to vote for, that party's presidential and vice presidential candidates. The popular vote is cast and certified, the electors are chosen, and they then assemble and vote in their respective states. While the nationwide popular vote count, the \"horse race,\" is generally accorded widespread publicity during the campaign, ultimately it is the electoral vote tally in the states that decides the election. The goal of presidential campaigns is to win by carrying states that collectively cast a majority of electoral votes. In particular, political parties and presidential campaign organizations focus on states that are closely contested, that have large delegations of electoral votes, or both. Winning a majority of the more populous of these \"battleground\" or \"swing\" states is considered crucial to obtaining the necessary electoral vote majority. In 48 states and the District of Columbia, the ticket that wins the most popular votes, a plurality or more, is awarded all the state's electoral votes. That is, the winning party's entire slate or ticket of candidates for the office of elector is elected. This is referred to as the \"general ticket\" or \"winner-take-all\" system or method. Maine and Nebraska use a different method, the \"district\" system, under which popular votes are counted twice; first, on a statewide basis, and second, on a congressional district basis. The presidential/vice presidential ticket receiving the most votes statewide receives two electors (or electoral votes) for this total. The ticket winning the most votes in each congressional district receives a single elector/electoral vote for that district. In this way, a state's electoral vote may be divided to reflect geographical differences in support within the state for different candidates. Presidential electors assemble on the first Monday after the second Wednesday in December following the election. In 2020, the electors are to assemble on December 14. They meet in their respective states and cast separate votes by paper ballot for the President and Vice President. As noted earlier, candidates for the office of elector are selected by their respective political party. They are expected to vote for the candidates to whom they are pledged, but occasionally a \"faithless elector\" will vote against instructions. After the electoral college votes, the results are forwarded by state officials to Congress and various other federal authorities designated by law. On January 6 of the year following a presidential election, Congress meets in a joint session to count the electoral votes and make a formal declaration of which candidates have been elected President and Vice President.",
"Historically, public opinion, as measured by survey research, consistently supported reform (i.e., direct popular election), until recently. The Gallup Poll reported as early as 1967 that 58% of respondents supported direct election, compared with 22% who favored retaining the electoral college; Gallup's 2013 survey recorded that 63% of respondents favored an amendment providing for direct election, while 29% favored retention of the electoral college. Following the 2016 election, however, Gallup reported a shift to greater support for the electoral college system by respondents who identified themselves as \"Republican\" or \"Lean Republican.\" Conversely, already high levels of support for direct popular election among respondents who identified themselves as \"Democratic\" or \"Lean Democratic\" rose to new heights in the post-2016 election Gallup Poll.",
"As noted in the introduction to this report, the electoral college and the system built around it have delivered a President and Vice President in 53 of 54 elections since the Twelfth Amendment was ratified in 1804. It has elected the candidates who received the most popular votes in 49 of those elections. While the system's defenders point to this as a considerable achievement, the electoral college has been criticized for a wide range of alleged failings since the earliest days of the republic. These criticisms fall generally in one of two categories. The first is essentially philosophical , and centers on the fact that the existing system is indirect, and provides a less-than-fully democratic indirect election of the President and Vice President. The second category addresses perceived constitutional, legislative, and political structural flaws in the system asserted by its critics, focusing on the potential for various dubious procedures and outcomes, and the \"biases\" it is alleged to confer on certain groups and jurisdictions.",
"Perhaps the fundamental contemporary criticism of the Founders' creation is philosophical. Proponents of change maintain that the electoral college system is intrinsically undemocratic—it provides for \"indirect\" election of the President and Vice President. They assert that this is an 18 th century anachronism, dating from a time when communications were poor, the literacy rate was much lower, and the nation had yet to develop the durable, sophisticated, and inclusive democratic political system it now enjoys. They maintain that only direct popular election of the President and Vice President is consistent with modern democratic values and practice.\nDefenders of the electoral college system reject this suggestion; they maintain that while it may be indirect, it is not undemocratic—electors are chosen by the voters in free elections. They argue that the system prescribes a federal election of the President with votes tallied in each state, noting that the United States is a federal republic, not a plebiscitary democracy. The states, they assert, are long-established entities: distinct political, social, and economic communities that exercise substantial authority in many areas of governance, including presidential elections. The Founders, they note, intended that choosing the President would be an action Americans take both as citizens of the United States and as members of their state communities.",
"Beyond the fundamental claim that the electoral college is undemocratic, critics also cite what they identify as a wide range of structural flaws in the system; some of these are asserted to have origins in the constitutional provisions authorizing the electoral college system, while others are attributed variously to state legislation and political party practices.",
"Some of the electoral college system's asserted failings are attributed by its critics to its structure and provisions as established in Article II, Section 1 of the Constitution and the Twelfth Amendment.",
"Perhaps the most widely cited structural criticism of the electoral college system is that it can lead to the election of Presidents and Vice Presidents who win a majority of the electoral vote, but who have gained fewer popular votes nationwide than their major opponents. This result has been variously referred to as \"wrong winner\" or an electoral college \"misfire,\" particularly among reform advocates, and has occurred four times in the nation's history, 1876, 1888, 2000, and most recently in 2016. In one other election, that of 1824, no candidate received a majority of electoral votes, leading to contingent election in Congress. Proponents of direct election claim this potentially violates a fundamental democratic principle that the candidate winning the most popular votes should be elected. Electoral college supporters defend the system on the grounds that it is a federal election rather than a national plebiscite, and further note the system has delivered \"the people's choice\" in 49 of 54 elections since ratification of the Twelfth Amendment, a rate of 90.7%, as noted earlier in this report.",
"Contingent election, the electoral college \"default\" setting for cases in which no candidate receives the necessary majority of electoral votes, has also been cited by some as a structural failing of the system. If the presidential and/or vice presidential candidates fail to receive a simple majority of the electoral college votes, the Twelfth Amendment to the Constitution provides that the House of Representatives chooses the President and the Senate chooses the Vice President by contingent election. In a contingent election, however, each state casts a single vote for President in the House, while each Senator casts a single vote for Vice President.\nCritics of contingent election generally argue that it removes the choice of President and Vice President one step further from the voters. That is, members of the House and Senate are free to exercise their choice without regard to the winners of the popular vote in their districts, states, or in the nation at large. Moreover, by effectively granting each state an equal vote, they claim that contingent election fails to account for great differences in population—and the number of popular votes cast—in the various states. Finally, it may be noted that the Twelfth Amendment does not provide for District of Columbia participation in a contingent election in the House and Senate. While the ratification of the Twenty-third Amendment in 1961 granted the District of Columbia three votes in the electoral college, the nation's capital would be effectively disenfranchised in a contingent election, as it is not a state and sends neither Senators nor Representatives to Congress. Defenders might counter by noting that contingent election is a \"break glass only in case of an emergency\" procedure, and has been required only once, under arguably unique circumstances, in the 54 presidential elections since ratification of the Twelfth Amendment.",
"An additional structural issue is that the electoral college system bases allocation of electoral votes on the results of each decennial census. After each census, all 435 Members of the House of Representatives are reapportioned among the states: some states gain Representatives, others lose them, and some remain unchanged. Gains or losses in House seats lead to comparable adjustments to state electoral vote allocations following the census. For instance, the most notable adjustments following the 2010 census were Texas, which gained four House seats and whose electoral vote allocation rose from 34 to 38, and New York, which lost two House seats, and whose electoral vote allocation fell from 31 to 29. The decennial reallocation of electoral votes is reflected in the first presidential election following each census; for instance, electoral college reallocations resulting from the 2010 census were in place for the 2012 and 2016 elections, and will continue for the 2020 election. Supporters of direct election note that decennial reapportionment of electors fails to account for significant population shifts that often occur during the course of a decade. Thus, the allocation of electoral votes for the elections of 2012, 2016, and 2020 reflect the 2010 population distribution among the states, but it makes no provision for changes during the decade. States that enjoy greater population gains during the current decade will not see those increases translated into more presidential electors until 2024. Until then, they will arguably be under-represented in the electoral college, while by the same logic, those that will ultimately lose seats and electors will be over-represented.",
"The Twelfth Amendment to the Constitution directs presidential electors to \"meet in their respective States, and vote by ballot for President and Vice President, one of whom, at least, shall not be an inhabitant of the same state with themselves.... \" It offers no further guidance beyond this instruction. There is ample evidence that the Founders intended electors to be representatives of their state political communities, free agents, able to vote for the persons they thought best fit for the presidency or vice presidency. Perhaps naively, they failed to anticipate the growth of partisanship and a nascent party system that emerged as early as President Washington's second Administration. The job of the elector was therefore quickly transformed from that of dispassionate judge to loyal party agent, expected to vote for the candidates designated by the party. So they remain today, and although nearly all electors since the earliest presidential elections have voted for the candidates to whom they were pledged, from time to time one or more electors have voted against the instructions of the electorate. Since the 1948 presidential election, 16 \"faithless\" or \"unfaithful\" electors have cast votes for candidates other than those to whom they were pledged, and one cast a blank ballot.\nTwenty-six states and the District of Columbia attempt to bind their electors by one of several means, generally by requiring an oath or pledge or requiring electors to vote for the candidates of the political party the elector represents. In 1952, the Supreme Court held in Ray v. Blair that political parties could exercise state-delegated authority to require elector-candidates for the office of elector to pledge to support the party's presidential and vice presidential nominees. The Court did not , however, rule on the constitutionality of state laws that bind electors. Many commentators suggest that binding electors and the pledges that electors make are constitutionally unenforceable, and that electors remain free agents who may vote for any candidate they choose. In the presidential election of 2016, however, three would-be faithless electors were prevented from voting for candidates other than those to whom they were pledged.\nFrom the standpoint of electoral college defenders, it may be noted that 9,675 electoral votes have been cast in the 18 presidential elections held since 1948. Of these, the 16 that were indisputably cast against voters' instructions comprised less than two thousandths of one percent (0.001654%) of the total and had no effect on the outcome of any election.",
"The second category of asserted distortions caused by the electoral college arrangement stems from procedures that have been added to its constitutional provisions by the states over a long period of time. The most important issue is the nearly universal adoption of the general ticket, or winner-take-all, system for awarding electoral votes.",
"The general ticket system of awarding electoral votes is cited by critics as a structural failing of the electoral college system, an issue that does not stem from the Constitution, but rather from state laws. At the present time, 48 states and the District of Columbia provide that the ticket of presidential and vice presidential candidates that wins the most popular votes wins all the electoral votes for that jurisdiction. By awarding all of a state's electoral votes to the winner, regardless of the closeness of the popular vote results, the general ticket system is said to discount the votes of citizens who preferred the candidates receiving fewer votes. This asserted inequity is said to be particularly apparent in states where the popular vote is closely divided. Conversely, electoral college defenders claim the general ticket system's \"multiplier\" effect tends to reinforce the overall election results by magnifying the winning ticket's margin and to deter frivolous challenges to the state-by-state results.\nMaine and Nebraska provide the only exceptions to the general ticket system, having established what is referred to as the \"district system\" of awarding electoral votes. In these states, as noted earlier in this report, votes are counted both by congressional district and on the statewide level. The candidates winning the most popular votes statewide are awarded the two electoral votes reflecting the state's \"senatorial\" electors, while the candidates winning in each congressional district are awarded one elector, reflecting the results in that district. Proponents of direct election criticize the district system on the grounds that adding the \"senatorial\" electors to the statewide winners' total has much the same effect of disadvantaging the losing candidates and their supporters. District system supporters claim that it better reflects geographical differences in candidate support throughout a state, thus delivering an electoral vote that more accurately represents local preferences.",
"Opponents of the electoral college identify another category of alleged distortion built into the system. These are said to provide an advantage derived from state population or voter characteristics or behavior.\nAs the composition of the electoral college is partially based on state representation in Congress, some maintain it is inconsistent with the \"one person, one vote\" principle. The Constitutional Convention agreed on a compromise plan whereby less populous states were assured of a minimum of three electoral votes, based on two Senators and one Representative, regardless of state population. Since electoral college delegations are equal to the combined total of each state's Senate and House delegation, its composition is arguably weighted in favor of the \"small,\" or less populous, states. The two \"senatorial\" or \"at large\" electors to which each state is entitled are said to confer on them an advantage over more populous states, because voters in the less populous ones cast more electoral votes per voter. For instance, in 2016, voters in Wyoming, the least populous state, cast 255,849 popular votes and three electoral votes for President, or one electoral vote for every 85,283 voters. By comparison, Californians cast 14,181,595 popular votes and 55 electoral votes, or one electoral vote for every 257,847 voters. As a result of this distribution of electoral votes among the states, it is argued that \"small\" states have an advantage over large states because their electoral vote totals are larger in proportion to their population.\nWhile it is generally recognized, as noted above, that small states possess an arithmetical advantage in the electoral college, some observers hold that, conversely, the most populous (large) states enjoy a voting power advantage, because they control the largest blocs of electoral votes. In combination with the general ticket system, this is said to confer an advantage on voters in these states because the large blocks of electoral votes they control have greater ability to influence the outcome of presidential elections. To use the previously cited example, a voter in Wyoming in 2016 could influence only three electoral votes, 1.1% of the 270 electoral votes needed to win the presidency, whereas a voter in California could influence 55 electoral votes in the same presidential election, 20.4% of the votes needed to gain an electoral college majority. According to this argument, known as the \"voting power\" theory, the electoral college system actually provides an advantage to the most populous states, and disadvantages all other states and the District of Columbia.\nAnother theory centers on an asserted advantage enjoyed by ethnic minority voters. According to this argument, minority voters, principally African Americans, Latinos, and Jews, tend to be concentrated in populous states with large electoral college delegations. By virtue of this concentration, they are said to exert greater influence over the outcomes in such states because their voting patterns tend to favor candidates whose policies they perceive to be in their interest, thus helping win the states and their electoral votes for these candidates.\nA further alleged bias in the electoral college system is said to stem from the constitutional mandate that\nRepresentatives shall be apportioned among the several States according to their respective numbers, counting the whole number of persons in each state (emphasis added), excluding Indians not taxed.\nExcept for the two \"senatorial electors,\" a state's electoral vote allocation depends on the number of Representatives in Congress apportioned to it. A state's electoral vote is based to this extent on residents , not on citizens , and therefore, it is asserted that states that have high numbers of noncitizen residents counted in the Census enjoy a bias in the allocation of both Representatives and electoral votes. For instance, the United States Election Project estimated that in 2016, 16.7% of California's population was noncitizens, the highest proportion of any state, followed by Texas at 13.5% and Nevada at 12.6%. Critics of the current method have argued that counting noncitizens for the purposes of apportionment of Representatives and presidential electors provides an unfair advantage to states with large non-citizen populations. A 2012 Washington Post article discussing this alleged bias concluded that, due to large concentrations of noncitizens, California gained five electors from the 2010 reapportionment that it would not have received if Representatives and electoral votes were allocated according to citizen population, rather than resident population. According to this calculation, Texas gained two additional electors and New York, Florida, and Washington each gained one because Representatives are apportioned according to population. Conversely, the author calculated that Indiana, Iowa, Louisiana, Michigan, Missouri, Montana, Ohio, Oklahoma, and Pennsylvania each lost one elector due to the noncitizen population advantage.\nAnother alleged advantage or bias of the electoral college centers on differing rates of voter participation in the states. Neal Peirce and Lawrence Longley, writing in The People's President , suggested that voters in states that have lower rates of participation may enjoy an advantage because it takes fewer popular votes per elector to win the state and all its electoral votes. For instance, in the 2016 election, Hawaii, with four electoral votes, had the lowest rate of voter participation: 42.2% of eligible voters participated, casting 428,937 votes for President, a figure that equals 107,234 votes for each elector. By comparison, Minnesota, with 10 electoral votes, had the highest rate of participation, 74.2% of eligible voters, who cast 2,944,813 votes for President, a figure that equals 294,481votes per elector.\nThese various biases have been debated over the years. For instance, the alleged minority vote advantage was advanced by the Presidents of the American Jewish Congress and the National Urban League as a reason for their support of the electoral college system during hearings before the Senate Judiciary Committee's Subcommittee on the Constitution during its 1979 consideration of direct election amendment, while Alexander Bickel also supported the electoral college in this context. Conversely, other commentators have sought to refute many of the \"biases\" of the electoral college system.",
"A final asserted bias considered in this report is the so-called \"electoral college lock,\" a perceived phenomenon identified in the late 1960s that was claimed to provide a long-term election advantage to the candidates of a particular party, originally to Republicans, and later, Democrats, at least through the 2016 election. The lock was loosely defined as a tendency of the system to favor presidential candidates of one party over another. It was said to operate because a bloc of states possessing a large, sometimes decisive, number of electoral votes could be reliably expected to vote in successive elections for the candidates of the political party that tended to dominate those states. For instance, California is regarded as a reliably Democratic or \"blue\" state in presidential elections, one that dependably delivers its 55 electoral votes to the Democratic Party presidential candidates. Texas is similarly cited as a \"red\" state that reliably produces its 36 electoral votes for Republican presidential candidates. These one-word descriptors quickly gained currency during the first decade of the 21 st century, and have since become a standard verbal identifier for defining a state's political record and voting patterns.\nAs with other electoral college issues, the electoral college lock was also said to be dependent on the general ticket system discussed earlier in this report, because it delivers a state's entire electoral vote to the winning candidates.\nThe electoral college lock theory dates to the late 1960s, when analyst and historian Kevin Philips developed a thesis that political and social developments were responsible for a partisan realignment that was arguably the most important factor in creating the lock. In The Emerging Republican Majority , he predicted that growing Republican Party conservatism and the Democratic Party's embrace of the civil rights movement and a socially and politically progressive or liberal agenda would combine with demographic developments favorable to the \"Sunbelt\" states to produce a restructuring of the nation's political balance in favor of the Republican Party. Political commentators generally credit Horace Busby, a political advisor to President Lyndon B. Johnson, with naming rights for the lock. During the 1980 presidential election campaign, Busby reviewed electoral college trends since the 1968 election and concluded that \"... Democratic candidacies for the White House may no longer be viable. The Republican lock (emphasis added) is about to close; it will be hard for anyone to open ... between now and the year 2000.\"\nAt the time Busby coined the term electoral college lock, the phenomenon was largely presumed to benefit the Republican Party. For a period of at least 20 years, beginning in 1968, observers pointed to a nearly uninterrupted string of GOP presidential election victories as proof of the lock. Republican candidates won five of six elections during this period, taking an average of 417 of 538 electoral votes per election.\nIn the years following the 2008 and 2012 presidential elections, some observers discerned a shift in the electoral college lock in favor of Democratic Party presidential candidates. They noted that Democratic candidates had won four of the previous six presidential elections (1992, 1996, 2008 and 2012) by convincing electoral college margins, taking an average of 327 electoral votes per election. In addition, it was noted that 18 states disposing of 242 electoral votes, sometimes referred to as \"the blue wall,\" had voted Democratic in all six. This tendency was said to provide both a structural electoral vote advantage for Democratic candidates, and a serious obstacle to Republicans in these contests. It was attributed in part to the fact that social attitudes in the general public were said to have grown more favorable to Democratic candidates, and that, as one observer claimed, \"the demographic pendulum is swinging toward the Democrats. Young voters, Hispanics and a more active African-American electorate added states like Nevada, New Mexico, Colorado and Virginia to President Obama's winning coalition in the past two elections.\"\nOther observers, however, cautioned against accepting the electoral college lock as an inevitable process that would advantage its current beneficiary notwithstanding other influences. They claimed that the purported Republican lock of the 1960s through 1980s, and the perceived Democratic lock that began in the 1990s were not a deterministic phenomenon, but could also be attributed to, and influenced by, a wide range of factors, including such influences as domestic social and economic conditions, international issues affecting public attitudes toward national security, U.S. involvement in conflict abroad, scandals of various sorts, candidate popularity, \"time for a change\" sentiment, and even the competence, or lack thereof, of a presidential nominee's campaign.\nThe 2016 presidential election arguably confirmed some of these cautions about the inevitability of the electoral college lock or the durability the \"blue wall,\" given that three of the claimed blue wall states, Michigan, Pennsylvania, and Wisconsin, voted for the Republican candidates, providing a combined total of 46 electoral votes to the GOP ticket, thus ensuring its election.",
"Congress may consider three basic options if it addresses the question of electoral college reform. The first choice, widely advocated for at least 50 years, would repeal the sections of the Constitution dealing with the electoral college—clause 2 of Article II, Section 1 and the Twelfth Amendment—and substitute direct popular election. The second, largely dormant for several decades, would reform the electoral college system by eliminating some of the alleged problem areas cited in the previous section of this report. A third option would be to leave arrangements as they are at present.",
"The direct election alternative would abolish the electoral college, substituting a single nationwide count of popular votes. The candidates winning a plurality, or a majority, of the votes cast would be elected President and Vice President. Most direct election proposals would constitutionally mandate today's familiar joint tickets of presidential/vice presidential candidates, a feature that is already incorporated in state law. Some would require simply that the candidates that gain the most popular votes be elected, while others would set a minimum threshold of votes necessary to win election—generally 40% of votes cast. Some proposals would require a majority to elect, and if no presidential ticket were to win either a majority or 40% of the popular vote, then the two tickets with the highest popular vote total would compete in a subsequent runoff election. Alternatively, some versions of the direct popular election plan would provide for Congress, meeting in joint session, to elect the President and Vice President if no ticket reached the 40% or majority threshold.",
"Proponents of direct popular election cite a number of factors in support of the concept, many of which address the issues cited in the previous sections of this report. As their core argument, they assert that the process would be simple, national, and democratic. They maintain that direct popular election would provide for a single, democratic choice, allowing all the nation's voters to choose the President and Vice President directly, with no intermediaries. The \"people's choice\" would always be elected. According to supporters of direct election, every vote would carry the same weight in the election, no matter where in the nation it was cast. No state or group of voters would be advantaged, nor would any be disadvantaged. Direct election would eliminate the potential complications that could arise under the current system in the event of a presidential candidate's death between election day and the date on which electoral vote results are declared, since the winning candidates would become President-elect and Vice President-elect as soon as the popular returns were certified. All other procedures of the existing system, such as provisions in law for certifying the electoral vote in the states and the contingent election process, would be replaced by these comparatively simple requirements.\nCritics of direct election and electoral college defenders seek to refute these arguments. Direct election proponents claim their plan is more democratic and provides for \"majority rule,\" yet most direct election proposals require only a plurality—as little as 40% of the vote—in order to elect the President. Other versions include no minimum vote threshold at all, or provide for election by Congress in these circumstances. How, they might ask, could plurality Presidents or those elected by Congress, a practice that was rejected by the Founders, be reconciled with the ideal of strict majoritarianism? Opponents might further maintain that direct election would result in political fragmentation, as various elements of the political spectrum form competing parties, and regionalism, as numerous splinter candidates claiming to champion the particular interests of various parts of the country, entered presidential election contests. Further, they assert that direct election would foster acrimonious and protracted post-election struggles, rather than eliminate them. A runoff election would, they might suggest, simply offer more incentives to bargaining and intrigue, thus confirming the founders' worst fears. Under direct election, they suggest, every close election might resemble the bitter post-election contests in 2000, not just in one state, but nationwide, as both parties seek to gain every possible vote. They contend that such rancorous disputes could have profound negative effects on political comity in the nation, and might ultimately undermine public confidence in the legitimacy of the presidency and federal government.",
"Reform measures that would retain the electoral college in some form have included several variants. Most versions of these plans share certain common elements. They would\neliminate the office of presidential elector while retaining electoral votes; award electoral votes directly to the candidates, without the action of electors; and retain the requirement that a majority of electoral votes is necessary to win the presidency.\nIn common with direct election, most would also require joint tickets of presidential-vice presidential candidates, a practice currently provided by state law. The three most popular reform proposals include\nthe automatic plan or system, which would mandate the assignment of electoral votes automatically on the current general ticket/winner-take-all basis in each state and the District of Columbia; the district plan or system, as currently adopted in Maine and Nebraska, which would automatically award one electoral vote to the winning ticket in each congressional district in each state, but would also automatically assign each state's two additional \"senatorial\" electoral votes to the statewide popular vote winners; and the proportional plan or system, which would automatically award each state's electoral votes in proportion to the percentage of the popular vote gained by each ticket.",
"Supporters of the electoral college, as presently structured, or reformed, offer various arguments in its defense. They reject the suggestion that it is undemocratic: electors are chosen by the voters in free elections, and have been in nearly all instances since the first half of the 19 th century. They cite the electoral college as a major component of federalism, noting that the Constitution prescribes a federal election of the President by which votes are tallied in each state. As a federal republic, they assert the states have a legitimate role in many areas of governance, and that the founders intended that in choosing the President voters act both as citizens of the United States, and as members of their state communities. Proponents of the electoral college maintain that the assignment of two electors to each state regardless of population is an additional \"federal\" component of the presidential election system, comparable to the two Senators assigned by the Constitution to each state. Further, they maintain the electoral college system promotes political stability. Parties and candidates must conduct ideologically broad-based campaigns throughout the nation in order to assemble a majority of electoral votes. The consequent need to forge national coalitions having a wide appeal has been a contributing factor in the moderation and stability of the two-party system. They find the \"faithless elector\" argument to be specious: as noted previously in this report, few votes have been cast against instructions, and none has ever influenced the outcome of an election. Moreover, nearly all electoral college reform plans would remove even this slim possibility for mischief by eliminating the office of elector. On a practical level, they note that the general ticket system generally magnifies the winning ticket's electoral vote margin, an action they claim tends to bring closure to the election process and promote the legitimacy of the winning candidates.\nSupporters of direct election and critics of the electoral college counter that the existing system is cumbersome, potentially anti-democratic, and beyond saving. As noted earlier they maintain that the existing arrangement is the antithesis of their simple and democratic proposal. Its worst flaw has thwarted the public will on four occasions, by electing as President a candidate who received fewer popular votes than his principal opponent, and by throwing election into the House of Representatives in a fifth. They find the Twelfth Amendment's contingent election provisions to be even less democratic than the primary provisions of Article II, Section 1 of the Constitution. They cite the decennial Census issue, the provision of \"senatorial\" electors regardless of state population, the prospect of the faithless elector, and the general ticket system as providing opportunities for political mischief and deliberate distortion of the voters' choice. They warn that although all states currently provide for choice of electors by popular vote, state legislatures still retain the constitutional option of taking this decision out of the voters' hands, and selecting electors by some other, less democratic means. This option was discussed in Florida in 2000 during the post-election recounts, and its survival they claim confirms their argument that even one of the more \"democratic\" features of the electoral college system is not guaranteed, and could be changed arbitrarily by politically motivated state legislators.",
"For nearly 30 years, the issue of electoral college reform held a prominent place on the agenda of successive Congresses. Between the late 1940s through 1979, hundreds of electoral college reform proposals were introduced in both chambers. They embraced a wide range of approaches to the question, but generally followed the outlines set out in the previous section: \"ending it\" by eliminating the entire electoral college system and establishing direct popular election, or \"mending it\" by reforming its more controversial provisions. The question of electoral college reform or replacement was actively considered throughout these years. Proposed amendments were the subject of hearings in the Senate and House Judiciary Committees on 17 different occasions between 1948 and 1979, and, most notably, electoral college reform proposals were debated in the full Senate on five occasions, and twice in the House during this period. Proposals were approved by the necessary two-thirds majority twice in the Senate and once in the House, but never the same amendment in the same Congress.\nFollowing the 1979 defeat of a direct popular election amendment on the Senate floor, and the subsequent departure of prominent congressional advocates, the question of electoral college reform largely disappeared from public attention and Congress's legislative agenda. The Senate's failed vote on a direct popular amendment marked the last occasion on which either chamber took floor action on an electoral college reform measure of any kind. Reform or replacement proposals had been familiar items on the congressional agenda; for instance, 26 amendments were introduced to abolish or reform the electoral college in the 96 th Congress (1979-1980). In the ensuing years, however, the number of related constitutional amendments introduced in the House or Senate dropped from an average of eight per Congress for the 101 st through 110 th Congresses, to none in the 113 th Congress (2013-2014).\nIn 2016, however, as noted previously, according to official state returns reported by the Federal Election Commission, a President and Vice President were elected with a majority of electoral votes, but fewer popular votes than their principal opponents. The recurrence of this outcome in 2016 contributed to renewed interest among some in replacing the electoral college with direct popular election. Following the election, four proposals to establish direct popular election were introduced in the last weeks of the 114 th Congress, To date in the 115 th Congress, two amendments to establish direct popular election have been introduced: H.J.Res. 19 , offered on January 5, 2017, by Representative Steve Cohen, would replace the electoral college with direct popular election of the President and Vice President by plurality vote. It would also authorize Congress to set voter qualifications, times, places, and manner of holding presidential elections, and other election-related policies. H.J.Res. 65 , the \"Every Vote Counts Amendment,\" introduced by Representative Gene Green on February 7, 2017, provides for direct popular election by plurality, and also provides Congress with additional authority over related activities. Both resolutions have been referred to the House Committee on the Judiciary and to its Subcommittee on the Constitution and Civil Justice. For additional information and analysis of current electoral college reform or replacement proposals, see CRS Report R44928, The Electoral College: Reform Proposals in the 114th and 115th Congress , by [author name scrubbed].",
"Two trends are identifiable within the context of congressional proposals to reform or replace the electoral college introduced since the late 20 th century. First, proposed amendments introduced in the past decade all embraced the \"end it\" option, substituting direct popular election for the electoral college; no proposal to reform the electoral college has been introduced since the 107 th Congress (2001-2003). Second, the scope of proposed direct popular election amendments has arguably grown in complexity and detail.\nGiven the contemporary context, it may be that the first development reflected a decline in electoral college support, lack of interest in reform proposals, or simply the absence of a sense of urgency. It is arguable that supporters of the current system would coalesce to defend the electoral college if its existence or integrity were endangered. Actions by the Heritage Foundation and the State Government Leadership Foundation identified later in this report arguably confirm this thesis.\nThe second trend is that recent proposed amendments not only provided for direct popular election, but also included provisions to enhance and extend federal authority in such areas as residence standards, definition of citizenship, national voter registration, inclusion of U.S. territories and other associated jurisdictions in the presidential election process, establishment of an election day holiday, and ballot access standards for parties and candidates. If approved and ratified, provisions such as these would provide Congress with enhanced authority to establish broad national election standards, potentially superseding current state and political party practices and requirements, at least with respect to federal elections.\nThe prospect of increased federal involvement in the administration of presidential elections raises two potential issues. The first is whether such federal involvement in traditionally state and local practices would impose additional responsibilities and uncompensated costs on state and local governments. If so, such requirements might be considered to be unfunded mandates, as they could impose additional costs on sub-federal governments, and as such would be subject to points of order on the floor of both the House and Senate. One response by the affected state and local governments might be to call for federal funding to meet the increased expenses imposed by federal requirements. Precedent for this exists in the grant program incorporated in the Help American Vote Act of 2002 (HAVA). An additional issue centers on perceptions that such an amendment and resultant legislation might be regarded as federal intrusion in state and local responsibilities. For instance, a far-reaching scenario could include the gradual assumption of the election administration structure by the federal government. In this hypothetical case, questions could be raised as to (1) the costs involved; (2) whether a national election administration system could efficiently manage all the varying nuances of state and local conditions; and (3) what would be the long-term implications for federalism. Conversely, it could be asserted that (1) a national or federal election administration structure is appropriate for national elections; (2) state or local concerns are counterbalanced by the urgent requirement that every citizen be enabled and encouraged to vote; and (3) every vote should be accurately counted.",
"While Congress has not taken significant action on the question of electoral college reform in recent years, there has been considerable activity in the states.\nOnly an amendment can alter the constitutional structure of the electoral college, but the states retain considerable authority concerning various aspects of the system. For instance, as noted elsewhere in this report, Article II, Section 1, clause 2 gives the state legislature broad authority to \"appoint\" electors in any way they choose.\nIn practice, this appointment has been by popular election for 150 years. States also have authority over the formula by which electors are elected; as noted, 48 states and the District of Columbia use the general ticket system, but Maine and Nebraska adopted the district system or plan decades ago, an example of the states acting in their classic role as \"laboratories of democracy.\"\nIn other words, the states are free to experiment with systems of elector selection and electoral vote allocation, up to a point. Over the past decade, both proportional and congressional district plan proposals have been advanced in the states, as identified in the following section, but none has been successfully adopted to date. These have included efforts in the following states:\nCalifornia —Ballot initiative campaigns in 2008 (the California Presidential Reform Act) and 2012 (the California Electoral College Reform Act) sought to establish a district system of electoral vote distribution and in 2014 (the California Split Electoral College Vote Distribution Initiative) to establish a proportional system by popular vote, but all three failed to gain ballot access. Colorado —On November 2, 2004, Colorado voters rejected a state constitutional amendment, Amendment 36, which would have provided a proportional allocation of electoral votes. After a contentious campaign that gained a degree of national interest, the proposal was ultimately defeated by the voters. Michigan —In 2011 and 2014, bills were introduced in the legislature to change electoral vote allocation in Michigan from the general ticket to the district system. No action beyond hearings was taken on either proposal. Nebraska —Bills to return Nebraska from the district system to the general ticket allocation of electoral votes were introduced in the state's unicameral legislature several times after 2011, most recently in 2016. None of these proposals has been successful to date. Pennsylvania —In 2011 and 2012, two proposals were introduced in the Pennsylvania legislature to award the commonwealth's electoral votes according to the district system, but neither bill was enacted. In 2013, legislation was introduced to award electoral votes according to the proportional system. As with earlier proposals, no action was taken beyond committee referral. Virginia —In 2012, a variant of the district system was introduced in the Virginia General Assembly. In contrast to the system as enacted in Maine and Nebraska, which awards each state's two senatorial electors to the presidential ticket winning the most popular votes statewide , this legislation would have awarded the senatorial electors to the presidential ticket that won the popular vote in the greatest number of congressional districts statewide . The bill was \"bypassed indefinitely\" in 2013. Wisconsin —Between 2011 and 2014, press accounts indicated that Wisconsin state legislators would introduce legislation to award the state's electoral votes according to the district system. The Wisconsin Legislature's database for this period does not, however, identify any such proposal as having been introduced.\nIn addition to these specific plans, other states have been reported as considering changes to their current allocation of electoral votes in recent years, particularly Ohio and Florida. At the time of this writing, however, no measure has been introduced in the legislature of either state to this effect, and press accounts indicate that such actions are unlikely in the immediate future.\nRelated activity in state legislatures continued following the 2016 presidential election. According to press reports, bills to change from the general ticket to district systems were introduced in 2017 in the legislatures of Minnesota and Virginia. At the time of this writing, neither proposal has progressed beyond committee assignment in the respective legislatures.",
"Another contemporary electoral college reform or replacement effort centers on the National Popular Vote initiative, (NPV), a non-governmental campaign. NPV is a nongovernmental initiative which seeks to establish direct popular election of the President and Vice President through an interstate compact, rather than by constitutional amendment. Under the compact's provisions, legislatures of signatory states (including the District of Columbia) would appoint presidential electors committed to the presidential ticket that gained the most votes nationwide . Assuming all 50 states joined the NPV compact, this would deliver a unanimous electoral college decision for the candidates winning the most popular votes.\nNorthwestern University law professor Robert W. Bennett and constitutional law professors Akhil and Vikram Amar are generally credited as originators of the NPV concept. NPV relies on the Constitution's broad grant (in Article II, Section 1, clause 1) of power to each state to \"appoint, in such Manner as the Legislature thereof may direct [emphasis added], a Number of Electors, equal to the whole Number of Senators and Representatives to which the State may be entitled in the Congress.\"\nSpecifically, the plan calls for an interstate compact in which the legislatures in each of the participating states agree to appoint electors pledged to the candidates who won the nationwide popular vote . State election authorities would count and certify the popular vote in each state, which would be aggregated and certified nationwide as the \"nationwide popular vote.\" The participating state legislatures would then choose the slate of electors pledged to the \"nationwide popular vote winner,\" notwithstanding the results within their particular state . Barring unforeseen circumstances, if all 50 states and the District of Columbia were to join the NPV, it would yield a unanimous electoral college vote of 538 electors for the winning candidates.\nThe compact, however, would take effect only if states controlling a majority of the electoral college, 270 or more votes, were to approve the plan. This would guarantee the plan's success by ensuring that at least 270 electoral votes would be cast for the candidates winning the most popular votes.\nIf the national popular vote were tied, the states would be released from their commitment under the compact, and would choose electors who represented the presidential ticket that gained the most votes in each particular state.\nOne novel NPV provision would enable the presidential candidate who won the national popular vote to fill any vacancies in the electoral college with electors of his or her own choice.\nStates would retain the right to withdraw from the compact, but if a state chose to withdraw within six months of the end of a presidential term, the withdrawal would not be effective until after the succeeding President and Vice President had been elected.\nBetween 2007 and 2014, 10 states and the District of Columbia joined the compact. They are allocated a total of 165 electoral votes, 61% of the 270 vote majority that would be required for the compact to be implemented. States that have adopted the NPV Compact, including their electoral vote allotments, are listed below, in chronological order.\nHawaii (4 electoral votes), 2008; Illinois (20 electoral votes), 2008; Maryland (10 electoral votes), 2008; New Jersey (14 electoral votes), 2008; Washington (12 electoral votes), 2009; Massachusetts (11 electoral votes), 2010; District of Columbia (3 electoral votes), 2010; Vermont (3 electoral votes), 2011; California (55 electoral votes), 2011; Rhode Island (four electoral votes), 2013; and New York (29 electoral votes), 2014.\nAccording to National Popular Vote, Inc., the national advocacy group for the NPV initiative, the compact has been introduced in all 50 states and the District of Columbia. The National Conference of State Legislatures reports that in 2017 it is \"pending\" in the legislatures of eight states that jointly dispose of 88 electoral votes.\nConversely, proposals to rescind approval of the NPV Interstate Compact have been introduced in the legislatures of Hawaii, Maryland, Massachusetts, New Jersey, and Washington to date, but none has been approved.\nFollowing California's accession to the NPV compact in 2011, various conservative or libertarian groups announced measures to defend the electoral college system. On December 7, 2011, the Heritage Foundation hosted a forum at which guest speakers, including five state secretaries of state, expressed their concern over the National Popular Vote campaign. On December 8 of the same year, Roll Call reported that the State Government Leadership Foundation, a project of the Republican State Leadership Committee, would begin a campaign to defend the electoral college and counter recent NPV gains.",
"The electoral college system emerged from the Philadelphia Convention of 1787 as one of the many compromises incorporated in the United States Constitution. It did not satisfy everyone, but it incorporated many of the goals sought for the presidential election process, including independence from control or influence by Congress, a substantial role for the states, and an effort to temper popular enthusiasms and partisan and sectional attachments by giving the actual vote to the electors, who, it was hoped, would be prominent citizens of their states and communities who would exercise restraint and balance in their choice of the President.\nSince that time, it has been modified directly by the Twelfth and Twentieth Amendments to the Constitution and indirectly through the Fifteenth, Nineteenth, and Twenty-fifth Amendments, the passage of various federal and state laws, and changing political party practices and traditions. The electoral college functions today in a way that is far more democratic and political-party oriented than the founders might have anticipated or desired, but the three essential features of the system cited above remain intact: the process is largely free of structural interference by Congress; it is based strongly on federal principles; and the electors, although now all popularly elected, still make the final choice of the President an indirect one.\nDespite the convention's satisfaction with its work, the electoral college has been criticized on various grounds from the earliest days under the republic; reform proposals were introduced in Congress as early as 1797. Since that time, amendments have been introduced to reform or replace the electoral college with direct popular election in almost every session of Congress. Estimates vary, but they number at least 752 through the 115 th Congress.\nFor more than two decades in the mid-20 th century, electoral college reform was actively considered in Congress. Relevant amendments were debated in the Senate on five occasions, and in the House, twice, but despite public support and the efforts of congressional leadership, none of these proposals met the stringent qualifications required by Article V of the Constitution: a two-thirds vote in both houses of Congress.\nCongressional support and public interest in the question waned in the 21 st century, notwithstanding an electoral college \"misfire\" in the presidential election of 2000, when, for the first time since 1888, a President was elected with a majority of electoral votes but fewer popular votes than his major-party opponent. During this period, the arena of electoral college reform was dominated for more than a decade by efforts at the state level, and by a non-governmental initiative, as noted earlier in this report. The states may continue to consider legislative action providing for changes in their procedures for allocating electoral votes by either the district or proportional systems. To date, however, such proposals have generated intense controversy and opposition in the states where they have been introduced, being regularly characterized by opponents as efforts to rig presidential elections and deprive minorities of their voting rights. To date, none has been successful. Barring unforeseen circumstances, such experiments do not appear to enjoy widespread support, and even if enacted, they might be subject to legal challenges on various grounds, including dilution of minority voter influence.\nWith respect to the National Popular Vote Initiative, despite its successful adoption by California in 2011 and New York in 2014, and the results of the 2016 election, the NPV interstate compact has yet to develop sustained momentum. While it has generated interest in various direct popular vote advocacy communities, it does not appear to have gained widespread awareness or support among the public at large.\nFollowing the presidential election of 2016, congressional interest in reform, specifically direct popular election of the President and Vice President, revived; as noted previously, two measures are pending in the 115 th Congress. To date, however, they have received no action beyond committee referral. These proposals face the exacting standards required by Article V of the Constitution, which establishes procedures for constitutional amendments. The founders intentionally made it difficult to revise the Constitution, establishing requirements for three separate super-majority votes: by two-thirds in both the Senate and House of Representatives Congress and ratification by three-quarters of the states. Congress exercises still further influence on the amendment process because it can choose ratification by state legislatures, or by ad hoc state ratification conventions, at its discretion. In practice, the standard for ratification is even higher, since it is customary to attach a seven-year deadline for ratification to all proposed amendments.\nNotwithstanding sometimes vigorous advocacy in Congress, no electoral college reform amendment has been able to meet even the first step of this exacting requirement since the Twelfth Amendment in 1804. That measure, which responded to a fundamental constitutional crisis resulting from the deadlocked presidential election of 1800, led to an overwhelming consensus for reform. The Twelfth Amendment was debated and approved in Congress and ratified by the states within a span of six months, a remarkable achievement for the time. It is arguable that a contemporary electoral college reform amendment might require a comparable stimulus in order to succeed."
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"question": [
"Why is the electoral college controversial?",
"What are the Constitutional and structural criticisms?",
"What are the legislative and political criticisms?",
"What are approaches to changing the electoral college system?",
"What do proposals to end the electoral college suggest as a replacement?",
"What evidence is there in favor of direct popular election?",
"What would \"mend it\" reform proposals do?",
"How would electoral votes be distributed?",
"What progress has been made in passing reform proposals?",
"What is the National Popular Vote initiative?",
"How is the NPV supported by the Constitution?",
"How large is the NPV at the time of writing?",
"How large would state support for the NPV compact need to be for it to come into effect?"
],
"summary": [
"The electoral college has been the subject of criticism and proposals for reform since before 1800.",
"Constitutional and structural criticisms have centered on several of its features: (1) although today all electors are chosen by the voters in the presidential election, it is claimed to be not fully democratic, since it provides indirect election of the President; (2) it can lead to the election of candidates who win the electoral college but fewer popular votes than their opponents, or to contingent election in Congress if no candidate wins an electoral college majority; (3) it results in electoral vote under- and over-representation for some states between censuses; and (4) \"faithless\" electors can vote for candidates other than those they were elected to support.",
"Legislative and political criticisms include (1) the general ticket system, currently used in all states except Maine and Nebraska, which is alleged to disenfranchise voters who prefer the losing candidates in the states; (2) various asserted \"biases\" that are alleged to favor different states and groups; and (3) the electoral college \"lock,\" which has been claimed to provide an electoral college advantage to both major parties at different times.",
"Changing the electoral college system presents several options, sometimes characterized as: \"end it,\" \"mend it,\" or \"leave it alone.\"",
"Proposals to end the electoral college almost always recommend direct popular election, under which the candidates winning the most popular votes nationwide would be elected.",
"In support of direct popular election, its advocates refer to the elections of 2000 and 2016, so-called electoral college \"misfires,\" in which candidates were elected with an electoral college majority, but fewer popular votes than their principal opponents.",
"Almost all reform proposals—\"mend it\"—would keep electoral votes, but eliminate electors, thus ending the faithless elector phenomenon.",
"They would then award the electoral votes directly by one of several methods: the general ticket system on a nationwide basis; the district system that awards electoral votes on a congressional district- and statewide-vote basis; or the proportional system that awards state electoral votes in proportion to the percentage of popular votes gained by each candidate.",
"Despite more than 30 years of legislative activity from the 1940s through the late 1970s, proposed constitutional amendments did not win the approval of two-thirds of Members of both houses of Congress required by the Constitution for referral to the states.",
"A nongovernmental organization is currently promoting the National Popular Vote (NPV) initiative, an interstate compact that would effectively achieve direct popular election without a constitutional amendment.",
"It relies on the Constitution's broad grant of authority to the states in Article II, Section 1, to appoint presidential electors \"in such Manner as the Legislature thereof may direct.... \" States that join the compact pledge to award their electoral votes to the nationwide popular vote winners, regardless of who wins in their particular states.",
"At the time of this writing, 10 states and the District of Columbia, which jointly control 165 electoral votes, have joined the NPV compact.",
"The compact would come into effect only after states controlling a majority of electoral votes (270 or more) were to join it."
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GAO_GAO-19-168
|
{
"title": [
"Background",
"SBA Has Implemented One of the Three Changes Made by the 2015 NDAA",
"Sole-Source Authority Has Been Implemented",
"A New WOSB Program Certification Process Has Not Been Implemented",
"SBA Has Not Fully Addressed Deficiencies in Oversight and Program Implementation",
"SBA Has Not Implemented Procedures to Regularly Monitor and Assess the Performance of Third- Party Certifiers",
"SBA Has Not Implemented Procedures to Improve Its Eligibility Examinations of WOSB Program Participants",
"SBA Has Not Addressed Previously Identified Issues with WOSB Set- Asides Awarded Under Ineligible Industry Codes",
"Federal Contracts to WOSB Set-Asides Remain Relatively Small, and Stakeholders Discussed Various Aspects of Program Use",
"The Percentage of Obligations to Women- Owned Small Businesses under the WOSB Program Increased Slightly since 2012",
"Stakeholders Discussed Various Issues Related to WOSB Program Usage",
"Conclusions",
"Recommendation for Executive Action",
"Agency Comments",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Comments from the U.S. Small Business Administration",
"Appendix III: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"Federal agencies conduct a variety of procurements that are reserved for small business participation through small business set-asides. The set- asides can be for small businesses in general, or they can be specific to small businesses that meet additional eligibility requirements in the Service-Disabled Veteran-Owned Small Business (SDVOSB), Historically Underutilized Business Zone (HUBZone), 8(a) Business Development (8(a)), and WOSB programs.\nThe WOSB program enables federal contracting officers to identify and establish a sheltered market, or set-aside, for competition among WOSBs and EDWOSBs in certain industries. To determine the industries eligible under the WOSB program, SBA is required to conduct a study to determine which NAICS codes are eligible under the program and to report on such studies every 5 years. WOSBs can receive set-asides in industries in which SBA has determined that women-owned small businesses are substantially underrepresented. EDWOSBs can receive set-asides in WOSB-eligible industries as well as in an additional set of industries in which SBA has determined that women-owned small businesses are underrepresented but not substantially so. As of February 2019, there were a total of 113 four-digit NAICS codes (representing NAICS industry groups) eligible under the WOSB program—92 eligible NAICS codes for WOSBs and 21 for EDWOSBs.\nAdditionally, businesses must be at least 51 percent owned and controlled by one or more women who are U.S. citizens to participate in the WOSB program. The owner must provide documents demonstrating that the business meets program requirements, including a document in which the owner attests to the business’s status as a WOSB or EDWOSB. EDWOSBs are WOSBs that are controlled by one or more women who are citizens and who are economically disadvantaged in accordance with SBA regulations. According to SBA, as of early October 2018, there were 13,224 WOSBs and 4,488 EDWOSBs registered in SBA’s online certification database.\nSBA’s Office of Government Contracting administers the WOSB program by promulgating regulations, conducting eligibility examinations of businesses that receive contracts under a WOSB or EDWOSB set-aside, deciding protests related to eligibility for a WOSB set-aside, conducting studies to determine eligible industries, and working with other federal agencies in assisting WOSBs and EDWOSBs. According to SBA officials, the Office of Government Contracting also works at the regional and local levels with SBA’s Small Business Development Centers and district offices, and with other organizations (such as Procurement Technical Assistance Centers), to help WOSBs and EDWOSBs obtain contracts with federal agencies. The services SBA coordinates include training, counseling, mentoring, facilitating access to information about federal contracting opportunities, and business financing. According to SBA, as of October 2018, there were two full-time staff within the Office of Government Contracting whose primary responsibility was the WOSB program.\nInitially, the program’s statutory authority allowed WOSBs to be self- certified by the business owner or certified by an approved third-party national certifying entity as eligible for the program. Self-certification is free, but some third-party certification options require businesses to pay a fee. Each certification process requires businesses to provide signed representations attesting to their WOSB or EDWOSB eligibility. Businesses must provide documents supporting their status before submitting an offer to perform the requirements of a WOSB set-aside contract. In August 2016, SBA launched certify.sba.gov, which is an online portal that allows firms to upload required documents and track their submission and also enables contracting officers to review firms’ eligibility documentation. According to the Federal Acquisition Regulation (FAR), contracting officers are required to verify that all required documentation is present in the online portal when selecting a business for an award. In addition, businesses must register and attest to being a WOSB in the System for Award Management, the primary database of vendors doing business with the federal government.\nIn 2011, SBA approved four organizations to act as third-party certifiers:\nEl Paso Hispanic Chamber of Commerce,\nNWBOC (previously known as the National Women Business Owners\nU.S. Women’s Chamber of Commerce, and\nWomen’s Business Enterprise National Council.\nThese organizations have been the WOSB program’s third-party certifiers since 2011. According to SBA data, the Women’s Business Enterprise National Council was the most active third-party certifier in fiscal year 2017—performing 2,638 WOSB certification examinations. The U.S.\nWomen’s Chamber of Commerce, NWBOC, and El Paso Hispanic Chamber of Commerce—completed 644, 105, and 12 certifications, respectively.\nAs discussed previously, in 2014 we reviewed the WOSB program and found a number of deficiencies in SBA’s oversight of the four SBA- approved third-party certifiers and in SBA’s eligibility examination processes and we made related recommendations for SBA. In addition, in 2015 and 2018 the SBA OIG reviewed the WOSB program and also found oversight deficiencies, including evidence of WOSB contracts set aside for ineligible firms. In both reports, the SBA OIG also made recommendations for SBA. Further, in July 2015, we issued GAO’s fraud risk framework, which provides a comprehensive set of key components and leading practices that serve as a guide for agency managers to use when developing efforts to combat fraud in a strategic, risk-based way. In July 2016, the Office of Management and Budget issued guidelines requiring executive agencies to create controls to identify and respond to fraud risks. These guidelines also affirm that managers should adhere to the leading practices identified in GAO’s fraud risk framework.",
"As of February 2019, SBA had implemented one of the three changes that the 2015 NDAA made to the WOSB program—sole-source authority. The two other changes—authorizing SBA to implement its own certification process for WOSBs and requiring SBA to eliminate the WOSB self-certification option—have not been implemented. The 2015 NDAA did not require a specific time frame for SBA to update its regulations. SBA officials have stated that they will not eliminate self- certification until the new certification process for the WOSB program is in place, which they expect to be completed by January 1, 2020.",
"In September 2015, SBA published a final rule to implement sole-source authority for the WOSB program (effective October 2015). Among other things, the rule authorized contracting officers to award a contract to a WOSB or EDWOSB without competition, provided that the contracting officer’s market research cannot identify two or more WOSBs or EDWOSBs in eligible industries that can perform the requirements of the contract at a fair and reasonable price. In the final rule, SBA explained that it promulgated the sole-source rule before the WOSB certification requirements for two reasons. First, the sole-source rule could be accomplished by simply incorporating the statutory language into the regulations, whereas the WOSB certification requirements would instead require a prolonged rulemaking process. Second, SBA said that addressing all three regulatory changes at the same time would delay the implementation of sole-source authority. SBA described the sole-source mechanism as an additional tool for federal agencies to ensure that women-owned small businesses have an equal opportunity to participate in federal contracting and to ensure consistency among SBA’s socioeconomic small business procurement programs.\nAccording to SBA, most of the 495 comments submitted about the sole- source rule supported the agency’s decision to implement the authority quickly. However, the SBA OIG’s June 2018 audit report cautioned that allowing sole-source contracting authority while firms can still self-certify exposes the WOSB program to unnecessary risk of fraud and abuse, and the report recommended that SBA implement a new certification process for the WOSB program per the 2015 NDAA. In addition, our previous report identified risks of program participation by ineligible firms associated with deficiencies in SBA’s oversight structure. As we discuss in detail later, SBA has still not addressed these risks, which may be exacerbated by the implementation of sole-source authority without addressing the other changes made by the 2015 NDAA, including eliminating the self-certification option.",
"As of February 2019, SBA had not published a proposed rule for public comment to establish a new certification process for the WOSB program. Previously, in October 2017, an SBA official stated that SBA was about 1–2 months away from publishing a proposed rule. However, in June 2018, SBA officials stated that a cost analysis would be necessary before the draft could be sent to the Office of Management and Budget for review. Certain stages of the rulemaking process have mandated time periods, such as the required interagency review process for certain rules. In June 2017, we reported that SBA officials said that an increase in the number of statutorily mandated rules in recent years had contributed to delays in the agency’s ability to promulgate rules in a more timely fashion. As of February 2019, SBA had not provided documentation or time frames for issuing a proposed rule or completing the rulemaking process. However, in response to the SBA OIG recommendation that SBA implement the new certification process, SBA stated that it would fulfill the recommendation (meaning implement a new certification process) by January 1, 2020.\nIn December 2015, SBA published an advance notice of proposed rulemaking to solicit public comments to assist the agency with drafting a proposed rule to implement a new WOSB certification program. In the notice, SBA stated that it intends to address the 2015 NDAA changes, including eliminating the self-certification option, through drafting regulations to implement a new certification process. Previously, in its September 2015 final rule implementing sole-source authority, SBA stated that there was no evidence that Congress intended that the existing WOSB program, including self-certification, be halted before establishing the infrastructure and new regulations for a new certification program. The advance notice requested comments on various topics, such as how well the current certification processes were working, which of the certification options were feasible and should be pursued, whether there should be a grace period for self-certified WOSB firms to complete the new certification process, and what documentation should be required.\nThree third-party certifiers submitted comments in response to the advance notice of proposed rulemaking, and none supported the option of SBA acting as a WOSB certifier. One third-party certifier commented that such an arrangement is a conflict of interest given that SBA is also responsible for oversight of the WOSB program, and two certifiers commented that SBA lacked the required resources. The three third-party certifiers also asserted in their comments that no other federal agency should be allowed to become an authorized WOSB certifier, with one commenting that federal agencies should instead focus on providing contracting opportunities for women-owned businesses. All three certifiers also proposed ways to improve the current system of third-party certification—for example, by strengthening oversight of certifiers or expanding their number. The three certifiers also suggested that SBA move to a process that better leverages existing programs with certification requirements similar to those of the WOSB program, such as the 8(a) program. In the advance notice, SBA asked for comments on alternative certification options, such as SBA acting as a certifier or limiting WOSB program certifications to the 8(a) program and otherwise relying on state or third-party certifiers. Further, in June 2018, SBA officials told us that they were evaluating the potential costs of a new certification program as part of their development of the new certification rule.",
"",
"SBA has not fully addressed deficiencies in its oversight of third-party certifiers that we identified in our October 2014 report. We reported that SBA did not have formal policies for reviewing the performance of its four approved third-party certifiers, including their compliance with their agreements with SBA. Further, we found that SBA had not developed formal policies and procedures for, among other things, reviewing the monthly reports that certifiers submit to SBA. As a result, we recommended that SBA establish comprehensive procedures to monitor and assess the performance of the third-party certifiers in accordance with their agreements with SBA and program regulations. While SBA has taken some steps to address the recommendation, as of February 2019 it remained open.\nIn response to our October 2014 recommendation, in 2016 SBA conducted compliance reviews of the four SBA-approved third-party certifiers. According to SBA, the purpose of the compliance reviews was to ensure the certifiers’ compliance with regulations, their signed third- party certifier certification form (or agreement) with SBA, and other program requirements. The compliance reviews included an assessment of the third-party certifiers’ internal certification procedures and processes, an examination of a sample of applications from businesses that the certifiers deemed eligible and ineligible for certification, and an interview with management staff.\nSBA officials said that SBA’s review team did not identify significant deficiencies in any of the four certifiers’ processes and found that all were generally complying with their agreements. However, one compliance review report described “grave concerns” that a third-party certifier had arbitrarily established eligibility requirements that did not align with WOSB program regulations and used them to decline firms’ applications. SBA noted in the report that if the third-party certifier failed to correct this practice SBA could terminate the agreement. As directed by SBA, the third-party certifier submitted a letter to SBA outlining actions it had taken to address this issue, among others. The final compliance review reports for the other third-party certifiers also recommended areas for improvement, including providing staff with additional training on how to conduct eligibility examinations and reviewing certification files to ensure they contain complete documentation. In addition, two of the three compliance review reports with recommendations (including the compliance review report for the certifier discussed above) required the certifier to provide a written response within 30 days outlining plans to correct the areas. SBA officials said that they reviewed the written responses and determined that no further action was required.\nIn January 2017, SBA’s Office of Government Contracting updated its written Standard Operating Procedures (SOP) to include policies and procedures for the WOSB program, in part to address our October 2014 recommendation. The 2017 SOP discusses what a third-party-certifier compliance review entails, how often the reviews are to be conducted, and how findings are to be reported. The 2017 SOP notes that SBA may initiate a compliance review “at any time and as frequently as the agency determines is necessary.” In September 2018, SBA officials told us that they were again updating the SOP, in part to address deficiencies we identified in our prior work and during this review. However, as of February 2019, SBA had not provided an updated SOP.\nIn addition, in April 2018, SBA finalized a WOSB Program Desk Guide that, according to SBA, is designed to provide program staff with detailed guidance for conducting oversight procedures, including compliance reviews of third-party certifiers. For example, the Desk Guide discusses how staff should prepare for a compliance review of a third-party certifier, review certification documents, and prepare a final report. However, the Desk Guide does not describe specific activities designed to oversee third-party certifiers on an ongoing basis. In November 2017, SBA officials told us that they planned to conduct additional compliance reviews of the third-party certifiers. However, in June 2018, officials said there were no plans to conduct further compliance reviews until the final rule implementing the new certification process was completed. Further, SBA officials said that the 2016 certifier compliance reviews did not result in significant deficiencies. However, as noted previously, one of the compliance review reports described a potential violation of the third-party certifier’s agreement with SBA.\nPer written agreements with SBA, third-party certifiers are required to submit monthly reports that include the number of WOSB and EDWOSB applications received, approved, and denied; identifying information for each certified business, such as the business name; concerns about fraud, waste, and abuse; and a description of any changes to the procedures the organizations used to certify businesses as WOSBs or EDWOSBs.\nIn our October 2014 report, we noted that SBA had not followed up on issues raised in the monthly reports and had not developed written procedures for reviewing them. At that time, SBA officials said that they were unaware of the issues identified in the certifiers’ reports and that the agency was developing procedures for reviewing the monthly reports but could not estimate a completion date.\nIn our interviews for this report, SBA officials stated that SBA still does not use the third-party certifiers’ monthly reports to regularly monitor the program. Specifically, SBA does not review the reports to identify any trends in certification deficiencies that could inform program oversight. Officials said the reports generally do not contain information that SBA considers helpful for overseeing the WOSB program, although staff sometimes use the reports to obtain firms’ contact information. SBA officials also said that staff very rarely receive information about potentially fraudulent WOSB firms from the third-party certifiers—maybe three firms per year—and that this information is generally received via email and not as part of the monthly reports. SBA officials said that when they receive information about potentially fraudulent firms, WOSB program staff conduct an examination to determine the firm’s eligibility and report the results back to the certifier. However, a third-party certifier told us it has regularly reported firms it suspected of submitting potentially fraudulent applications in its monthly reports and that SBA has not followed up with them. In addition, two third-party certifiers said that if SBA is not cross-checking the list of firms included in their monthly reports, a firm deemed ineligible by one certifier may submit an application to another certifier and obtain approval.\nThe three third-party certifiers we spoke with said that SBA generally had not communicated with them about their implementation of the program since the 2016 compliance reviews. However, SBA officials noted that three of the four third-party certifiers attended an SBA roundtable in March 2017 to discuss comments on the proposed rulemaking. In addition, SBA officials said that the third-party certifiers may contact them with questions about implementing the WOSB program, but SBA generally does not reach out to them.\nAlthough SBA has taken steps to enhance its written policies and procedures for oversight of third-party certifiers, it does not have plans to conduct further compliance reviews of the certifiers and does not intend to review certifiers’ monthly reports on a regular basis. SBA officials said that third-party certifier oversight procedures would be updated, if necessary, after certification options have been clarified in the final WOSB certification rule. However, ongoing oversight activities, such as regular compliance reviews, could help SBA better understand the steps certifiers have taken in response to previous compliance review findings and whether those steps have been effective. In addition, leading fraud risk management practices include identifying specific tools, methods, and sources for gathering information about fraud risks, including data on fraud schemes and trends from monitoring and detection activities, as well as involving relevant stakeholders in the risk assessment process. Without procedures to regularly monitor and oversee third-party certifiers, SBA cannot provide reasonable assurance that certifiers are complying with program requirements and cannot improve its efforts to identify ineligible firms or potential fraud. Further, it is unclear when SBA’s final rule will be implemented. As a result, we maintain that our previous recommendation should be addressed—that is, that the Administrator of SBA should establish and implement comprehensive procedures to monitor and assess the performance of certifiers in accordance with the requirements of the third-party certifier agreement and program regulations.",
"SBA also has not fully addressed deficiencies found in our 2014 review related specifically to eligibility examinations. We found that SBA lacked formalized guidance for its eligibility examination processes and that the examinations continued to identify high rates of potentially ineligible businesses. As a result, we recommended that SBA enhance its examination of businesses that register for the WOSB program to ensure that only eligible businesses obtain WOSB set-asides. Specifically, we suggested that SBA consider (1) completing the development of procedures to conduct annual eligibility examinations and implementing such procedures; (2) analyzing examination results and individual businesses found to be ineligible to better understand the cause of the high rate of ineligibility in annual reviews and determine what actions are needed to address the causes, and (3) implementing ongoing reviews of a sample of all businesses that have represented their eligibility to participate in the program.\nSBA has taken some steps to implement our recommendation—such as by completing its 2017 SOP and its Desk Guide, both of which include written policies and procedures for WOSB program eligibility examinations. The 2017 SOP includes a brief description of what activities are entailed in the examinations, the staff responsible for conducting them, and how firms are selected. In addition, as noted previously, SBA officials told us in September 2018 that a forthcoming update to the SOP would address deficiencies we identified regarding WOSB eligibility examinations. However, as of February 2019, SBA had not provided an updated SOP. The Desk Guide contains more detailed information on eligibility examinations. It notes that a sample of firms is to be examined annually and it provides selection criteria, which can include whether the agency has received information challenging the firm’s eligibility for the program. The Desk Guide also provides specific instructions on how to determine whether a firm meets the WOSB program’s ownership, control, and financial requirements and what documentation should be consulted or requested.\nSBA does not collect reliable information on the results of its annual eligibility examinations. According to SBA officials, SBA has conducted eligibility examinations of a sample of businesses that received WOSB program set-aside contracts each year since fiscal year 2012. However, SBA officials told us that the results of annual eligibility examinations— such as the number of businesses found eligible or ineligible—are generally not documented. As a result, we obtained conflicting data from SBA on the number of examinations completed and the percentage of businesses found to be ineligible in fiscal years 2012 through 2018. For example, based on previous information provided by SBA, we reported in October 2014 that in fiscal year 2012, 113 eligibility examinations were conducted and 42 percent of businesses were found to be ineligible for the WOSB program. However, during this review, we received information from SBA that 78 eligibility examinations were conducted and 37 percent of businesses were found ineligible in fiscal year 2012. We found similar disparities when we compared fiscal year 2016 data provided by SBA for this report with a performance memorandum summarizing that fiscal year’s statistics. Regardless of the disparity between the data sources, the rate of ineligible businesses has remained significant. For example, according to documentation SBA provided during this review, in fiscal year 2017, SBA found that about 40 percent of the businesses in its sample were not eligible.\nIn addition, SBA continues to have no mechanism for evaluating examination results in aggregate to inform the WOSB program. In 2014, we reported that SBA officials told us that most businesses that were deemed ineligible did not understand the documentation requirements for establishing eligibility. However, we also reported that SBA officials could not explain how they knew a lack of understanding was the cause of ineligibility among businesses and had not made efforts to confirm that this was the cause. In June 2018, SBA officials told us they did not analyze the annual examinations in aggregate for common eligibility issues because the examination results are unique to each WOSB firm. They noted that this was not necessary as WOSB program staff are familiar with common eligibility issues through the annual eligibility examinations. As we noted in 2014, by not analyzing aggregate examination results, the agency is missing opportunities to obtain meaningful insights into the program, such as the reasons many businesses are deemed ineligible.\nAlso, SBA still conducts eligibility examinations only of firms that have already received a WOSB award. In 2014, we concluded that this sampling practice restricts SBA’s ability to identify potentially ineligible businesses prior to a contract award. Similarly, during this review, SBA officials said that while some aspects of the sample characteristics have changed since 2012, the samples still generally consist only of firms that have been awarded a WOSB set-aside. In addition, officials said that the sample size of the eligibility examinations has varied over time and is largely based on the workload of WOSB program staff. Restricting the samples in this way limits SBA’s ability to better understand the eligibility of businesses before they apply for and are awarded contracts, as well as its ability to detect and prevent potential fraud.\nSBA officials said that their other means of reducing participation by ineligible firms and mitigating potential fraud is through WOSB or EDWOSB status protests—that is, allegations that a business receiving an award does not meet program eligibility requirements. A federal contractor can file a status protest against any firm receiving an award that represents itself as a WOSB in the System for Award Management for grounds that include failure to provide all required supporting documentation. The penalties for misrepresenting a firm’s status, per regulation, include debarment or suspension. However, one third-party certifier expressed in its comments to the advance notice of proposed rulemaking on certification that status protests alone are not a viable option for protecting the integrity of the WOSB program. The certifier questioned how a firm could have sufficient information about a competitor firm to raise questions about its eligibility. According to SBA officials, 11 status protests were filed under the WOSB program in fiscal year 2018. Of these, four firms were deemed ineligible for the WOSB program, four were deemed eligible, and three status protests were dismissed. In fiscal year 2017, 9 status protests were filed; of these, three firms were found ineligible, two were found eligible, and four status protests were dismissed.\nWe recognize that SBA has made some effort to address our previous recommendation by documenting procedures for conducting annual eligibility examinations of WOSB firms. However, leading fraud risk management practices state that federal program managers should design control activities that focus on fraud prevention over detection and response, to the extent possible. Without maintaining reliable information on the results of eligibility examinations, developing procedures for analyzing results, and expanding the sample of businesses to be examined to include those that did not receive contracts, SBA limits the value of its eligibility examinations and its ability to reduce ineligibility among businesses registered to participate in the WOSB program. These deficiencies also limit SBA’s ability to identify potential fraud risks and develop any additional control activities needed to address these risks. As a result, the program may continue to be exposed to the risk of ineligible businesses receiving set-aside contracts. In addition, in light of these continued oversight deficiencies, the implementation of sole-source authority without addressing the other changes made by the 2015 NDAA could increase program risk. For these reasons, we maintain that our previous recommendation that SBA enhance its WOSB eligibility examination procedures should be addressed.",
"In 2015 and 2018, the SBA OIG reported instances in which WOSB set- asides were awarded using NAICS codes that were not eligible under the WOSB program, and our analysis indicates that this problem persists. In 2015, the SBA OIG reported on its analysis of a sample of 34 WOSB set- aside awards and found that 10 awards were set aside using an ineligible NAICS code. The SBA OIG concluded that this may have been due to contracting officers’ uncertainty about NAICS code requirements under the program and recommended that SBA provide additional, updated training and outreach to federal agencies’ contracting officers on the program’s NAICS code requirements. In response, SBA updated WOSB program training and outreach documents in March 2016 to include information about the program’s NAICS code requirements.\nIn 2018, the SBA OIG issued another report evaluating the WOSB program, with a focus on the use of the program’s sole-source contract authority. Here, the SBA OIG identified additional instances of contracting officers using inaccurate NAICS codes to set aside WOSB contracts. Specifically, the SBA OIG reviewed a sample of 56 awards and found that 4 were awarded under ineligible NAICS codes. The report included two recommendations for SBA aimed at preventing and correcting improper NAICS code data in FPDS-NG: (1) conduct quarterly reviews of FPDS- NG data to ensure contracting officers used the appropriate NAICS codes and (2) in coordination with the Office of Federal Procurement Policy and GSA, strengthen controls in FPDS-NG to prevent contracting officers from using ineligible NAICS codes.\nSBA disagreed with both of these recommendations. In its response to the first recommendation, SBA stated that it is not responsible for the oversight of other agencies’ contracting officers and therefore is not in a position to implement the corrective actions. With respect to the second recommendation, SBA stated that adding such controls to FPDS-NG would further complicate the WOSB program and increase contracting officers’ reluctance to use it. SBA also stated its preference for focusing its efforts on ensuring that contracting officers select the appropriate NAICS code at the beginning of the award process.\nIn our review, we also found several issues with WOSB program set- asides being awarded under ineligible NAICS codes. Our analysis of FPDS-NG data on all obligations to WOSB program set-asides from the third quarter of fiscal year 2011 through the third quarter of fiscal year 2018 found the following:\n3.5 percent (or about $76 million) of WOSB program obligations were awarded under NAICS codes that were never eligible for the WOSB program;\n10.5 percent (or about $232 million) of WOSB program obligations made under an EDWOSB NAICS code went to women-owned businesses that were not eligible to receive awards in EDWOSB- eligible industries; and\n17 of the 47 federal agencies that obligated dollars to WOSB program set-asides during the period used inaccurate NAICS codes in at least 5 percent of their WOSB set-asides (representing about $25 million).\nAccording to SBA officials we spoke with during this review, WOSB program set-asides may be awarded under ineligible NAICS codes because of human error when contracting officers are inputting data in FPDS-NG or because a small business contract was misclassified as a WOSB program set-aside. They characterized the extent of the issue as “small” relative to the size of the FPDS-NG database and said that such issues do not affect the program’s purpose. Rather than review FPDS-NG data that are inputted after the contract is awarded, SBA officials said that they have discussed options for working with GSA to add controls defining eligible NAICS codes for WOSB program set-aside opportunities on FedBizOpps.gov—the website that contracting officers use to post announcements about available federal contracting opportunities. Adding controls to this system, officials said, would help contracting officers realize as they are writing the contract requirements that they should not set aside contracts under the WOSB program without reviewing the proper NAICS codes. However, SBA officials said that the feasibility of this option was still being discussed and that the issue was not a high priority. For these reasons, according to officials, SBA’s updated oversight procedures described in the 2017 SOP and the Desk Guide do not include a process for reviewing WOSB program set-aside data in FPDS-NG to determine whether they were awarded under the appropriate NAICS codes.\nFurther, as of November 2018, the WOSB program did not have targeted outreach or training that focused on specific agencies’ use of NAICS codes. As noted previously, in March 2016, SBA updated its WOSB program training materials to address NAICS code requirements in response to a 2015 SBA OIG recommendation. In fiscal year 2018, SBA conducted three WOSB program training sessions for federal contracting officers, including (1) a virtual learning session, (2) a session conducted during WOSB Industry Day at the Department of Housing and Urban Development, and (3) a session conducted during a Department of Defense Small Business Training Conference. However, with the exception of the virtual learning session, these training sessions were requested by the agencies. SBA officials did not identify any targeted outreach or training provided to specific agencies to improve understanding of WOSB NAICS code requirements (or other issues related to the WOSB program).\nCongress authorized SBA to develop a contract set-aside program specifically for WOSBs and EDWOSBs to address the underrepresentation of such businesses in specific industries. In addition, federal standards for internal control state that management should design control activities to achieve objectives and respond to risks and to establish and operate monitoring activities to monitor and evaluate the results. Because SBA does not review whether contracts are being awarded under the appropriate NAICS codes, it cannot provide reasonable assurance that WOSB program requirements are being met or identify agencies that may require targeted outreach or additional training on eligible NAICS codes. As a result, WOSB contracts may continue to be awarded to groups other than those intended, which can undermine the goals of and confidence in the program.",
"",
"Federal dollars obligated for contracts to all women-owned small businesses increased from $18.2 billion in fiscal year 2012 to $21.4 billion in fiscal year 2017. These figures include contracts for any type of good or service awarded under the WOSB program, under other federal programs, or through full and open competition. Contracts awarded to all women-owned small businesses within WOSB-program-eligible industries also increased during this period—from about $15 billion to $18.8 billion, as shown in figure 1. However, obligations under the WOSB program represented only a small share of this increase. In fiscal year 2012, WOSB program contract obligations were 0.5 percent of contract obligations to all women-owned small businesses for WOSB-program- eligible goods or services (about $73.5 million), and in fiscal year 2017 this percentage had grown to 3.8 percent (about $713.3 million) (see fig. 1).\nFrom fiscal years 2012 through 2017, 98 percent of total dollars obligated for contracts to all women-owned small businesses in WOSB-program- eligible industries were not awarded under the WOSB program. Instead, these contracts were awarded without a set-aside or under other, longer- established socioeconomic contracting programs, such as HUBZone, the SDVOSB, and 8(a). For example, during this period, dollars obligated to contracts awarded to women-owned small businesses without a set-aside represented about 34 percent of dollars obligated for contracts to all women-owned small businesses in these industries (see fig. 2).\nAs shown in table 1, six federal agencies—DOD, DHS, Department of Commerce, Department of Agriculture, Department of Health and Human Services, and GSA—collectively accounted for nearly 83 percent of the obligations awarded under the WOSB program from the third quarter of fiscal year 2011 through the third quarter of fiscal year 2018, with DOD accounting for about 49 percent of the total.\nContracting officers’ use of sole-source authority was relatively limited, representing about 12 percent of WOSB program obligations from January 2016 through June 2018. In fiscal year 2017—the only full fiscal year for which we have data on sole-source authority—about $77 million were obligated using sole-source authority. The share of sole-source awards as a percentage of total WOSB program set-asides also varied considerably by quarter—from as low as 5 percent in the third quarter of 2016 to as high as 21 percent in the first quarter of 2017 (see fig. 3).",
"We spoke with 14 stakeholder groups to obtain their views on usage of the WOSB program. These groups consisted of staff within three federal agencies (DHS, DOD, and GSA), eight contracting offices within these agencies, and three third-party certifiers. Issues stakeholders discussed included the impact of sole-source authority and program-specific NAICS codes on program usage. Stakeholders also noted the potential effect of other program requirements on contracting officers’ willingness to use the program, and some suggested that SBA provide additional guidance and training to contracting officers.\nSole-source authority. Participants in 12 of the 14 stakeholder groups commented on the effect of sole-source authority on WOSB program usage. Staff from 4 of the 12 stakeholder groups—including three contracting offices—said that sole-source authority generally had no effect on the use of the WOSB program. One of these stakeholders believed contracting officers seldom use the authority because they lack an understanding of how and when to use it; therefore, in this stakeholder’s opinion, use of the WOSB program has not generally changed since the authority was implemented. However, staff from two contracting offices and one third-party certifier said that sole-source authority was a positive addition because, for example, it can significantly reduce the lead time before a contracting officer can offer a contract award to a firm. Staff from one of these two contracting offices stated that the award process can take between 60 to 90 days using sole-source authority, compared to 6 to 12 months using a competitive WOSB program set-aside. These staff also said that negotiating the terms of a sole-source contract is easier, from a contracting officer’s perspective, because they can communicate directly with the firm. As discussed previously, SBA officials we interviewed said that adding sole-source authority to the WOSB program made the program more consistent with other existing socioeconomic set-aside programs, such as 8(a) and HUBZone.\nThe remaining five stakeholder groups that discussed the effects of WOSB sole-source authority described difficulties with implementing it. Specifically, representatives from DHS, DOD, and one third-party certifier said that executing sole-source authority under the WOSB program is difficult for contracting officers because rules for sole-source authority under WOSB are different from those under other SBA programs, such as 8(a) and HUBZone. For example, the FAR’s requirement that contracting officers justify, in writing, why they do not expect other WOSBs or EDWOSBs to submit offers on a contract is stricter under the WOSB program than it is for the 8(a) program. Further, staff from one contracting office noted that justifications for WOSB set-asides must then be published on a federal website. In contrast, contracting officers generally do not need to prepare and publish a justification under the 8(a) program. According to staff from another contracting office, it may be difficult to find more than one firm qualified to do the work under some WOSB-eligible NAICS codes, but contracting officers would still have to conduct market research and explain why they do not expect additional offers in order to set the contract aside for a WOSB.\nProgram-specific NAICS codes. Participants in 13 of the 14 stakeholder groups we interviewed commented on the requirement that WOSB program set-asides be awarded within certain industries, represented by NAICS codes. For example, two third-party certifiers we interviewed recommended that the NAICS codes be expanded or eliminated to provide greater opportunities for WOSBs to win contracts under the program. Another third-party certifier said that some of its members focus their businesses’ marketing efforts on industries specific to the WOSB program to help them compete for such contracts.\nRepresentatives from GSA and DHS made comments about limitations with respect to the WOSB program’s NAICS code requirement. Staff we interviewed from three contracting offices made similar statements, adding that the NAICS codes limit opportunities to award a contract to a WOSB or EDWOSB because they are sufficient in some industry areas but not others. All five of these stakeholder groups suggested that NAICS codes be removed from the program’s requirements to increase opportunities for WOSBs.\nConversely, staff from five other contracting offices we interviewed generally expressed positive views about the WOSB program’s NAICS code requirements and stated that eligible codes line up well with the services for which they generally contract. Finally, SBA officials noted that there are no plans to reassess the NAICS codes until about 2020. However, SBA officials also stated that the NAICS code requirements complicate the WOSB program and add confusion for contracting officers who use program, as compared to other socioeconomic programs that do not have such requirements, such as HUBZone or 8(a).\nRequirement to verify eligibility documentation. Staff from 7 of the 14 stakeholder groups we interviewed discussed the requirement for the contracting officer to review program eligibility documentation and how this requirement affects their decision to use the program. For example, staff from one contracting office said that using the 8(a) or HUBZone programs is easier because 8(a) and HUBZone applicants are already certified by SBA; therefore, the additional step to verify documentation for eligibility is not needed. GSA officials noted that eliminating the need for contracting officers to take additional steps to review eligibility documentation for WOSB-program set-asides—in addition to checking the System for Award Management—could create more opportunities for WOSBs by reducing burden on contracting officers. However, staff from two contracting offices said it is not more difficult to award contracts under the WOSB program versus other socioeconomic programs.\nWOSB program guidance. Staff from 13 of the14 stakeholder groups we interviewed discussed guidance available to contracting officers under the WOSB program. Most generally said that the program requirements outlined in the FAR are fairly detailed and help contracting officers implement the program. According to SBA officials, SBA provides training on WOSB program requirements to contracting officers in federal agencies by request, through outreach events, and through an annual webinar. SBA officials also said that the training materials include all the regulatory issues that contracting officers must address.\nHowever, representatives from two third-party certifiers described feedback received from their members about the need to provide additional training and guidance for contracting officers to better understand and implement the WOSB program. Staff from two contracting offices also expressed the need for SBA to provide additional training and guidance. Staff from one of these contracting offices said that the last time they received training on the WOSB program was in 2011, when the program was first implemented. Staff in the other contracting office added that the most recent version of a WOSB compliance guide they could locate online was at least 6 years old. SBA officials estimated that the WOSB compliance guide was removed from their public website in March 2016 because it was difficult to keep the document current and officials did not want to risk publishing a guide that was out-of-date. SBA officials also said that there are no plans to issue an updated guide as the FAR is sufficient.\nThe stakeholder groups also identified positive aspects of the WOSB program. Specifically, staff from seven stakeholder groups believed that the program provided greater opportunities for women-owned small businesses to obtain contracts in industries in which they are underrepresented. In addition, staff from three stakeholder groups mentioned that SBA-led initiatives, such as the Small Business Procurement Advisory Council and SBA’s co-sponsorship of the ChallengeHER program, help improve collaboration between federal agencies and the small business community and overall government contracting opportunities for women-owned small businesses.",
"The WOSB program aims to enhance federal contracting opportunities for women-owned small businesses. However, weaknesses in SBA’s management of the program continue to hinder its effectiveness. As of February 2019, SBA had not fully implemented comprehensive procedures to monitor the performance of the WOSB program’s third- party certifiers and had not taken steps to provide reasonable assurance that only eligible businesses obtain WOSB set-aside contracts, as recommended in our 2014 report. Without ongoing monitoring and reviews of third-party certifier reports, SBA cannot ensure that the certifiers are fulfilling the requirements of their agreements with SBA, and it is missing opportunities to gain information that could help improve the program’s processes. Further, limitations in SBA’s procedures for conducting, documenting, and analyzing eligibility examinations inhibit its ability to better understand the eligibility of businesses before they apply for and potentially receive contracts, which exposes the program to unnecessary risk of fraud. In addition, given that SBA does not expect to finish implementing the changes in the 2015 NDAA until January 1, 2020, these continued oversight deficiencies increase program risk. As a result, we maintain that our previous recommendations should be addressed.\nIn addition, SBA has not addressed deficiencies that the SBA OIG identified previously—and that we also identified during this review— related to WOSB set-asides being awarded under ineligible industry codes. Although SBA has updated its training and outreach materials for the WOSB program to address NAICS code requirements, it has not developed plans to review FPDS-NG data or provide targeted outreach or training to agencies that may be using ineligible codes. As a result, SBA is not aware of the extent to which individual agencies are following program requirements and which agencies may require targeted outreach or additional training. Reviewing FPDS-NG data would allow SBA to identify those agencies (and contracting offices within them) that could benefit from such training. Without taking these additional steps, SBA cannot provide reasonable assurance that WOSB program requirements are being met.",
"The SBA Administrator or her designee should (1) develop a process for periodically reviewing FPDS-NG data to determine the extent to which agencies are awarding WOSB program set-asides under ineligible NAICS codes and (2) take steps to address any issues identified, such as providing targeted outreach or training to agencies making awards under ineligible codes. (Recommendation 1)",
"We provided a draft of this report to DHS, DOD, GSA, and SBA for review and comment. DHS, DOD, and GSA indicated that they did not have comments. SBA provided a written response, reproduced in appendix II, in which it agreed with our recommendation. SBA stated that it will implement a process to review WOSB program data extracted from FPDS-NG and certified by each agency. Specifically, through the government-wide Small Business Procurement Advisory Council, SBA plans to provide quarterly presentations to contracting agencies’ staff that would include training and an analysis and review of the data. The response also reiterated that SBA has contacted GSA to implement a system change to FedBizOpps.gov that would prevent contracting officers from entering an invalid NAICS code for a WOSB program set-aside.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time we will send copies of this report to appropriate congressional committees and members, the Acting Secretary of DOD, the Secretary of DHS, the Administrator of GSA, the Administrator of SBA, and other interested parties. This report will also be available at no charge on our website at http://www.gao.gov.\nIf you or your staff have any questions concerning this report, please contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.",
"This report examines (1) the extent to which the Small Business Administration (SBA) has implemented changes to the Women-Owned Small Business Program (WOSB program) made by the 2015 National Defense Authorization Act (2015 NDAA); (2) the extent to which SBA has implemented changes to address previously identified oversight deficiencies; and (3) changes in WOSB program use since 2011 and stakeholder views on its use, including since the 2015 implementation of sole-source authority.\nTo describe the extent to which SBA has implemented changes to the WOSB program made by the 2015 NDAA, we reviewed relevant legislation, including the 2015 NDAA; related proposed regulations; and SBA documentation. We reviewed comment letters on the advance notice of proposed rulemaking for the new WOSB program certification process from three of the four SBA-approved third-party certifiers: the El Paso Hispanic Chamber of Commerce, the U.S. Women’s Chamber of Commerce, and the Women’s Business Enterprise National Council. To ensure the accuracy of our characterization of the comment letters, one staff member independently summarized the third-party certifiers’ comments on the advance notice, and a second staff member then reviewed the results. We also interviewed SBA officials, including officials from SBA’s Office of Government Contracting and Business Development.\nTo respond to the second and third objectives, we conducted interviews on SBA’s implementation and oversight of the WOSB program and its use with SBA officials, three of the WOSB program’s four third-party certifiers, three selected agencies (and three agency components within two of the agencies), and a total of eight selected contracting offices within six selected agencies or components. Using data from the Federal Procurement Data System-Next Generation (FPDS-NG), we judgmentally selected the three federal agencies and three components (for a total of six federal agencies and components) because their WOSB program dollar obligations (including competed and sole-source) were among the largest or because we had interviewed them for our prior work. Specifically, we selected the following six agencies or agency components: the Department of Homeland Security (DHS) and, within DHS, the Coast Guard; the Department of Defense (DOD) and, within DOD, the U.S. Army and U.S. Navy; and the General Services Administration (GSA). Within the components and GSA, we judgmentally selected eight contracting offices (two each from Coast Guard, U.S. Army, U.S. Navy, and GSA) based on whether they had a relatively large amount of obligations and had used multiple types of WOSB program set- asides (competed or sole-source) to WOSBs or economically disadvantaged women-owned small businesses (EDWOSB).\nTo address our second objective, we reviewed the findings and recommendations in our October 2014 report and in audit reports issued by the SBA Office of Inspector General (OIG) in May 2015 and June 2018. We also reviewed SBA documentation on the WOSB program, including SBA’s 2017 Standard Operating Procedures and 2018 WOSB Program Desk Guide, results from 2016 compliance reviews of the four third-party certifiers, and SBA eligibility examinations from fiscal years 2012 through 2018. In addition, we analyzed FPDS-NG data on contract obligations to WOSB program set-asides from the third quarter of fiscal year 2011 through the third quarter of fiscal year 2018 to determine whether set-asides were made using eligible program-specific North American Industry Classification System (NAICS) codes. To conduct this analysis, we compared contract obligations in FPDS-NG with the NAICS codes eligible under the WOSB program at the time of the award for the time frame under review. The WOSB program’s eligible NAICS codes have changed three times since the program was implemented in 2011, but the eligible industries have changed once. SBA commissioned the RAND Corporation to conduct the first study to assist SBA in determining eligible NAICS codes under the WOSB program. Based on the results of the RAND study, SBA identified 45 four-digit WOSB NAICS codes and 38 four-digit EDWOSB NAICS codes, for a total of 83 four-digit NAICS codes. WOSB and EDWOSB NAICS codes are different and do not overlap. In December 2015, the Department of Commerce issued the next study, which increased the total NAICS codes under the program to 113 four-digit codes, with 92 WOSB NAICS codes and 21 EDWOSB NAICS codes (which became effective March 2016). Often, there is a time lag between the effective date of NAICS codes and when they are entered in FPDS-NG. Therefore, we did not classify a contract as having an ineligible NAICS code if the code eventually became eligible under the WOSB program. We also excluded actions in FPDS-NG coded other than as a small business. These actions represented a small amount of contract obligations—approximately $125,000. We compared SBA information on its oversight activities and responses to previously identified deficiencies, federal internal control standards, and GAO’s fraud risk framework.\nWe assessed the reliability of FPDS-NG data by considering their known strengths and weaknesses, based on our past work and through electronic testing for missing data, outliers, and inconsistent coding in the data elements we used for our analysis. We also reviewed FPDS-NG documentation, including the FPDS-NG data dictionary, FPDS-NG data validation rules, FPDS-NG user manual, prior GAO reliability assessments, and relevant SBA OIG audit reports. Based on these steps, we concluded that the data were sufficiently reliable for the purposes of reporting on trends in the WOSB program and the use of sole-source authority under the program.\nTo describe how participation in the WOSB program has changed since 2011, including since the 2015 implementation of sole-source authority, we analyzed FPDS-NG data from the third quarter of fiscal year 2011 through the third quarter of fiscal year 2018. We identified any trends in WOSB program participation using total obligation dollars set aside for competitive and sole-source contracts awarded to WOSBs and EDWOSBs under the program. We also compared data on obligations for set-asides under the WOSB program with federal contract obligations for WOSB-program-eligible goods and services to all women-owned small businesses, including those made under different set-aside programs or with no set-asides, to determine the relative usage of the WOSB program. In our analysis, we excluded from WOSB program set-aside data actions in FPDS-NG coded other than as a small business (representing approximately $125,000) or coded under ineligible NAICS codes that were never eligible under the WOSB program (representing approximately $76.3 million).\nTo describe stakeholder views on WOSB program use, we conducted semistructured interviews to gather responses from 14 stakeholder groups. These groups consisted of staff within three federal agencies (DHS, DOD, and GSA), eight contracting offices within these agencies, and three third-party certifiers (selection criteria described above). One person summarized the results of the interviews, and another person reviewed the summary of the interviews to ensure an accurate depiction of the comments. In addition, a third person then reviewed the summarized results.\nWe conducted this performance audit from October 2017 to March 2019 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"",
"",
"",
"In addition to the contact named above, Allison Abrams (Assistant Director), Tiffani Humble (Analyst-in-Charge), Pamela Davidson, Jonathan Harmatz, Julia Kennon, Jennifer Schwartz, Rebecca Shea, Jena Sinkfield, Tyler Spunaugle, and Tatiana Winger made key contributions to this report."
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"question": [
"Which changes has the SBA implemented with regards to the WOSB program?",
"What change has the SBA opted not to implement as of February 2019?",
"What did SBA officials say about the requirement?",
"How have WOSB program oversight deficiencies been addressed?",
"How has SBA failed to address these deficiencies?",
"Why is it important for SBA to improve oversight of the WOSB program?",
"What findings support GAO's recommendations?",
"Why is SBA susceptible to the problems identified by GAO?",
"What did the WOSB program allow contractors to do?",
"How can firms participate in the WOSB program?",
"How did the 2015 NDAA change the process for firms to participate in the WOSB program?",
"What was GAO asked to review?",
"How did GAO go about reviewing the SBA and WOSB?",
"What is included within the report?"
],
"summary": [
"The Small Business Administration (SBA) has implemented one of the three changes to the Women-Owned Small Business (WOSB) program authorized in the National Defense Authorization Act of 2015 (2015 NDAA). Specifically, in September 2015 SBA published a final rule to implement sole-source authority, effective October 2015.",
"As of February 2019, SBA had not eliminated the option for program participants to self-certify that they are eligible to participate, as required by 2015 NDAA.",
"SBA officials stated that this requirement would be addressed as part of the new certification process for the WOSB program, which they expect to implement by January 1, 2020.",
"SBA has not addressed WOSB program oversight deficiencies identified in GAO's 2014 review (GAO-15-54).",
"For example, GAO previously recommended that SBA establish procedures to assess the performance of four third-party certifiers—private entities approved by SBA to certify the eligibility of WOSB firms. While SBA conducted a compliance review of the certifiers in 2016, it has no plans to regularly monitor them.",
"By not improving its oversight of the WOSB program, SBA is limiting its ability to ensure third-party certifiers are following program requirements. In addition, the implementation of sole-source authority in light of these continued oversight deficiencies can increase program risk.",
"Consequently, GAO maintains that its prior recommendations should be addressed. In addition, similar to previous findings from SBA's Office of Inspector General, GAO found that about 3.5 percent of contracts using a WOSB set-aside were awarded for ineligible goods or services from April 2011 through June 2018.",
"SBA does not review contracting data that could identify this problem and inform SBA which agencies making awards may need targeted outreach or training. As a result, SBA cannot provide reasonable assurance that WOSB program requirements are being met and that the program is meeting its goals.",
"In 2000, Congress authorized the WOSB program, allowing contracting officers to set aside procurements to women-owned small businesses in industries in which they are substantially underrepresented.",
"To be eligible to participate in the WOSB program, firms have the option to self-certify or be certified by a third-party certifier.",
"However, the 2015 NDAA changed the WOSB program by (1) authorizing SBA to implement sole-source authority, (2) eliminating the option for firms to self-certify as being eligible for the program and (3) allowing SBA to implement a new certification process.",
"GAO was asked to review the WOSB program.",
"GAO reviewed relevant laws, regulations, and program documents; analyzed federal contracting data from April 2011 through June 2018; and interviewed SBA officials, officials from contracting agencies selected to obtain a range of experience with the WOSB program, and three of the four private third-party certifiers.",
"This report discusses (1) the extent to which SBA has addressed the 2015 NDAA changes, (2) SBA's efforts to address previously identified deficiencies, and (3) use of the WOSB program."
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CRS_R42880
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{
"title": [
"",
"Introduction",
"Physician Supply",
"Supporting Practitioners",
"Practice Consolidation",
"Market Trends",
"Larger Group Practices and Physician Organizations",
"Hospital Affiliation and Employment",
"Affiliation with Insurers and Other Payers",
"Delivery Reforms",
"Concierge Practices",
"Legal Issues",
"Issues for Congress",
"Medical Spending",
"Access",
"Coordinated Care/Quality",
"Appendix. Physician Income and Practice Costs"
],
"paragraphs": [
"",
"Most Americans enter the health care system through their local physician's office, which is the setting for 84% of primary care visits. Historically, physicians have operated in what the American Medical Association and others have called a \"cottage industry\" of small or solo practices around the country. Even now, the majority of the approximately 972,376 doctors and residents in the United States work mainly from smaller, office-based practices. This decentralized network has served to deliver medical services to most Americans, but it has also been cited by analysts as a reason that the health care market is inefficient, with patients seeing duplicate providers who may prescribe overlapping treatments or deliver widely divergent, uncoordinated care.\nDuring the past several years, however, physician practices appear to be changing, as a number of doctors merge their offices into larger practices; sell their practices to hospitals, insurance companies, and physician management firms; contract to provide exclusive services to providers such as hospitals; or go to work for larger providers as salaried employees. While there are no definitive statistics, a 2011 American Hospital Association (AHA) survey found the number of doctors on hospital payrolls had increased by 32% from 2000 to 2010, with the rate of increase accelerating after 2005. According to the AHA, about 20% of practicing physicians now work for hospitals. The Medical Group Management Association (MGMA), which represents larger medical practices and outpatient clinics, has noted an increase in the share of medical groups owned by U.S. hospitals, while other surveys have also found rising hospital employment of doctors, with some regional variations. For example, an American College of Cardiology survey found the share of physician-owned cardiology practices declined to 60% in 2012 from 73% in 2007, while the share of such practices owned by hospitals grew from 8% to an estimated 24%.\nThe changes appear to be the result of a number of factors, including broad consolidation in the overall health care industry that has created dominant hospitals and insurers in many areas. In order to gain negotiating leverage with large providers and payers, a number of physicians have merged their practices into larger groups or entered into business arrangements with them. Lifestyle preferences are at play, with younger doctors more willing than their predecessors to work for an outside institution to secure a set schedule and salary; about half of doctors hired out of residencies or fellowships in 2010 took jobs at hospitals. Physicians may be having a harder time finding doctors to buy or join a small practice, as management becomes more complex and average compensation declines.\nAt the same time, hospitals and insurers are eager to hire doctors, given forecasts of a pending physician shortage by the end of the decade (see \" Physician Supply \"). The shortfall is predicted to occur in the midst of rising demand for medical services by aging baby boomers and millions of Americans who could gain insurance coverage under the 2010 Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended). According to some experts, financial incentives in the ACA may provide further incentives for consolidation and integration of services. For example, the health care law creates integrated delivery systems called Accountable Care Organizations (ACO) that contract with payers who agree to be responsible for the entire continuum of care provided to a group of patients. If the treatment costs less than set targets, and certain quality measures are met, the ACO and the payer share in the savings. Hundreds of physician practices, insurers, and hospitals have announced financial and clinical integration to quality as ACOs.\nThe ongoing changes in practice organization—if they alter the way that physicians deliver care—could help determine whether the U.S. health care system expands access, improves quality of treatment, and addresses the growth of government and private health care spending, according to analysts. Though physician payments account for about 20% of medical spending, studies suggest that physicians direct as much as 90% of total health care spending through referrals, tests, hospital admissions, and other actions.\nCongress is playing dual roles regarding the consolidation. On the one hand, lawmakers designed the ACA in part to reduce health delivery fragmentation and help control government and private spending. In addition, Congress and federal regulators have been monitoring, and continue to monitor, the health care system for signs that mergers and acquisitions may be having negative effects on costs, competition, and consumer access such as distorting prices or creating conflicts of interest in provision of services. Analysts and lawmakers are aware that the health care sector went through a similar round of restructuring during the 1980s and 1990s, as physicians sold their practices and managed care insurance plans expanded. The changes ultimately prompted a consumer backlash, and many of the deals were dissolved. In contrast to the previous round of consolidation, where doctors were seen as gatekeepers for managed care plans that attempted to limit services, the ACA envisions \"patient-centered\" care where doctors and other providers are rewarded for necessary treatment that improves quality of outcomes. Still, it is not clear how the new round of changes ultimately will play out.\nThis report provides background on factors contributing to changes in physician practice organization, including physician supply, lifestyle changes, and government incentives. Next it examines different types of integration, the legal intricacies of affiliation, and the possible implications for consumer and federal policy.",
"Most U.S. physicians are MDs, or doctors of medicine, who have completed four years of medical school and a minimum of three years of residency, with specialists undergoing additional training. About 7% of the more than 972,376 physicians and residents are osteopaths, who have completed medical education and additional training in areas including the musculoskeletal system. The physician population is about one-third primary care physicians and two-thirds specialists, a distribution that some experts suggest is not optimal. A quarter of U.S. doctors are graduates of international medical schools. The ratio of physicians to the population varies across the country, with New England and the Middle Atlantic regions having the highest number of doctors per capita, and the West South Central and Mountain regions having the fewest. Rural areas are struggling to attract enough physicians.\nIn the 1980s, after a congressional effort to fund an expansion of U.S. medical education, experts forecasted a possible surplus of doctors. More recently, however, analysts have predicted that the country faces a potential shortage, particularly in primary care. The federal Health Resources and Services Administration in 2006 predicted a shortfall of 55,000 to 150,000 physicians by 2020, while the nonprofit Association of American Medical Colleges (AAMC) in 2008 said there could be a dearth of 130,600 patient care physicians by 2025. Following up in 2012, the AAMC found that 33 states had documented current physician shortages or were anticipating shortages.\nAdding to concerns, nearly a third of physicians are age 55 or older and nearing retirement. In addition, studies indicate that doctors of both sexes and from varying backgrounds are working fewer hours each week, a change more pronounced among younger doctors. A 2010 study found a nearly 6% decrease in hours among nonresident physicians from 1996-1998 to 2006-2008. The reduction in hours was akin to a loss of 36,000 doctors, had the number of hours worked not changed. Some analysts have suggested that the combination of retirements and lifestyle changes will put a tremendous stress on the system and hasten the need for doctors to find more efficient ways to practice.\nThe forecast supply shortage and changes in work patterns are already having impacts, according to analysts. For example, some hospitals have been having increasing difficulty finding physicians to take voluntary duty and have hired more full-time staff doctors, including hospitalists, who oversee patient care in hospitals, and emergency room physicians (see \" Hospital Affiliation and Employment \"). A number of hospitals are seeking to hire or affiliate with primary care physicians, to ensure supply, staff outpatient centers, gain access to referral networks, and form ACOs. A 2010 survey by the American Hospital Association found 80% of hospitals were looking to hire primary care physicians.",
"Mitigating the projected physician shortage somewhat is the growing use of professionals who are not doctors but who have specialized training and can perform some basic functions of physicians, including nurse practitioners and physician assistants. In 2009, nearly half of all office-based physician practices included nurse practitioners, certified nurse midwives, or physician assistants. However, state laws vary in terms of the scope of services that nurse practitioners and physician assistants are allowed to provide.\nNurse practitioners must complete graduate education beyond the bachelor's degree needed to become a registered nurse. They can work with physicians or separately in such areas as taking case histories, performing basic exams, ordering lab work and prescribing some medications, and providing health education and counseling. There are approximately 155,000 active U.S. nurse practitioners.\nPhysician assistants complete at least two years of college courses in basic science and behavioral science before applying to one of the 170 accredited physician assistant programs. Most physician assistants have a bachelor's degree, another 27 months of specialized training, and 2,000 hours of clinical rotations. Physician assistants, once licensed by state boards, generally can take patient medical histories, examine patients, treat minor injuries, order and interpret laboratory tests, and make rounds in medical facilities. There are about 86,000 certified physician assistants in the United States.",
"Historically, physicians have operated in small or solo practices, with a number of factors limiting integration with other health care providers. In states such as California, laws designed to bar the corporate practice of medicine complicated efforts at affiliation between physician practices and insurance companies or hospitals. Doctors and hospitals have been paid separately for services, minimizing the need for tight coordination, though physicians benefited from access to and affiliations with hospitals, including serving on voluntary staff or taking call.\nThere has long been a debate about the efficiency of the decentralized physician practice structure. During the 1930s, for example, a health sector-created blue ribbon \"Committee on the Costs of Medical Care\" suggested improving health care by moving toward a more coordinated system centered on hospitals, including affiliation between doctors and hospitals. The recommendations created controversy, with some groups concerned that such a change would lead to the corporate practice of medicine, affecting quality and physician independence.\nIn the 1980s and 1990s, the type of broad system changes that some health experts had advocated appeared to take root, including the growth of managed care plans, where health insurers coordinate use of health care for enrollees by directly arranging for services through affiliated physicians, hospitals, and other providers. A number of physicians sold their practices to hospitals or specialty physician management companies, as health plans were able to pressure providers to accept lower payment rates and assume some financial risk for patient care.\nBut as consumers protested the managed care restrictions on services, and hospitals and physician management firms found they had overpaid for some physician practices, managed care plans loosened their controls and a number of mergers and acquisitions were dissolved. For example, in California from 1998 to 2002 nearly 150 physician organizations that served millions of patients closed or went into bankruptcy. Though consolidation slowed, it continued (see Table 1 ).\nAccording to one estimate, the share of doctors with an ownership stake in their practices declined from 62% in 1996-1997 to 54% in 2004-2005. The percentage of office visits to physicians in solo practices declined from 38.7% in 1997 to 30.5% in 2007, while the share visiting physicians in practices of 6-10 physicians rose from 12.1% in 1997 to 17.7% in 2007.\nMore recently there has been what some analysts call a reconsolidation of physician practices. While there are limited data at the individual office level, general surveys and studies have found a decline in the number of solo practices and an increase in the number of larger practices. There appears to be a rise in the number of practices owned by hospitals and insurers, and in the share of doctors in private practices working under exclusive contract to hospitals and insurance companies. The Center for Studying Health System Change, in a 2010 survey of 12 communities, found rising hospital employment of physicians, with some regional variations. Separately, a 2008 survey by the American Medical Association, which includes more solo and smaller practices than the MGMA data, did not show that the share of physicians working for hospitals had increased significantly since 2000, but did indicate that fewer doctors owned their practices and more were working as employees.\nThe consulting firm Accenture predicted that just a third of U.S. doctors would be truly independent by 2013, which Accenture defines as physicians who are in a partnership or have an ownership share in a practice. The 33% figure compares to 57% in 2000 and 43% in 2009. A 2012 report by the California Health Care Foundation listed a number of factors for the trends in that state, including the complexity and cost of running a practice; health care providers' concern about a potential shortage of physicians; declining reimbursement for services, including Medicare and Medicaid; and the cost of implementing new systems such as electronic health records.",
"The practice changes are taking several forms. There is horizontal consolidation, where businesses in the same part of the production process band together for economies of scale and to forestall competition, including mergers of specialty practices. There is vertical consolidation, where different industry segments form financial and clinical affiliations to seek potential efficiency gains. Examples of such consolidation and integration include hospitals buying physician practices or hiring physicians; physicians affiliating with insurers; and formation of ACOs. While not consolidation per say, the growth of concierge practices is another response to economic and other factors, and could affect physician supply and patient care.",
"The share of solo and small practices has been declining, while the number of larger practices is increasing, with some spanning a number of counties or entire states. Larger physician practices, particularly specialty practices, have advantages such as increased leverage in negotiations with insurance companies, greater purchasing power, and efficiencies in overhead and in their ability to use advanced technology and other patient-management tools.\nPhysicians can organize into different configurations, from mergers to independent practice associations, which are organizations of physicians who maintain their independent corporate status but can integrate financially or clinically and contract as a group. In addition, activity by for-profit practice management companies, which buy and run physician practices, has been growing, particularly those that contract with hospitals. There is also growth in private equity investment in physician practices.\nThere are no definitive figures regarding practice consolidation. However, the accounting and consulting firm Moss Adams has documented a doubling of mergers, acquisitions, and private equity investments in specialty physician practices between 2008 and 2012. In 2008 there were 125 mergers, acquisitions, public offerings, or private equity investments involving specialty practices, according to the firm. In 2010 there were nearly 240, and more than 260 were estimated for 2011. Moss Adams says the ACA \"is bringing about or accelerating\" changes in the health care system, including creation of larger medical group practices and \"transactions among specialty physician groups, medical clinics, hospitals, and other organizations looking to take advantage of scale and cost savings.\"\nSome recent examples of growing physician organizations include the 2011 merger of Cogent HMG and the Hospitalists Management Group, which created the largest private hospitalist company in the country. (Hospitalists are physicians who coordinate patient care in hospital settings.) Cogent now contracts with about 130 hospitals around the country. Another example is IPC The Hospitalist Company. The company in 2011 employed or was affiliated with about 1,200 hospitalists, including doctors and other health professionals, and had employment agreements with about 600 additional professionals. Mednax, a physician management firm, oversees 1,400 doctors and nurse practitioners in its Pediatrix division who specialize in neonatal and pediatric care, as well as more than 400 doctors and 500 nurse anesthetists in its American Anesthesiology group.",
"The AHA survey finding a 32% increase in hospital employment of doctors from 2000 to 2010 is one indication of the growing consolidation in this area. In another example, the physician search and consulting firm Merritt Hawkins told the House Committee on Small Business in July 2012 that from April 1, 2011, to March 31, 2012, company employees conducted more than 2,700 physician search assignments for hospitals, medical groups, and small physician practices. Only 2% of those physician searches were on behalf of entities seeking doctors to start a practice in an area or to join a solo practitioner as a partner, compared with 42% in 2004. Overall, 63% of the group's physician search assignments were carried out for hospitals that wanted to hire doctors, compared with 11% in 2004.\nLikewise, a 2011 survey by the American College of Cardiology found that 40% of hospital administrators had acquired or considered acquiring a cardiology practice during the previous two years, and 20% were considering a future acquisition. In one example of the changes, the number of hospitalists has risen from less than 1,000 in the late 1990s to nearly 30,000 in 2011.\nPhysician-hospital affiliation can take a number of forms, from contracts for specific services with physician practices or organizations, such as those outlined above, to full-time employment of doctors (see Figure 1 ).\nOver time, physician-hospital arrangements have shifted as financial incentives have changed. Some general examples of possible affiliations include the following:\nPhysician practices can contract to provide doctors and other staff for a hospital independently or work through intermediaries like physician management companies. Hospitals can directly employ doctors. In states that have laws barring the corporate practice of medicine, some hospitals have created non-profit foundations to secure physician services. Doctors and hospitals can form physician-hospital organizations or other forms of joint ventures to provide services, bid for insurance contracts, or achieve financial and clinical integration.\nAccording to the AHA, affiliations involving independent groups of physicians have been declining in prevalence, while arrangements in which physicians are salaried employees have been increasing. For physicians, selling a practice to a hospital or entering into a close financial agreement can reduce overhead, while providing predictable schedules and compensation. For hospitals, buying or affiliating with practices allows development of areas of excellence, ensures staff, provides a network of referrals from physicians, and can give the combined entity more leverage with insurers. Affiliation in the form of a joint venture such as an outpatient center can be a way for the hospital to increase revenues and ward off competition from independent doctors and practices that open such centers.\nDiffering Medicare reimbursement based on provider status may also be providing incentives for physician-hospital affiliations. In 2011, Medicare paid more for a 15-minute evaluation and management physician visit in a hospital outpatient setting than it did for a visit in an independent physician's office. Because hospitals also charge facility fees for physician visits, costs are not only higher costs for payers but also for patients, since the fees are subject to deductibles and coinsurance. In a 2012 report to Congress, Medpac, noting increased outpatient billing as more hospitals employ physicians or buy physician practices, said that if current trends continue, Medicare costs could rise by $2 billion annually by 2020:\nThis payment difference creates a financial incentive for hospitals to purchase freestanding physician offices and convert them into (outpatient departments) OPDs without changing their location or patient mix. Indeed, (evaluation and management) clinic visits provided in OPDs increased 6.7% in 2010, potentially increasing Medicare and beneficiary expenditures without any change in patient care.\nAs the experience of the 1990s showed, hospital employment of physicians has not always been successful. Hospitals may not make as much money as expected, and may incur initial losses. An analysis in The New England Journal of Medicine estimated that hospitals lose $150,000 to $250,000 per year for the first three years they employ a doctor, as physicians adapt to the new system. During the 1990s, some hospitals found that physician productivity declined after practices were purchased by hospitals. Merritt Hawkins data indicate that even though a number of hospitals are now preparing to make the transition to coordinated systems such as ACOs, they are still basing physician compensation on a fee-for-service or volume basis—offering new hires a salary with a productivity bonus.",
"Insurance companies are affiliating with physicians as they attempt to meld coverage and delivery systems to better control costs. Some analysts suggest that physicians may find their financial and professional interests are more aligned with insurers, given that emerging payment systems such as medical homes and ACOs increase pressure to reduce costs and increase quality by improving preventive care and follow-up care to avoid hospitalizations. However, the AMA in a manual for members notes that the success of such arrangements, as with other ACO configurations, depends on a number of factors regarding the amount of decision making insurers are willing to give physicians and other professional and financial concerns.\nSome recent examples of affiliation include the following: UnitedHealth Group, a large California insurer, in 2011 bought the management arm of Monarch HealthCare, the largest physician group in Orange County, California. Health insurance firm Cigna has expanded its accountable care network via deals with physician practices in seven states, and now has more than 20 such plans. Pennsylvania-based Highmark Inc., a major insurer in the Blue Cross/Blue Shield system, has been working on an acquisition of the West Penn Allegheny Health System, a physician-led hospital and multi-group practice network. The move is part of a larger effort by Highmark to develop an integrated care system.",
"Physician practices, hospitals, and other health care providers in recent months have announced affiliations to qualify as accountable care organizations (ACOs) under the ACA. Group practices, independent practice associations, and networks or independent practitioners can participate if they meet HHS standards. In the simplest case, an ACO contracts with payers to be accountable for the continuum of care provided to a defined population. If the costs of care provided are less than targeted amounts, and certain quality measures are achieved, the ACO and the payer share the savings. Under the Medicare Shared Savings Program, the government will contract with ACOs that will assume responsibility for improving quality of care and coordinating care across providers. ACOs must be financially and organizationally integrated.\nSome industry analysts say the ACOs could have a notable effect on the health care marketplace. Morgan Stanley in a June 2011 analysis predicted the ACA would accelerate health care consolidation, noting that the share of physicians in independent practices was declining by 1% to 3% a year as doctors entered into financial arrangements with hospitals and other providers. While most of the initial ACOs that formed were sponsored by hospitals, however, a growing number are being built around physician practices or insurers.\nThe ACA includes other provisions intended to increase health system coordination that could help to drive additional integration. One is medical homes, where the primary physician's office assumes the role for coordinating care across other providers to improve outcomes and reduce costs. The ACA also includes Medicare \"bundled\" payments, where billing is based on the totality of a treatment, and the law gives physicians new ability to form health co-ops or affiliate with insurers and managed care plans. A GAO examination of bundled payments found they are difficult to set up and administer without provider affiliation.\nSome analysts predict the market changes now underway will be more long-lasting and pervasive than was the case during the 1990s, given moves toward integrated care. For example, private equity firms looking at investing in health care providers are targeting companies that can capitalize on consolidation by providing management services or physician staff for health care providers. Bain & Co. in a recent report predicted that health care providers and services will become more significant for investors. As Bain analysts wrote: \"We expect significant strategic interest in accountable-care oriented investments, including investments that stretch across traditional boundaries (such as UnitedHealth Group's acquisition of Monarch Care).\"",
"While the main trends appear to be consolidation, a small but growing number of doctors are responding to pressures to change health care delivery and reimbursement by creating concierge practices, where physicians see fewer patients who pay an annual fee to receive care. In return, patients get enhanced services such as longer office visits, more in-depth physicals, and other preventive and continuous care. Because physicians in concierge practices see fewer patients on average, there have been questions about the potential impact on physician supply. To date, however, the number of such practices remains relatively small.\nA 2010 study by researchers at the University of Chicago and Georgetown University for Medpac found there were at least 756 retainer-based physicians providing care (a number the report said probably represented the minimum), with average fees from about $1,500 to $2,000, although the physicians interviewed charged anywhere from $600 to $5,400. The physicians interviewed by the researchers had 100 to 425 patients in their practices, compared to more than 2,000 before starting or joining a concierge practice. Large, regional concierge groups include MDVIP, headquartered in Boca Raton, FL, and New York-based Concierge Choice Physicians.\nSeveral states have examined whether concierge medicine is in compliance with their insurance laws, and there have also been issues regarding whether the additional fee is in compliance with government and other insurance policies. For example, concierge practices can only include Medicare patients if (1) the physician elects to opt out of Medicare and does not treat any Medicare beneficiaries for two years, or (2) the physician contracts to provide concierge care only for non-Medicare covered services.",
"As physicians seek to affiliate with other practices or providers, through ACOs or other means, they must comply with state and federal laws designed to ensure fair competition and transparency, as well as prevent over-utilization of services in the health care sector. Among the laws are federal antitrust and anti-kickback statutes, state laws barring the corporate practice of medicine, and the Stark law that imposes limitations on physician self-referrals.\nFederal antitrust laws are directed at ensuring that markets remain competitive. Antitrust is a means of governing market behavior that is, in essence, the flip side of market regulation accomplished via regulatory oversight. The consolidation or integration of health care entities, or other behavior by them (joint and/or unilateral), even if prompted by or taken in furtherance of achieving some level of joint functioning deemed necessary to achieve the stated goals of the ACA or other improvements in the health care sector, could create cause for antitrust concern. Joint negotiation over fees or terms of reimbursement by physicians or other providers is an example of behavior that might implicate the antitrust laws, for example.\nApplicable antitrust or antitrust-related provisions include Sections 1 and 2 of the Sherman Act (15 U.S.C. §§1, 2), which prohibit, respectively, \"contracts or conspiracies in restraint of trade\" and monopolization or attempted monopolization; and Section 7 of the Clayton Act (15 U.S.C. §18), the so-called \"anti-merger\" provision; both are enforceable by the antitrust agencies (Antitrust Division of the Department of Justice, FTC), as well as by individual plaintiffs. Section 5 of the FTC Act, which prohibits \"unfair methods of competition in or affecting commerce,\" is enforceable only by the commission. The FTC and the DOJ have issued guidance regarding ACOs and other configurations that could pass antitrust review, and those that might be problematic. The DOJ and FTC have been investigating some hospital physician mergers.\nMedicare and Medicaid anti-kickback law (42 U.S.C. §1320a-7b(b)) makes it a felony for a person to knowingly and willfully offer, pay, solicit, or receive anything of value (i.e., \"remuneration\") in return for a referral or to induce generation of business reimbursable under a federal health care program. The statute prohibits both the offer or payment of remuneration for patient referrals, as well as the offer or payment of anything of value in return for purchasing, leasing, ordering, or arranging for, or recommending the purchase, lease, or ordering of any item or service that is reimbursable by a federal health care program. Persons found guilty of violating the anti-kickback statute may be subject to a fine of up to $25,000, imprisonment of up to five years, and exclusion from participation in federal health care programs for up to one year.\nThe Stark provisions that impose limitations on physician self-referrals were enacted in 1989 under the Ethics in Patient Referrals Act (42 U.S.C. §1395nn). The Stark law, as amended, and its implementing regulations prohibit certain physician self-referrals for designated health services that may be paid for by Medicare or Medicaid. In its basic application, the Stark law provides that if (1) a physician (or an immediate family member of a physician) has a \"financial relationship\" with an entity, the physician may not make a referral to the entity for the furnishing of designated health services (for which payment may be made under Medicare or Medicaid), and (2) the entity may not present (or cause to be presented) a claim to the federal health care program or bill to any individual or entity for DHS furnished pursuant to a prohibited referral. The general idea behind the prohibitions in the Stark law is to prevent physicians from making referrals based on financial gain, thus preventing overutilization and increases in health care costs.\nThe laws include some exceptions for direct employment arrangements, and some legal experts say direct employment of physicians may be the most straightforward way for hospitals and other providers to integrate with physicians, given the legal complexities that can be involved in other arrangements. There can be financial downsides to direct employment, as hospitals discovered during the 1990s when they did not realize expected financial gains after buying physician practices.",
"Congress has been paying close attention to consolidation in the health care industry, and specifically in physician practices, including hearings in the Ways and Means Committee and the House Committee on Small Business during the 112 th Congress. There are a number of reasons that lawmakers are taking an active interest in the market developments, including physician complaints about federal policies and concerns that a decline in smaller, independent practices could exacerbate existing physician shortages in areas such as rural regions. Lawmakers also want to ensure that the market changes are meeting the goals of expanding access and addressing government and private health care spending. Because health care is highly regulated, and government payments make up an increasing share of physician revenues, congressional action can affect the pace of practice consolidation and other market trends. In general, Congress is monitoring developments in several broad areas:",
"Rising health care costs have led to federal, state, and private efforts to rein in medical spending, including controlling physician payments and providing incentives for consolidation to realize greater efficiency. One question surrounding affiliation between physicians and other health organizations such as hospitals is whether they will help to reduce costs. There is concern that such affiliations could instead lead to higher prices for consumers and the government as the larger entities gain negotiating leverage with insurers and can charge more for some Medicare-covered services. To date, studies have provided mixed results on whether closer affiliation improves efficiencies and leads to reduction in prices for health care services.\nA study of integration between physician practices and hospitals that took place in California during the 1990s did not find evidence that such affiliations increased prices. There was evidence that such vertical integration may have reduced prices, though the findings were not precise nor statistically significant. Other studies have found differing effects, while a review of research on doctor-hospital affiliation found that such alignments were often designed to increase market power by reducing competition, and that the limited evidence on price impacts was mixed. The study noted that most of the arrangements studied thus far have involved coordination of services, but not clinical integration of the type envisioned in programs such as ACOs.\nWhile the emerging incentives are different, given quality-based initiatives in the ACA and in a number of private insurance plans, some analysts express concerns that large organizations—such as ACOs built around a major regional hospital or large physician group—could gain more market share and negotiating leverage with insurers, which could lead to higher prices. Anecdotally, a growing number of news reports indicate that patients are facing higher charges for services when physicians provide services in hospital outpatient settings, partly due to differences in Medicare payment. Some analysts say pricing concerns can be mitigated with stronger antitrust oversight and have noted an increase in FTC and DOJ investigations of proposed mergers due to concerns about their impact on the competitive landscape.\nAt the same time, coordinated care delivery systems are in the nascent stage, and health care payments are still mainly based on volume of services rather than quality improvements. As Merritt Hawkins data indicate, many hospitals now hiring physicians or buying practices are basing physician compensation partly on productivity, which, combined with higher Medicare reimbursement for hospital-based services, could result in a higher number of physician services going forward.",
"According to some experts, the unfolding efforts at physician coordination could improve access to care, by increasing competition in health care markets and creating networks that provide additional services and access to specialists to underserved consumers, such as Medicaid patients.\nBut lawmakers and analysts have expressed concerns that as more doctors work in larger practices, there could be a change in the traditional doctor-patient relationship and potentially fewer entry points into the health care system if physician offices, outpatient clinics, or other facilities in a local area close. Another open question, as government and private payers base more payments on quality improvement measures, is whether such patient-driven systems could perpetuate disparities in the health care system. For example, some experts have asked whether ACOs and other quality-based systems could have a disincentive to treat sicker, more expensive patients and be more selective in their choice of patients, though HHS has designed the ACOs to make such so-called cherry picking difficult.\nSome lawmakers have suggested that consolidation could make it harder for rural areas to attract physicians. Rural areas have long had trouble recruiting doctors. But precisely because there are fewer physicians in rural areas, they may have more individual clout in negotiating with local hospitals during the current market evolution, some analysts say.\nThe issue of access also goes to the question of whether consumers will have as much freedom to see the doctor of their choice, or visit a specialist, in integrated health care systems where physicians work for insurers or hospitals. In other words, will ACOs and medical homes be managed differently than the managed care plans that created consumer unrest in the 1990s? Some analysts say it will be important to analyze required information on patients' access to primary and specialty physicians in the emerging health organizations.\nAccess is also linked to the issue of physician supply, such as the potential for growth in concierge practices that accept fewer patients and the projected shortage of primary care doctors. In an effort to increase supply, and possibly reduce prices for certain services, state legislatures and Congress have debated initiatives to expand the scope of allowable care provided by nurse practitioners and physician assistants.",
"New payment and delivery systems in Medicare and private plans are based on the theory that coordinated care can bring about increased quality, thereby reducing costs and allowing payers to enhance physician reimbursement. Some demonstration programs have shown potential for savings, though the scale is as yet unclear. A Congressional Budget Office analysis of past demonstration programs designed to reduce Medicare spending by implementing quality care initiatives concluded that a number cut hospitalizations and improved measures of patient care, but most did not meet their spending goals. The report also noted that physicians may have incentives to upcode, or increase the severity of an initial diagnosis, in order to show larger quality improvements. A 2012 analysis of a coordinated care pilot study at the University of Washington at St. Louis hospital found notable improvements in quality of care, as well as health savings.\nThere may also be differences in the ability of smaller versus larger physician practices to experiment with new quality-based systems such as medical homes. Practices bear many of the up-front costs of creating new coordinated care services, while many savings may be dispersed through the broader health care system.\nAnother potential factor that could affect efforts to improve coordination of care is increased segmentation of physicians as a result of ongoing market changes. A 2012 report on the future of medical practices noted:\nThese changes in the practice environment have given rise to a large segment of the physician community that no longer hospitalizes patients, but rather manages them exclusively in ambulatory settings (imaging, surgery, chemotherapy, etc.) ... In an increasing number of places, there are now two non-overlapping physician communities: physicians who never visit the hospital and physicians who never leave it, as is the case in most of Europe.\nUnder many quality-based systems, primary care physicians are envisioned as the focal point for managing patient care. In some scenarios, coordinating physicians or medical groups can face financial penalties based on the quality of care by other providers whose actions they do not directly control. With the rise of hospitalists, emergency room physicians, and other hospital-based physicians with segmented roles, such coordination can be more challenging, according to some analysts. For example, many lower-income consumers use emergency rooms as their entree to care. The growing use of specialized emergency room doctors and other hospital-based physicians who make the decision to admit patients may mean that primary care physicians are not brought into the decision-making loop in an early fashion. Such issues could be addressed in structured care organizations, analysts say.",
"Although doctors are among the best-paid professionals in the country, they have less ability than some other white collar workers to determine prices for their services, which are largely set by the federal payment rates in the Medicare and Medicaid programs or via negotiations with insurers.\nPhysician income can be affected by factors including (1) specialty, (2) source of payment (public vs. private), and (3) productivity, in terms of the volume or range of services offered. General practitioners and pediatricians make less than specialists such as cardiologists and oncologists, for example. Annual survey data from the MGMA provide detailed information on median compensation for physicians in different medical specialties (see Table A-1 ).\nSome studies indicate that physician income has been declining in real terms in recent years. According to one analysis, inflation-adjusted physician fees declined by 25% from 1995 to 2006, a time period during which physicians also worked fewer hours. Income did not appear to decline as much as time worked, however, suggesting that some doctors may have found other ways to earn money, such as performing more tests in their offices, opening outpatient clinics, increasing intensity of services, or providing more expensive services. A second study found that average physician net income declined about 7% after inflation from 1995 to 2003, though there were differences among specialties.\nThe recession that began in December 2007 and ended in June 2009 may have had an impact on physician income. Physician visits by privately insured patients under age 65 declined by 17% from spring 2009 to the end of 2011. The decline in the share of people covered by private insurance during that period was smaller than the decline in visits.\nPhysician practice operating costs have not been declining in concert with real compensation, according to the MGMA. That may not only make it more financially challenging for some small practices, it may also mean that practices that want to enter into new payment and coordinated care systems such as ACOs or medical homes may have more difficulty raising necessary capital unless they affiliate with other health providers.\nFederal Policies Affecting Compensation\nMost physicians accept patients insured through the federal Medicare program for the elderly and disabled. Determining the proper level of Medicare physician payments has been a challenge for lawmakers. In the Balanced Budget Act of 1997 (BBA97, P.L. 105-33 ), Congress created the Medicare Sustainable Growth Rate (SGR) formula, a system for making annual updates to the physician fee schedule. Since 2002, the SGR formula has resulted in spending above targets and mandated annual cuts in physician reimbursement. With the exception of 2002, when a 4.8% cut went into effect, Congress has voted to override the planned cuts. The ACA did not address the SGR issue, but includes financial incentives to increase some primary care, including a 10% bonus for Medicare primary care services from 2011 to 2016. The ACA also introduced new Medicare payment systems such as the Medicare Shared Savings Program, where doctors who are part of ACOs receive a part of any savings to Medicare from higher quality, more efficient care.\nSolo and group physician practices face costs for acquiring and using electronic health record (EHR) technology to replace paper-based systems. The transition is being driven by Medicare and Medicaid incentive programs, authorized under the Health Information Technology for Economic and Clinical Health (HITECH) Act, which provide financial assistance to help offset the costs of the systems. In its 2010 final rule establishing the EHR incentive programs, CMS said average EHR implementation costs can be as much as $54,000 per physician, with subsequent annual maintenance costs as much as $20,600 per physician. Physicians who meet certain criteria can receive incentive payments under Medicare of up to $44,000 over five years—plus an additional 10% if practicing in a designated medically underserved area. The payments phase out over time and are replaced by financial penalties. Beginning in 2015, physicians who are not meaningful users of EHR technology will see a slight reduction in Medicare Part B reimbursement."
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"question": [
"What are ACOs?",
"Why have hospitals and health plans been hiring physicians?",
"How might the care of Americans change in the future due to the number of doctors?",
"What are the provisions of the 2010 Patient Protection and Affordable Care Act are designed to do?",
"What was the ACA designed to do?",
"Why are lawmakers monitoring the health care system for the effects of consolidation?",
"What kind of backlash was received during health care restructuring in the 1980s and 1990s?",
"What system of care does the AVA seek to create?",
"How clear is it what will happen as a result of these changes?",
"What does this report provide and examine?"
],
"summary": [
"For example, the ACA creates health care delivery systems called Accountable Care Organizations (ACOs), under which providers contract to oversee a patient's total course of care in a bid to manage costs and improve quality.",
"In another move partly spurred by the ACA, hospitals and health plans have been hiring physicians to ensure they will have adequate staff to treat the millions of Americans projected to gain insurance during the next few years.",
"Several major studies have warned of a looming shortage of physicians, particularly primary care doctors.",
"According to experts, physician practices also may be affected, in part, by provisions of the 2010 Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended), designed to spur closer financial and clinical affiliation among health care providers.",
"On the one hand, the ACA was designed, in part, to prompt affiliation among doctors and other health care providers in order to reduce fragmentation and help control government and private health spending.",
"At the same time, lawmakers are monitoring the health care system for signs that consolidation is having negative effects on consumer access, prices, and competition.",
"The health care sector went through a similar round of restructuring during the 1980s and 1990s, including mergers and acquisitions of physician practices, ultimately prompting a backlash from some consumers who complained they were being blocked from specialists and procedures.",
"The ACA envisions a different system of \"patient-centered care,\" where doctors and other providers are given incentives to improve quality and efficiency, rather than to limit services.",
"Still, it remains to be seen how the current round of changes will play out as physicians and other providers form larger organizations.",
"This report provides background on factors contributing to changes in physician practice organization, including physician supply, sources of revenue, operating costs, and government incentives. It also examines the different types of integration, the legal intricacies of affiliation, and the possible implications for consumer and federal policy."
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GAO_GAO-16-177
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{
"title": [
"Background",
"The U.S. Mint’s Analysis Indicates Potential for Government Savings from Changing the Composition of Coins",
"The U.S. Mint’s Analysis of Viable Metal Alternatives Shows Potential for Savings",
"The U.S. Mint’s Cost- Estimating Process Does Not Fully Align with Best Practices",
"Other Estimates of Government Savings Are Narrow in Scope",
"Industry Costs Could Be Significant, but Estimates May Be Overstated",
"Industry Estimates Find Significant Costs Associated with Changes in Coin Composition",
"Industry Cost Estimates May Be Overstated",
"Industry Has Little Incentive to Support Coin Composition Changes and Alternatives to Reduce Costs",
"Gaining Efficiencies by Updating Multiple Machines at the Same Location",
"Updating Machines during Routine Maintenance",
"Moving to a Coinless Business Model",
"Using Change Machines to Reduce the Need to Alter Other Machines",
"Coin Compositions That Increase Government Savings Also May Increase Industry Costs",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Summary Assessment of the U.S. Mint’s Cost-Estimating Process Compared to Best Practices",
"Appendix III: Comments from the Department of the Treasury",
"Appendix IV: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"Coins serve as a medium of exchange in everyday commerce. In 2012, Concurrent Technologies Corporation, a contractor to the U.S. Mint, estimated that there were from 355 billion to 370 billion coins in circulation—about two-thirds of them pennies. Many of these coins are not in active circulation because people hold coins in storage containers in their homes, automobiles, or office desk drawers, among other places. However, coins in active use are accepted across the nation as payment in hand-to-hand transactions and for products and services in millions of machines ranging from vending and laundry to amusement and parking machines. These automated, unattended machines validate U.S. coins and their denominations by measuring one or more of the diameter, thickness, weight, and electromagnetic signature (EMS) of each coin. In addition to the four primary coins in circulation—the penny, nickel, dime, and quarter—the 50-cent piece and 1-dollar coin are also considered circulating coins.\nThe Constitution gives Congress the power to coin money, and under this authority, Congress has specified that the current metal composition of coins be as follows: the penny (1-cent) is made of copper-plated zinc and consists of 97.5 percent zinc and 2.5 percent copper, the nickel (5-cent) is made with an alloy of 75 percent copper and 25 percent nickel (a combination known as “cupronickel”), and the dime (10-cent) and the quarter (25-cent) consist of three layers of metal. The inner layer is copper and the two identical outer layers are a silver-colored alloy of 75 percent copper and 25 percent nickel. (A multi-layer coin is called a “clad coin.”)\nThe Federal Reserve determines the number of coins required to meet the public’s needs. Specifically, depository institutions (e.g., commercial banks and credit unions) order new coins from the Federal Reserve through an online coin-ordering system called FedLine. Then, the Federal Reserve’s Cash Product Office submits a new coin order to the U.S. Mint. In turn, the U.S. Mint produces and distributes new coins each month to the 12 Federal Reserve Banks that fulfill the orders made by the depository institutions. In general, coin production varies from year to year depending on several factors, such as public demand, the need to replace mutilated or worn coins, and the price of copper, as well as orders from the Federal Reserve to maintain its targeted inventory levels. The U.S. Mint produced about 5-billion circulating coins in 2010 and about 13- billion circulating coins in 2014.\nWhen the cost to produce and distribute a coin is less than its face value, the federal government experiences a financial gain, creating a value known as “seigniorage”. In fiscal year 2014, the U.S. Mint realized about $315 million in seigniorage from circulating coins. The quarter and dime resulted in seigniorage of $406 million, whereas the nickel and penny resulted in a loss of seigniorage in the amount of $91 million. Seigniorage is returned to the Treasury General Fund and reduces government’s borrowing and interest cost, resulting in a financial benefit to the government, whereas loss of seigniorage is absorbed as part of the U.S. Mint’s operating costs. Table 1 shows the amount of seigniorage from fiscal year 2010 through 2014.\nThe Act authorized the Secretary of the Treasury to conduct research and development on new metals for all circulating coins with the goal of reducing production costs. The Act also required, among other things, that the Secretary: consider “actors relevant to the ease of use of and ability to co- circulate of new coinage materials, including the effect on vending machines and commercial coin processing equipment and making certain, to the greatest extent practicable, that any new coins work without interruption in existing coin acceptance equipment without modification;” “include detailed recommendations for any appropriate changes to the metallic content of circulating coins in such a form that the recommendations could be enacted into law as appropriate;” “to the greatest extent possible, may not include any recommendation for new specifications for producing a circulating coin that would require any significant change to coin accepting and coin-handling equipment to accommodate changes to all circulating coins simultaneously;” and submit a biennial report to Congress “analyzing production costs for each circulating coin, cost trends for such production, and possible new metallic materials or technologies for the production of circulating coins.”\nThe Secretary of the Treasury issued the first biennial report in December 2012 and another in December 2014. These reports summarized the U.S. Mint’s research and development efforts to identify new metallic materials or technologies for the production of circulating coins and also included information on the U.S. Mint’s outreach efforts to industry and industry cost estimates. In identifying potential new materials for circulating coins, the U.S. Mint needed to ensure that the material could be used as a viable, durable coin. After testing 29 different metal compositions for circulating coins, the U.S. Mint has identified four viable metal compositions—a new version of the current cupronickel (copper and nickel), nickel-plated steel, multi-ply plated steel, and stainless steel. The U.S. Mint plans to issue another report in December 2016. According to U.S. Mint officials, the 2016 report will highlight areas of further study as discussed in the 2014 Biennial Report to Congress. The areas of study include further testing and evaluation of the new cupronickel alloy, stainless steel research and development, improvements in production, and outreach to the coin industry, among other things.\nOther countries have also taken steps to reduce metal composition of coins to reduce costs. For example, the Royal Canadian Mint and the Royal Mint of the United Kingdom have both changed the metal composition of their coins from cupronickel to steel-based coinage in an effort to reduce production costs. The Royal Canadian Mint manufacturers its coins using a patented multi-ply plated steel technology. The Royal Mint produces its coins using its own plated steel technology known as aRMour® plating.\nA variety of businesses rely on coins. Some industries sell products or services through the use of coin machines, such as vending and coin- operated laundry machines. According to the vending machine industry, it generally sells products using modern, technologically advanced coin machines that validate and accept many types of circulating coins as well as dollar bills. Its members include well-known, large corporations. In contrast, representatives from the coin-operated laundry industry stated that the industry is comprised of small “mom-and-pop” business owners and operators, provides services using mechanical technology, and depends heavily on the quarter. Representatives from the amusement industry also stated that their industry depends heavily on the quarter for playing games, billiards, and juke-boxes. Businesses in the amusement industry range from large national chains to small owners and operators. Another type of industry that deals with coins is the armored car industry. According to this industry, it sorts, counts, wraps, and transports all denominations of circulating coins from Federal Reserve Banks to commercial banks and other privately owned businesses. This industry is dominated by four large armored car carriers. Finally, manufacturers that make coin acceptance and handling equipment support the entire coin industry.",
"",
"The U.S. Mint’s analysis estimates that the government could potentially save from about $8 million to about $39 million per year through different changes in coin composition to the nickel, dime, and quarter. The U.S. Mint developed four alternatives for coin composition and estimated the savings for each alternative (see fig. 1).\nThe U.S. Mint’s analysis shows that changing to a new version of a copper and nickel combination (cupronickel) could potentially save the government about $8 million per year, based on 2014 production costs, and should not affect industry. This change is known as the “seamless” alternative because it would not significantly change the characteristics of the nickel, dime, or quarter. The savings would result from a change in metal costs alone, specifically (1) increasing the amount of copper in the nickel and the outer clad layer of the dime and the quarter from 75 percent to 77 percent and decreasing the amount of nickel, which is more expensive, from 25 percent to 20 percent, and (2) adding manganese to the coins. The seamless alternative is designed to have the same diameter and EMS characteristics and nearly the same weight as the current cupronickel composition. According to the U.S. Mint, this alternative would not require any changes to coin acceptance machines and would not affect industry. As of September 30, 2015, the U.S. Mint was conducting further testing of another version of this alloy that substitutes zinc or zinc and manganese for some of the nickel, to help ensure that the alloy has the same characteristics as the current nickel and would not require changes to coin acceptance machines.\nThe U.S. Mint’s analysis also shows that the largest savings the government could potentially achieve is about $39 million per year by changing the coin composition of the nickel and dime to multi-ply plated steel. This type of change is referred to as a “co-circulating” alternative because different types of coin compositions for the same coin denomination would circulate together in the economy for 30 years or more. Under this co-circulating alternative, savings would result from both metal changes (as steel is less expensive than copper or nickel) and production changes. According to U.S. Mint officials, their metal suppliers would supply coin “blanks” for multi-ply plated steel coins, thereby eliminating the need for the U.S. Mint to make its own blanks. Currently, suppliers provide sheets of metal that the U.S. Mint uses to produce coin blanks. A change to steel-based coins would require the coin industry to make modifications to current coin acceptance machines to recognize and accept both new and existing coins, because the new coins would have a different weight and EMS than existing coins and would also be magnetic.\nThe U.S. Mint had originally included the quarter in its savings estimates for a co-circulating coin change. When including the quarter, the U.S. Mint had estimated that the government could save $83 million per year by changing the quarter, nickel, and dime to multi-ply plated steel.\nIn October 2015, U.S. Mint officials told us that they determined that neither multi-ply plated steel nor the nickel-plated steel compositions were viable for the quarter due to security concerns. Specifically, as the use of steel coins has increased around the world, the U.S. Mint determined that there is too great a risk that the size, weight, and EMS of any steel- based U.S. quarter may be close to that of a less valuable foreign coin. According to Mint officials, this disparity may result in fraud because machines would not be able to differentiate between the U.S. quarter and lower-value foreign coins. According to U.S. Mint officials, it is viable to change the nickel and dime to multi-ply plated steel because these coins are lower in value and therefore do not provide a similar incentive to counterfeiters.\nThe Act provides the parameters that the U.S. Mint used to direct its research and development and evaluate the impact to industry as it developed estimates. For example, the Act limits the U.S. Mint to considering metallic materials during its research and development for co- circulating alternative coinage. Specifically, the Act specifies that metallic materials be tested for coinage, and this testing prevents the U.S. Mint from considering less expensive materials and nonmetallic alloys that could be suitably fabricated as coins and limits the co-circulating alternatives. Additionally, the U.S. Mint did not include metallic changes to the penny because the U.S. Mint could not identify a less expensive metal for the penny. In its 2012 biennial report, the U.S. Mint reported that while the penny costs more to produce than its face value, there is no viable metal alternative that is cheaper than zinc. Representatives from a raw material supplier, and consulting firm told us that they agreed with the U.S. Mint’s assessment. The Act also specified that any proposed changes may not allow for greater risk of fraud from counterfeiting or substituting cheaper foreign coins. Finally, according to U.S. Mint officials, the Act’s language on minimizing the effect on vending machines and commercial coin processing equipment led the U.S. Mint to pursue research on a seamless alternative as well as a co-circulating alternative.\nIn addition, the U.S. Mint’s analysis did not include information on how the organization would transition from the current coin composition to a new coin composition. For example, the U.S. Mint did not determine the disposal costs of equipment that would no longer be used if coin composition changed or consider potential changes to its workforce. According to officials, the U.S. Mint has improved its internal processes through a separate effort. Specifically, according to U.S. Mint officials, the U.S. Mint reduced plant overhead by 7 percent and general and administrative costs by 18 percent from between 2009 to 2014; reduced employee shifts—from 3 to 2 shifts per day—at the two Mints that produce circulating coins; and streamlined its die- manufacturing process.",
"Although these estimates can provide an understanding of the general magnitude of potential government savings, our analysis found that the U.S. Mint’s cost-estimating process and resulting analyses are limited because they did not fully align with best practices for estimating costs, as outlined in the Cost Guide. Without following best practices, the U.S. Mint’s estimates may not be reliable.\nThe Cost Guide includes a 12-step process to develop a reliable cost estimate. These best practices are the basis for developing high-quality, reliable cost estimates and help ensure that the cost estimates are comprehensive, well documented, accurate, and credible. For example, following these practices should result in cost estimates that can, among other things, be replicated and updated. According to the Cost Guide, these best practices can guide government managers as they assess the credibility of a cost estimate for decision-making purposes for a range of programs. Of the 12 steps in the Cost Guide, our analysis found that the U.S. Mint’s cost-estimating processes fully met 1, partially met 7, minimally met 3, and did not meet 1 of these 12 steps. More detailed information describing how the U.S. Mint’s cost estimating process aligned with the Cost Guide can be found in appendix II. In summary:\nFully met: The U.S. Mint fully met one step. This step was to brief its management as part of its review process and obtain and document management’s approval of the estimate.\nPartially met: The U.S. Mint partially met 7 steps of the cost- estimating process. These steps generally occurred during the cost assessment portion of the cost-estimating process. To its credit, the U.S. Mint partially met the steps of (1) defining the estimate’s purpose, (2) developing the estimating plan using technical staff, (3) defining the program characteristics, (4) determining the estimating structure from the cost of raw materials to overhead, (5) obtaining the data from the U.S. Mint’s cost-accounting system, (6) developing the point estimate and comparing it to an independent cost estimate, and (7) updating the estimate. For example, the U.S. Mint partially met defining the purpose of the savings estimate because the U.S. Mint defined the scope of the estimate but did not fully consider all costs. Specifically, the U.S. Mint did not include about $5.7 million in one- time expenses to conduct research, development, and testing of viable metals and did not consider expenses to dispose of equipment that may no longer be needed if a decision is made to produce steel- based coins.\nMinimally met: The U.S. Mint minimally met 3 steps that generally occurred during the analysis of the cost-estimating process. These steps include (1) conducting a sensitivity analysis, (2) documenting the estimate, and (3) identifying ground rules and assumptions. While U.S. Mint officials discussed a sensitivity analysis, it was not conducted. Without a fully documented sensitivity analysis, the U.S. Mint cannot determine how a change in inputs—such as the price of metal—would affect the potential for savings because the cost of metal is an important factor in the U.S. Mint’s overall costs to produce coins. Also, when documenting estimates, the U.S. Mint used 2014 metal prices to determine its estimates. However, metal prices change over time. For example, from 2011 to 2015, the price of copper ranged from $2.24 per pound to $4.58 per pound. Such a change in metal prices impacts the U.S. Mint’s costs and therefore can significantly impact its savings estimates. Finally, certain assumptions were not made or documented since the U.S. Mint’s savings estimate did not project savings into the future, but rather all analyses were based on one year.\nNot met: The U.S. Mint did not meet the step that required it to conduct a cost-risk and uncertainty analysis. These analyses examine a broad range of factors, such as unforeseen technical problems or changes in staff availability and expertise, that could possibly occur and would affect the estimate.\nThe U.S. Mint’s cost-estimating process did not fully align with the best practices described in the Cost Guide and therefore the estimates may not be reliable as a precise indication of government savings. However, the efforts taken by the U.S. Mint nonetheless provide an understanding of the general magnitude of government savings. We discuss later in this report how the magnitude of estimated government savings compares to the magnitude of estimated industry costs to illustrate the scale and relationship between estimates of government savings and industry costs.",
"Our review of other estimates of potential government savings found these estimates to be narrow in scope. For example, a 2012 Navigant study that was commissioned by a supplier of coin material estimated that the U.S. government could achieve savings of up to $207.5 million per year by changing the current coin compositions of the nickel, dime, and quarter to multi-ply plated steel, which is the same composition used in Canadian coins. However, by design, the estimate is not comprehensive because it does not account for other costs associated with making this change such as production, processing, transportation, and new equipment costs as well as licensing fees to use multi-ply plated steel technologies. In addition, this study was limited in scope because it was not designed to be a comprehensive cost-benefit analysis of government savings and industry costs. Generally, according to guidance from the Office of Management and Budget (OMB), changes in federal programs should be informed by an assessment of whether the benefits exceed the costs. Navigant determined how the use of multi-ply plated steel that is used by the Royal Canadian Mint could be applied to U.S. government coins to potentially achieve raw material savings. Navigant did not make comparisons to other seamless or other co-circulating metal-composition options and did not consider how a statutory requirement, such as minimizing industry conversion costs, might be applied.\nAnother 2012 Navigant study explored potential government savings by eliminating the penny but did not consider how a change in metal composition other than multi-ply plated steel for the other coins could be made to reduce costs and achieve savings. This study concluded that eliminating the penny would not result in government savings, as more nickels may be required and the government also loses money on the production of nickels.",
"",
"The six selected industry associations that provided cost estimates to the U.S. Mint stated that there would be significant cost impacts ranging from $2.4 billion to $10 billion. These costs result from modifying an estimated 21.9-million coin acceptance machines as a result of potential changes to the metal composition of coins, as shown in table 2. Industry associations developed these cost estimates and provided them to the U.S. Mint in response to an April 2014 Federal Register notice. The U.S. Mint reprinted the estimates in its December 2014 Biennial Report to Congress.\nThe cost estimates in table 2 presuppose a metal change from cupronickel to steel for the nickel, dime, and quarter as well as the need to accept both current and new coins co-circulating together. These estimates reflect a level of uncertainty about the dimensions (diameter and thickness) and other technical specifications of any new coins. For example, the vending industry estimated a cost impact of at least $700 million—a cost of at least $100 per machine—to update the software in 7- million modern, electronic coin machines to accept new metallic coins with different EMSs. The vending industry representative we interviewed said the low estimate assumes little or no changes to the dimensions of new coins, and therefore costs for mechanical hardware changes are not estimated, but presumed are changes in the EMS or weight due to a metal change. Two of the six industry associations we contacted, as well as a coin machine manufacturer and the contractor for the U.S. Mint, told us that software modification costs are primarily driven by labor costs to update software, not the software cost itself. That is, businesses would have to hire a certified technician to update the software on every electronic coin machine in order for that machine to accept any new coins that do not have the same properties as the current coins that would remain in circulation. These representatives stated that updates would typically take less than an hour and each service call would cost up to $100. The vending industry’s high cost estimate of $3.5 billion reflects changes to coin dimensions as well as EMS specifications. According to a vending industry representative, changes in coin dimensions would require the vending industry to update the software as well as remove the hardware associated with coins within the vending machine and replace it with redesigned and expanded hardware in order to accept both current and new coins with different dimensions.\nThe situation for the amusement industry is similar to that of the vending industry. The amusement industry estimated costs ranging from $100 million to $500 million depending on the need to either update the software on the estimated 1-million amusement machines, or remove and replace their coin machines with new machines designed to accept both current and new coins with different dimensions, which would be more costly. For the owners and operators of pool tables and coin laundries that use older mechanical (not electronic) coin machines, their cost estimates reflect a need to remove and replace their machines with new machines that could accept both current coins as well as steel-based coins, yet reject steel-based slugs.",
"We reviewed industry estimates and identified factors that indicate that these estimates may be overstated:\nThe published cost estimates do not account for the U.S. Mint’s position not to alter the dimensions of coins. According to U.S. Mint officials, new coins would retain the same dimensions as current coins. Consequently, the high cost estimate of $10 billion may be overstated because it is based on the need for mechanic hardware changes in machines to accommodate new coins with different dimensions. The low cost estimate of $2.4 billion assumes no changes to coin dimensions.\nThe cost estimates do not account for the U.S. Mint’s position to not alter the quarter to a steel-based coin. Specifically, these published estimates assumed that the characteristics of the quarter would change, but U.S. Mint officials have determined that it is not viable to produce a steel-based quarter. According to U.S. Mint officials, they are currently only exploring changing the cupronickel composition of the quarter, which would not require any modification to a machine that accepts only quarters.\nThe number of coin machines needing modifications may be overstated. Industry costs to modify machines are proportional to the number of coin machines needing modifications. As the number of coin machines decreases, these costs would also decrease. Two examples illustrate that the number of coin machines may be overstated. First, the vending association reported in its 2014 written response to the U.S. Mint that there were about 7-million food, beverage, and product vending machines in the United States. However, a 2015 study developed by the vending association, in partnership with a food research and consulting firm, reported that there are now 4.5-million vending machines—a decrease of about 36 percent. A lower actual number of vending machines would translate to a decrease in estimated cost from $700 million to about $450 million—assuming the cost of $100 per machine. Second, in a 2014 written response to the U.S. Mint, the amusement park industry association—whose members include family entertainment centers and arcades, among others—stated that there are about 10-million coin-operated machines in the United States and that changes in the metallic content of coins would result in a cost impact ranging from $1 billion to $5 billion. However, our review found the its cost estimate may have double-counted coin machines from the larger amusement sector, which also represents family entertainment centers and arcades. The industry did not provide enough detail to determine the scope and breadth of its coin machine estimate.\nThe parking industry is shifting from coin-operated to coinless parking meters. According to a parking industry representative, the number of parking meters is decreasing due to a trend from single-space, coin- operated, parking meters to multi-space, smart meters that allow payment by credit card or phone. Because of the many benefits associated with smart meters, the representative believes that within 15 years, nearly all parking meters will no longer accept coins. However, the parking industry estimated its costs by estimating that 2- million parking meters would need to be updated to accept new coins. According to a parking industry representative, this information was based on data collected from an informal phone survey in 2007 and does not reflect industry changes since then.\nAccording to U.S. Mint officials, they did not independently verify industry cost estimates to help ensure that they are reliable. Rather, officials said that they obtained and reported industries’ written responses to the U.S. Mint’s Federal Register notice, dated April 10, 2014, which requested estimates from industry within 60-days after the notice was published. Although we interviewed industry representatives to understand their cost estimates, we did not independently verify the estimates as this was outside the scope of our work.\nOne foreign mint, which has changed the metal composition of coins found that actual industry costs were less than industry estimated. Specifically, a Royal Mint memorandum stated that initial vending industry estimates to accept new coins in the United Kingdom were about £40 million (about $60 million). However, after the United Kingdom had completed its transition to steel coins, studies showed that actual conversion costs were about £17 million (about $26 million), or about 58 percent less than estimated. According to a Royal Canadian Mint official, the Royal Canadian Mint did not compare industry cost estimates to the actual costs incurred.",
"In written responses to the U.S. Mint’s Federal Register notice, two of the six industry associations we contacted explicitly said that they do not support changes to the metallic composition of any coins. Specifically, representatives for industries that handle or accept coins of all denominations—such as the banking, armored carrier, and vending industry—called for no changes to be made to the metallic content of coins because such a change would require these industries to spend money to update their coin machines. Representatives for industries that accept certain coin denominations—such as the parking, amusement, and coin laundry industries that rely primarily on the quarter—were not opposed to metallic changes as long as changes were not made to the quarter. These representatives told us that changing to a steel-based quarter would complicate their business operations because these industries tend to have mechanical, rather than electronic, coin machines that currently use magnets to reject steel-based materials, commonly called slugs. A coin machine manufacturer that updates or sells machines to other businesses was generally supportive of potential changes to circulating coins. Five industry associations we contacted said that if new metallic coins are introduced, the changes should be seamless to avoid any cost impact to industry.\nThree industry associations we spoke with stated there is little benefit to phasing in the introduction of new coins. Representatives from these associations explained that even if the U.S. Mint introduced new coins at a rate of 3 percent per year (thereby taking a number of years for a substantial percentage of new coins to be in circulation), their industries would take immediate action to modify their equipment because they would not want to lose any potential revenue from customers who could not use new coins in unmodified machines. They believed that those customers would be unlikely to return to machines that rejected their coins due to a perception that the machines were faulty.\nRepresentatives from the six associations that provided cost estimates to the U.S. Mint generally stood by their estimates and said that the assumptions on which their cost estimates are based are reasonable. Nonetheless, due to the Act’s mandate that the conversion costs to industry be minimized, we discussed various potential changes in business practices with some industry representatives to determine if implementation of these practices could reduce costs. In general, they did not believe these practices would reduce costs or identify other practices that could reduce costs.",
"Like other industries that provided cost estimates, the vending industry estimated its potential cost by multiplying the total number of coin machines by the cost to update each machine. Because two or more vending machines (one food and one drink machine) are often at the same location, the total cost to update the software on the machines may be less if a technician would be able to modify multiple vending machines for the cost of one service call. When we asked its representative whether it would be reasonable for businesses to update the software on multiple machines at the same location, the representative said that costs may be reduced by efficiencies in servicing machines at the same time, but cautioned that the overall cost reduction was not large. The representative was not able to provide other business practices that would result in a lower cost estimate.",
"Representatives from three of the six industry associations we contacted said that it was not a viable business practice to update their machines during routine maintenance cycles, rather than scheduling special one- time service calls to accommodate new coins. Amusement industry representatives said that they rarely replace coin acceptance machines because their coin machines are built and designed to work for decades without routine maintenance. Similarly, the coin laundry representatives said there would be few opportunities for updating and replacing of coin machines since washers and dryers tend to be in-service without failure for a minimum of 12 to 15 years. The vending industry representative said that drivers who stock vending machines are not trained, nor is it in their skillset, to update software on vending machines. Representatives from these industries said that if and when a decision is made to change the metal composition of coins, they would take immediate actions to modify their machines because doing nothing would result in lost revenue.",
"Given a potential cost to modify coin machines, we interviewed four selected industry associations to determine whether their costs would be lower if they moved to a coinless business model that accepts various forms of electronic payments, not coins. Representatives from the coin laundry and amusement machine industry association told us that moving to a coinless business may increase, not decrease, costs because of the substantial capital investment needed to install the necessary infrastructure (i.e., payment mechanisms, Internet, modem, Wi-Fi, and associated wiring) to move to a coinless system. For example, amusement industry representatives said that a small number of entertainment businesses have switched to coinless card readers at large venues having 25 or more game machines, but it is not financially viable for some business owners with a small number of amusement machines in multiple locations to make this investment. Additionally, two representatives from the coin laundry industry stated that their industry serves individuals who are often “unbanked.” These unbanked individuals who do not have or use bank accounts, debit cards, and other banking services may prefer using only coin-operated laundry machines rather than coinless-operated laundry systems.",
"In lieu of modifying all of the coin machines to accept new coinage, we interviewed representatives from two selected industry associations to determine whether a viable business practice would be to install change machines that dispense current coins. Representatives from both industry associations told us that buying and installing change machines would not be a cost-effective alternative to modifying their existing coin machines due to procurement and installation costs as well as any maintenance and servicing costs associated with these change machines.",
"Although the estimates of potential government savings and industry cost may not be precise, the estimates provide enough information to show that metal compositions that increase the potential government savings may also increase the potential industry costs. As discussed previously, the U.S. Mint has determined that it is not viable to change the quarter to a steel-based coin. As a result, the potential cost impact to industry is greatly reduced. Specifically, industries that only accept the quarter— such as the coin laundry and amusement industries— would not incur any costs if the quarter did not change. Table 3 shows options for changing coin composition and the potential government savings and industry cost impact of each option. These options do not include the possibility of making no changes to the current coin composition, which would result in no government savings and no costs to industry.\nThe first option calls for changing the nickel and dime to a steel-based coin (either multi-ply or nickel-plated steel). The U.S. Mint estimates that this option could save the government from $32 million to $39 million per year. Using U.S. Mint data, we estimate that if these savings were consistently realized over 10 years, the savings would be from $320 million to $390 million. However, coin machines for some industries, such as the vending industry, would require a one-time update to accept these new nickels and dimes because the properties of these coins would change. Industry costs are unknown for this option because industry estimates reflect the cost to change all coin acceptance machines for all denominations. Under this option, there may be significant costs for those industries that accept the nickel and the dime (about $1.1 billion to about $4.1 billion for the vending, parking, and armored car as shown in table 2). However, the costs would likely be less than currently reported.\nThe second option is to change only the nickel to a plated or stainless steel coin. The U.S. Mint estimates that this option could save the government from $25 million to $32 million per year. As with option 1, there may be significant costs for a few industries that accept the nickel, but overall industry costs would likely be less than currently reported (about $1.1 billion to about $4.1 billion for the vending, parking, and armored car industries, as shown in table 2). It is also unclear if some industries would choose not to modify their coin acceptance machines if only the nickel would change. Some owners of coin acceptance machines may decide to no longer accept the nickel instead of updating their coin acceptance machines to accept the new nickel.\nThe third option—the seamless option—would increase the amount of copper in the nickel, dime, and quarter. The U.S. Mint estimates that the government could save about $8 million per year. The U.S. Mint is conducting research to ensure it could reduce the amount of nickel in each coin and increase the amount of copper while ensuring that the coins work in current coin acceptance machines. The U.S. Mint is expected to report on the results of this research in 2016. If the new coins worked seamlessly in current machines, it is expected that there would be no costs to industry.\nAs previously discussed, the Act requires that any new coins work without interrupting existing coin acceptance equipment “to the greatest extent practicable.” In addition, it requires that any recommendations to change coin composition may not have “significant” changes to coin acceptance machines. The U.S. Mint has not yet determined how to quantify “significant” change and “to the greatest extent practicable” to determine what, if any, recommendations could be made to change the composition of coins that would be authorized under the Act. The Act does not set a time frame for providing recommendations to Congress and the U.S. Mint has not established a time frame for making any recommendations. However, U.S. Mint officials told us that if and when the Department of the Treasury makes any recommendations to Congress, the U.S. Mint and Treasury officials will ensure that the recommendations are within the framework of the Act.",
"We provided a draft of this report to Secretary of the Treasury for review and comment. In its comments, the U.S. Mint expressed concerns regarding two issues–our use of the Cost Guide to assess the U.S. Mint’s cost-estimating process and our lack of discussion regarding a 2012 report by Concurrent Technologies Corporation (CTC). The U.S. Mint also provided additional context regarding the Act’s requirements that the U.S. Mint consider the effect on industry of any coin change.\nRegarding our use of the Cost Guide, the U.S. Mint took exception to our statement that the U.S. Mint’s cost estimates may not be reliable because they did not consistently follow the best practices outlined in the Cost Guide. The U.S. Mint stated that there is no requirement for agencies to use the Cost Guide and that it is not intended for use on non-capital, operational changes such as manufacturing coinage. The U.S. Mint also stated that manufacturing coinage is covered under the Statement of Federal Financial Accounting Standard 4 (SFFAS 4), which the U.S. Mint used in developing its cost estimates. While we agree that there is no requirement for agencies to use the Cost Guide, the guide consists of best practices that can guide government managers as they assess the credibility of a cost estimate. In addition, SFFAS 4 primarily refers to fundamental elements of managerial cost accounting rather than cost analysis and estimating. In our view, the Cost Guide is the most appropriate criteria to assess the reliability of cost estimates. The Cost Guide includes best practices, from the private and public sectors, in cost estimating for capital assets. A coin is produced using capital equipment and is a physical asset. Based on all of these factors, we continue to assert that the Cost Guide is both sufficient and reasonable criteria for assessing the U.S. Mint’s cost-estimating procedures.\nIn its letter, the U.S. Mint also stated that our report should have discussed a 2012 report by CTC. We used this report to inform our assessment of the U.S. Mint’s cost-estimating process and interviewed CTC representatives. However, the U.S. Mint’s 2014 Biennial Report to Congress contained both updated cost estimates on viable metal alternatives and updated information from industry stakeholders. As a result, we obtained information on the U.S. Mint’s cost estimates from that report and reflected them in our report.\nRegarding the Act’s requirement to consider the effect on industry of any coin change, the U.S. Mint emphasized that it has analyzed the Act in its entirety, including the statutory provisions that require special considerations for the vending industry regarding any recommendations for new metal coin compositions. The U.S. Mint also stated that it will be important to provide a current analysis of the effect on industry when the U.S. Mint is ready to recommend new coinage materials to Congress because technology used by the industry is constantly changing. The U.S. Mint also provided technical comments, which we incorporated as appropriate. The U.S. Mint’s comments are reproduced in appendix III.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees and the Secretary of the Treasury. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov.\nIf you or members of your staff have questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV.",
"We addressed the following questions: (1) What is known about potential government savings from changes to the metal composition of coins? (2) What is known about potential industry costs from changes to the metal composition of coins? (3) How potential coin composition options could affect government savings and industry costs?\nTo determine what is known about the potential government savings from changes to the metal composition of circulating coins, we reviewed savings estimates reported by the U.S. Mint in its December 2012 and 2014 biennial reports to Congress, which were required by the Coin Modernization, Oversight, and Continuity Act of 2010 Act (the Act). These estimates identified savings by coin denomination (nickel, dime, and quarter) and by alternative metals (cupronickel and steel-based alternatives) when compared to fiscal year 2014 actual costs. We also reviewed the Concurrent Technologies Corporation study on alternative metals conducted under contract with the U.S. Mint. We interviewed U.S. Mint officials to understand (a) the rationale for not considering metal alternatives to the penny; (b) the purpose, data sources, methodology, and assumptions used in developing savings estimates; and (c) the process followed in developing these costs estimates. We compared the U.S. Mint’s cost-estimating process with best practices. Specifically, the GAO Cost Estimating and Assessment Guide (Cost Guide) identifies best practices that represent work across the federal government and are the basis for a high-quality, reliable cost estimate. We analyzed the extent to which the cost-estimating process used by the U.S. Mint to develop these cost and savings estimates followed the 12-step process described in cost estimating best practices—and assigned each step with a rating of not met, minimally met, partially met, substantially met, or fully met. We also held detailed discussions with U.S. Mint officials and reviewed their documentation to identify key factors that could affect the potential costs and savings such as changes in coin production or workforce and operational changes that may not have been included directly in the estimates. We shared our Cost Guide, the criteria against which we evaluated the Mint’s savings estimates, and our preliminary findings with U.S. Mint officials. When warranted, we updated our analyses based on the agency response and additional documentation provided to us. Finally, we corroborated our analyses in interviews with U.S. Mint officials responsible for developing the savings estimates. In addition, we reviewed two other reports prepared by Navigant Consulting—a global, independent consulting firm—under contract from Jarden Zinc—a material supplier to the Royal Canadian Mint. These reports contained cost-savings estimates based on (a) producing the nickel, dime, and quarter using multi-ply plated steel —the material currently used by the Royal Canadian Mint for its coin denominations—and (b) costs estimates should the U.S. Mint eliminate the penny. We interviewed the authors of these reports to better understand the purpose, scope, and methodology used in developing these estimates. We did not assess the reliability of the Navigant cost estimates using GAO best practices because this assessment was not within the scope of the review.\nTo determine what is known about potential industry costs from changes to the metal composition of coins, we reviewed all 20 industry stakeholder’s written responses that were reprinted in the December 2014 biennial report. The U.S. Mint obtained these responses through an April 10, 2014 Federal Register notice in which it solicited written responses from industry on the impacts of changing the metal composition of circulating coins. To focus our review, we selected a non- generalizable sample group of 11 industry stakeholders. See table 4. We made our selection using a variety of criteria—such as a mix of industries (manufacturing, logistics, and commerce); being specifically identified in the Act; industries that reported sizeable cost impact; the size of industry; and mix of coin denominations, among others. This resulted in three stakeholders coming from the coin-machine manufacturing industry and a raw material supplier, two from the logistics industry, and six from the commerce industry.\nWhile information from our industry stakeholders is not generalizable, the diverse perspectives of the stakeholders gave us a better understanding of the impacts to industry costs should a change in coin composition occur. We then contacted these selected stakeholders to understand the data sources, methodology, and assumptions used to develop their cost estimates. We asked these stakeholders to identify the coin denominations that are of importance to them, the type of coin acceptance machines that are used in their industries, and the circumstances that would require software and/ or hardware changes that that would need to occur to accept new coins. Finally, we asked these stakeholders to comment on potential changes to business practices that we developed. These changes were designed to reduce the conversion costs to industry. We did not, nor did the U.S. Mint, validate any industry cost estimates. Finally, we interviewed officials from the Royal Canadian Mint and the Royal Mint of the United Kingdom about their experiences in transitioning to steel-based coins.\nTo identify how potential coin composition options could affect government savings and industry costs, we reviewed the legal framework in Coin Modernization, Oversight, and Continuity Act of 2010 and the cost estimates prepared by the U.S. Mint, Navigant, and industry associations. We also interviewed industry representatives, who generally called for no changes to the quarter (and in one case, no changes to coins at all). From this work, we independently identified some options for changing coin composition. This list of options is not exhaustive. For each option we identified, we described how each option could affect government savings and industry costs.\nWe conducted this performance audit from March 2015 to December 2015, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"We developed the GAO Cost Estimating and Assessment Guide in order to establish a consistent methodology that is based on best practices and that can be used across the federal government for developing, managing, and evaluating program cost estimates. We have identified 12 steps that, followed correctly, should result in reliable and valid cost estimates that management can use for making informed decisions. We assessed the U.S. Mint’s cost estimation process using the 12 steps associated with high-quality, reliable cost estimates. Table 5 provides a summary assessment on our comparison of the estimate to best practices.",
"",
"",
"",
"In addition to the contact name above, John W. Shumann (Assistant Director), Aisha Cabrer, Tim Guinane, Dave Hooper, Jennifer Leotta, Steve Martinez, Josh Ormond, Amy Rosewarne, and Elizabeth Wood made key contributions to this report."
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"question": [
"How much money could the government save money in how they create coins?",
"How would these savings come about?",
"How would the nickel and dime change under the U.S. Mint's estimations?",
"Why is it not viable to change the quarter?",
"What potential issues have GAO found with the U.S Mint's cost-estimating process?",
"Despite these issues, how could U.S. Mint’s cost-estimating process be useful?",
"What kind of money would be needed to modify coin acceptance machines?",
"Where do these costs come from?",
"What difference is there between the vending industry's assumption of what number of machines would require modification in comparison to a 2015 industry study?",
"How does whether a machine only accept quarters change the number of machines that might need modification?",
"How would metal compositions affect government savings and industry costs?",
"What is the Coin Modernization, Oversight, and Continuity Act of 2010 do?",
"What do U.S. Mint officials need to consider when making recommendations to Congress?",
"How has the U.S Mint or Treasury been working with Congress?",
"How have changes in metal prices since 2006 affected the costs of creating coins?",
"What was the U.S Mint directed to do by statute?",
"What authority does the Treasury have over coin changes?",
"What about coins does this report examine?",
"What did GAO review about the U.S. Mint?",
"Why did GAO interview U.S. Mint officials?"
],
"summary": [
"The U.S. Mint estimated that the government could potentially save between $8 million and $39 million per year by changing the metal composition of the nickel, dime, and quarter.",
"The estimated savings of $8 million would come from slightly changing the current metal in coins, which would decrease metal costs and retain the characteristics of existing coins.",
"The savings of $39 million would come from changing the nickel and dime to a plated steel coin, which would change the coin's weight and other characteristics.",
"While the U.S. Mint previously estimated potential savings of $83 million per year by changing the nickel, dime, and quarter to a plated steel-based coin, the U.S. Mint determined that it was not viable to change the quarter because less-valuable foreign coins would have similar characteristics to a steel quarter and could be used as counterfeit quarters.",
"GAO found that the U.S. Mint's cost-estimating process does not fully align with best practices outlined in the GAO Cost Estimating and Assessment Guide ( Cost Guide ) and as such may not result in precise estimates. For example, U.S. Mint officials discussed but did not conduct a sensitivity analysis—a best practice— that would have allowed them to know how savings estimates could be affected by changes in metal prices.",
"However, the U.S. Mint's estimates can provide insight into the general magnitude of potential savings.",
"Associations representing selected industries that use coin acceptance machines estimated a cost impact ranging from $2.4 billion to $10 billion to modify an estimated 22-million coin machines, such as vending machines, to accommodate steel-based coins.",
"According to these associations, these costs would be incurred because coin machines would require modifications to accept new coins while continuing to accept current coins.",
"For example, the vending industry assumed 7-million vending machines would require modification, but a 2015 industry study estimated that there are 4.5-million vending machines in the United States.",
"Therefore, machines that only accept quarters (such as coin laundry machines) would not require modification.",
"Although government savings and industry cost estimates may not be precise indicators of savings and costs, they nonetheless show that metal compositions that would increase government savings also increase industry costs. U.S. Mint estimates show that one change could result in no industry costs but show a savings of only $8 million annually.",
"The Coin Modernization, Oversight, and Continuity Act of 2010 requires that any new coins work in existing machines that accept coins “to the greatest extent practicable.”",
"The Coin Modernization, Oversight, and Continuity Act of 2010 requires that any new coins work in existing machines that accept coins “to the greatest extent practicable.” U.S. Mint officials have not yet analyzed whether the options they are considering meet these criteria for making recommendations to Congress.",
"U.S. Mint officials said when and if the Department of the Treasury (Treasury) makes recommendations to Congress, they will ensure that recommendations are within the framework of the Act.",
"Since 2006, metal prices have risen to where the unit costs of a penny and nickel exceed their face value.",
"The U.S. Mint was directed by statute to develop and evaluate the use of new metals that would reduce the costs of coin production while minimizing the impact on coin accepting equipment.",
"Treasury is authorized to recommend coin changes to Congress based on the U.S. Mint's analysis and has not yet done so. GAO was asked to examine the U.S. Mint's efforts.",
"This report examines (1) what is known about potential government savings from changes to the metal composition of coins; (2) what is known about potential industry costs from changes to the metal composition of coins; and (3) how potential coin composition options could affect government savings and industry costs.",
"GAO reviewed legislative provisions and U.S. Mint estimates of government savings; compared the U.S. Mint's estimating process to best practices; and reviewed cost estimates from associations that represent selected businesses that submitted estimates to the U.S. Mint, such as the vending and laundry industries.",
"GAO interviewed U.S. Mint officials and industry representatives to understand how their estimates were developed."
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CRS_R40990
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{
"title": [
"",
"Allowances and Emissions Reductions from REDD",
"REDD Allowance Provisions in the Bills",
"Administering Agency",
"Eligibility",
"Types of Activities",
"Implementation Standards",
"Indigenous Peoples and Forest-Dependent Communities",
"Reporting and Monitoring",
"Potential Issues Affecting the Effectiveness of Allowances in Both Bills",
"Implementation Capacity",
"Oversight and Enforcement of REDD",
"\"Permanence\" of GHG Reductions",
"International REDD Offsets",
"REDD Offset Provisions in the Bills",
"Quantity of International Offsets Allowed",
"Guidelines for REDD Offsets",
"Types of Activities Authorized",
"State or Province Level Activities",
"Project and Program Level Activities",
"Indigenous Peoples and Forest-Dependent Communities",
"Potential Issues Affecting REDD Offsets in Both Bills",
"Allowance Reserve Auction",
"Conclusion"
],
"paragraphs": [
"Efforts to mitigate climate change have focused on reducing carbon dioxide (CO 2 ) emissions into the atmosphere. Some of these efforts focus on reducing deforestation, since deforestation is a significant source of CO 2 emissions. Deforestation releases about 1.6 GtCO 2 (gigatons or billion metric tons of CO 2 ) annually, about 17% of all annual anthropogenic greenhouse gas (GHG) emissions. Thus, discussions and negotiations on international climate change mitigation policies, such as in Congress and at the 15 th Conference of the Parties to the U.N. Framework Convention on Climate Change (UNFCCC) in Copenhagen in December 2009, typically include reducing emissions from deforestation and forest degradation (REDD).\nThe two primary climate change bills in the 111 th Congress, S. 1733 and H.R. 2454 , include REDD activities as part of a strategy to reduce GHG emissions. Both S. 1733 and H.R. 2454 seek to reduce U.S. GHG emissions, among other things. Both would establish \"cap-and-trade\" systems, where emissions from many economic sectors (accounting for about 85% of U.S. GHG emissions) are capped, with the emissions cap declining over time.\nThe cap would establish the total quantity of annual allowances. Capped, or covered, entities would be required to acquire allowances to fulfill their compliance obligations. Congress may choose to distribute emission allowances at no cost to capped (or covered) sources or to non-capped entities, or to sell the allowances through auctions. Because allowances to non-covered entities can be sold by the recipients to covered entities, they effectively provide funding to the recipients, generally called allowance value. In both bills, many allowances would be allocated to various entities at no cost; others (especially from the reserves) would be auctioned by the government to covered entities. Both bills would allocate 5% of the allowances to finance REDD activities in developing countries (although the bases for allocating allowances differ); the funding that this would generate depends on the market value of those allowances.\nOffsets are GHG emissions reductions by a non-covered entity (including other countries) that can be purchased by covered entities and used to meet their compliance obligations under the emissions cap. REDD activities could be a major source of offsets, because deforestation in tropical countries is a major source of emissions. Both bills would authorize international offsets from REDD activities in developing countries, within limits.\nIn addition to allocated allowances and offsets, both bills would establish allowance reserves. The primary purpose of the reserves is for allowance sales to stabilize market prices for allowances. If carbon prices are too high or rise too quickly, reserve allowances could be sold, expanding supply and moderating prices. The proceeds from reserve allowance sales could (under S. 1733 ) or must (under H.R. 2454 ) be used for additional REDD activities, thus providing a third source of funding to reduce deforestation.\nAdvocates support REDD activities to reduce GHG emissions because it will not require new technology, and thus can be implemented quickly, providing time for longer-term solutions that involve the energy sector. Further, some contend that reducing deforestation is a low-cost strategy to reduce GHG emissions. The U.S. Environmental Protection Agency (EPA) estimated that the opportunity for U.S. firms to get credits from international offsets reduces the permit price by 89% under one climate bill, and that nearly 60% of the international offsets will come from REDD activities.\nCritics object to relying heavily on REDD for GHG reductions. They are concerned that flooding carbon markets with REDD offsets will detract from other critical GHG-reducing activities, such as developing and implementing new technologies to lower emissions. Other concerns are that REDD projects might not be sustainable in developing countries for long periods of time and that use of REDD in developing countries may inhibit both developed and developing countries from reducing their own emissions.\nThis report summarizes, compares, and analyzes provisions related to international REDD in H.R. 2454 (as passed the House) and S. 1733 (the revised Chair's mark of 10/30/09). This includes a discussion of major differences between bills and potential issues associated with selected provisions. Three aspects of the bills address international REDD activities: (1) allowances for capacity-building and emissions reductions; (2) international REDD offsets; and (3) allowance reserves.",
"S. 1733 and H.R. 2454 both would allocate 5% of allowances for REDD activities in developing countries. The aim under both bills is to use the allowance value to reduce deforestation in developing countries. The allowance value could be used in two ways: (1) to build capacity (e.g., develop a deforestation baseline and acquire monitoring technology) for countries to reduce deforestation and to participate in markets for international offset credits, and (2) to directly reduce deforestation emissions and supplement emissions reductions from non-REDD activities.\nSupplemental emissions reductions from REDD activities are expected to help the United States reach emission reduction goals, particularly in the first 10-15 years of the program. Under both bills, supplemental emissions reductions from REDD activities are expected to reduce GHG emissions in developing countries by at least 720 million tons of CO 2 in 2020 (a one-year target quantity for 2020), and a cumulative quantity of 6 GtCO 2 by 2025. This is in addition to the U.S. emissions reductions targets from covered sources that the bills aim to achieve by 2020, which could be achieved in part through international offsets including REDD activities. (See below.)\nSome contend that the supplemental emission reduction targets in both bills might be unrealistic, due to the lack of readiness and unwillingness of some developing countries to participate in the program. They argue that, in the early years of the program, funds from allowances might have to flow largely to capacity-building activities rather than emission-reducing activities, thus delaying progress toward the emission reduction targets. Supporters counter that an abundance of emission reduction opportunities are ready to be funded, and that sub-national or program-level projects are the first steps toward reducing emissions. H.R. 2454 (§754(b)) would allow sub-national deforestation activities and pilot programs that aim to reduce GHG emissions; S. 1733 does not specify that these activities would be allowed under this program, although the regulations required by S. 1733 could include them.",
"The bills contain several conditions on the use of allowance values for implementing REDD to build capacity and reduce emissions in developing countries. The bills differ in (1) which agency is assigned to administer REDD provisions; (2) the conditions placed on developing countries eligible for capacity building and supplemental emissions reductions; and (3) the types of activities, the implementation standards, and the monitoring and reporting requirements. In general, and as discussed below, H.R. 2454 contains more explicit requirements for REDD allowances than does S. 1733 . The more explicit requirements and conditions under H.R. 2454 might take several years for countries and projects to qualify, and suggest that S. 1733 could potentially be implemented in less time. However, this likely depends on the time needed to promulgate regulations under S. 1733 as well as the nature of the requirements and conditions in those regulations.",
"Different agencies would administer this program under each bill. Under H.R. 2454 (§2(1)), the Administrator of EPA would be authorized to administer the REDD activities funded through allowance values. Under S. 1733 (§751(1)), the Administrator of the U.S. Agency of International Development (USAID) would be authorized to administer the REDD activities. Under each bill, the authorized administrator would be directed to consult with relevant or appropriate federal agency heads to establish a program to use emission allowances for REDD activities.\nThese agencies have different missions and histories that would likely affect their implementation of REDD activities. EPA's mission includes enforcing domestic compliance with various environmental regulatory provisions, including air and water pollution control and solid waste disposal. EPA has experience in measuring and monitoring emissions and in enforcing pollution reduction programs. EPA is a larger organization than USAID, with an annual budget of about $10 billion.\nIn contrast, USAID was created to administer international economic and humanitarian assistance programs; international environmental programs were added later to the agency's mission. USAID currently administers foreign assistance projects, including forestry and forest protection projects, in many countries. USAID has experience in overseeing environmental and economic programs in developing countries. USAID is a smaller organization then EPA, with an annual budget of about $1 billion, although it administers more than $20 billion in annual foreign assistance funding.",
"Developing countries would be eligible for funding under this program in both bills. S. 1733 does not specify eligibility factors for developing countries; instead it would direct USAID to develop a program within two years to reduce GHG through REDD activities in developing countries. This would provide some flexibility for USAID to develop criteria for including and prioritizing countries that can participate in the program.\nH.R. 2454 includes a set of eligibility criteria for developing countries to participate in the supplemental emission reduction program. EPA, in consultation with USAID, would be required to determine that the developing country is experiencing deforestation or forest degradation, or has standing forests that might be at risk of deforestation or degradation. In addition, the country must have entered into a bilateral or multilateral agreement with the United States establishing conditions for its participation in the program. S. 1733 contains similar requirements for carbon offsets, but not for supplemental emissions reductions.\nNeither bill defines what constitutes a forest, making it difficult to understand the type, location, and extent of forested land that might be eligible for REDD activities. S. 1733 does define deforestation and forest degradation, but without a definition of forest or forested land, the implications of these definitions are uncertain. There are several published definitions of a forest, usually reflecting the concerns or interests of various entities. Definitions commonly define the percent tree (canopy) cover in a forest or some minimum level of tree or woody biomass growth.\nIn both bills, emissions reduction activities funded under this section would not be eligible for international offset credits. The intent might be to prevent funding the same project twice, once from allowances and a second time as an offset. However, REDD activities funded by allowances could later become offsets. Indeed, both bills phase out supplemental emissions reductions, transitioning from REDD activities funded from supplemental emission reductions into offset generating activities. By providing the opportunity to later qualify for offsets, projects with initial investments from this program might have a greater incentive to remain intact, or to extend their permanence.",
"The types of REDD activities that can be funded with allowances are defined in H.R. 2454 , but not in S. 1733 . H.R. 2454 specifies authorized activities, such as reducing national and sub-national deforestation; capacity-building to measure, monitor, and verify deforestation, leakage prevention, forest governance, and enforcement; and reducing illegal logging. H.R. 2454 further specifies that activities for reducing emissions from forest degradation also can qualify; S. 1733 does not specify this activity.",
"H.R. 2454 defines mechanisms for providing allowances to address REDD in developing countries; S. 1733 does not. Under H.R. 2454 , EPA would be authorized to distribute emission allowances to: (1) a country; (2) a public or private group; or to (3) an international fund established by an international agreement to which the United States is a party. For its REDD activities under H.R. 2454 , the Administrator of USAID has discretion over how to distribute allowances. H.R. 2454 further states that, if support is given to an international organization, the agency responsible for selecting the activities is to ensure that mechanisms to enforce the requirements of the program are established. Under H.R. 2454 , it is unclear if public or private groups must be affiliated with the country where the project is to occur to receive support.\nIntruding upon national sovereignty can be an issue associated with some U.S. overseas development assistance programs, if the assistance is used for land acquisition or protection decisions. For example, national sovereignty became an issue in Bolivia in 1987 when a conservation organization was reported to have obtained title to forested lands; there was a public outcry and ensuing political crisis when the Bolivian people thought a large part of their country had been given to a foreign organization. It is unclear if REDD allowances could be used to purchase lands or property in the country (e.g., forest preserves).\nH.R. 2454 would establish a set of standards for implementing REDD activities for supplemental emissions reductions. These include:\nDevelopment of a national deforestation baseline for each participating country that is consistent with national mitigation commitments or actions toward deforestation; that establishes a trajectory to achieve zero net deforestation no later than 20 years after it is created; and that is adjusted over time to take into account changing national circumstances; Verification that supplemental emissions are achieved prior to compensation; Use of a discount factor to account for uncertainty in the measuring and monitoring techniques for sub-national REDD activities; and Assurance that activities have collateral benefits, such as being designed with widely accepted forest management practices, improving biodiversity, being implemented with the participation of indigenous and local people, and equitably sharing profits with indigenous and local people.\nS. 1733 does not specify such standards.",
"Significant sums are likely to flow to developing countries under this program, but their distribution might not include the indigenous and local communities that depend on forests and their resources. Some contend that REDD activities could force native people off their land, increase corruption, and create incentives to deny land rights to local populations. H.R. 2454 addresses this issue by involving local and indigenous people in the implementation process and ensuring safeguards for human rights.\nH.R. 2454 also would require EPA to ensure that safeguards are established and enforced to protect the rights of indigenous and local communities and to promote consultation and equitable sharing of benefits. S. 1733 does not contain provisions stating similar criteria for implementing REDD activities for this program. However, both bills contain provisions authorizing international offsets related to REDD (see below) with several references to protecting the rights of local and indigenous populations, as well as equitably sharing benefits.",
"H.R. 2454 has several provisions on reporting and monitoring REDD activities under this program; S. 1733 does not. H.R. 2454 would require an annual report from EPA and USAID to the House Committees on Energy and Commerce and on Foreign Affairs and the Senate Committees on Environment and Public Works and on Foreign Relations, beginning on January 1, 2014. The report is to include the amount of supplemental emissions reductions funded by emission allowances, the distribution of allowances to each recipient, a description of the REDD activities implemented, and a description of what was accomplished through each of the activities. Every four years thereafter, a review of the activities implemented under this program is to be provided. This review is to include the effects of the REDD activities on carbon stocks in the country that received support under this program, number of countries that can participate in offset markets, and factors that address indigenous rights, biodiversity, and leakage. S. 1733 does not specify requirements for reports, but does not preclude them from being included in the regulations to be promulgated by USAID.",
"There are some potential issues that could affect the supplemental emission reduction program in both bills, including lack of implementation capacity in developing countries, oversight of REDD activities and enforcement of rules, and permanence of GHG emissions reductions.",
"Several developing countries which are expected to qualify for REDD activities for supplemental emissions reduction do not currently have the capacity to implement REDD activities within the conditions under H.R. 2454 ; S. 1733 does not contain comparable conditions or requirements for supplemental emissions allowances, but USAID could include similar provisions in regulation. Developing this capacity could delay the distribution of emissions allowances under this program. The United Nations REDD Programme (UNREDD) is assisting countries to implement REDD activities and has 33 participating countries. Few countries have submitted progress reports and implemented REDD-ready activities (e.g., developing a national baseline and monitoring strategies). H.R. 2454 further requires countries to enter into a bilateral or multilateral agreement establishing the condition of its participation, further delaying implementation, depending on the conditions of the agreement. Before distribution of emission allowances, concurrence from the Secretary of State is required. It is unclear if the Secretary of State will be evaluating countries based on political criteria, similar to other programs such as debt-for-nature swaps under the Tropical Forest Conservation Act (TFCA, P.L. 105-214 ; 22 U.S.C. §2431). For activities that generate supplemental emissions reductions, compensation from allowances will be granted only after the emissions have been achieved and verified. This would require funding from the developing country to implement the activity, and implies that the country has a national deforestation baseline and the capacity to measure and monitor GHG emissions reductions. Attaining all of these conditions in a developing country could take time and resources. Indeed, some might opt for creating offset credits to trade in international carbon markets with their projects rather than accepting allowance funds for emissions reductions.",
"This program is intended to provide significant amounts of funding to developing countries to conduct REDD activities with little leverage for ensuring activities are implemented, monitored, and enforced. Monitoring foreign assistance activities is difficult because the United States has no jurisdiction to enforce laws and policies in foreign countries. Neither bill directly addresses enforcement of activities in countries receiving allowances under this program or discusses potential consequences if guidelines are not met. This issue could be addressed, in part, through reporting and monitoring. H.R. 2454 does contain requirements for reporting and reviewing REDD activities under this program. For example, in §754(f), H.R. 2454 would authorize a publicly accessible registry of supplemental emissions reductions achieved through this program annually, and §755 would require an annual report on the quantity of supplemental emissions reductions and description of the REDD activities implemented and allowances distributed. S. 1733 and H.R. 2454 (§731(d) of both bills) also would require a scientific review of offsets and supplemental emissions reductions activities at five-year intervals. This review could analyze scientific and technical information on offsets and supplemental emission reduction activities (e.g., project monitoring, audits, evaluation of net emissions of offset projects) and recommend changes in protocols or to the overall offset program.\nNeither bill discusses any penalties or consequences for not following guidelines or maintaining the integrity of projects that are supported through allowances in this program. (There are provisions that discuss penalties for offset reversals.) Nor do the bills establish an environmental justice mechanism where disputes or claims can be heard, discussed or settled. Some U.S. environmental initiatives that provide international development assistance related to the environment have approached enforcement and oversight in different ways. For example, under the TFCA, a fund that provides grants to local non-governmental organizations is overseen by an independent board. The U.S. government, the government of the beneficiary country, and individuals who represent a broad range of environmental, academic, and scientific organizations in the beneficiary country may each appoint one or two representatives.\nAnother example of existing oversight structures is the dispute resolution entity in the U.S.-Peru Trade Promotion Agreement (TPA). The TPA requires that both Parties adopt laws and measures to fulfill each Party's obligations under multilateral environmental agreements, such as Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Further, the TPA requires the Parties to enforce their own environmental laws and establishes a policy mechanism to address public complaints that a Party is not effectively enforcing its environmental laws, whether or not the failure is trade related. Complaints may be filed by individuals and organizations of each Party to the agreement and would be addressed according to a set of procedures outlined in the TPA.",
"Ensuring the permanence of GHG emissions reductions through REDD activities is a significant issue. Ensuring permanence for GHG reductions in developing countries could be difficult due to changes in the economic viability of REDD activities, inaccurate or misleading monitoring for compliance, and inconsistent government support for REDD. Permanence of reductions could be supported by sustained funding incentives. Still, supporters argue that, even if permanence of reductions cannot be guaranteed, REDD activities are still useful. They contend that capturing carbon in forests may be the only way to reduce carbon emissions significantly in the short term, until a technological solution emerges. Further, they contend that some REDD activities might have long-term consequences, such as the need to implement new forest governance systems and facilitate sustainable forestry management activities. For activities under supplemental emissions reductions, neither bill discusses permanence of GHG reductions; however, both contain monitoring and reporting requirements that might uncover changes in the carbon emissions reductions from REDD projects.",
"International offsets are a mechanism for covered entities to \"offset\" their emissions by purchasing credits for activities that reduce GHG emissions elsewhere, including in foreign countries. REDD activities are one category of international offsets under both bills.",
"The bills include several conditions and requirements for the use of offsets from REDD activities in other countries. The bills differ on the amount of international offsets that can be purchased by a covered entity, on the guidelines for REDD offsets, on the types of activities that can qualify, and on the transparency of the treatment of indigenous people and local communities. In addition, while offsets are generally established at the national level, both bills allow offsets at the sub-national or regional level as well as project-specific offsets, under prescribed conditions.",
"Each bill limits the amount of offsets that can come from international activities, including the offsets from REDD activities that are expected to provide a majority of the international offsets. Overall, both H.R. 2454 and S. 1733 limit total (domestic and international) offsets at 2 GtCO 2 annually. Each bill, however, has a different limit on the number of international offsets that can be generated. Under H.R. 2454 , not more than one-half of all offsets (i.e., 1 GtCO 2 ) can come from international offset credits. Under S. 1733 , not more than one-quarter of offsets (i.e., 0.5 GtCO 2 ) can come from international offset credits. Both bills specify conditions under which these limits can be modified. Specifically, if the estimated use of domestic offsets are expected to be below 0.9 GtCO 2 annually, limits on the use of international offsets can be modified. Under H.R. 2454 , the ceiling on international offset credits can be increased by the amount that the estimated domestic offset usage falls below 1 GtCO 2 , up to an additional 0.5 GtCO 2 . For example, if the domestic offset usage is 0.9 billion tons, the international offset credits could be 1.1 GtCO 2 (1 GtCO 2 allowed domestic offsets – 0.9 GtCO 2 estimated domestic offsets = 0.1 GtCO 2 additional international offsets). Therefore under H.R. 2454 , the potential for international offset credits is 1.5 billion tons annually. Under S. 1733 , potential additional international offset credits is determined the same way, but limited to an additional 0.75 GtCO 2 of international offset credits. This has the potential to generate up to 1.25 GtCO 2 of international offsets annually under S. 1733 , 0.25 GtCO 2 less than under H.R. 2454 .",
"Both bills would require countries to meet certain eligibility standards to establish salable international offsets. The requirements include 1) there is bilateral or multilateral agreement between the United States and the host country; 2) the country is a developing country; and 3) the agreement between the United States and the host country ensures that requirements are met and offset credits are distributed appropriately. S. 1733 contains an additional provision requiring that the offset projects be subject to civil and regulatory actions in U.S. federal courts.\nIn both bills, the quantity of international REDD offset credits a country can establish would be determined by comparing deforestation emissions after the REDD action to an already-established baseline of emissions from deforestation. In both bills, credits would be issued after the emissions reductions have been realized and measured; no credits could be given in anticipation of emissions reductions. Funding for projects to create REDD-based offsets would have to be provided upfront, before the reductions have occurred and offsets have been sold.\nBoth bills contain several additional requirements for offsets, including having a land or forest sector strategic plan in place. The requirements for the plan are more extensive in S. 1733 than in H.R. 2454 , but several criteria are the same. Similar criteria include an assessment of drivers of deforestation; an estimate of the country's emissions from deforestation and forest degradation; identification of improvements in data collection, monitoring, and institutional capacity to implement a deforestation reduction program; and a strategy for transitioning to low-emissions development from forest and land use activities. S. 1733 contains additional provisions that address transparency (who receives the benefits), local and indigenous people's participation, and monitoring, among other things. Most aspects of land use plans in both bills would fall under the jurisdiction of the host country and be subject to its laws. It is uncertain if meeting these criteria would be required to participate in an offset program, or if they are guidelines for implementation.\nThe bills use parallel characteristics for the required deforestation baseline. Baseline calculations are to be national in scope; consistent with mitigation commitments; consider the deforestation rates from at least five years in the past; establish a trajectory that would result in zero net deforestation within 20 years, adjusted over time to take into account changing national circumstances; designed to account for significant sources of GHG emissions in the country; and consistent with the baseline established for supplemental emissions reductions. Neither bill clarifies what type of changing circumstances would warrant a change in the national deforestation baseline. A possible example might be improved technology for measuring emissions that shows a significant difference from previous measurements or a natural disaster that alters forest cover. Any change in the baseline could be significant, since it would affect the quantity of offset credits a country could sell.",
"For international offsets associated with REDD, three categories of activities would qualify in both bills: (1) national level activities under developing countries that meet eligibility requirements; (2) state or province level activities within developing countries that meet certain requirements; and (3) program and project level activities in a developing country that is responsible for less than 1% of global GHG emissions, and less than 3% of global forest-sector and land use change emissions. State or province level activities and program and project level activities have distinct provisions that are discussed below.\nActual REDD activities eligible for international offsets are not listed in either bill, and are left to the discretion of the President under S. 1733 and of the EPA Administrator under H.R. 2454 . Some project types to be considered for the initial list under S. 1733 include projects involving afforestation or reforestation of acreage not forested as of January 1, 2009; forest management resulting in an increase of forest carbon stores; reductions in GHG emissions from restoring forests; and changes in carbon stocks attributable to land use change and forestry activity (e.g., reduced deforestation and agroforestry). Both bills also would allow EPA to expand the scope of REDD activities that could receive offsets to include reductions in forest degradation and losses in soil carbon associated with forested wetlands or peatlands.",
"In both bills, state- or province-level REDD activities could qualify for offsets if the national government is not ready, willing, or able to participate. The national government must demonstrate an effort to transition to a national program with a strategic land use plan. Eligibility requirements for these activities vary between the bills, although both would require that eligible states or provinces follow guidelines for REDD offsets set under national level emissions. Under S. 1733 , eligible states or provinces must be affected by deforestation activities and have the technical and institutional capacity to implement REDD. H.R. 2454 emphasizes that the state or province must be a major emitter of GHG from tropical deforestation, on a scale commensurate to the emissions of other countries, but does not include capacity requirements.\nBoth bills would require the creation of a state or province level baseline of carbon emissions from deforestation and would direct that offsets be issued based on the difference between the baseline and the emissions reductions for the state or province. Further, both bills have a phase-out provision prohibiting offset credits for state and province level activities after five years.",
"Project and program level activities that generate REDD offsets are also authorized in both bills. These activities are intended to give projects and programs within a developing country an opportunity to generate offsets for a limited period of time, while the host country is developing a national plan.\nBoth bills would authorize EPA to create a list of eligible countries for offsets from project or program level activities. REDD project credits could only occur in countries that account for less than 1% of global GHG emissions and less than 3% of global forest sector emissions. In terms of global forest sector emissions, large emitting countries such as Brazil and Indonesia (among others) would not be eligible under the bills. It appears that project and program level REDD activities would not preclude state and provincial level REDD activities, and that activities at different scales could potentially be done concurrently. Eligible countries for these activities also must be making progress towards implementing a national level plan under both bills. S. 1733 also would require that countries make efforts to develop a monitoring program to assess leakage, and a land use plan that identifies intact, primary, and managed forest areas. It appears that these sections are intended to require countries to make progress towards implementing a national level REDD program. However, this section allows international REDD offsets at the project or program level for countries not interested in a national level program. Brazil, for example, has expressed hesitancy at implementing a national offset program, but its states could sell REDD offsets under this program.\nBoth bills would phase out the project or program level activities after a certain period. Under S. 1733 , project and program level offsets would be phased out after eight years; under H.R. 2454 , they would be phased out in five years. Both bills would allow for an extension of project and program offsets if certain criteria are met, such as if the country is among the least developed among developing countries according to the United Nations. Under S. 1733 , the extension could be for up to five years; under H.R. 2454 , the extension could be up to eight years. Extensions could allow the program to last up to 13 years in both bills.\nWithout proper monitoring and protections, sub-national and project or program activities could cause \"leakage\" to neighboring areas within the host country or to neighboring countries. For this reason, some contend that all REDD activities should be measured against a national baseline, rather than one developed for an individual project or state. Measuring at the national level might also reduce concerns about permanence of GHG emissions reductions at the project level, since GHG emissions reductions would be aggregated among projects.",
"Addressing the rights of indigenous and local people is a recurring theme throughout both bills. Some are concerned that funds from REDD offsets will be disproportionately given to wealthier landowners who have large holdings, access to funds, and a secure title to their land. Rural and poor landowners might not benefit from REDD activities and could be at a disadvantage in some cases. For example, REDD might lead to conflicts in efforts to secure title, and therefore would likely favor those with more resources. Furthermore, a majority of land in developing countries is owned by the government, thus putting local people at risk of displacement. REDD activities could also depress local economies by taking away land used to produce agricultural commodities and wood and other forest products and by eliminating the associated infrastructure.\nUnder the offset program, both bills would direct EPA to ensure the establishment and enforcement of legal regimes, processes, standards, and safeguards that (1) give due regard to the rights and interests of local communities, indigenous peoples, forest-dependent communities, and vulnerable social groups; (2) promote consultations with, and full participation of, forest-dependent communities and indigenous peoples during the design, planning, implementation, and monitoring and evaluation of activities; and (3) encourage equitable sharing of profits and benefits derived from international offset credits with local communities, indigenous peoples, and forest-dependent communities. Ensuring that these provisions are adhered to in foreign countries could be challenging. One approach could be establishing a dispute resolution mechanism in the offset agreement with the host country. This would allow a third-party to oversee disputes related to offsets and their implementation. The decision-making authority of this entity could be specified in the agreement as well. This type of policy mechanism has been used in some free trade agreements, such as the North American Free Trade Agreement and more recently in the Central American Free Trade Agreement.",
"There are numerous concerns about REDD offsets. These concerns include verifiability (measuring, monitoring, and reporting), additionality, leakage, and permanence. Other concerns relate to REDD projects more specifically, and are similar to the concerns about REDD allowance implementation, discussed above.\nSome developing countries may not have the capacity to address concerns about REDD offsets—particularly the ability to enforce laws and land tenure (ownership), to prevent illegal logging and other activities, and to measure and monitor forest carbon levels. While the REDD allowances described above can be used to build capacity, allowance funding might be focused on achieving the supplemental emissions reductions, and not provide sufficient funding to build governance capacity in developing countries to allow them to participate in the REDD offset markets.\nA related concern, discussed briefly above, is the transition in developing countries from the REDD supplemental emissions reductions program to the REDD offset markets. While the bills clearly anticipate this transition, with the phase-out of supplemental emissions reductions, the pathway for the transition is not clear. In addition, the bills phase-out the project/ program and regional/state REDD offsets, with a transition to national REDD offsets, but the pathway for this transition is also unclear. In particular, it is unclear how near-term failures (e.g., carbon emissions from wildfires) in the supplemental program and in project or state REDD offsets might affect the national deforestation baseline and other criteria necessary for a national REDD offsets.\nAnother issue is the long-term participation of developing countries in global efforts to reduce GHG emissions. If developing countries participate actively in the REDD offset market, it might prevent those countries from using REDD to offset emissions from domestic development. This might prevent economic growth and continue the impoverished state of many developing countries.\nFinally, host nations might act strategically, establishing a national deforestation baseline to create the most favorable conditions or maximum opportunities for REDD offsets. Entities that develop offsets (e.g., offset aggregators) have similar incentives to minimize pre-existing carbon baselines so as to maximize the carbon sequestration that can be sold. However, where offset projects will likely require independent, third-party verification of carbon changes from the baseline conditions, there is no comparable independent review of the national deforestation baselines for REDD offsets. Because of the bilateral or multi-lateral agreements needed for REDD offsets, the baselines might be determined, or at least influenced by political considerations, rather than objective standards, raising questions about the reality of additional carbon sequestration from REDD activities.",
"A third source of money for REDD activities might come from the expenditure of proceeds from the auction of allowances in a strategic reserve. Under both bills, a portion of the allowances would be deposited in a strategic reserve ( H.R. 2454 ) or market stability reserve ( S. 1733 ). The purpose of the reserve is to provide a supply of allowances that can be auctioned off to stabilize prices if allowance markets become highly volatile. Reserve allowances would be auctioned separately from quarterly auctions of other allowances.\nUnder H.R. 2454 , EPA would use the proceeds from each strategic reserve auction to purchase international offsets from REDD activities. These offsets would be converted back into emissions allowances (with 1.25 offsets needed for each 1 allowance) and placed in the strategic reserve account to refill the reserve to its size before the auction. Once the reserve is replenished, additional allowances from international offsets (to some extent) would be allocated and auctioned as part of the normal allowance auction in a future year. For each of the first five years, EPA may auction up to 5% of the emissions allowances established for each year. The percentage increases incrementally during each five years.\nUnder S. 1733 , the expenditure of proceeds from the Market Stability Reserve (similar in function to the Strategic Reserve under H.R. 2454 ) could be used to purchase either domestic or international offset credits. This could enhance the domestic offset credit sector, since domestic offsets are expected to be available sooner than international offsets. Further, S. 1733 would not limit purchases to international REDD offsets, and therefore other types of international offsets could presumably be purchased. When the offsets are converted back into emissions allowances, it would be at a one-to-one ratio under S. 1733 .\nThe Strategic Reserve under H.R. 2454 and the Market Stability Reserve under S. 1733 have the potential to generate large sums of funds for REDD offsets. This potential depends on the price of offsets in the market and how that compares to the price of reserves. REDD activities would likely benefit more under H.R. 2454 since proceeds can only be used to purchase international REDD offsets.",
"Deforestation is a significant source of global CO 2 emissions. The two primary climate change bills, H.R. 2454 and S. 1733 , generally include similar processes to reduce emissions from deforestation and forest degradation (REDD). Both would use allowances for capacity building in developing countries and for supplemental emissions reductions. Both would allow international REDD offsets for covered entities in the United States. Both contain a reserve to stabilize carbon offset prices and possibly supplement REDD efforts. H.R. 2454 generally contains more details on the implementation of these programs; S. 1733 leaves more of the details to be determined in regulation. H.R. 2454 would use the U.S. Environmental Protection Agency as the primary federal administrator of these REDD-related programs; S. 1733 would rely substantially on the U.S. Agency for International Development for implementation.\nAllowances for REDD activities could include both capacity building and supplemental emissions reductions. The pending legislation provides significant details on the supplemental emissions reductions, although \"forest\" is undefined and concerns about the effectiveness of implementation for supplemental reductions will persist until countries can demonstrate their capacity. The bills do not identify how to balance funding between supplemental emissions reduction and capacity building, although developing country capacity for implementing REDD is critical to both the supplemental reductions and REDD offsets. Furthermore, the activities included in \"capacity building\" are ill-defined.\nCarbon offsets from REDD activities offer a substantial opportunity to reduce global CO 2 emissions. However, concerns persist about offsets generally and about REDD offsets in particular. Many developing countries do not have the ability (personnel and equipment) to verify (to measure, monitor, and report on) avoided deforestation, and may have difficulty acquiring or developing the ability. Because of existing forest protection programs, many question whether REDD activities would merely substitute for efforts that a country would undertake anyway. Furthermore, avoiding deforestation in one location may merely displace it to another location (leakage). Many also question the capacity of developing countries to provide permanence in avoided deforestation. In addition, the bills allow for project level or state level REDD activities, with a transition to national programs, but the process for making the transition is largely undefined. Many also question whether REDD offsets in developing countries might undermine global efforts to get all nations to participate in reducing GHG emissions and might inhibit those countries from developing low-carbon economies."
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"question": [
"What effect has deforestation had on the amount of anthropogenic greenhouse gas emissions?",
"What is REDD?",
"What do H.R. 2454 and S. 1733 address?",
"How would the two bills differ?",
"What similarity is there between the bills?",
"What kinds of criteria and standards does H.R. 2454 focus on?",
"How would S. 1733 get these details?",
"How do the bills affect international offsets?",
"What kind of guidelines are addressed in these bills?",
"What about REDD activities and offsets need to be clarified by the guidelines in these bills?",
"How do these bills take into account indigenous people and forest-dependent communities?",
"What are some things H.R. 2454 lacks clarity on?",
"What clarity do the bills lack regarding funding and funded activities?",
"Why might it be worth considering adding penalties or consequences to legislation regarding reductions in carbon release?",
"What issues are typically there for carbon offsets?",
"Why are these issues exacerbated for REDD offsets?",
"What concern is there about REDD offsets inhibiting developing countries?"
],
"summary": [
"Deforestation releases substantial amounts of carbon dioxide, about 17% of all anthropogenic greenhouse gas (GHG) emissions.",
"The two primary bills, H.R. 2454 and S. 1733, include provisions that would reduce emissions from deforestation and forest degradation; these activities are referred to as REDD.",
"Both bills would use allowances to build capacity in developing countries and supplement U.S. emissions reductions; both would allow offsets for U.S. industries; and both contain a reserve to stabilize carbon prices.",
"H.R. 2454 would rely on the U.S. Environmental Protection Agency for implementation; S. 1733 would use the U.S. Agency for International Development.",
"The bills are generally similar on allowances for REDD activities, but significant differences exist.",
"H.R. 2454 contains eligibility criteria and implementation standards for the supplemental emissions reductions, and identifies the types of activities that could be funded.",
"S. 1733 would rely on federal agencies to issue regulations for these details.",
"Both would limit the quantity of international offsets—1 gigaton or billion metric tons (GtCO2) in H.R. 2454, and 0.5 GtCO2 in S. 1733—but would allow some additional international offsets if domestic offsets are insufficient.",
"Both contain guidelines that require agreements with the developing country, and national baselines and strategic forest plans by the developing country.",
"Both would allow project level and state or regional level REDD offsets, and both would phase-out such offsets to encourage national level REDD offsets, but neither bill describes how the transition from project level or state level REDD offsets to national offsets is to proceed.",
"Both bills also address the rights and needs of indigenous peoples and forest-dependent communities, requiring due regard to indigenous and local rights and directing consultations with and the participation of indigenous peoples and forest-dependent communities.",
"H.R. 2454 provides significant details for supplemental emissions reductions, but eligible forests are undefined and the criteria and standards might be insufficient for effective implementation.",
"Both bills would use allowances for building capacity (e.g., personnel and equipment) to measure, monitor, and enforce REDD activities in developing countries, but neither bill defines capacity-building activities that could be funded, nor allocates funds between capacity building and supplemental emissions reductions.",
"The bills contain no penalties or consequences for failures to achieve the overall anticipated reductions in carbon release or to measure and monitor the activities.",
"There are issues for carbon offsets generally—their verification (measuring, monitoring, and reporting carbon sequestration), their additionality (activities not already occurring or required), their permanence, and leakage (merely shifting deforestation to other locations).",
"These issues are exacerbated for REDD offsets, because many developing countries do not have the capacity to address these concerns.",
"In addition, many are concerned that REDD offsets may inhibit developing countries from committing to GHG reductions and from evolving to low-carbon economies."
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GAO_GAO-16-585
|
{
"title": [
"Background",
"Los Alamos’s Role in NNSA’s Nuclear Security Enterprise",
"DOE and NNSA Plutonium Analysis Needs at Los Alamos",
"NNSA Office of Defense Programs",
"DOE Office of Nuclear Energy’s Office of Space and Defense Power Systems",
"DOE and NNSA Project Management Orders and Policies",
"Best Practices for Project Cost and Schedule Estimating",
"NNSA Did Not Identify the Plutonium Analysis Capacity That Its Revised CMRR Project Should Provide, So the Project May Not Meet DOE and NNSA Needs NNSA’s Requirements for the Revised CMRR Project Did Not Define the Plutonium Analysis Capacity the Project Should Provide",
"NNSA Is Pursuing Actions to Increase Analysis Capacity",
"NNSA Is Not Designing the Revised CMRR Project to Directly Meet Plutonium Analysis Needs of All DOE and NNSA Programs at Los Alamos",
"NNSA Did Not Define Key Parameters or Program Requirements for the Plutonium Modular Approach, Therefore It Is Unclear If It Will Meet Analysis Needs",
"NNSA Did Not Specify Key Parameters, Including Plutonium Analysis Capacity",
"Mission Need Prematurely Identified a Specific Solution",
"NNSA’s Revised CMRR Project Has a Lower Estimated Total Cost than the Previously Approved CMRR Project, but Agency Estimates of Cost Savings May Be Overstated",
"NNSA’s Schedule and Cost Estimates for the Revised CMRR Project Partially Met Best Practices",
"NNSA’s Schedule Did Not Include Most Activities Needed to Complete the Project",
"NNSA Had Not Maintained an Integrated Master Schedule",
"NNSA Did Not Conduct a Schedule Risk Analysis",
"NNSA May Not Meet Its Estimate to Complete the CMRR Subproject That Supports Ending Operations in the Chemistry and Metallurgy Research Facility",
"NNSA’s Cost Estimate Exhibited Two of Four Characteristics of Reliable Estimates",
"Cost Estimate Was Partially Credible",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Assessment of NNSA’s Schedule Estimate for the Revised Chemistry and Metallurgy Research Replacement Project",
"Appendix III: Assessment of NNSA’s Cost Estimate for the Revised Chemistry and Metallurgy Research Replacement Project",
"Appendix IV: Comments from the National Nuclear Security Administration",
"Appendix V: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"This section describes: (1) Los Alamos’s role in NNSA’s nuclear security enterprise; (2) DOE and NNSA programs’ plutonium analysis needs at Los Alamos; (3) DOE and NNSA project management orders and policies; and (4) best practices for project cost and schedule estimating.",
"NNSA is responsible for managing the nation’s nuclear security missions: ensuring a safe, secure, and reliable nuclear deterrent; achieving designated reductions in the nuclear weapons stockpile; and supporting the nation’s nuclear nonproliferation efforts. NNSA directs these missions but relies on management and operating contractors to carry them out and manage day-to-day operations at each of its eight sites that comprise the agency’s nuclear security enterprise. These sites include laboratories, production plants, and a test site. Together, these sites implement NNSA’s stockpile stewardship program. Specifically, under this program, NNSA annually assesses the nation’s nuclear weapons stockpile and (1) determines which components, including the pit, will need refurbishment to extend each weapon’s life; (2) designs and produces the necessary components; (3) installs components in the weapons; and (4) certifies that the changes do not adversely affect the safety and reliability of the weapons. The 2010 Nuclear Posture Review—which outlines U.S. nuclear policy, strategy, capabilities, and force posture— identified long-term stockpile modernization goals for NNSA that include sustaining a safe, secure, and effective nuclear arsenal through life extension programs and investing in a modern infrastructure. NNSA has identified the revised CMRR project as critical to its infrastructure modernization efforts.\nOf NNSA’s eight sites, the Los Alamos National Laboratory in New Mexico houses most of the nation’s capabilities for plutonium analysis in support of its nuclear weapons mission. Los Alamos also has a broader plutonium-related research and analysis mission. For example, Los Alamos conducts basic and applied research in the chemistry of plutonium and other radiological materials for the study of nuclear materials, including nuclear materials separation, processing, and recovery.\nCurrently there are three main facilities at Los Alamos that support plutonium analysis:\nChemistry and Metallurgy Research facility. This facility became operational in 1952 and houses equipment for performing plutonium analysis. With this equipment, NNSA conducts analysis activities that support: the production, development, and testing of nuclear weapon pits, programs to extend the life of nuclear weapons in the stockpile, and efforts to dismantle surplus nuclear weapons. NNSA continues to operate some plutonium analysis equipment in the facility, but the agency has committed to ending plutonium operations in the facility by the end of 2019.\nPlutonium Facility 4. This facility began operations in 1978 and is the nation’s only high-hazard, high-security, fully operational plutonium facility that produces pits. Plutonium Facility 4 is also used to support the production of plutonium-238 heat sources used for NASA spacecraft missions as well as the development of methods for fabricating advanced nuclear fuels.\nRadiological Laboratory Utility Office Building (radiological lab).\nNNSA began operations in the radiological lab in 2014. NNSA built the radiological lab—consisting of office space, training areas, utilities, and laboratory space for analysis—to complement the previously approved CMRR nuclear facility. The radiological lab has the capacity to handle small plutonium samples for use in analytical chemistry analysis to support plutonium program missions in Plutonium Facility 4.",
"Several DOE and NNSA program offices conduct plutonium analysis in the three main plutonium facilities at Los Alamos. The following are the primary users of plutonium analysis capabilities at Los Alamos.",
"This office is responsible for maintaining the reliability, security, and safety of the nuclear weapons stockpile by assessing the reliability of existing nuclear weapon pits and producing new pits to replace those destroyed in the testing process, among other activities. The majority of funding and scope associated with plutonium work at Los Alamos supports the Office of Defense Programs’ missions. Pit production relies on plutonium analysis to produce war reserve pits—pits that are certified for inclusion in the nuclear weapons stockpile—in support of life extension programs. Los Alamos has used its analytical chemistry equipment to support pit production more than to support all other program activities combined. From 2007 to 2012, NNSA produced a limited number of war reserve pits at Los Alamos; according to NNSA, by 2011 the agency had demonstrated a production rate of up to 10 pits per year. In 2008, the Nuclear Weapons Council—a body that serves as the focal point of the Department of Defense and DOE interagency activities to maintain the nation’s nuclear weapons stockpile—established the requirement for NNSA to develop pit production capabilities of 50 to 80 pits per year.\nWe found in March 2016 that modernizing NNSA’s pit production capacity, including implementing the revised CMRR project, is fundamental to supporting a multi-billion-dollar life extension program.\nNNSA’s Fiscal Year 2016 Stockpile Stewardship and Management Plan contains the agency’s plan for meeting the weapons council’s requirement and supporting life extension programs. According to the fiscal year 2016 plan, NNSA will develop the capability to produce at Los Alamos an increasing number of new pits over time. These pits will be of a different type than the pits produced earlier, so Los Alamos has started a development process to establish a pit production capability for a new pit type. Beginning in fiscal year 2024, NNSA plans to be able to produce 10 war reserve pits per year, increasing to 30 war reserve pits per year in fiscal year 2026, and 50 to 80 war reserve pits per year by 2030 (see table 1).\nNNSA’s ARIES supports the disposition of surplus weapons-grade plutonium by disassembling pits and converting the plutonium into a plutonium oxide. NNSA established ARIES in Plutonium Facility 4 as a technology development and demonstration project for pit disassembly and conversion and has used plutonium analysis equipment there to analyze plutonium samples from the oxide converted from existing pits. According to NNSA, ARIES currently conducts most of its plutonium analysis that supports disassembly and conversion at NNSA’s Savannah River Site in South Carolina. However, ARIES will likely need more analysis equipment in Plutonium Facility 4 if its mission at Los Alamos is expanded, according to NNSA.",
"This office provides plutonium-238 heat sources for electric generators used on NASA spacecraft and for national security applications. The plutonium-238 heat sources are also used to heat critical components on NASA spacecraft. The office relies on plutonium analysis equipment to support its work. The office recently stopped operating in the Chemistry and Metallurgy Research facility and installed its plutonium analysis equipment in Plutonium Facility 4. This DOE office shares the plutonium-238 analysis equipment with NNSA to support work examining existing pits.",
"DOE Order 413.3B governs NNSA’s capital asset acquisition activities. The order establishes the critical decision (CD) process. This process breaks down capital asset acquisition into project phases that progress from a broad statement of mission need into requirements that guide project execution, through design and construction, and conclude with an operational facility. Each phase ends with a major approval milestone—or “critical decision”—and each critical decision requires the successful completion of the preceding phase. DOE’s capital asset acquisition process, or critical decision process, is depicted in figure 1.\nDOE Order 413.3B provides direction for preparing a mission need statement at CD-0 (identify need). According to the order, a mission need statement identifies the capability gap between the current state of a program’s mission and the mission plan and is part of the first phase of identifying and executing a capital asset project. The mission need, however, should not identify a particular solution such as equipment, facility, or technology.\nIn addition, Order 413.3B and NNSA’s business operating procedure for creating program requirements documents for capital asset projects (NNSA’s requirements policy) provide direction for preparing and updating a program requirements document. According to Order 413.3B, requirements identified in a program requirements document are statements that define the ultimate goals a project must satisfy. According to A Guide to the Project Management Body of Knowledge, defining requirements for a project is a key step in developing a project because the requirements dictate what is included—and what is not included—in a project’s scope of work. Order 413.3B states that NNSA must prepare a program requirements document for capital asset projects at CD-0. Order 413.3B directs project managers to implement NNSA’s requirements policy when preparing the program requirements document at CD-0. According to this policy, a project’s requirements should include a specific type of requirement called a key performance parameter. Order 413.3B states that key performance parameters define how well a project will perform its functions, and appropriate parameters are those that express performance in terms of capacity, throughput (i.e., the amount of material or items passing through a system or process), or processing rate, among others. These parameters, among other things, identify vital characteristics, functions, or design bases that, if changed, would have a major impact on facility or system performance, scope, schedule, cost, or risk.\nUnder Order 413.3B, the first two decision points—CD-0 (identify need) and CD-1 (select alternative)—span the analysis of alternatives process. The use of the analysis of alternatives process is a key first step to help ensure that the selected alternative best meets the agency’s mission need. The majority of the analysis of alternatives process is conducted during the conceptual design phase and ends with CD-1 approval.",
"To provide assistance in preparing high-quality cost and schedule estimates, we compiled best practices used throughout government and industry in two guides. In March 2009, we issued our Cost Estimating and Assessment Guide (cost guide). Drawing from federal cost estimating organizations and industry, our cost guide provides best practices about the processes, procedures, and practices needed for ensuring development of high-quality—that is, reliable—cost estimates. A high-quality cost estimate helps ensure that management is given the information it needs to make informed decisions. The cost guide identifies the following four characteristics of a high-quality cost estimate: (1) comprehensive, (2) well documented, (3) accurate, and (4) credible.\nWe issued our Schedule Assessment Guide (schedule guide) in May 2012 as a companion to the cost guide. A well-planned schedule is a fundamental management tool that can help government programs use public funds effectively by specifying when work will be performed in the future and measuring program performance against an approved plan. The schedule guide identifies 10 best practices for developing and maintaining a reliable, high-quality schedule. For example, the first best practice is for the schedule to capture all activities necessary to complete the project.\nIn May 2016, DOE published an update to Order 413.3B that institutionalizes recent policies that the Secretary of Energy had established in two memorandums, including one dated June 2015 that related to, among other things, cost and schedule estimating best practices. Specifically, the updated order incorporates policies first established in the June 2015 memorandum that state (1) cost estimates shall be developed, maintained, and documented in a manner consistent with methods and best practices identified in our cost guide, DOE guidance, and applicable acquisition regulations and Office of Management and Budget guidance; and (2) projects shall develop and maintain an integrated master schedule in a manner consistent with the methods and best practices identified in our schedule guide and in the National Defense Industrial Association’s Planning and Scheduling Excellence Guide.",
"NNSA defined a set of requirements for the revised CMRR project, but these requirements did not include key performance parameters, such as the plutonium analysis capacity that the project should provide. NNSA has initiated actions that could increase the project’s plutonium analysis capacity, but these actions create risk for meeting the project’s estimated cost and schedule. Even with the new actions that NNSA has initiated, the agency is not designing the revised CMRR project to meet all DOE and NNSA plutonium analysis needs at Los Alamos.\nNNSA defined a set of requirements for the revised CMRR project, but these requirements did not include key performance parameters, as called for by NNSA’s requirements policy. Order 413.3B states that key performance parameters define how well a project will perform its functions, and appropriate parameters are those that express performance in terms of capacity or throughput, among others. According to NNSA documents, the revised CMRR project’s primary function is to provide plutonium analysis capabilities in support of NNSA’s stockpile stewardship program. The stockpile stewardship program includes producing new plutonium pits, but the revised CMRR project’s requirements document did not define the annual rate of pit production that the project should support in a key performance parameter. NNSA’s Fiscal Year 2016 Stockpile Stewardship and Management Plan stated that the agency will increase its capability to produce new pits over time to support life extension programs: 10 pits per year in 2024, 30 pits per year in 2026, and 50 to 80 pits per year by 2030. According to NNSA documents, the agency needs adequate quantities of plutonium analysis equipment, namely analytical chemistry equipment, and the space in which to house the equipment to support its planned pit production rates. The higher the pit production rate, the more analytical chemistry equipment will be needed. The project’s requirements document included a list of plutonium analysis equipment that the project will provide and the capacity that each piece of equipment will provide—expressed as a number of plutonium samples processed per year. This information indicates the analysis capacity the project may provide but does not indicate the extent to which the project will support broader needs, including pit production.\nNNSA officials and Los Alamos contractor representatives said that the program requirements document for the revised CMRR project does not contain a pit production-related performance parameter because NNSA tasked the revised project only with replacing plutonium analysis equipment that had been located in the Chemistry and Metallurgy Research facility. They explained that NNSA did not specifically task the revised project with supporting specific pit production levels. Instead, contractor representatives told us that they created the list of analysis equipment to include in the revised project based on the capabilities that needed to be transferred from the Chemistry and Metallurgy Research facility and the amount of available space in the radiological lab and Plutonium Facility 4. NNSA officials told us they do not plan to identify key performance parameters for the revised CMRR project until CD-2 and that they do not plan to establish a key performance parameter that identifies pit production rates for the revised CMRR project to support in the near future. These officials agreed, however, that having sufficient plutonium analysis capacity is critical to supporting pit production.\nNot identifying key performance parameters in the program requirements document for the revised CMRR project, including a parameter related to pit production, likely contributed to the project potentially providing insufficient plutonium analysis capacity to support planned pit production rates. In 2015, NNSA’s contractor at Los Alamos conducted an analysis, calculating the pit production rate that the revised CMRR project’s analysis equipment was expected to support, based on the amount of equipment, location, and the amount of plutonium allowed in the radiological lab and Plutonium Facility 4. The contractor’s analysis showed that the revised CMRR project, as approved at CD-1 in August 2014, may not provide sufficient analysis capacity to support a 10-pits-per-year production rate. Although NNSA previously demonstrated that it could produce up to 10 war reserve pits per year at Los Alamos, the pits were produced in Plutonium Facility 4 with support from the Chemistry and Metallurgy Research facility. However, according to contractor representatives, the radiological lab has stricter limits on the amount of plutonium allowed in it than the Chemistry and Metallurgy Research facility does, so supporting pit production in Plutonium Facility 4 with the radiological lab limits analysis capacity to support pit production.\nNot identifying a key performance parameter related to pit production in the requirements document may have also contributed to different understandings of how the project will meet critical mission requirements. For example, NNSA and DOE management officials we interviewed have drawn their own, widely different conclusions about the extent to which the revised CMRR project will support pit production. One NNSA official involved in overseeing the project told us that the analysis equipment that will be installed under the revised CMRR project would provide the analysis capacity to support a production rate of 30 pits per year. A senior NNSA official said the project would provide the same capabilities as the previously approved CMRR project that included the nuclear facility but said that he was not aware of the revised CMRR project’s expected analysis capacity. A senior DOE official said that, when he reviewed the CD-1 documentation and participated in meetings regarding the August 2014 CD-1 approval for the revised CMRR project, he was not aware that the project was needed to support pit production, and another DOE official responsible for reviewing the project said the revised project would support a production rate of about 10 pits per year.\nWe have previously found that poorly defined, incomplete, or missing requirements make it difficult to hold projects accountable, result in programs or projects that do not meet user needs, and can result in cost and schedule growth. Notably, the memorandum approving CD-1 for the revised CMRR project states that one of the main reasons that the CMRR nuclear facility experienced significant cost and schedule growth was because of poorly defined requirements for the facility. By updating the program requirements document for the revised CMRR project to identify a key performance parameter that describes the plutonium analysis capacity that the revised CMRR project is required to provide to support specific pit production rates, NNSA could clarify the extent to which the project will support planned pit production, better enabling the agency to identify whether it will need to acquire additional plutonium analysis equipment or space by other methods.",
"Even though NNSA did not identify pit production rates in a key performance parameter in the program requirements document for the revised CMRR project to support, the agency has taken steps since the August 2014 CD-1 approval that may increase the plutonium analysis capacity that the project will provide. For example, although the 2015 contractor analysis determined that the revised CMRR project as approved in August 2014 may not support a 10 pits-per-year production rate, the analysis also found that the project could support such a production rate at project completion in 2024 if the contractor successfully implements efforts to increase the efficiency of working in the radiological lab. These efforts involve potentially increasing the project’s analysis capacity by reducing the amount of plutonium used in each analysis, in turn allowing scientists to conduct more analyses at a time. According to contractor representatives we interviewed, they have not determined if these efforts will be successful.\nNNSA has initiated another action that could increase the plutonium analysis capacity that the revised CMRR project will provide, according to contractor documents. In November 2015, DOE approved a restructuring of the revised CMRR project by splitting the Plutonium Facility 4 Equipment Installation subproject, one of the two subprojects that comprised the revised CMRR project when it was approved in August 2014, and adding a new subproject that would upgrade the radiological lab from a radiological facility to a Hazard Category 3 nuclear facility. Upgrading the radiological lab, according to NNSA and contractor documents, would involve (1) renovating the radiological lab to accommodate higher levels of plutonium, and (2) installing and operating a set of plutonium analysis equipment in the radiological lab that was otherwise slated to go into Plutonium Facility 4 as part of the revised CMRR project. In May 2015, NNSA and its contractor conducted a business case analysis of the upgrade that stated that the benefits of increasing work performed in the radiological lab instead of in Plutonium Facility 4 include increased operational efficiency and therefore increased analysis capacity. In addition, the business case analysis stated that the proposal offers the benefit of avoiding using the high-hazard, high- security space in Plutonium Facility 4 for analysis operations that do not need that level of safeguarding. According to the separate 2015 contractor analysis, conducting more plutonium analysis in the radiological lab instead of in Plutonium Facility 4—if combined with successful efforts to reduce the amount of plutonium used in each analysis—would likely increase the project’s plutonium analysis capacity enough to support a 30-pits-per-year production rate. In a best case scenario, the analysis found the project might be able to support production at 80 pits per year.\nNNSA’s efforts to increase the plutonium analysis capacity of the revised CMRR project, however, may create risks for meeting the project’s estimated cost and schedule. NNSA and DOE officials told us that the agency has not increased an existing facility’s hazard category before and that NNSA is working to identify all of the steps that will be involved in upgrading the radiological lab to a Hazard Category 3 nuclear facility. Also, the May 2015 business case analysis described some of the risks associated with the upgrade, some of which carry potentially significant cost and schedule effects if realized. For example, the business case analysis stated that it is possible that a forthcoming nuclear safety analysis could require modifying the building’s ventilation system or increasing the safety rating of the gloveboxes used in the radiological lab for handling plutonium. The business case analysis found that requiring such modifications could negatively affect the upgrade’s schedule because, for example, the contractor has already started procuring gloveboxes for the radiological lab and changing their safety rating would require modifying the procurement or the gloveboxes themselves. Also, project costs could increase to the point where NNSA might decide it is not affordable to pursue the upgrade. If NNSA does not pursue the upgrade or the upgrade does not result in increasing the revised project’s analysis capacity enough to support pit production rates of 50 to 80 pits per year by 2030 to support life extension programs, NNSA officials told us they do not currently have an alternate plan for acquiring and locating the remaining analysis equipment needed to support those production rates. Given the uncertainty surrounding the revised CMRR project’s ability to support pit production rates of 50 to 80 pits per year, having a plan for providing sufficient analysis capacity may better enable NNSA to meet its pit production plans and support planned life extension programs critical to the agency’s modernization efforts.",
"Even considering the actions that NNSA is pursuing to increase analysis capacity, the agency is designing the revised CMRR project to meet the Office of Defense Programs’ plutonium analysis needs for its stockpile management mission and not the analysis needs of other NNSA and DOE programs that conduct plutonium analysis work at Los Alamos. This is counter to the revised CMRR project’s requirements document for CD-1. More specifically, the first project requirement states that the revised CMRR project must provide infrastructure and equipment needed to support program offices with missions assigned to Los Alamos that involve plutonium analysis operations, including stockpile support and national security and science stewardship. As stated, this requirement appears to include all DOE and NNSA program offices with plutonium analysis needs assigned to Los Alamos, including but not limited to the needs of the program sponsor—the Office of Defense Programs—and also other program offices, including the NNSA Office of Defense Nuclear Nonproliferation’s ARIES and the DOE Office of Nuclear Energy’s Office of Space and Defense Power Systems. The revised CMRR project’s first requirement also directs readers to an appendix to the program requirements document that shows a list of programs—both within and outside of the Office of Defense Programs—that use plutonium analysis capabilities at Los Alamos mapped against specific types of plutonium analysis techniques. NNSA’s requirements policy states that mission requirements should be a comprehensive set of what the project must provide to satisfy the mission need. In addition, A Guide to the Project Management Body of Knowledge states that mission requirements provide the basis for defining a project’s scope.\nAccording to NNSA officials and contractor representatives, however, the revised CMRR project’s scope does not include dedicated analysis equipment that specifically meets the needs of DOE and NNSA programs outside of the Office of Defense Programs. These officials and contractor representatives said that these programs’ plutonium analysis needs are not specifically included in the first project requirement for the revised CMRR project. They said that, as the project sponsor, it is Defense Programs’ requirements that will dictate the specific analysis equipment to include in the project’s scope of work. Officials we interviewed with ARIES and the Office of Space and Defense Power Systems said they are not customers of the revised CMRR project and that they did not provide input about their plutonium analysis requirements to inform the revised CMRR project’s program requirements document. The Space and Defense Power Systems officials said that they have acquired dedicated plutonium analysis equipment to meet their plutonium analysis needs separately at Los Alamos, and the ARIES officials said they have moved most of their plutonium analysis work to another site but that they may seek to increase their analysis work at Los Alamos in the future if their mission changes.\nContractor representatives explained that they included programs outside of Defense Programs in the revised CMRR project’s program requirements document to be comprehensive and show that the project may support customers beyond Defense Programs. They said that other programs may use the plutonium analysis equipment installed as part of the revised CMRR project, if and when the equipment is available. However, writing the first project requirement in a broad manner may provide the impression to senior managers and other stakeholders that the revised CMRR project will include the dedicated analysis equipment and space necessary to meet the plutonium analysis needs of programs other than Defense Programs. It also adds to the uncertainty surrounding the exact nature of the plutonium analysis capacity that the project will provide. By updating the program requirements document for the revised CMRR project to clarify whether the revised project will provide plutonium analysis equipment to meet the needs of DOE and NNSA programs other than those in the Office of Defense Programs, managers and stakeholders may have a clearer understanding of the extent to which the project will satisfy DOE and NNSA programs’ needs.",
"In November 2015, DOE approved the mission need (CD-0) for the Plutonium Modular Approach to examine building modular nuclear facilities to support plutonium work at Los Alamos. However, it is unclear whether the Plutonium Modular Approach will help meet DOE and NNSA programs’ plutonium analysis needs at Los Alamos because NNSA did not identify key performance parameters, as with the revised CMRR project, or program-specific requirements in the mission need documentation. Further, the Plutonium Modular Approach’s statement of mission need prematurely identified a specific solution, which is counter to Order 413.3B.",
"In its mission need documentation for the Plutonium Modular Approach, NNSA adopted a mission need statement and an initial set of requirements to meet the mission need. The mission need statement defined two missions: (1) provide high-hazard, high-security laboratory space to conduct operations to support enduring stockpile stewardship and management activities and (2) enable NNSA to continue working in Plutonium Facility 4 for longer than its planned life by moving some high- hazard operations out of the facility. The Plutonium Modular Approach requirements document stated that the project is to build no less than two modular nuclear facilities at Los Alamos adjacent to Plutonium Facility 4. The requirements document also included a list of potential program missions that the site might relocate from Plutonium Facility 4 into the new modular facilities and a statement that the space should be designed to accommodate any of the potential program missions listed. The program missions included pit production, pit disassembly conducted by ARIES, and plutonium-238 work conducted in part by the Office of Space and Defense Power Systems.\nAs with the revised CMRR project, NNSA did not identify any key performance parameters for the Plutonium Modular Approach to meet. NNSA’s requirements policy directs NNSA to develop as many requirements as can be determined, including key performance parameters, in the program requirements document when it is first developed at CD-0. Also, NNSA did not identify any requirements that are specific to the needs of NNSA or DOE programs, including requirements related to providing additional plutonium analysis capacity that could support pit production. According to the best practices that we have identified for conducting analyses of alternatives, setting project requirements early in the analysis of alternatives process helps ensure that the selected alternative best meets the agency’s needs. The program requirements document for the Plutonium Modular Approach states that NNSA plans to identify program-specific requirements at CD-2, which is after the agency has selected the project alternative. NNSA officials and contractor representatives told us that they did not identify program-specific requirements for the Plutonium Modular Approach to meet because they expect that these requirements will change between now and project completion. They said that although additional high- hazard, high-security laboratory space is needed, the exact use for that space has not been determined. In commenting on a draft of this report, contractor representatives stated that the justification for the Plutonium Modular Approach is “somewhat nebulous” because the mission need is based on the need to extend the life of Plutonium Facility 4 rather than on meeting specific program needs. Extending the life of Plutonium Facility 4 may be worthwhile, but by defining key performance parameters and program-specific requirements before conducting the analysis of alternatives, NNSA would have better information about program-specific requirements to inform its analysis and to provide a clearer basis for selecting a project alternative at CD-1.\nConducting the analysis of alternatives for the Plutonium Modular Approach without considering program-specific requirements may negatively affect programs that currently use space in Plutonium Facility 4. For example, NNSA reported in the mission need documentation that moving plutonium-238 activities out of Plutonium Facility 4 and into a new modular facility is a key example of how NNSA could extend the life of Plutonium Facility 4 by reducing nuclear safety risks in the facility. NNSA officials and contractor representatives told us that plutonium-238 activities is a top candidate to move into a modular facility if the goal is to extend the life of Plutonium Facility 4. However, NNSA did not consult the Office of Space and Defense Power Systems, which conducts most of the plutonium-238 activities in Plutonium Facility 4, when developing the mission need and requirements for the Plutonium Modular Approach, according to officials with this office. These officials told us that they were not involved in discussions regarding the mission need for the project and that they had not heard about NNSA’s potential plan to move plutonium-238 equipment out of Plutonium Facility 4. They said that NNSA’s projected 2027 operational date for new modular facilities could directly impede the office’s ability to meet NASA’s future needs. They also said that if NNSA determines it needs to move the plutonium-238 equipment out of Plutonium Facility 4 to reduce risks, the Office of Space and Defense Power Systems may seek options for housing their equipment at another site rather than move into a new modular facility at Los Alamos.",
"NNSA’s mission need statement for the Plutonium Modular Approach may not provide NNSA with the flexibility to explore a variety of alternatives without limiting potential solutions because it prematurely identified a specific solution for the project, contrary to DOE Order 413.3B. According to the order, at CD-0 NNSA must develop statements of mission need that do not identify a particular solution such as equipment, facility, or technology. However, NNSA’s mission need statement identifies a specific type of facility—high-hazard, high-security laboratory space. Also, in the program requirements document supporting CD-0, NNSA lists the Plutonium Modular Approach’s first mission requirement as delivering no less than two new nuclear facilities with full operating capability no later than 2027. The mission need statement document states that a few options appear to be available to meet the mission need that would involve upgrading existing facilities instead of building new modular facilities, and NNSA officials told us that they will consider a range of options as part of the analysis of alternatives to support CD-1. However, by narrowly defining the mission need and the first requirement in terms of building two modular nuclear facilities at Los Alamos by 2027, there is effectively no project alternative other than the modular approach that NNSA could select to satisfy this requirement and the mission need as currently documented.\nAccording to an NNSA official who helped develop the CD-0 project documentation, NNSA included language about building two new nuclear facilities in the project documentation to acknowledge congressional direction contained in the national defense authorization acts for fiscal years 2014 and 2015 about building new modular facilities. This official characterized the mission need statement as balancing compliance with congressional direction with compliance with Order 413.3B. The fiscal year 2014 statutory language limited the funds that NNSA could spend on pursuing an alternative other than the modular facilities, and the fiscal year 2015 statutory language expressed the sense of Congress that the best choice was to build two modular structures by 2027. The language neither required NNSA to move forward with a specific strategy nor relieved NNSA of its responsibility to analyze other alternatives.\nIdentifying a specific solution in the mission need statement may create a potential bias against other potentially viable alternatives, limiting NNSA’s ability to explore a variety of solutions. In our December 2014 report on NNSA’s analysis of alternatives process, we found that conducting such an analysis without a predetermined solution is a best practice. In that report, DOE and NNSA officials acknowledged that an unreliable analysis of alternatives is a risk factor for major cost increases and schedule delays for NNSA projects. We recommended that NNSA incorporate best practices into its analysis of alternatives requirements to minimize the risk of developing unreliable analyses of alternatives and incurring major cost increases and schedule delays on projects. DOE agreed with our recommendation and in May 2016, the agency included language in an update to Order 413.3B directing that analyses of alternatives be conducted consistent with our published best practices. By rephrasing the Plutonium Modular Approach mission need statement and requirements so they are independent of a particular solution before conducting the analysis of alternatives, NNSA may be better positioned to objectively consider other alternatives before it makes its selection of an alternative at CD-1.",
"The total estimated cost for the revised CMRR project is lower than the total estimated cost for the previously approved CMRR project that included constructing the CMRR nuclear facility, but estimates of cost savings may be too high because the revised project includes less scope and is likely to provide less plutonium analysis capacity. In internal documents used to present information to senior decision makers as they considered approving CD-1 for the revised CMRR project, DOE and NNSA stated that cancelling the nuclear facility portion of the previously approved CMRR project and approving the revised CMRR project would save billions of dollars. For example, in an August 2014 slide presentation to DOE’s acquisition advisory board, NNSA reported that the total cost of its previously approved CMRR project—consisting of designing and constructing both the radiological lab and the nuclear facility, and installing equipment in both—would have reached up to approximately $7 billion. The presentation showed that since the total estimated cost of the revised CMRR project is up to approximately $3 billion—including sunk costs spent on designing, constructing, and installing equipment in the radiological lab and partially designing the nuclear facility—the agency will reduce costs by approximately $4 billion as a result of cancelling the CMRR nuclear facility. In a memorandum to the Deputy Secretary of Energy dated a day after the presentation and recommending approval of the revised CMRR project, DOE’s Office of Management stated that approving the revised CMRR project would reduce the total cost by more than $2 billion. In that memorandum and in NNSA’s budget requests for fiscal years 2016 and 2017, the agency stated that the revised CMRR project eliminated the need to construct the CMRR nuclear facility, thereby serving as its replacement.\nNNSA’s cost savings calculations—whether $2 billion or $4 billion—may be overstated, however, because the revised CMRR project will likely provide less plutonium analysis capacity and less work scope than the previously approved CMRR project, which included the nuclear facility, and the calculations did not include costs associated with the Plutonium Modular Approach. More specifically:\nThe revised CMRR project will likely provide less analysis capacity than the previously approved CMRR project. Before NNSA deferred construction of the CMRR nuclear facility, NNSA’s contractor at Los Alamos estimated that the nuclear facility could support production of 40 pits per year in Plutonium Facility 4, and found that supporting 80 pits per year would require additional equipment and staff. NNSA reported that it expected the nuclear facility to support the production of up to 80 pits per year. In contrast, as discussed earlier, the 2015 contractor analysis determined that the revised project, as approved at CD-1 in August 2014, may not support the production of 10 pits per year and that the agency needs to successfully implement efforts to increase the project’s analysis capacity to support production rates of 10 pits per year and 30 pits per year. In a best case scenario, the project might be able to support an 80-pits-per-year rate, according to the contractor’s analysis. NNSA’s statement that the revised CMRR project replaces the CMRR nuclear facility is based on the revised project providing the same analysis “capabilities” as the planned nuclear facility but not the same analysis capacity. NNSA uses the term capability to refer to specific types of analysis techniques, such as radiochemistry. For example, according to NNSA’s contractor at Los Alamos, the revised project will install a set of plutonium analysis capabilities that is roughly comparable to the set of capabilities that was planned for the nuclear facility. However, contractor representatives added that, although the set of analysis capabilities is comparable, the analysis capacity is likely to be less because it is less efficient to conduct plutonium analysis in Plutonium Facility 4 and the radiological lab than it would have been in the CMRR nuclear facility.\nThe revised CMRR project includes less work scope than the previously approved CMRR project. The CMRR nuclear facility was to include, among other things: a 31,100 square foot nuclear material storage vault; a 12,800 square foot tunnel system for secure transfer of materials between Plutonium Facility 4, the nuclear facility, and the radiological lab; and 7,200 square feet for staging waste drums before they were to be shipped for disposal. The revised CMRR project does not include the storage vault, tunnel, or a new waste staging area. In its CD-1 documentation for the revised CMRR project, NNSA stated that it eliminated these scope elements because they were not needed at the time. However, NNSA also stated that it will eventually need a tunnel connecting Plutonium Facility 4 to the radiological lab and the future modular nuclear facilities and a waste staging area and that although the need for a new storage vault has been delayed, it has not necessarily been eliminated. As a result, removing these scope elements from the revised CMRR project may result in a reduction of the CMRR project’s total cost, but it may not represent a net cost savings to the agency or the taxpayer, because some scope elements that were removed will need to be constructed eventually.\nNNSA’s calculations did not include costs associated with the modular facilities. NNSA stated in the revised CMRR project’s CD-1 documentation that the overall strategy for maintaining plutonium operations at Los Alamos without the CMRR nuclear facility consists of both the revised CMRR project and the Plutonium Modular Approach. The documentation mentioned that building new modular nuclear facilities will accommodate activities that are not included in the revised CMRR project or that are needed to facilitate the project. Therefore, without including some costs associated with the Plutonium Modular Approach, any cost savings calculations from cancelling the CMRR nuclear facility are likely to be overstated.\nAccording to NNSA officials and contractor representatives, NNSA’s cancellation of the previously approved CMRR project’s nuclear facility may yield benefits in terms of an improved funding profile. These officials and representatives explained that one benefit of pursuing the revised CMRR project and the Plutonium Modular Approach lies in improving the agency’s ability to fund the two projects. They said that although the total cost to build a set of modular nuclear facilities is not necessarily less than building one large nuclear facility, acquiring smaller nuclear facilities over time may be more affordable because NNSA can spread out the facilities’ effect on the budget over a greater period of time. However, we found in our March 2016 report on NNSA’s modernization plans and the budget estimates to implement these plans that the total costs of NNSA’s plutonium infrastructure strategy at Los Alamos included in the plans were uncertain and may be underestimated because NNSA had not determined the number of modular facilities that may be required. Therefore, the actual amount of any cost savings that NNSA may realize has yet to be determined.",
"NNSA’s estimated schedule and costs for completing the revised CMRR project partially met best practices. Importantly, the schedule estimate did not include all work activities required for the project’s successful execution. The cost estimate exhibited two of the four characteristics of reliable cost estimates; as a result, NNSA cannot have confidence that it can meet its schedule and cost goals, including supporting the agency’s commitment to end plutonium operations in the Chemistry and Metallurgy Research facility by the end of 2019.",
"NNSA did not maintain a schedule for the revised CMRR project that included all activities needed to complete the project and did not sufficiently analyze risks to determine whether the project’s estimated completion dates are reasonable. In August 2014, in support of the CD-1 decision, NNSA estimated that it would complete the revised CMRR project’s first subproject—installing plutonium analysis equipment in the radiological lab—in December 2019 and that it would complete the second subproject—installing plutonium analysis equipment in Plutonium Facility 4—in February 2024. NNSA’s contractor at Los Alamos updated the schedule subsequent to CD-1 approval. We reviewed an updated project schedule from August 2015 and assessed the extent to which it reflected best practices for creating a high-quality, reliable schedule. We found that NNSA had not maintained an integrated master schedule that contained all work activities needed to complete the project consistent with best practices or conducted a schedule risk analysis to determine the likelihood of meeting completion dates. Also, the agency may not meet the December 2019 completion date for the first subproject to install analysis equipment in the radiological lab, which supports NNSA’s commitment to end plutonium operations in the Chemistry and Metallurgy Research facility.",
"We found that NNSA’s August 2015 updated schedule for the revised CMRR project substantially or fully met several scheduling best practices, but the schedule was limited to short-term work that ends in 2017. The project schedule estimate fully met the best practice of establishing durations for those activities that the contractor included in the schedule. This best practice allows managers to more easily track progress and ensures that the schedule realistically reflects how long each activity will take. The schedule also substantially met the best practice of being horizontally and vertically traceable, meaning that related activities were correctly linked to intended outcomes, so that changing the amount of time planned for an activity would appropriately affect forecasted dates and that varying levels of activities were properly aligned. In addition, the updated schedule also substantially met the best practices for assigning resources to activities and sequencing activities. These best practices help ensure that resources, such as labor and equipment, are available when needed and that activities are listed in the order in which they are to be carried out.\nHowever, we found that NNSA had not maintained a schedule for the revised CMRR project that contained all the activities within the project’s scope of work, as called for by best practices. NNSA’s August 2015 updated schedule that we reviewed did not contain most of the planned work necessary to complete the project. According to best practices, a project team should develop and maintain an integrated master schedule that includes the entire scope of work required for a project’s successful execution. An integrated master schedule should include near-term and long-term activities throughout the life of the project, and a project team may account for uncertainty in future years by using a lesser level of detail to describe future activities. Among other things, an integrated master schedule provides managers with a plan for carrying out the project and a mechanism for measuring progress and identifying potential problems in meeting schedule milestones. An integrated master schedule is also important for meeting other best practices, such as assigning resources to activities and validating the critical path.\nAn NNSA official and contractor representatives we interviewed who are members of the CMRR project team told us that they developed an integrated master schedule to support the project’s CD-1 decision, but they did not maintain the integrated master schedule after CD-1. Rather, the August 2015 updated project schedule we reviewed was limited to work activities scheduled to occur in the short-term, including design and site preparation activities that support progress toward CD-2 and long- lead procurement of analysis equipment. According to schedule documentation, these activities represent about 7 percent of the total remaining project, by cost. Specifically, these activities were scheduled to end in 2017 at an estimated cost of approximately $134 million. In contrast, the project’s entire scope of work is not scheduled to end until 2024 at an approximate cost of up to $2 billion.\nAn NNSA project team member said the team did not maintain the integrated master schedule after CD-1 because, in general, they do not update a CD-1 schedule until they develop the project’s schedule baseline before CD-2. NNSA directed contractor team members to create the project’s updated schedule based on a plan—finalized in September 2014—to implement the project through CD-2. Project team members said that the updated schedule was sufficient for managing the project until CD-2. Project team members also said limiting the updated schedule to short-term work allows them to focus attention on near-term, critical activities as they manage and execute the project. At the time of the revised CMRR project’s CD-1 approval in August 2014, Order 413.3B directed agencies to develop project schedules before multiple critical decisions, but the order did not specify when, and if, projects should create and maintain an integrated master schedule. By maintaining a schedule that is limited to short-term work ending in 2017, however, NNSA and its contractor have limited insight into how current performance affects completion dates beyond 2017, including completing the first subproject to install analysis equipment in the radiological lab in December 2019—in support of ending operations in the Chemistry and Metallurgy Research facility—and completing the rest of the revised CMRR project by 2024.\nSubsequent to approving CD-1 in August 2014, DOE updated its direction to project managers for developing and maintaining integrated master schedules. In June 2015, the Secretary of Energy issued a department- wide memorandum directing NNSA to, among other things, develop, maintain, and document an integrated master schedule consistent with the methods and best practices identified by our schedule guide. In May 2016, DOE incorporated these policies into an update to Order 413.3B. Project team members said that they are creating a new project schedule to support the revised CMRR project’s first CD-2 decision scheduled to occur by the end of September 2016, but according to an NNSA project team member, this schedule will be limited to activities estimated to end in 2019, primarily involving the installation of equipment in the radiological lab and, to a lesser extent, in Plutonium Facility 4. As a result, this new schedule may not meet the criteria for an integrated master schedule and may not conform to the May 2016 update to Order 413.3B. NNSA plans to approve additional schedule baselines at a second CD-2 decision in mid-2017 for the remaining portions of the project, including activities needed to support upgrading the radiological lab to a Hazard Category 3 nuclear facility and installing most of the analysis equipment planned for Plutonium Facility 4. An NNSA project team member said that the remaining portions will be added to the overall project schedule estimate once their schedule baselines are approved at the second CD-2 decision. By using this approach, however, NNSA will not develop an integrated master schedule that includes all activities until the second CD-2 decision in mid-2017. Without developing and maintaining an integrated master schedule that includes all project activities under all subprojects prior to approving the first CD-2 decision for the revised CMRR project, NNSA does not have reasonable assurance that it has a mechanism for measuring progress and identifying potential problems in meeting schedule milestones for the revised CMRR project. Appendix II contains additional information about the details supporting our assessment of the August 2015 updated project schedule.",
"We found that NNSA developed the revised CMRR project schedule without sufficiently analyzing risks to determine whether the project’s estimated completion dates are reasonable, contrary to best practices.\nProject teams should conduct a schedule risk analysis to examine risks and opportunities for the project, according to scheduling best practices. This analysis determines the level of confidence that the agency can have in whether it will meet its estimated completion dates, typically expressed as a percentage. For example, an agency may learn from a schedule risk analysis that it can have 70 percent confidence that it will finish the project by the estimated completion date. For the revised CMRR project, NNSA reported that it created an “aggressive” schedule to finish its first subproject by the end of 2019 to support ending plutonium operations in the Chemistry and Metallurgy Research facility. However, because NNSA did not conduct a schedule risk analysis, the agency does not have information about the level of confidence associated with meeting the first subproject’s estimated completion date, and therefore cannot determine if that date is reasonable.\nInstead of a schedule risk analysis, the CMRR project team completed a different kind of analysis called a risk assessment to support the August 2014 CD-1 approval decision, but this assessment minimally met best practices for a schedule risk analysis. The risk assessment provided information about, among other things, the potential effects of selected technical and programmatic risks on the schedule but was less comprehensive than a schedule risk analysis. The project team told us that they did not conduct a schedule risk analysis because they did not have sufficient detail about activities in the schedule, including those that would occur beyond CD-2. However, according to best practices, a schedule risk analysis can be performed on a summary version of the schedule if some activities are not well defined.\nWe previously found weaknesses in the schedule risk analysis that NNSA conducted on the previously approved CMRR project’s schedule. In March 2012, immediately after NNSA deferred construction of the CMRR nuclear facility, we found that NNSA’s schedule risk analysis did not include all risks identified by the project team, and we recommended that the agency conduct a new schedule risk analysis when it resumed the CMRR project and before establishing the schedule baseline at CD-2. NNSA disagreed with our recommendation, stating that it would not be prudent to update the project’s schedule at that time because the agency had just deferred the project. However, NNSA did not conduct a schedule risk analysis when it later resumed the project in 2014. Project team members told us that they plan to complete separate schedule risk analyses before each CD-2 decision for the revised CMRR project. According to the Secretary of Energy’s June 2015 memorandum on project management and the May 2016 update to Order 413.3B, NNSA is to develop project schedules consistent with the methods and best practices found in our schedule guide; these best practices include conducting a schedule risk analysis on a complete project schedule. Since NNSA will not create an integrated master schedule that includes all project activities until mid-2017, the schedule risk analysis that the agency will conduct on the portion of the project that NNSA is to approve at the first CD-2 decision by the end of September 2016 will be limited and may not account for all project risks. As a result, the schedule risk analysis may provide NNSA with information about the confidence level associated with meeting the first subproject’s December 2019 completion date, but may not provide information on the likelihood of meeting the project’s overall 2024 completion date. Without conducting a comprehensive schedule risk analysis that applies to the integrated master schedule to identify the likelihood that the revised CMRR project can meet all of its estimated completion dates, NNSA does not have reasonable assurance that it can meet the project’s overall 2024 completion date.",
"According to NNSA documentation, the agency may not meet its December 23, 2019, estimate for completing the first subproject of the revised CMRR project because the schedule for the first subproject does not include any schedule contingency to account for risks to the “aggressive” schedule that may be realized. NNSA’s risk assessment identified four risks to the subproject that could require from 19 to 20 months, or more, of schedule contingency if the risks are realized. Therefore, if NNSA needs to add more than 8 days to the schedule as contingency to mitigate risks, the subproject’s completion date extends into 2020; if NNSA needs the entire schedule contingency, the completion date extends into 2021. Project team officials told us that they set the completion date for the first subproject so that it would finish before the end of 2019 to support NNSA’s commitment to end plutonium operations in the Chemistry and Metallurgy Research facility in 2019. According to NNSA documents, the project team streamlined some activities, including glovebox design work, to support the 2019 completion date. Unless its “aggressive” schedule stays precisely on track, the agency is likely to need at least some of its schedule contingency, extending the first subproject’s completion date to beyond 2019.\nNNSA officials told us that the agency remains committed to ending plutonium operations in the Chemistry and Metallurgy Research facility by the end of 2019. In commenting on a draft of this report, NNSA stated that the Office of Defense Programs may choose to accept risk or a gap in plutonium analysis capabilities to support this commitment if the first CMRR subproject is not completed by the end of 2019. One official also said NNSA is evaluating options to account for any gaps in capabilities and has worked with contractor representatives to prioritize establishing the most important capabilities first so that any gaps would involve less critical capabilities.",
"NNSA’s cost estimate for the revised CMRR project exhibited two of the four characteristics of a high-quality, reliable estimate. We reviewed and assessed NNSA’s August 2014 CD-1 cost estimate covering the entire revised CMRR project—a cost range from $1.5 billion to $2.0 billion— against the four characteristics of reliable cost estimating: (1) comprehensive, (2) well documented, (3) accurate, and (4) credible. We found that NNSA’s cost estimate was substantially comprehensive and well documented. For example, the estimate recorded all ground rules and assumptions and fully defined the project’s scope, including technical characteristics and performance, design, and quality assurance requirements, which are important for comprehensiveness. The estimate also sufficiently described the methods used to calculate the cost of each component of the estimate, which helps make an estimate well documented. Figure 2 shows our assessment of NNSA’s cost estimate and appendix III contains additional information about the details supporting our assessment.\nWe found that NNSA’s cost estimate was partially accurate, in part, because the project team did not determine the project’s most likely costs when calculating management reserve and the total cost range for the project. Specifically, the project team generally used appropriate estimating techniques to develop the point estimate. The team, however, then increased the point estimate by as much as 50 percent to include funds for management reserve. According to our cost guide, management reserve is typically the amount of funds the contractor may need to spend to account for uncertainty. According to best practices, managers should use analyses, such as a risk analysis, to calculate a project’s most likely costs, and the estimate should not be overly conservative or optimistic. Contractor project team members told us that they set the amount of management reserve funding based on their subject matter experts’ assessments about the uncertainty related to the project and not on a formal risk analysis.\nSimilarly, contractor project team members told us that they created the top end of the total cost range by applying the highest amount possible under DOE guidance rather than using a risk analysis to calculate the most likely costs. DOE guidance suggests that NNSA could have added from 20 percent to 100 percent to the point estimate to create the top end of the range, depending on the level of information available about the project’s scope of work. Project team members said they determined that the highest amount possible was appropriate based on their subject matter experts’ opinion that the project carried high levels of uncertainty. However, adding the highest amount possible above the point estimate may increase the high end of the cost range more than necessary. Because NNSA calculated management reserve and the total cost range based on assumptions rather than analyses, the high end of the cost range may overestimate the funds that will be needed and may not provide management with reliable information to inform its decisions.",
"We found that NNSA’s cost estimate was partially credible, in part, because NNSA did not follow the best practice to conduct a sensitivity analysis. A sensitivity analysis quantifies the extent to which the cost estimate could vary because of changes in key assumptions and ground rules. Performing such an analysis increases the chance that decisions that influence the design of the project will be made with a focus on the elements that have the greatest effect on cost. The CMRR project team created a document that it labeled a sensitivity analysis to support its cost estimate, but this analysis did not follow most of the steps for conducting a sensitivity analysis as called for by best practices. The project team members said that they plan to conduct a sensitivity analysis to support the baseline cost estimate at CD-2. This would be in keeping with the Secretary’s June 2015 memorandum and the May 2016 update to Order 413.3B, which direct project managers to develop cost estimates in accordance with best practices found in our cost guide, including sensitivity analysis.\nThe cost estimate also was partially credible because NNSA did not conduct an independent cost estimate of the revised CMRR project. According to best practices, an independent cost estimate is generated by an entity that has no stake in approval of the project and provides an unbiased test of whether a project estimate is reasonable. Prior to CD-1, DOE conducted an independent cost review of the project estimate, which addresses a cost estimate’s high-value, high-risk, and high-interest aspects without evaluating the remainder of the estimate, as permitted under Order 413.3B. The independent cost review identified a number of problems with NNSA’s cost estimate, such as estimation errors, and according to DOE officials, NNSA incorporated some of the independent cost review team’s comments and recommendations prior to CD-1. Nevertheless, an independent cost estimate is a more thorough analysis than an independent cost review. We have previously recommended that DOE require independent cost estimates for all major projects at CD-1 to improve the credibility of cost estimates at this stage, but DOE has made independent cost estimates optional at CD-1. Project officials told us NNSA is preparing to have an independent cost estimate conducted to support the CD-2 cost estimate, which is required by Order 413.3B.",
"NNSA has committed to improving its performance in managing major construction projects and has recently taken important steps toward achieving that end. However, NNSA’s planning for the revised CMRR project at the Los Alamos National Laboratory indicates that the agency still has work to do. Specifically, NNSA did not identify a type of requirement called a key performance parameter in the revised CMRR project’s requirements document, contrary to NNSA’s requirements policy. These performance parameters are important because they define how well a project will perform its functions, expressed in terms such as capacity or throughput. One of the revised CMRR project’s primary functions is to provide plutonium analysis to support producing new plutonium pits for life extension programs that are critical to NNSA’s nuclear modernization efforts. NNSA needs a sufficient amount of plutonium analysis capacity to support the agency’s pit production plans, but it is currently unclear how well the project will support NNSA’s plan to develop the capability to produce 50 to 80 pits per year by 2030. By updating the program requirements document for the revised CMRR project to identify a key performance parameter that describes a pit production rate, NNSA could clarify the extent to which the project will support pit production plans, better enabling the agency to identify whether it will need to acquire additional plutonium analysis equipment or space by other methods. Also, NNSA officials told us that if the revised CMRR project does not provide sufficient plutonium analysis capacity to support a 50 to 80 pits-per-year rate by 2030, they do not have an alternate plan for obtaining that capacity. Given the uncertainty associated with the revised CMRR project supporting a 50 to 80 pits-per- year rate, having a plan for providing sufficient analysis capacity if the revised CMRR project will not support this rate may better enable NNSA to meet its pit production plans and support planned life extension programs critical to the agency’s modernization efforts.\nIn addition, NNSA’s broadly stated first requirement for the revised CMRR project suggests that the project must meet plutonium analysis needs of all DOE and NNSA program offices with plutonium analysis operations at Los Alamos. However, the revised CMRR project’s scope is focused on exclusively meeting the needs of the Office of Defense Programs. Other DOE and NNSA offices may use the plutonium analysis equipment installed for the CMRR project, if and when it is available, but NNSA is not including plutonium analysis equipment in the scope of the project specifically to meet their needs. NNSA’s requirements policy states that the project’s requirements should be a comprehensive set of what the project must provide to satisfy the mission need. By updating the program requirements document for the revised CMRR project to clarify whether the CMRR project will provide plutonium analysis equipment to meet the needs of DOE and NNSA programs other than those in the Office of Defense Programs, managers and stakeholders may have a clearer understanding of the extent to which the project will satisfy DOE and NNSA programs’ needs.\nWe commend the Secretary of Energy for issuing the May 2016 update to Order 413.3B—and the June 2015 department-wide memorandum that preceded it—directing project teams to develop and maintain integrated master schedules consistent with the best practices in our schedule guide. Such a step is likely to improve schedule outcomes for the agency. However, NNSA did not maintain the integrated master schedule it created at CD-1 for the revised CMRR project, and the schedule that the agency plans to create to support the first CD-2 decision by the end of September 2016 may not meet the criteria for an integrated master schedule and, therefore, may not conform to the May 2016 update to Order 413.3B. Without developing and maintaining an integrated master schedule that includes all project activities under all subprojects prior to approving the first CD-2 decision for the revised CMRR project, consistent with current DOE project management policy and scheduling best practices, NNSA does not have reasonable assurance that it has a mechanism for measuring progress and identifying potential problems in meeting schedule milestones for the revised CMRR project. Also, waiting until the second CD-2 decision in mid-2017 to create the integrated master schedule means NNSA will not conduct a schedule risk analysis for the entire project until then. Conducting a schedule risk analysis to support the first CD-2 decision by the end of September 2016 may provide NNSA with information about the level of confidence that the agency can have in its ability to complete the first subproject by the end of 2019. However, without conducting a comprehensive schedule risk analysis that applies to the integrated master schedule to identify the likelihood that the project can meet all of its estimated completion dates, NNSA does not have reasonable assurance that it can meet the project’s overall 2024 completion date.\nRegarding the Plutonium Modular Approach, NNSA has approved the mission need for another potentially multi-billion dollar project at Los Alamos. NNSA, however, prematurely identified a specific solution when it approved the mission need—contrary to Order 413.3B and best practices—by stating that the Plutonium Modular Approach would construct high-hazard, high-security laboratory space. NNSA also specifically set the project’s first requirement as building no less than two modular nuclear facilities at Los Alamos with full operating capability by 2027. By defining the mission need and requirements in terms of this specific type of laboratory space and nuclear facility, NNSA has effectively predetermined that it is the only alternative that can meet the mission need and satisfy requirements. By rephrasing the mission need statement and requirements so they are independent of a particular solution before conducting the analysis of alternatives, NNSA may be better positioned to objectively consider other alternatives before making its selection of a project alternative at CD-1.\nAlso, when approving the mission need for the Plutonium Modular Approach, NNSA did not identify key performance parameters or program-specific requirements in the program requirements document. NNSA’s requirements policy directs NNSA to develop requirements that include key performance parameters in the program requirements document when it is first developed, and according to the best practices that we have identified for conducting analyses of alternatives, setting requirements early in the analysis of alternatives process helps ensure that the selected alternative best meets the agency’s needs. By defining key performance parameters or program-specific requirements before conducting the analysis of alternatives, NNSA would have better information about programs’ specific needs to inform its analysis and to provide a clearer basis for selecting a project alternative at CD-1.",
"We are making seven recommendations to the Secretary of Energy.\nTo ensure that NNSA will acquire sufficient plutonium analysis equipment and space to meet its needs, including pit production to support critical life extension programs, we recommend that the Secretary direct that the Under Secretary for Nuclear Security, in his capacity as the NNSA Administrator: update the program requirements document for the revised CMRR project to identify a key performance parameter that describes the plutonium analysis capacity the CMRR project is required to provide to support specific pit production rates and specify plans for how the agency will obtain additional plutonium analysis capacity if the revised CMRR project will not provide sufficient plutonium analysis capacity to support NNSA’s pit production plans.\nTo ensure that NNSA will provide clear information to stakeholders about the program needs that the revised CMRR project will satisfy, we recommend that the Secretary direct the Under Secretary for Nuclear Security, in his capacity as the NNSA Administrator, to update the program requirements document for the revised CMRR project to clarify whether the project will provide plutonium analysis equipment to meet the needs of DOE and NNSA programs other than those in the Office of Defense Programs.\nTo ensure that NNSA’s future schedule estimates for the revised CMRR project provide the agency with reasonable assurance regarding meeting the project’s completion dates, we recommend that the Secretary direct the Under Secretary for Nuclear Security, in his capacity as the NNSA Administrator, to develop future schedules for the revised CMRR project that are consistent with current DOE project management policy and scheduling best practices. Specifically: develop and maintain an integrated master schedule that includes all project activities under all subprojects prior to approving the project’s first CD-2 decision and conduct a comprehensive schedule risk analysis that applies to the integrated master schedule to identify the likelihood the project can meet its completion dates.\nTo ensure that NNSA is better positioned to objectively consider alternatives before making its selection of an alternative for the Plutonium Modular Approach, we recommend that the Secretary direct the Under Secretary for Nuclear Security, in his capacity as the NNSA Administrator, before completing the analysis of alternatives, to rephrase the statement of mission need and requirements for the Plutonium Modular Approach so that they are independent of a particular solution.\nFinally, to ensure that NNSA has information about program-specific needs to inform its analysis of alternatives for the Plutonium Modular Approach and to provide a clearer basis for selecting a project alternative, we recommend that the Secretary direct the Under Secretary for Nuclear Security, in his capacity as the NNSA Administrator, before completing the analysis of alternatives, to identify key performance parameters and program-specific requirements for the Plutonium Modular Approach.",
"We provided a draft of this report to DOE and NNSA for their review and comment. In its written comments, reproduced in appendix IV, NNSA generally neither agreed nor disagreed with our recommendations, although it outlined actions taken and planned to address each of our recommendations. NNSA also provided technical comments, which we incorporated in the report as appropriate.\nConcerning our findings, in its comments, NNSA stated that the report substantially misinterprets the relationship between the CMRR project and plutonium pit production. NNSA also stated that the report incorrectly implies that the driver for the CMRR project and the project's ultimate success depend on meeting plutonium pit production needs when the goal of the project is to replace specific plutonium analysis capabilities. We state in this report that the revised CMRR project’s purpose is to provide plutonium analysis capabilities to facilitate replacing the aging Chemistry and Metallurgy Research facility. However, we also state that, according to NNSA documents, one of the primary functions of these analysis capabilities is to support NNSA’s efforts to produce new plutonium pits for life extension programs that are critical to nuclear modernization efforts. As such, the revised CMRR project plays a key role in supporting NNSA’s pit production plans. We agree that the success of the CMRR project should not be measured in terms of actual pits produced, but rather in terms of the plutonium analysis capacity the project provides in support of production efforts and other stockpile stewardship needs. As a result, we continue to believe that it is important for the agency to be clear about how well the CMRR project will support NNSA’s pit production plans. In addition, NNSA stated that the report does not reflect the depth and breadth of steps NNSA has taken in the last 2 years to improve project management in accordance with the Secretary of Energy's new policies. As we state in the report, we are pleased with the steps that NNSA has recently taken to improve project management, including the Secretary’s new policies, and we are hopeful that they will lead to improved outcomes.\nConcerning our recommendations, in its written comments NNSA outlined planned actions that are responsive to two of our seven recommendations. Specifically, the first of these two recommended that NNSA specify plans for how the agency will obtain additional plutonium analysis capacity if the revised CMRR project will not provide sufficient capacity to support pit production plans. In its written comments, NNSA stated that it will update its plutonium strategy to include estimates of the requirements and additional means, if needed, to achieve the required capacity. NNSA stated that this action will be completed by September 30, 2017. The second of these two recommended that NNSA update the CMRR program requirements document to clarify whether the project will provide plutonium analysis equipment to meet the needs of DOE and NNSA programs other than those in the Office of Defense Programs. NNSA stated that it will update this document to clarify that the project will not install any unique analysis equipment required solely for non-defense-related programs. NNSA estimated the completion date for this activity to be December 31, 2017, or the next planned revision of the program requirements document.\nRegarding our other five recommendations, NNSA outlined actions planned or taken that we do not believe are sufficiently responsive. Specifically, regarding our recommendation that NNSA identify a key performance parameter for the CMRR project that describes the plutonium analysis capacity needed to support specific pit production rates, NNSA stated that it is important to understand how the revised CMRR project will support the agency’s overall plutonium strategy, including pit production and other NNSA programs. However, NNSA did not agree that it would be appropriate to establish a key performance parameter for the revised CMRR project related to supporting a specific pit production rate. The agency stated that incorporating such a key performance parameter would require the project to rely on factors beyond its control to demonstrate that it had met such a performance parameter before the project was completed. Instead, NNSA stated that it will perform an analysis to estimate a pit production capacity range that the project will support and include a reference to this analysis in its next revision to the program requirements document. Although conducting this analysis and including a reference to it in the program requirements document may be helpful, it may not be sufficient to describe how well the CMRR project will perform one of its primary functions—conducting plutonium analysis that is essential to supporting NNSA’s pit production activities. As a result, we continue to believe that it is important for NNSA to define this information in a key performance parameter.\nRegarding our recommendation that NNSA develop and maintain an integrated master schedule that includes all project activities contained within the revised CMRR project, NNSA stated that it does not intend to create one integrated master schedule. Instead, NNSA reiterated its plan—described earlier in this report—to create a separate schedule for each subproject as it reaches CD-2 rather than create an integrated master schedule that includes all project efforts. NNSA stated that, because the subprojects are minimally interdependent, there is little value to be gained by developing an integrated master schedule for the entire project. NNSA also stated that the subproject schedules will reflect best practices defined in our schedule guide, including representing effort beyond the near-term that is less well defined as planning packages. We are pleased that DOE plans to incorporate the scheduling best practices into the subproject schedules. However, NNSA’s proposed action does not meet the criteria for an integrated master schedule because it will not result in a schedule that includes all activities needed to complete the project when NNSA approves the first schedule baseline by the end of September 2016. At that time, the project schedule will reflect work activities only through 2019. Given that the entire CMRR project schedule is anticipated to extend into the mid-2020s, we continue to believe that it is necessary for NNSA to follow the best practice of creating an integrated master schedule that reflects the entire project because it provides the transparency needed to properly manage this complex project.\nSimilarly, regarding our recommendation that NNSA conduct a comprehensive schedule risk analysis for the revised CMRR project, NNSA stated that, rather than conduct a risk analysis that applies to an integrated master schedule, it would conduct separate schedule risk analyses for each of the subproject schedules in accordance with our schedule guide. We are pleased that NNSA will follow best practices when conducting these analyses. Conducting individual schedule risk analyses on each subproject schedule could provide information regarding the level of confidence associated with meeting the subprojects’ estimated completion dates. However, a comprehensive risk analysis performed on an integrated master schedule—a best practice—is important to identify threats and opportunities that may affect multiple subprojects and the entire CMRR project.\nRegarding our recommendation that NNSA rephrase the statement of mission need and requirements for the Plutonium Modular Approach to be independent of a particular solution, NNSA stated that it concurs with the recommendation. However, NNSA stated that it believes the conclusions articulated in our report that the agency has preselected an alternative for the Plutonium Modular Approach are incorrect and that it initiated the analysis of alternatives process in May 2016, which was always intended to be independent of a particular solution. We are encouraged by NNSA’s statement that it intends to conduct the analysis of alternatives independent of a particular solution. However, we do not believe that NNSA’s actions are responsive to this recommendation because these actions do not include rephrasing the mission need statement and requirements. Since the mission need statement provides the foundation on which the analysis of alternatives process is based, we believe that continuing to define the mission need in terms of a specific solution—constructing high-hazard, high-security laboratory space— creates a potential bias against other potentially viable alternatives.\nRegarding our recommendation that NNSA identify key performance parameters and program-specific requirements before conducting the analysis of alternatives for the Plutonium Modular Approach, NNSA stated in its written comments that it plans to develop initial key performance parameters, consistent with applicable DOE policy, after it completes the analysis of alternatives. The applicable policy, however, is NNSA’s. Under NNSA policy, NNSA is directed to define these parameters prior to approving the mission need at CD-0 rather than after the agency completes the analysis of alternatives, as NNSA is proposing to do. Therefore, we continue to believe that NNSA should identify these parameters before completing the analysis of alternatives that they have already begun.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Energy, the Administrator of NNSA, and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or trimbled@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to the report are listed in appendix V.",
"In this report, we assessed: (1) the extent to which the National Nuclear Security Administration’s (NNSA) revised Chemistry and Metallurgy Research Replacement (CMRR) project is expected to meet NNSA and other Department of Energy (DOE) programs’ plutonium analysis needs at Los Alamos National Laboratory; (2) the extent to which the Plutonium Modular Approach is expected to meet plutonium analysis needs at Los Alamos; (3) how the revised CMRR project’s scope and cost compare with those of the previously approved CMRR project; and (4) the extent to which the revised CMRR project’s schedule and cost estimates reflect scheduling and cost estimating best practices.\nTo assess the extent to which NNSA’s revised CMRR project is expected to meet NNSA and DOE programs’ plutonium analysis needs, we first identified the plutonium analysis equipment, space for that equipment, and the analysis capacity that the project is expected to provide. This information was contained in a set of documents that NNSA and its management and operating contractor at Los Alamos developed to support the revised project’s most recent critical decision (CD) milestone in August 2014, CD-1, including the mission need statement and program requirements document. We also reviewed documents that NNSA and its management and operating contractor at Los Alamos created after the revised CMRR project’s CD-1 approval, including analyses that estimated the project’s plutonium analysis capacity. We reviewed the revised CMRR project’s mission need statement and program requirements document in light of DOE’s project management directive Order 413.3B and accompanying DOE guidance and NNSA’s business operating procedure for program requirements documents, as appropriate. We interviewed officials from the CMRR project sponsor, NNSA’s Office of Defense Programs’ Office of Major Modernization Programs, and other project stakeholders, including NNSA’s Office of Acquisition and Project Management, DOE’s Office of Project Management Oversight and Assessments, and DOE’s Office of Enterprise Assessments, about the revised CMRR project. We also interviewed Los Alamos contractor representatives involved with the revised CMRR project during a visit to the Los Alamos site in August 2015 and later by telephone. We then reviewed documentation of NNSA and DOE programs’ planned plutonium analysis needs at Los Alamos, as summarized in planning documents created by the Los Alamos contractor and as contained in the CD-1 documentation. We discussed the information in these documents with officials from NNSA’s Offices of Defense Programs and other relevant program offices, including the NNSA Office of Defense Nuclear Nonproliferation’s Advanced Recovery and Integrated Extraction System (ARIES) and the DOE Office of Nuclear Energy’s Office of Space and Defense Power Systems. We selected these program offices because after the Office of Defense Programs, they conduct the most plutonium analysis at Los Alamos.\nTo determine the extent to which NNSA’s Plutonium Modular Approach is expected to meet plutonium analysis needs, we reviewed documentation supporting DOE’s November 2015 approval of the mission need (CD-0), including the mission need statement and program requirements document. We reviewed the mission need statement in light of DOE Order 413.3B and accompanying DOE guidance. We interviewed NNSA officials with the Office of Defense Programs’ Office of Major Modernization Programs—the Plutonium Modular Approach sponsor— and other stakeholders, including NNSA’s Office of Acquisition and Project Management and DOE’s Office of Project Management Oversight and Assessments. We also interviewed Los Alamos contractor representatives during our August 2015 site visit and officials with the Office of Space and Defense Power Systems and ARIES to discuss their involvement with the project.\nTo assess how the cost and scope of NNSA’s revised CMRR project compare with those of the previously approved CMRR project, which included the construction of a nuclear facility, we reviewed the revised project’s CD-1 documentation and noted instances where the revised CMRR project CD-1 documentation discussed the difference between the cost estimates for the previously approved project and the revised project, including in the CD-1 approval memo signed by the Deputy Secretary of Energy and in a slide presentation that NNSA provided to a DOE acquisition advisory board. Regarding the projects’ scopes of work, we also reviewed the revised project’s CD-1 documentation and noted instances where it discussed the scope that NNSA planned to include in the previously approved project but that the agency eliminated from the revised project. We also reviewed an analysis conducted by the Department of Defense’s Office of Cost Assessment and Program Evaluation that included a comparison of the scope of the CMRR nuclear facility with the scope of the two subprojects that make up the revised CMRR project and the Plutonium Modular Approach, and we interviewed officials from this office about their analysis.\nTo assess the extent to which the revised CMRR project schedule and cost estimates reflect scheduling and cost-estimating best practices, we compared the schedule and cost estimates with best practices. Specifically, for our assessment of the revised CMRR project schedule estimate, we used the criteria in the May 2012 GAO Schedule Assessment Guide (schedule guide). The schedule guide identifies 10 best practices associated with effective scheduling: (1) capturing all activities, (2) sequencing all activities, (3) assigning resources to all activities, (4) establishing the duration of all activities, (5) verifying that the schedule can be traced horizontally and vertically, (6) confirming that the critical path is valid, (7) ensuring total reasonable float, (8) conducting a schedule risk analysis, (9) updating the schedule using actual progress and logic, and (10) maintaining a baseline schedule. We assessed an August 2015 version of the revised CMRR project schedule that NNSA’s contractor at Los Alamos had updated since the project’s August 2014 CD-1 approval. We did not assess the August 2014 project schedule estimate that NNSA developed to support CD-1 approval, because the agency did not provide us with an electronic copy of the CD-1 schedule, which was necessary to conduct our analysis. NNSA provided the August 2015 project schedule to us in two parts, one for each of the two subprojects that make up the revised CMRR project. We assessed each subproject’s schedule estimate against the criteria in our schedule guide and then combined the scores to create the overall schedule assessment. For our assessment of the revised CMRR project cost estimate, we used the criteria in the GAO Cost Estimating and Assessment Guide (cost guide). The cost guide identifies best practices for the development of reliable cost estimates and summarizes these best practices into four characteristics of high-quality cost estimating—comprehensive, well documented, accurate, and credible. We reviewed the revised CMRR project cost estimate that NNSA prepared to support the CD-1 approval in August 2014 and assessed the extent to which it exhibited the characteristics of high-quality cost estimating and the associated best practices. We also reviewed the project’s CD-1 documentation that supported the cost estimate. For the schedule and cost assessments, we interviewed members of the CMRR project team, which consisted of NNSA officials and Los Alamos contractor representatives who helped develop and maintain the estimates, to determine the policies and procedures the project team had followed to develop the estimates. We also interviewed officials with DOE’s Office of Project Management Oversight and Assessments to understand the department’s schedule and cost estimating policies and guidance, and we reviewed those policies and guidance. After conducting our initial assessments of the schedule and cost estimates, we shared our draft analyses with NNSA officials and contractor representatives and obtained comments and additional information, which we then incorporated as appropriate. We did not assess the schedule or cost estimates for the Plutonium Modular Approach because NNSA had not approved the estimates when we started our review.\nWe conducted this performance audit from May 2015 to August 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"When the National Nuclear Security Administration (NNSA) approved critical decision (CD) 1 (select alternative) for the revised Chemistry and Metallurgy Research Replacement (CMRR) project at Los Alamos National Laboratory in New Mexico in August 2014, the project’s future work was organized under two subprojects. The first subproject, Radiological Laboratory Utility Office Building Equipment Installation Phase 2, involved installing plutonium analysis equipment in the radiological laboratory. The second subproject, Plutonium Facility 4 Equipment Installation, involved installing new plutonium analysis equipment in Plutonium Facility 4, the only high-hazard, high-security, fully operational plutonium facility in the country for producing plutonium pits, after removing contaminated equipment in space no longer in use. For our assessment of the revised CMRR project schedule, we used the criteria in the GAO Schedule Assessment Guide (schedule guide), which identifies 10 best practices associated with effective scheduling. We assessed an August 2015 version of the revised CMRR project schedule that NNSA’s contractor at Los Alamos had updated since the project’s approval in August 2014. We did not assess the project schedule estimate that NNSA developed to support the August 2014 CD-1 approval because the agency did not provide us with an electronic copy of that schedule. NNSA provided the August 2015 project schedule to us in two parts, one for each of the subprojects. We assessed each subproject’s schedule estimate against the criteria in our schedule guide and then combined the scores to create the overall schedule assessment. Table 2 presents our assessment, including a narrative summary of the subprojects’ schedule estimates and overall scores in terms of the 10 best practices.",
"The GAO Cost Estimating and Assessment Guide (cost guide) identifies best practices for the development of reliable cost estimates. The cost guide identifies the following four characteristics of a high-quality, reliable cost estimate: comprehensive, well documented, accurate, and credible. Using the criteria in our cost guide, we assessed the extent to which the National Nuclear Security Administration’s (NNSA) August 2014 cost estimate for both subprojects of the revised Chemistry and Metallurgy Research Replacement (CMRR) project exhibited the characteristics of high-quality cost estimating and the related best practices. NNSA created the cost estimate in June 2014 to support the revised CMRR project’s August 2014 critical decision (CD) 1 (select alternative). Table 3 shows scores for both the characteristics and the best practices, including a narrative summary of our findings for each best practice.",
"",
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"In addition to the individual named above, Dan Feehan (Assistant Director), Andrew Berglund, Antoinette Capaccio, John Delicath, Jennifer Echard, Emile Ettedgui, Keith Hornbacher, Jason Lee, Leslie Kaas Pollock, Sara Sullivan, and Kiki Theodoropoulos made significant contributions to this report."
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"question": [
"What did NNSA fail to specify regarding the CMRR project's plutonium analysis?",
"What does NNSA policy state?",
"What key parameter did NNSA not identify?",
"How may the CMRR project support the planned pit production rates?",
"Why did the project not include a pit production-related parameter?",
"Not identifying this parameter likely contributed to what?",
"How does the NNSA's total estimated cost for the revised CMRR project differ from the previously approved CMRR project?",
"What might have caused NNSA to overstate or misestimate its cost savings?",
"What advantages are there to NNSA's approach for the revised CMRR?",
"What disadvantages may there be in the revised CMRR project?",
"How well did the revised CMRR project meet best practices?",
"How did the schedule compare to best practices?",
"Why might NNSA not have maintained a complete schedule?",
"How does relying on a partial schedule affect other parts of the project?",
"What obstacles did the NNSA encounter in their current approach to budgeting for the design of large construction projects?",
"What loss was incurred as a result of NNSA reversing its decision to build a nuclear facility?",
"Why might have NNSA reversed their decision?",
"How might NNSA's new approved project still benefit the CMRR project?",
"What provision does senate report 113-44 include for GAO?",
"What does GAO's report assess?",
"What does GAO review in their report?"
],
"summary": [
"The Department of Energy's (DOE) National Nuclear Security Administration (NNSA) defined requirements for the revised Chemistry and Metallurgy Research Replacement (CMRR) project to provide plutonium analysis equipment at its Los Alamos site but did not specify the capacity for analyzing plutonium that the project should provide, making it possible that the project would not meet plutonium analysis needs.",
"NNSA policy states that project requirements should include key performance parameters, which describe how well a project will perform its functions, expressed in terms such as processing rate or capacity.",
"However, NNSA did not identify a key parameter that addresses a primary function of the project's analysis equipment—to analyze plutonium in support of producing an essential part of a nuclear weapon, known as a pit.",
"NNSA has determined that it needs sufficient analysis capacity to support producing pits, including at planned rates of 10 pits per year in 2024 and 50 to 80 pits per year by 2030, but an NNSA analysis shows that the revised CMRR project may not support these rates.",
"NNSA officials said the project's requirements do not include a pit production-related parameter because NNSA only tasked the CMRR project with replacing analysis equipment used in an aging facility, regardless of analysis capacity.",
"Not identifying this parameter likely contributed to the project potentially not providing sufficient analysis capacity to support planned pit production and may have contributed to different understandings among senior agency officials about how well the project will support pit production.",
"NNSA's total estimated cost for the revised CMRR project is lower than the cost of the previously approved CMRR project, which included a large nuclear facility, but NNSA may have overstated its cost savings.",
"NNSA's total estimated cost for the revised CMRR project is lower than the cost of the previously approved CMRR project, which included a large nuclear facility, but NNSA may have overstated its cost savings. NNSA's estimated savings from cancelling the previously approved nuclear facility did not account for work that the agency deferred to future projects, including a storage vault and tunnel.",
"NNSA's approach for the revised CMRR project allows costs to be spread out over time, improving NNSA's ability to concurrently fund other work.",
"However, the revised CMRR project includes less scope and is likely to provide less plutonium analysis capacity than the previously approved nuclear facility.",
"The revised CMRR project schedule and cost estimates only partially met best practices.",
"For example, the schedule did not include most of the work needed to complete the project. According to best practices, agencies should develop and maintain a schedule that contains all necessary work activities, but the revised project's schedule was limited to near-term work ending in 2017.",
"When NNSA created the revised CMRR schedule, DOE did not specifically require projects to maintain complete schedules after project approval.",
"Continuing to rely on a partial schedule limits managers' insight into how current activities might affect future completion dates, including NNSA's goal to end plutonium work in an aging facility at Los Alamos.",
"In recent years, NNSA has spent billions of dollars designing large construction projects, only to revisit options after cost increases and schedule delays.",
"At Los Alamos, NNSA reversed its prior decision to build a nuclear facility as part of the CMRR project after spending $450 million. The facility was to provide analysis equipment needed to support the production of pits as part of nuclear weapons life extension programs.",
"In recent years, NNSA has spent billions of dollars designing large construction projects, only to revisit options after cost increases and schedule delays. Instead, NNSA approved a revised CMRR project to install plutonium analysis equipment in existing facilities.",
"Instead, NNSA approved a revised CMRR project to install plutonium analysis equipment in existing facilities.",
"Senate report 113-44 includes a provision for GAO to review NNSA's revised CMRR project.",
"GAO's report assesses (1) the extent to which the revised CMRR project is expected to meet plutonium analysis needs, (2) how its cost and scope compare to the previously approved project, and (3) the extent to which its schedule and cost estimates reflect best practices, among other objectives.",
"GAO reviewed project documentation, assessed cost and schedule estimates against GAO-identified best practices, and interviewed NNSA and DOE officials and CMRR contractor representatives."
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CRS_R42441
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{
"title": [
"",
"Introduction",
"Medicare",
"Short-Term Medicare Changes (FY2013-FY2022)",
"Long-Term Medicare Changes (FY2023 and Beyond)",
"Age of Medicare Eligibility",
"Conversion of Medicare to a Premium Support System",
"Medicaid",
"Repeal of Certain Medicaid Provisions in ACA",
"Conversion of Medicaid to a Block Grant System",
"Private Health Insurance",
"Repeal of Certain Private Health Insurance Provisions in ACA",
"Other Health Care Proposals",
"Medical Malpractice",
"Other Health Reforms"
],
"paragraphs": [
"",
"On March 20, 2012, Representative Paul Ryan, the Chairman of the House Budget Committee, released the Chairman's mark of the FY2013 House budget resolution. Additional detail on budgetary objectives and justifications was provided in Chairman Ryan's report entitled \"The Path to Prosperity: A Blueprint for American Renewal,\" issued the same day. The House Budget Committee considered the Chairman's mark on March 21, 2012, and voted 19-18 to report the budget resolution to the full House. H.Con.Res. 112 was introduced in the House March 23, 2012, and was accompanied by the House Budget Committee report ( H.Rept. 112-421 ). The House agreed to H.Con.Res. 112 on March 29, 2012, by a vote of 228 to 191.\nThe House budget resolution sets general budgetary parameters. Among other things, it expresses the desired levels of spending for government health programs over 10 years (FY2013-FY2022), creates two health care-related reserve funds, and presents a policy statement regarding assumptions about future Medicare reforms. The budget resolution includes instructions for reconciliation to six committees, which are instructed to identify specified dollar amounts of deficit reduction. A budget resolution is not intended to establish details of spending or revenue policy and does not provide levels of spending for specific agencies or programs; it is not a law and is not signed by the President. Rather, the budget resolution provides the framework for the consideration of other legislation. While the House budget resolution suggests and assumes certain health care-related policy changes, separate legislation would need to be developed (by the committees of jurisdiction) and passed to actually modify federally funded health care programs.\nThe Congressional Budget Office (CBO) was asked to provide an analysis of the long-term budgetary impact of Chairman Ryan's budget proposal, and issued its report on March 21, 2012. CBO was provided additional detail by the staff of the House Budget Committee regarding assumptions that should be made while conducting the analysis that were not included in the budget resolution language or the accompanying report. CBO's analysis, however, does not provide an official cost estimate for legislation that might implement the proposal, as it did not conduct its analysis using actual legislative language and was asked to provide an impact analysis beyond the 10-year budgetary window. To conduct its analysis, CBO used its most recent long-term projections, which are based on an extension of CBO's baseline forecasts issued in March 2012.\nIn general, the budget proposal, as outlined in Chairman Ryan's \"Path to Prosperity\" report, in the committee report, and in CBO's analysis, suggests a change in the structure of the Medicare and Medicaid programs; the repeal of many of the provisions in the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010 (ACA, P.L. 111-148 , P.L. 111-152 ), including those that establish insurance exchanges; and changes to tort law governing medical malpractice.\nThis report provides a synopsis of the health care-related changes in Chairman Ryan's FY2013 budget proposal. This summary is based on the text of the Concurrent Resolution, the committee report, the FY2013 \"Path to Prosperity\" report, and the CBO analysis of the proposal. The collective details are referred to in this report as the \"budget proposal\" or Chairman Ryan's proposal. CRS provided a similar summary of the proposed health care changes included in the FY2012 House Budget in CRS Report R41767, Overview of Health Care Changes in the FY2012 Budget Offered by House Budget Committee Chairman Ryan .",
"Medicare is the nation's federal insurance program that pays for covered health services for most persons 65 years old and older and for most permanently disabled individuals under the age of 65. Generally, individuals are eligible for Medicare if they or their spouse worked for at least 40 quarters in Medicare-covered employment, are 65 years old, and are a citizen or permanent resident of the United States. Individuals under the age of 65 may also qualify for coverage if they have a permanent disability, have End-Stage Renal disease, or have amyotrophic lateral sclerosis (ALS).\nIn FY2012, the program will cover an estimated 50 million persons at an estimated total cost of $576 billion, accounting for approximately 3.6% of GDP. CBO estimates that federal Medicare spending (after deduction of beneficiary premiums and other offsetting receipts) will be about $492 billion in FY2012, accounting for about 13.7% of total federal spending. Medicare is an entitlement program, which means that it is required to pay for covered services provided to eligible persons so long as specific criteria are met. Spending under the program (except for a portion of the administrative costs) is considered mandatory spending and is not subject to the appropriations process.\nThe Medicare program has four parts, each responsible for paying for different benefits, subject to different eligibility criteria and financing mechanisms.\nPart A (Hospital Insurance, or HI) covers inpatient hospital services, skilled nursing care, and home health and hospice care. The HI trust fund is mainly funded by a dedicated payroll tax of 2.9% of earnings, with employers and workers each paying 1.45%. (The self-employed pay 2.9%.) ACA added an additional 0.9% hospital insurance tax on high-income taxpayers beginning in 2013. Part B (Supplementary Medical Insurance, or SMI) covers physician services, outpatient services, and some home health and preventive services. The SMI trust fund is funded through beneficiary premiums (set at 25% of estimated program costs for the aged) and general revenues (the remaining amount, approximately 75%). High-income enrollees pay higher premiums, and certain low-income enrollees receive assistance with their premiums from Medicaid. Enrollment in Part B is voluntary, with over 90% of Medicare beneficiaries choosing this option. Part C (Medicare Advantage, or MA) is a private plan option for beneficiaries that covers all Part A and B services, except hospice. Individuals choosing to enroll in Part C must also enroll in Part B. Part C is funded through both the HI and SMI trust funds. About 12 million (25%) of Medicare beneficiaries are enrolled in MA. Part D covers outpatient prescription drug benefits. Funding is included in the SMI trust fund and is financed through beneficiary premiums (set to cover 25.5% of costs), with the rest paid for out of general revenues and state transfer payments. High-income enrollees pay higher premiums, and low-income enrollees may receive assistance from Medicare with premiums and cost sharing. This portion of the program is also voluntary; about 60% of eligible Medicare beneficiaries are enrolled in a Part D plan, while another 13% are enrolled in an employer plan subsidized by Medicare.\nUnder traditional Medicare, Parts A and B, services are generally paid directly by the government on a \"fee-for-service\" basis, using different prospective payment systems or fee schedules. Under Parts C and D, private insurers are paid a monthly \"capitated\" amount to provide enrollees with at least a minimum standard benefit. Premium amounts may vary depending on which plan the enrollee selects. The capitated payment is adjusted to reflect the higher relative cost of older or sicker beneficiaries.\nSince its establishment in 1965, the Medicare program has undergone considerable change. Most recently, ACA made numerous changes to the Medicare program that modify provider reimbursements, provide incentives to improve the quality and efficiency of care, and enhance certain Medicare benefits.",
"Under CBO's Medicare baseline, net Medicare outlays are expected to total approximately $6.6 trillion over the next 10 years (FY2013-FY2022). The House budget resolution suggests total Medicare outlays of about 2% less than CBO's baseline over the same period. Because CBO's spending baseline is based on current law, its figures are based on the assumption that physician payment reductions and the 2% reduction in Medicare spending under Budget Control Act of 2011 sequestration requirements will both occur starting in 2013. Therefore, any reductions that are assumed under the proposed budget would be in addition to spending reductions already scheduled to occur (or to equivalent alternative spending reductions). The proposal did not suggest specific program changes that would reduce Medicare spending to this level over the 10-year period.\nThe budget proposal also assumes a repeal of the Independent Payment Advisory Board (IPAB) created by the ACA (Section 3403, as modified by 10320). Under current law, beginning in 2014, the IPAB is required to develop proposals to reduce the Medicare per capita expenditure growth rate if Medicare spending is projected to exceed a certain target. CBO estimates that the repeal of IPAB would cost $3.1 billion over 10 years. No other ACA Medicare provisions were explicitly mentioned.\nIn addition, the committee report ( H.Rept. 112-421 ) notes that the budget accommodates legislation that fixes the Medicare physician payment formula for the next 10 years. Specifically, Section 403 of H.Con.Res. 112 would provide procedural flexibility to allow for the consideration within the framework of the budget resolution of legislation that would reform the sustainable growth rate system (SGR), as long as the legislation did not increase the deficit for the period FY2013-FY2022.\nAs a result of these reductions (and changes that begin in FY2023), CBO estimates that Medicare spending as a portion of GDP in 2023 would decrease from 3.75% under CBO's baseline to 3.50% under the budget proposal.",
"Starting in 2023, the Ryan budget proposal would phase in an increase in the age of eligibility for Medicare and would convert the current Medicare defined benefits program to a fixed federal contribution. Assumptions regarding the broad parameters of the new system are outlined in Section 601, the \"Policy Statement on Medicare,\" of H.Con.Res. 112 . The \"Path to Prosperity\" document and the House report offer more specificity on suggested changes. However, as previously noted, while a budget resolution may suggest broad policy changes, separate legislation would need to be developed by the committees of jurisdiction and enacted into law to effect such changes.",
"The budget proposal would gradually increase the Medicare eligibility age to 67. Beginning in 2023, the age of eligibility for Medicare would increase by two months each year until it reached 67 in 2034. Younger individuals could still qualify on the basis of disability.",
"Under the Ryan budget proposal, current Medicare beneficiaries and individuals who become eligible for Medicare prior to 2023 (i.e., those who turn 55 in 2012), would remain in the current Medicare program (described earlier). Individuals who become eligible (based either on age or disability) for Medicare beginning in 2023 would be given the option of enrolling in a private insurance plan or a traditional fee-for-service option through a newly established Medicare exchange. These plans would be required to offer standard benefits that are at least actuarially equivalent to traditional fee-for-service benefits, and to accept all people eligible for Medicare who apply regardless of age or health status.\nAll of the plans, including the traditional fee-for-service option, would engage in an annual competitive bidding process. The lower of the second-lowest approved plan bid or fee-for-service Medicare would be used to establish the amount of the subsidy (premium support) provided by Medicare and the base premium paid by Medicare beneficiaries. The amount of the subsidy would generally be the same regardless of the cost of the plan; so, for instance, if a beneficiary selects a plan whose bid is higher than the second lowest bid, the beneficiary would pay a higher premium to make up the difference between the subsidy and the base premium. Similarly, if the beneficiary enrolls in a plan that bid lower than the second-lowest approved bid, the beneficiary would be provided a rebate in the amount of the difference. The payments to plans would be geography-rated and risk-adjusted for health status. Additionally, based on annual risk reviews conducted by the Centers for Medicare and Medicaid Services (CMS), fees would be imposed on plans that enrolled a higher-than-average number of low-risk beneficiaries; those that enrolled a higher-than-average number of high-risk (expensive) enrollees would receive incentive payments funded by the fees from the low-risk plans.\nIn 2023, the premium subsidy would be set at $7,500, on average. The amount of premium support provided to high-income individuals would be reduced. Low-income beneficiaries would be provided a dedicated savings account to be used to pay premiums, co-pays, and other out-of-pocket costs. The proposal suggests that program cost growth would be mitigated through the competitive bidding process; however, should that not occur, the proposal would limit annual per capita premium support increases to nominal GDP growth plus 0.5%. Should actual costs exceed this amount, Medicare beneficiaries would pay increased premiums to make up the difference. The proposal would limit the impact of these increases for low-income enrollees, with Medicaid continuing to pay for the out-of-pocket expenses for dual-eligibles (those who qualify for both Medicare and Medicaid), and additional funding would be provided in savings accounts for those who meet certain low-income limits but do not qualify for Medicaid.\nUnder this premium support model, CBO estimates that by 2030, 39% of Medicare beneficiaries would be enrolled in this new system and thus subject to these new spending constraints, and by 2050, this number would increase to 91%. While average spending per Medicare beneficiary is still expected to increase through time, it would do so at a slower rate. For example, in 2050, under the new system, spending for new enrollees (67 years old) would be $11,100 per year (in 2011 dollars) compared with $17,000 under CBO's baseline scenario. Under this proposal, net federal Medicare spending as a share of GDP would be expected to grow from 3.25% in 2011 to 4.75% in 2050, compared with 6.50% in 2050 under CBO's baseline scenario (see Table 1 ).\nThose who support converting the current system to a premium support model note that it sets a limit for the federal portion of Medicare spending and that an overhaul of the Medicare program is needed in order to avoid a debt crisis. Supporters also suggest that the new system would add price incentives at the consumer level and plans would be incentivized to control costs in order to be competitive. Those who oppose the model express concerns over the potential for increased out-of-pocket spending for health care for the elderly, the potential for the erosion of benefit coverage, and reduced access to health care services. Some also maintain that the proposal does not address the main reason for the growth in Medicare spending (i.e., excessive costs in the health care delivery system).\nThe impact of the proposed Medicare changes on the federal government, beneficiaries, and health care plans and providers would ultimately depend on how such a premium support system is designed and implemented. Numerous decisions, ranging from fundamental social policy decisions about the appropriate nature and level of federal financial support of the elderly to detailed administrative decisions, would need to be made before such a model could become operational. For example, decisions would need to be made regarding which parts of Medicare would be financed through premium subsidies, for example, would Parts A and B (and possibly D) and their trust funds be combined; would changes be made to the voluntary nature of Parts B and D (or could one opt out of Medicare entirely); and would beneficiary premiums be based on expected per capita Part B and D costs, or would they include the costs of Part A (which is now premium free for most enrollees). Decisions would also need to be made regarding whether Medicare Advantage would still be an option after 2023 for those currently age 55 and older or whether private plans would only be available through the exchanges, and whether the financial risk to private plans participating in the exchanges would be mitigated to encourage participation (e.g., Part D provides reinsurance for catastrophic costs and has risk corridors to limit losses). Additionally, as a final example, an administrative structure, including appropriate information technology systems, would need to be designed and established to support both traditional Medicare options and new options under the exchanges.",
"Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term care. Medicaid is jointly funded by the federal government and the states. In FY2012, the Medicaid program will cover an estimated 67 million people at any point during the fiscal year, and federal Medicaid payments to states are estimated to reach $275 billion in FY2012. In a typical year, the federal government covers roughly 57% of the total cost for Medicaid. Federal Medicaid spending is expected to reach about 1.7% of GDP in FY2012.\nEach state designs and administers its own version of Medicaid under broad federal rules. While states that choose to participate in Medicaid must comply with all federal mandated requirements, state variability is the rule rather than the exception in terms of eligibility levels, covered services, and how those services are reimbursed and delivered. ACA makes changes along these dimensions for the Medicaid program. Some of the changes are mandatory for states, and others may be implemented at state option. Most notable of these provisions is the expansion of Medicaid eligibility for individuals under the age of 65 with income up to 133% of the federal poverty level.\nThe unofficial estimate provided in Chairman Ryan's \"Path to Prosperity\" report states that the proposed budget would reduce federal outlays for Medicaid by about $810 billion over 10 years. When compared to CBO's baseline projection for federal Medicaid spending, the proposal would reduce federal Medicaid outlays by 17.6% from FY2013 to FY2022.\nAccording to CBO's long-term analysis of the proposal, when compared with long-term estimates of current law, combined federal spending for Medicaid, the State Children's Health Insurance Program (CHIP), and the exchange subsidies will be 76% to 78% lower in FY2050. Since spending on CHIP and exchange subsidies is expected to be small relative to federal spending on Medicaid over this time period, most of the reduction will come from the Medicaid program.\nTable 2 shows a comparison of projected federal spending on Medicaid, CHIP, and exchange subsidies as a percentage of GDP under CBO's extended baseline scenario, CBO's extended alternative fiscal scenario, and Chairman Ryan's proposal. By 2023, under Chairman Ryan's proposal, Medicaid and CHIP spending would comprise 1.25% of GDP, while under both CBO scenarios federal spending on Medicaid, CHIP, and exchange subsidies would total 3.00% of GDP.",
"The Medicaid provisions of ACA represent the most significant reform to the Medicaid program since its establishment in 1965. In general, ACA (1) raises Medicaid income eligibility levels for nonelderly individuals up to 133% of the federal poverty level, (2) adds both mandatory and optional benefits to Medicaid, (3) increases the federal matching payments for certain groups of beneficiaries and for particular services provided, (4) provides new requirements and incentives for states to improve quality of care and encourage more use of preventive services, and (5) makes a number of other Medicaid program changes. The major expansion and reform provisions in ACA are slated to take effect in 2014.\nOne of the \"illustrative policy options\" offered in the House Budget Committee report ( H.Rept. 112-421 ) includes repealing the Medicaid expansion included in ACA.",
"Another \"illustrative policy option\" included in the House Budget Committee report ( H.Rept. 112-421 ) is restructuring Medicaid from an individual entitlement program to a block grant program. Few details are available regarding the specific design of the proposed block grant. The proposal indicates that (1) federal funding to states would increase annually according to inflation (CPI-U) and population growth, and (2) states would be provided additional flexibility to design and administer their Medicaid programs.\nProponents of the block grant model suggest that this design would make federal Medicaid spending more predictable and provide states with stronger incentives to control the cost of their Medicaid programs. Additionally, this design could relieve some of the cost burden to states by removing certain federal Medicaid requirements.\nAccording to CBO, the implications of converting Medicaid to a block grant program would depend on how states respond to the change. With the added flexibility provided under Chairman Ryan's proposal, states could improve the efficiency of their Medicaid programs. However, even with significant efficiency gains, the magnitude of the federal Medicaid spending reductions under this proposal would make it difficult for states to maintain their current Medicaid programs. As a result, states would have to weigh the impact of maintaining current Medicaid service levels against other state priorities for spending. They could choose to constrain Medicaid expenditures by reducing provider reimbursement rates, limiting benefit packages, and/or restricting eligibility. These types of programmatic changes could also affect the access to and the quality of medical care for Medicaid enrollees. For example, if states reduce the Medicaid reimbursement rates to providers, such as hospitals, physician, and nursing homes, these providers may be less willing to participate in Medicaid at all or accept new Medicaid patients.",
"Private health insurance covers over 195 million people in the United States. Workers and their families often receive health insurance as a fringe benefit from their employers. Some individuals and families purchase private insurance on their own, where premiums and benefits may be based on health status and may be more limited than in the employer market.\nReflecting the attributes of these different \"customers\" for insurance (larger firms, smaller firms, and individuals), the private health insurance market is made up of three different segments: the large group market, the small group market, and the nongroup (individual) market. Each of these market segments offer distinct insurance products, and each is subject to different regulatory standards. Traditionally, the primary regulators of private insurance have been the states. However, overlapping federal requirements complicate the regulation of this industry and enforcement of insurance standards.\nACA's private market provisions were designed to expand federal standards applicable to the private health insurance market, and increase access to coverage, such as establishment grants for the creation of state-based exchanges to offer private health insurance options to individuals and small employers. The law also increases access to health insurance coverage by subsidizing private insurance premiums and cost-sharing for certain lower-income individuals enrolled in exchange plans, among other provisions. These costs are projected to be offset by reduced spending for public coverage, and by increased taxes and other revenues.\nACA creates several programs to increase access and funding for targeted groups, including establishment of temporary high-risk pools for uninsured individuals with preexisting conditions, and funding for non-profit organizations offering coverage to small businesses and individuals. Other private insurance provisions include those that build on the state-based regulatory system, such as the review of proposed increases of health insurance premiums, and programs to mitigate risk across health plans (such as risk adjustment and reinsurance).",
"H.Con.Res. 112 contains a reserve fund (Section 401) that would provide procedural flexibility to allow for the consideration of legislation that would repeal ACA as amended. Moreover, one of the \"illustrative policy options\" included in the House Budget Committee report is repeal of the \"exchange subsidies created by the new health care law.\"\nThe unofficial estimate provided in the \"Path to Prosperity\" report states that more than $800 billion would be saved over 10 years (beginning FY2013) due to the repeal of the exchange subsidies and other implementation-related funding. More specifically, the repeal of funding would extend beyond the premium tax credits and cost-sharing subsidies established under ACA for certain exchange enrollees. The savings estimate also includes the grants to states for the establishment of exchanges and review of proposed premium increases, temporary high risk pools, funding program for non-profit health organizations, and payments for risk adjustment and reinsurance.",
"",
"Medical malpractice has attracted congressional attention numerous times over the past few decades, particularly in the midst of three \"crisis\" periods for medical malpractice liability insurance in the mid-1970s, the mid-1980s, and the early 2000s. These periods were marked by sharp increases in medical liability insurance premiums, difficulties in finding any liability insurance in some regions and among some specialties as insurers withdrew from providing coverage, reports of providers leaving areas or retiring following insurance difficulties, and a variety of public policy measures at both the state and federal levels to address the market disruptions. In each case, attention receded to some degree after a few years as premium increases moderated and market conditions calmed.\nThe overall medical liability insurance market is not currently exhibiting the same level of crisis as in previous time periods. Nonetheless, problems with the affordability and availability of malpractice insurance persist, especially in particular regions and physician specialties (e.g., obstetricians). In addition, concern about claims for medical malpractice may affect individual provider decisions, particularly through increased use of tests and procedures to protect against future lawsuits (\"defensive medicine\"), which may affect health care costs. The malpractice system also experiences issues with equity and access. For example, some observers have criticized the current system's performance with respect to compensating patients who have been harmed by malpractice, deterring substandard medical care, and promoting patient safety.\nAccording to the Ryan \"Path to Prosperity\" report, the budget proposal assumes reforms to tort law governing medical malpractice, including a cap on awards for noneconomic damages and deterrents to frivolous lawsuits.",
"The \"Path to Prosperity\" report also suggests that the budget proposal assumes the following changes: individuals would be allowed to buy health insurance across state lines, the availability of consumer-directed health plans would be expanded, and employees would be provided with the option to use their employer's health coverage contribution toward other coverage options."
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{
"question": [
"What is \"The Path to Prosperity: A Blueprint for American Renewal\"?",
"What analysis did CBO issue?",
"What did the House Budget Committee decide about the Chairman's mark and budget resolution?",
"How was the resolution received by the House?",
"What does a budget resolution do?",
"How would changes assumed or suggested by a budget resolution become set in stone?",
"What changes does Chairman Ryan suggest in his budget proposal?",
"What does the budget proposal assume about ACA provisions?",
"What does the proposal assume about age of eligibility and Medicare?",
"How would the proposal restructure Medicaid?"
],
"summary": [
"On March 20, 2012, House Budget Committee Chairman Paul Ryan released the Chairman's mark of the FY2013 House budget resolution together with his report entitled \"The Path to Prosperity: A Blueprint for American Renewal,\" which outlines his budgetary objectives.",
"On the same day, CBO issued an analysis of the long-term budgetary impact of Chairman Ryan's budget proposal based on specifications provided by House Budget Committee staff.",
"The House Budget Committee considered and amended the Chairman's mark on March 21, 2012, and voted to report the budget resolution to the full House.",
"H.Con.Res. 112 was introduced in the House March 23, 2012, and was accompanied by the committee report H.Rept. 112-421. H.Con.Res. 112 was agreed to by the House on March 29, 2012.",
"A budget resolution provides general budgetary parameters; however, it is not a law.",
"Changes to programs that are assumed or suggested by the budget resolution would still need to be passed by separate legislation.",
"Chairman Ryan's budget proposal, as outlined in his report and in the CBO analysis, suggests short-term and long-term changes to federal health care programs including Medicare, Medicaid, and the health insurance exchanges established by the Patient Protection and Affordable Care Act as amended (ACA, P.L. 111-148, P.L. 111-152).",
"Within the 10-year budget window (FY2013-FY2022), the budget proposal assumes that certain ACA provisions would be repealed, including those that expand Medicaid coverage to the non-elderly with incomes up to 133% of the federal poverty level, and those provisions that establish health insurance exchanges.",
"Beyond the 10-year budget window, beginning in 2023, the budget proposal assumes an increase in the age of eligibility for Medicare and the conversion of Medicare to a fixed federal contribution program.",
"The proposal would also restructure Medicaid from an individual entitlement program to a block grant program."
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GAO_GAO-12-696
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{
"title": [
"Background",
"EPA Plays a Key Role in Protecting the Environment",
"Responsibilities for EPA’s Information Security Program",
"Control Weaknesses Threaten Information and Systems Supporting EPA’s Mission",
"EPA Did Not Fully Implement Access Controls",
"EPA Did Not Effectively Implement Other Controls",
"EPA Has Not Fully Documented and Implemented Components of Its Information Security Program",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objective, Scope, and Methodology",
"Appendix II: Comments from the Environmental Protection Agency",
"Appendix III: GAO Contacts and Staff Acknowledgments",
"GAO Contacts",
"Staff Acknowledgments"
],
"paragraphs": [
"Safeguarding government computer systems and the sensitive information that resides on them is an ongoing challenge because of the complexity and interconnectivity of systems, the ease of obtaining and using hacking tools, the steady advances in the sophistication and effectiveness of attack technology, and the emergence of new and more destructive attacks. Without adequate safeguards, systems are vulnerable to individuals and groups with malicious intentions, who may obtain sensitive information, commit fraud, disrupt operations, or launch attacks against other computer systems and networks. Federal agencies have experienced a significant rise in security incidents in recent years, with data from the U.S. Computer Emergency Readiness Team showing an increase in security incidents and events from 29,999 in 2009 to 42,887 in 2011.",
"EPA was established in 1970 in response to concerns about environmental pollution. To perform its statutory responsibilities, EPA develops and enforces regulations and gives grants to and sponsors partnerships with state environmental programs, non-profit organizations, educational institutions, and others. In addition, the agency conducts research and publishes materials on a variety of environmental topics.\nIn fiscal year 2011, EPA’s appropriation was about $8.6 billion. The agency has headquarters in Washington, D.C., 10 regional areas, and multiple laboratories and centers that support research and development. At headquarters, EPA develops national programs, policies, and regulations for mission areas, as described in table 1.\nEPA’s regional offices are responsible for the execution of agency programs within the states, and within some regions, including U.S. territories. Figure 1 shows the distribution of these ten regions.\nEPA relies on IT to support its mission and achieve its goals. In fiscal year 2011, the agency reported having 117 agency-operated systems and 12 contractor-operated systems. These systems include networks, telecommunications, and specific applications. The Office of Technology Operations and Planning within the Office of Environmental Information provides centralized management and control of EPA’s IT resources and services, including the EPA wide area network, a primary general support system of EPA. The Office of Technology Operations and Planning is located in Washington, D.C., and provides connectivity to EPA program offices, regional offices and laboratories, and federal agencies. It is responsible for the planning, design, operation, management, and maintenance of the EPA wide area network with support from on-site contractors and its Managed Trusted Internet Protocol Services (MTIPS) service provider. Two divisions within the Office of Technology Operations and Planning have primary responsibility for carrying out day- to-day operations of these services: the National Computer Center (NCC), located in Research Triangle Park, North Carolina, is responsible for EPA’s wide area network operations and server operations for systems operated in the NCC. The Enterprise Desktop Solutions Division, located in Washington, D.C., is responsible for the D.C. area local area network, voice, and shared server room operation. Figure 2 depicts a simplified version of EPA’s network.\nEPA, in response to the Office of Management and Budget’s (OMB) “Cloud First” policy that requires each agency to identify three services that it will migrate to a cloud by June 2012, has identified two cloud services: Enterprise Service Desk and MTIPS, which is part of the Networx program offered by the General Services Administration. EPA also operates a virtual hosting infrastructure in four internal data centers with a standardized platform supporting up to 1,750 servers. Officials stated that the goal is to migrate e-mail and collaboration services to a commercial external cloud provider by 2015.",
"The Federal Information Security Management Act of 2002 (FISMA) requires each federal agency to develop, document, and implement an agencywide information security program to provide security for the information and information systems that support the operations and assets of the agency, including those provided or managed by other agencies, contractors, or other sources. According to FISMA, each agency is responsible for providing information security protections, commensurate with risk, for information collected or maintained by or on behalf of the agency, and information systems used or operated by the agency or on its behalf. FISMA requires that a chief information officer or a comparable official of the agency be responsible for developing and maintaining an agencywide information security program.\nThe Administrator of EPA is responsible for ensuring that an information security program is implemented, and that security processes are integrated with strategic and operational planning. EPA is responsible for reporting annually to congressional committees, GAO, and to the Director of OMB on the effectiveness of the agency’s information security program and compliance with FISMA. The Chief Information Officer appoints a senior agency information security officer and ensures that EPA’s information security program follows applicable federal laws. Senior leaders of EPA’s program offices and regions appoint information security officers to implement agency information security program requirements for the systems and information under their control.\nThe Office of Environmental Information centrally administers EPA’s information security program. The Assistant Administrator of the Office of Environmental Information serves as the Chief Information Officer for EPA. As described in table 2, EPA has designated key roles in IT security according to FISMA and agency policy.",
"Although EPA has taken steps to safeguard the information and systems that support its mission, security control weaknesses pervade its systems and networks, thereby jeopardizing the agency’s ability to sufficiently protect the confidentiality, integrity, and availability of its information and systems. These deficiencies include those related to access controls, as well as other controls such as configuration management and sensitive media protection. A key reason for these weaknesses is that EPA has not yet fully implemented its agencywide information security program to ensure that controls are appropriately designed and operating effectively. As a result, EPA has limited assurance that its information and information systems are being adequately protected against unauthorized access, use, disclosure, modification, disruption, or loss.",
"A basic management objective for any organization is to protect the resources that support its critical operations from unauthorized access. Agencies accomplish this objective by designing and implementing controls that are intended to prevent, limit, and detect unauthorized access to computing resources, programs, information, and facilities. Inadequate access controls diminish the reliability of computerized information and increase the risk of unauthorized disclosure, modification, and destruction of sensitive information and disruption of service. Access controls include those related to (1) protection of system boundaries, (2) user identification and authentication, (3) authorization, (4) cryptography, (5) audit and monitoring, and (6) physical security.\nBoundary protection controls logical connectivity into and out of networks and controls connectivity to and from devices connected to the network. For example, multiple firewalls can be deployed to prevent both outsiders and trusted insiders from gaining unauthorized access to systems, and intrusion detection technologies can be deployed to defend against attacks from the Internet. Unnecessary connectivity to an organization’s network increases not only the number of access paths that must be managed and the complexity of the task, but also the risk of unauthorized access in a shared environment. National Institute of Standards and Technology (NIST) guidance states that agencies should provide adequate protection for networks and employ information control policies and enforcement mechanisms to control the flow of information between designated sources and destinations within information systems.\nEPA has established network boundaries, but did not always adequately enforce those boundaries to secure connectivity into and out of its networks. For example, at one location, network boundaries did not have adequate segregation between a public library and the EPA facilities in Research Triangle Park, North Carolina. In addition, EPA had allowed unrestricted inbound use of an encrypted protocol that could be used to access EPA internal networks. As a result, EPA’s networks were vulnerable to unnecessary and potentially undetectable access at these points.\nA computer system must be able to identify and authenticate different users so that activities on the system can be linked to a specific individual. When an organization assigns a unique user account to a specific user, the system is able to distinguish that user from another—a process called identification. The system must also establish the validity of a user’s claimed identity by requesting some kind of information, such as a password, that is known only by the user—a process known as authentication. The combination of identification and authentication—such as a user account/password combination—provides the basis for establishing individual accountability and for controlling access to the system. NIST 800-53 recommends that information systems uniquely identify and authenticate all users (or processes on behalf of users) and that systems establish complex passwords to reduce the likelihood of a successful attack. NIST also recommends using multifactor authentication to access user accounts via a network.\nWhile EPA has developed an interim security policy that addresses identification and authentication and a draft procedure that is based on NIST guidance, the agency did not always adequately implement these interim requirements. For example, EPA did not authenticate routing protocols on several of its internal network devices, leaving them vulnerable. In addition, EPA did not enforce its own password complexity requirements or change passwords for multiple servers. Further, EPA did not require two-factor authentication for remote authentication and access to e-mail accounts. As a result, EPA’s networks and systems are at increased risk that an unauthorized individual could guess a legitimate user’s identification and password combination and gain access to these devices.\nAuthorization is the process of granting or denying access rights and permissions to a protected resource, such as a network, a system, an application, a function, or a file. For example, operating systems have some built-in authorization features such as permissions for files and folders. Network devices, such as routers, have access control lists that can be used to authorize a user who can access and perform certain actions on the device. A key component of granting or denying access rights is the concept of “least privilege.” Least privilege is a basic principle for securing computer resources and information. This principle means that a user is granted only those access rights and permissions needed to perform official duties. To restrict legitimate user access to only those programs and files needed to perform work, agencies establish access rights and permissions. “User rights” are allowable actions that can be assigned to a user or to a group of users. File and directory permissions are rules that regulate which users can access a particular file or directory and the extent of that access. To avoid unintentionally authorizing user access to sensitive files and directories, an agency must give careful consideration to its assignment of rights and permissions.\nNIST requires federal agencies to grant a user only the access and rights to information and information systems needed to perform official duties. National Security Agency (NSA) network security best practice guidance recommends prohibiting root from logging directly into a remote system. The guidance also recommends creating a set of filtering rules, also known as an access control list, which permits the traffic identified on the list and prohibits other traffic.\nAlthough EPA has established an access control methodology based on least privilege and need-to-know principles, it did not always limit user access rights and permissions to only those necessary to perform official duties. For example, EPA allowed for a large number of unused accounts across several network domains. At one location, EPA did not have adequate restrictions on a sensitive server to control access in managing and administering network devices either locally or remotely, leaving them vulnerable. In addition, EPA had not removed the accounts of former employees. The result of these weaknesses is an increased risk of unauthorized access to EPA systems and information.\nCryptography underlies many of the mechanisms used to enforce the confidentiality and integrity of critical and sensitive information. Cryptographic tools help control access to information by making it unintelligible to unauthorized users and by protecting the integrity of transmitted or stored information. A basic element of cryptography is encryption. Encryption is the conversion of data into a form, called a cipher text, which cannot be easily understood. Encryption can be used to provide basic data confidentiality and integrity by transforming plain text into cipher text using a special value known as a key and a mathematical process known as an algorithm. NIST guidelines state that agencies should use encryption to protect the confidentiality of remote access sessions and encrypt sessions between host systems. The NIST standard for an encryption algorithm is Federal Information Processing Standards (FIPS) 140-2.\nEPA did not always effectively encrypt certain sensitive information. For example, EPA did not always encrypt private keys stored on certain servers and had used a weak password encryption feature on network devices. In addition, the agency allowed the use of insecure network protocols to manage network devices. The agency also did not always use a FIPS-compliant algorithm to encrypt passwords on three support servers we reviewed. These weaknesses expose critical and sensitive information to unnecessary risk of unauthorized access, modification, or destruction.\nTo establish individual accountability, monitor compliance with security policies, and investigate security violations, it is crucial to determine what, when, and by whom specific actions have been taken on a system. Agencies accomplish this by implementing system or security software that provides an audit trail, or a log of system activity, that can be used to determine the source of a transaction or attempted transaction and to monitor a user’s activities. Audit and monitoring involves the regular collection, review, and analysis of auditable events for indications of inappropriate or unusual activity, and the appropriate investigation and reporting of such activity. Automated mechanisms may be used to integrate audit monitoring, analysis, and reporting into an overall process for investigation and response to suspicious activities. Audit and monitoring controls can help security professionals routinely assess computer security, perform investigations during and after an attack, and even recognize an ongoing attack. Audit and monitoring technologies include network and host-based intrusion detection systems, audit logging, security event correlation tools, and computer forensics.\nNIST guidance states that agencies should retain sufficient audit logs to allow monitoring of key activities, provide support for after-the-fact investigation of security incidents, and meet organizational information retention requirements.\nAlthough EPA has many useful mechanisms at its disposal to help prevent and respond to security breaches, such as firewalls and intrusion detection systems, it has not consistently implemented integrated and responsive audit and monitoring. For example, EPA had not enabled auditing on a server used for receiving confidential data from commercial entities. Furthermore, more than 150 of EPA’s network devices had remote logging set to a severity level that was not sufficient for logging important security information. In addition, the number of error logs on one server database system was set so low that old logs would be overwritten as soon as this number was reached, thus removing the old logs from use. As a result, EPA is limited in its ability to establish accountability, ensure compliance with security policies, and investigate violations.\nPhysical security controls are a key component of limiting unauthorized access to sensitive information and information systems. These controls are important for protecting computer facilities and resources from espionage, sabotage, damage, and theft. They involve restricting physical access to computer resources and sensitive information, usually by limiting access to the buildings and rooms in which the resources are housed and periodically reviewing access rights granted to ensure that access continues to be appropriate based on established criteria. Such controls include perimeter fencing; surveillance cameras; security guards; gates; locks; environmental controls such as smoke detectors, fire alarms and extinguishers; and uninterruptible power supplies. NIST guidance states that federal agencies should implement physical security and environmental safety controls to protect employees and contractors, information systems, and the facilities in which they are located.\nEPA had implemented numerous physical security controls for protecting its information, information systems, and employees. For example, the agency used electronic badges, guards, magnetometers, and x-ray machines to help control access to computing environments at two locations. EPA had also implemented environmental and safety controls such as temperature and humidity controls as well as emergency lighting to protect its staff and sensitive IT resources.\nNonetheless, EPA did not always ensure that these controls were consistently implemented. For example, over a period of 5 days, five staff members at one location used their electronic badges to gain access to the computer room, but they were not on the list of staff authorized to enter the area. Two of these staff members were contractors, and the other three were EPA staff. Similarly, EPA did not always effectively control access to sensitive IT equipment kept in server or telecommunication rooms. To illustrate, visitor logs were incomplete for several rooms that contained sensitive IT equipment. These logs did not always include information such as the visitor’s purpose for visiting the room, the time of departure, or the type of identification used to sign in. As a result, EPA has diminished assurance that its computing resources are protected from inadvertent or deliberate misuse including sabotage, vandalism, theft, and destruction. EPA officials stated that the access controls list issue had been resolved and that IT equipment in the rooms would be moved as part of its data center consolidation effort. The agency also provided a subsequent response stating that most of the IT equipment had been moved. We have not yet verified this information.",
"In addition to access controls, other important controls should be in place to ensure the confidentiality, integrity, and availability of an agency’s information. These controls include policies, procedures, and techniques for securely configuring information systems, sufficiently disposing of media, and implementing personnel security. Weaknesses in these areas increase the risk of unauthorized use, disclosure, modification, or loss of sensitive information and information systems supporting EPA’s mission. EPA had personnel security controls in place.\nConfiguration management controls ensure that only authorized and fully tested software is placed in operation, software and hardware are updated, patches are applied to these systems to protect against known vulnerabilities, and changes are documented and approved. To protect against known vulnerabilities, effective procedures must be in place, appropriate software installed, and patches updated promptly. Up-to-date patch installation helps mitigate flaws in software code that could be exploited to cause significant damage and enable malicious individuals to read, modify, or delete sensitive information or disrupt operations. NIST guidance states that agencies should document approved system changes and retain records of configuration changes to systems and that agencies should configure security settings to the most restrictive mode consistent with operational requirements. Both NIST and NSA guidance recommend that certain system services be disabled.\nEPA has developed, documented, and established procedures to manage configuration changes. For example, although the agencywide configuration management procedure is still a draft document, EPA’s Office of Technology Operations and Planning has developed, documented, and implemented a change management process and procedures document that is intended to provide formal and standardized processes and procedures for identifying, assessing, approving, implementing, and accounting for changes to EPA information systems. In addition, the agency uses a central tool to request, approve, and track the status of configuration change requests. The system owners or managers have responsibility for documenting these changes. According to agency officials, EPA uses an automated tool for applying patches that are intended to correct software security vulnerabilities.\nDespite these efforts, EPA had not always implemented configuration management controls. For example, although the agency has an automated tool in place for managing changes, officials could only provide records of approved changes for four of the six systems we reviewed. Information for the other two systems consisted only of e-mails describing the changes. Furthermore, information for only two of the six systems included the unique change request number generated by the tool; this number could be used to research and determine whether a change had been formally approved. During a demonstration of the tool, an EPA official suggested that we contact system owners for system- specific change reports. However, change information provided by the system owners varied in content, and the agencywide configuration management guide did not instruct them on how such records should be documented.\nSimilarly, EPA had not securely configured its networks and databases in accordance with NIST guidance and web applications and operating systems were not always configured to the most restrictive settings in accordance with NIST guidance. Moreover, some EPA information systems and network devices were running outdated software that was no longer supported by the manufacturer, resulting in EPA being unable to effectively patch them for vulnerabilities. In addition, newly released security patches, service packs, and hot fixes had not been installed in a timely manner, and several critical systems had not been patched or were out of date, and some had known vulnerabilities. Without adequate security controls, EPA systems are susceptible to many known vulnerabilities.\nThe destruction of media and their disposal are key to ensuring the confidentiality of information. Media can include magnetic tapes, optical disks (such as compact disks), and hard drives. Agencies safeguard used media to ensure that the information they contain is appropriately controlled or disposed of. Media that are improperly disposed of can lead to the inappropriate or inadvertent disclosure of an agency’s sensitive information, including the personally identifiable information of its employees and customers. NIST guidance states that verifying the selected information sanitization and disposal process and testing of media is an essential step for maintaining confidentiality. EPA has documented a media protection policy through its interim network security policy that states that all IT resources scheduled for disposal must be adequately sanitized to protect the confidentiality of agency information and that appropriate security controls such as those prescribed by NIST must be applied. EPA has a supplemental disk sanitization procedure, and program offices have the option to develop their own separate procedures if needed.\nHowever, EPA did not provide evidence that equipment used for disposal of sensitive information had been tested to ensure that it was working properly. Specifically, EPA could not provide documentation or support to verify whether or not media disposal equipment had been tested for three systems. Additionally, both sanitized and unsanitized hard drives were being kept together in the storage area for one system. None of the drives were labeled to show whether or not they had been sanitized, which could allow intended or unintended access to sensitive data on an unsanitized hard drive. Until EPA tests, documents, and implements information security controls for media disposal and sanitization, increased risk exist that the agency’s sensitive information may not be adequately protected.\nThe greatest harm or disruption to a system comes from the actions, both intentional and unintentional, of individuals. These intentional and unintentional actions can be reduced through the implementation of personnel security controls. According to NIST guidance, personnel security controls help agencies ensure that individuals occupying positions of responsibility (including third-party service providers) are trustworthy and meet established security criteria for these positions. According to NIST, personnel security controls include, among other things, that the agency develop a formal personnel security policy and screen individuals prior to authorizing access to an information system. EPA’s security policy for personnel screening states that the type of investigation should be based on the sensitivity of the position and the level of public trust. According to EPA policy, all system administrative staff, including contractors, must have an adequate background check.\nEPA has conducted the appropriate background investigations for all 14 employees and contractors reviewed. For one system reviewed, we verified that EPA has a process in place to track whether personnel who require access to the system have the necessary security clearances.",
"A key reason for the weaknesses in controls over EPA’s information and information systems is that it has not yet fully implemented its agencywide information security program to ensure that controls were effectively established and maintained. FISMA requires each agency to develop, document, and implement an information security program that, among other things, includes policies and procedures that (1) are based on risk assessments, (2) cost-effectively reduce risks, (3) ensure that information security is addressed throughout the life cycle of each system, and (4) ensure compliance with applicable requirements; plans for providing adequate information security for networks, facilities, and systems; security awareness training to inform personnel of information security risks and their responsibilities in complying with agency policies and procedures, and information security training for personnel with significant security responsibilities for information security; periodic testing and evaluation of the effectiveness of information security policies, procedures, and practices, to be performed with a frequency depending on risk, but no less than annually, and that includes testing of management, operational, and technical controls for every system identified in the agency’s required inventory of major information systems; a process for planning, implementing, evaluating, and documenting remedial action to address any deficiencies in its information security policies, procedures, or practices; and plans and procedures to ensure continuity of operations for information systems that support operations and assets of the agency.\nFISMA also requires agencies to maintain and update annually an inventory of major information systems and the program requirements that apply to the information and information systems that support the operations and assets of the agency, including those provided or managed by another agency, contractor, or other source.\nA key element of an effective information security program is to develop, document, and implement risk-based policies, procedures, and technical standards that govern the security over an agency’s computing environment. If properly implemented, policies and procedures should help reduce the risk that could come from unauthorized access or disruption of services. Developing, documenting, and implementing security policies is important because they are the primary mechanisms by which management communicates its views and requirements; these policies also serve as the basis for adopting specific procedures and technical controls. In addition, agencies need to take the actions necessary to effectively implement or execute these procedures and controls. Otherwise, agency systems and information will not receive the protection that the security policies and controls should provide. FISMA requires agencies to develop and implement policies and procedures that support an effective information security program.\nAlthough EPA has developed information security policies and procedures, most of its agencywide requirements were not finalized. For example, EPA’s agencywide information security policy and its security assessment and authorization procedure are both interim documents. While EPA has developed 18 procedures that correspond to NIST’s “18 families of controls,” such as those for access controls, security training, and contingency planning, 17 of the procedures are still in draft, including 12 that have been in draft since 2008. The Office of Environmental Information, the organization with the primary responsibility for implementing EPA’s security program, has also issued its own information security program manual intended to complement EPA’s security policy. However, the Office of Environmental Information program manual has not been revised since 2006 and is not based on the current EPA interim security policy issued in August 2011.\nAccording to EPA’s Office of Environmental Information web page, the agency is undertaking an extensive IT/management policy review and update, but the website does not cite any specific dates for completion. Until EPA has finalized and implemented its security policies and procedures, the agency cannot be sure that its information security requirements are being applied consistently and effectively across the agency.\nAn objective of system security planning is to improve the protection of IT resources. A system security plan provides an overview of the systems’ security requirements and describes the controls that are in place or planned to meet those requirements. OMB Circular A-130 directs agencies to develop system security plans for major applications and general support systems, and to ensure that those plans address policies and procedures for providing management, operational, and technical controls.explains that agencies were expected to be in compliance with NIST In addition, OMB’s fiscal year 2011 FISMA reporting guidance standards and guidelines within 1 year of publication unless otherwise directed by OMB.\nEPA has developed and documented system security plans, but those plans have not been updated to reflect current policies and procedures. For example, all six systems we reviewed referenced expired policies and procedures. In addition, two of the six plans did not reflect controls identified in the current NIST Special Publication 800-53. two controls for moderate systems, publically accessible content and least privilege—allowing only authorized access for users—were not reflected in system security plans. An EPA official with responsibility for one of the system’s that had an outdated plan attributed this to the agency not having a security procedure in place to clearly explain how updated federal guidance should be implemented. In a fiscal year 2010 report,agency’s system security plans were not current.\nEPA’s Inspector General also indentified instances where the EPA officials informed us that the agency was replacing its current automated tool for managing security with one that is intended to improve system security planning, among other activities. Currently in the pilot stage, the new tool is to provide a built-in system security planning capability and a central location to store all system security documentation. However, until EPA updates system security plans and finalizes security plan procedures, the agency may not have assurance that controls are being effectively implemented for its systems.\nNIST, Special Publication 800-53. complying with agency policies and procedures designed to reduce these risks. FISMA also includes requirements for training personnel with significant responsibilities for information security. OMB guidance states that personnel should be trained before they are granted access to systems or applications. The training is intended to ensure that personnel are aware of the system’s or application’s rules, their responsibilities, and their expected behavior. In addition, EPA interim policy requires annual security awareness training to be completed by all personnel and those personnel with significant network security roles and responsibilities to complete sufficient information system security training and continuing education to ensure compliance with agency policy.\nEPA has implemented a security awareness training program and maintains training records as part of its e-learning system: users of EPA systems are required to complete and pass a web-based course. According to EPA’s fiscal year 2011 FISMA report, the Chief Information Officer reported that 100 percent of EPA’s employees had completed the required security awareness training.\nEPA also uses its e-learning system to deliver training content for employees who have significant network and system security roles. However, for this group of employees, the Chief Information Officer reported that approximately 81 percent had completed training related to their specialized security responsibilities. According to EPA officials, the agency has been unable to enforce the specialized security training requirement, which has led to reporting a lower percentage. In addition, officials also noted that formalized standard procedures related to specialized training are not well documented, including to what extent employees should complete specialized training and the specific actions to take if an employee does not complete the training.\nTo assist with addressing these inconsistencies, the senior agency Information Security Officer distributed a memorandum to information security officials that describes the requirement for employees with significant information security responsibilities. Specifically, EPA has determined that, at a minimum, all employees with significant security responsibilities should complete two courses using the e-learning system or through another mechanism. In addition, EPA sent e-mails to its information security officers that denote what positions include the requirement to complete the two-courses. However, EPA’s actions did not ensure that all employees with significant security responsibilities met this requirement. Until EPA implements a procedure to enforce the completion of specialized security training and tailors the training to specific roles, the agency will not have reasonable assurance that its staff have the adequate knowledge, skills, and abilities consistent with their roles to protect the confidentiality of the information housed within EPA systems to which they are assigned.\nAnother key element of an information security program is to test and evaluate policies, procedures, and controls to determine whether they are effective and operating as intended. This type of oversight is a fundamental element because it demonstrates management’s commitment to the security program, reminds employees of their roles and responsibilities, and identifies and mitigates areas of noncompliance and ineffectiveness. FISMA requires that the frequency of tests and evaluations of management, operational, and technical controls be based on risks and occur no less than annually. OMB directs agencies to meet their FISMA-required controls testing by drawing on security control assessment results that include, but are not limited to, continuous monitoring activities. EPA’s interim security assessment procedure requires that information system security controls be assessed annually to meet FISMA’s requirements and to support continuous monitoring.\nEPA had documented that management, operational, and technical controls for five of six systems were tested or reviewed. Assessment results for five systems consisted of self assessments generated by EPA’s Automated System Security Evaluation and Remediation Tracking (ASSERT) tool, used for continuous monitoring, along with vulnerability assessments for two of the five systems. However, the agency did not provide any information demonstrating that controls for a clean air markets division system had been tested or reviewed at least annually. The last assessment for the system had been completed during fiscal year 2009. An EPA official stated that testing would be completed during fiscal year 2012.\nWe also identified data reliability challenges with EPA’s ASSERT tool. The data reliability weakness with this tool was previously reported by EPA’s Inspector General in 2010.in 2011 that the agency had not implemented continuous monitoring The Inspector General also reported procedures or a strategy. As a result, EPA has less assurance that controls over its information and information systems are adequately implemented and operating as intended.\nRemedial action plans, also known as plans of action and milestones (POA&M), help agencies identify and assess security weaknesses in information systems, set priorities, and monitor progress in correcting the weaknesses. NIST and OMB guidance specify steps that federal agencies should take to address identified security weaknesses.\nNIST standards state that organizations must periodically assess security controls in their information systems and develop and implement plans of action to correct deficiencies and reduce or eliminate vulnerabilities.\nOMB guidance specifies information that should be recorded for each POA&M, including a description of the weakness identified, the audit or other source where it was identified, and key milestones with completion dates.\nNIST guidance also states that POA&Ms should be updated to show progress made on current outstanding items and to incorporate the results of the continuous monitoring process.\nOMB guidance further states that initial milestone and completion dates should not be altered; rather, changes to dates should be recorded in a separate column.\nFurther, EPA procedure states that any IT security finding and recommendation that results from a review, audit, assessment, test, or from another source must be assigned a risk level and assessed for appropriate action.\nEPA uses an automated tool to record and track remediation of vulnerabilities. This tool contains fields for entering a description of each weakness, where it was reported, the risk level, milestones describing appropriate actions and their completion dates, and the status of actions taken. However, the manner in which the agency uses the tool can preclude retrieval of specific POA&Ms and pose weaknesses with data reliability. For example, EPA officials were unable to locate certain POA&Ms pertaining to findings and recommendations in fiscal year 2011 reports from EPA, the agency’s Inspector General, and GAO. These officials could not find the requested information because POA&M entries did not have all the information called for by federal guidance. In particular, these entries lacked a specific description of each weakness and did not list the report where the weakness had initially been identified. Additionally, the tool does not have built-in safeguards to keep individuals who have access to POA&Ms from altering initial milestone and completion dates. Since the Chief Information Officer and other agency officials use POA&M information to track the progress of corrective actions, inaccurate milestone information could hinder their efforts to effectively remediate program and system-level IT security weaknesses.\nThe EPA Inspector General had also documented weaknesses in the agency’s remediation process. In its fiscal year 2011 FISMA report, the Inspector General found that EPA does not consistently create POA&Ms for vulnerabilities and the agency missed remediation deadlines for about 20 percent of the POA&Ms that have been created. Another fiscal year 2011 Inspector General report found that data in the agency’s POA&M tracking tool is unreliable, and that EPA lacked the skills and resources needed to identify and remediate ongoing cyber threats.\nEPA officials noted that deficiencies in the way that the current tool is used are expected to be addressed when the new remediation tool is deployed agencywide in fiscal year 2013. Until weaknesses with EPA’s remediation of vulnerabilities have been resolved, they will compromise the ability of the Chief Information Officer and other EPA officials to track, assess, and report accurately the status of the agency’s information security.\nContingency planning is a critical component of information protection. If normal operations are interrupted, network managers must be able to detect, mitigate, and recover from a service disruption while preserving access to vital information. Contingency plans detail emergency response, backup operations, and disaster recovery for information systems. To mitigate service disruptions, these plans should be clearly documented, communicated to potentially affected staff, updated to reflect current operations, and regularly tested. FISMA, a NIST Special Publication, and EPA procedures specify requirements and guidelines for contingency planning.\nFISMA requires each agency to develop, document, and implement plans and procedures to ensure continuity of operations for information systems that support the agency’s operations and assets.\nNIST guidance states that contingency plans for information systems In addition, the plans should account for be developed and tested. primary and alternate contact methods and should discuss procedures to be followed if an individual cannot be contacted.\nEPA procedures further specify that the plans must be reviewed, tested, and updated at least annually.\nEPA has taken steps to implement FISMA requirements and NIST specifications but has not fully met them. Contingency plans were in place for five of the six systems we reviewed. The contingency needs for the one remaining system were addressed in disaster recovery plans. However, the agency did not follow its own procedures or NIST guidance for approving contingency plans, reviewing them annually, and updating them as necessary. All six of the plans lacked evidence that they had been signed by the approving officials. According to EPA, an approving official does not need to sign a contingency plan because the plan is included in each system’s certification and authorization package and approval of the package applies to all documents within it. The agency provided documentation indicating that system security plans were part of certification and authorization packages, and two systems had contingency plans embedded in their respective system security plans. However, EPA did not provide clear evidence that contingency plans were included in certification and authorization packages for the other four systems. In addition, two of the six plans had no evidence of having had an annual review. Without clear dates for initial approvals and subsequent reviews, EPA employees and contractors cannot be certain that they have access to current, updated versions of contingency plans.\nIn addition to providing current information, plans are to provide adequate contact information on personnel who may be needed during an emergency. For example, the National Computer Center Hosting Systems contingency plan states that personal contact information should include home addresses, cell phone numbers, pager numbers, and alternate contact information. Among the six plans reviewed, five did not provide full contact information for some staff listed, giving only office telephone numbers and e-mail addresses or, in some cases, office numbers alone. Having inadequate information could jeopardize the agency’s ability to contact key personnel during an emergency.\nTo help ensure that contingency plans are viable and will meet an agency’s needs during an emergency, these plans should be tested at least annually. While EPA provided evidence that it had tested three of the six plans in 2011, it did not provide the requested test results for the other three plans.\nThe EPA Inspector General has also noted deficiencies with the agency’s contingency planning. In reports from fiscal years 2009 through 2011, the Inspector General described plans that lacked approval, were out of date, did not have a record of changes, and did not have evidence that contingency plans had been tested annually.\nUntil EPA addresses identified weaknesses in its contingency planning processes, the agency will have less assurance that it can recover important systems in a timely manner when disruptions occur.\nFISMA requires agencies to maintain and update annually an inventory of major information systems operated by the agency or operated by others on its behalf, such as those operated by a contractor or other third party. For their fiscal year 2011 FISMA reports, agencies were required to report the number of agency and contractor systems by impact levels.fiscal year 2011, EPA reported a total of 129 systems, composed of 117 agency and 12 contractor systems, as shown by impact level in table 3. This represents a slight decrease in the total number of systems from For fiscal year 2010, with the number of agency systems remaining the same and the number of contractor systems decreasing.\nEPA did not ensure that its inventory of information systems was accurate. For example, the total number of systems in inventories provided by EPA on August 5, 2011, and September 26, 2011, did not equal each other or equal the number of systems in the agency’s fiscal year 2011 FISMA report. Specifically, the initial inventory provided listed 59 general support systems and 85 major applications for a total of 144 systems, but a subsequent list reflected 47 general support systems and 85 major applications, for a total of 132 systems. Within that same time, the agency provided another listing that consisted of only general support systems; that list identified 57 general support systems, a number that did not equal the totals on either of the two inventories.\nEPA also provided three lists of systems that the agency had determined contained or processed confidential business information, and all three lists differed in the number of systems identified, totaling 19, 21, and 24 systems. One system on the third list was not included on either of the first two inventories provided by EPA. Furthermore, three systems were erroneously listed twice, with minor variations of the spelling of the system names as the distinguishing information between the duplicate entries. These errors could be due to inadvertent data entry errors, as the agency places responsibility on individual information security officers to update the central systems inventory that is maintained in its ASSERT tool. The agency’s Inspector General has previously identified issues with the quality of system-related information entered into the tool.\nAs a result, senior management has reduced assurance that the inventory accurately represents the number of EPA systems cited in its annual FISMA reporting and reduced assurance that agency information systems have been accounted for properly.",
"Although EPA has implemented numerous controls and procedures intended to protect key information and information systems, control weaknesses continue to jeopardize the confidentiality, integrity, and availability of its sensitive information. The agency has established a framework for its information security program and taken actions toward developing, documenting, and implementing the components of its program. However, there are weaknesses in access controls and other information security controls over EPA’s systems. Additionally, some control deficiencies are longstanding, having been identified in past reports by the EPA Inspector General. These shortcomings will likely persist until EPA (1) addresses weaknesses such as those for identification and authentication, authorization, cryptography, audit and monitoring, physical security, and configuration management and (2) fully implements key components of a comprehensive information security program that ensures that policies and procedures are completed and effectively implemented; security plans are updated to reflect current federal and agency requirements; remedial actions are effectively managed for all weaknesses; and management, operational, and technical controls for all systems are tested and evaluated at least annually. However, until EPA fully implements these controls, it will have limited assurance that its information and information systems are being adequately protected against unauthorized access, disclosure, modification, and loss.",
"To help establish an effective and comprehensive information security program for EPA’s information and information systems, we recommend that the Administrator of EPA direct the Assistant Administrator for the Office of Environmental Information to take the following 12 actions:\nUpdate configuration management procedures to ensure they include guidance for documenting records of approved changes.\nFinalize the 17 agencywide interim information security policies and draft procedures.\nUpdate system security plans to reflect current policies and procedures.\nInclude current NIST Special Publication 800-53 guidance in system security plans.\nDevelop and finalize a role-based security training procedure that tailors specific training requirements to EPA users’ role/position descriptions and details the actions information security officers must take when users do not complete the training.\nConduct testing of management, operational, and technical controls, based on risks, to occur no less than annually, for the clean air markets division system identified. Include features in the planned remedial action tracking tool that will require users to enter all information required by OMB policy, including descriptions of each weakness and the source of the finding. Include features in the planned remedial action tracking tool that block inappropriate alteration of data. Implement an agencywide, uniform method for approving contingency plans.\nDevelop and implement procedures to annually test the viability of contingency plans for agency systems.\nDevelop and implement procedures to ensure that both work and home contact information are included for each individual in a contingency plan’s emergency contact list. Implement procedures to verify the accuracy of system inventory information.\nIn a separate report with limited distribution, we are also making 94 detailed recommendations to correct weaknesses in access controls and in other information security controls.",
"In providing written comments on a draft of this report (reprinted in app. II), EPA’s Assistant Administrator stated that the agency’s response reflected its continued efforts to ensure that information assets are protected and secured in a manner consistent with the risk and magnitude of the harm resulting from loss, misuse, or unauthorized access to or modification of information. The Assistant Administrator also indicated that the agency agreed with 10 of our 12 draft recommendations, and partially agreed with the other 2 recommendations, as discussed below.\nEPA agreed with implementing our recommendation to implement an agencywide method for approving contingency plans, but did not agree with requiring the approving officials’ signature and date to be on the document. The agency stated that a centralized repository for managing all security documents would be the more appropriate mechanism for ensuring plans are the most recent official versions. We believe this alternative action meets the intent of our draft recommendation and have modified our recommendation accordingly.\nFor the second recommendation, EPA agreed to implement a uniform method for recording annual contingency plan testing, but did not agree to keep records of contingency plan testing within the contingency plans. The intent of our draft recommendation was to ensure that EPA implements procedures to test contingency plans at least annually. Accordingly, we have clarified our recommendation to emphasize this point.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution of it until 30 days from the date of this letter. At that time, we will send copies to interested congressional committees and to the Administrator of the Environmental Protection Agency. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact Gregory C. Wilshusen at (202) 512-6244 or wilshuseng@gao.gov or Dr. Nabajyoti Barkakati at (202) 512-4499 or barkakatin@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III.",
"The objective of our review was to determine whether the Environmental Protection Agency (EPA) had effectively implemented appropriate information security controls to protect the confidentiality, integrity, and availability of the information and systems that support its mission.\nTo determine the effectiveness of EPA’s security controls, we gained an understanding of the overall network control environment, identified interconnectivity and control points, and examined controls for the agency’s networks and facilities. Specifically, we reviewed controls over EPA’s network infrastructure and systems that support EPA’s business functions of air, land, and water quality management and process or contain confidential business information. We performed our work at EPA’s National Computer Center in Research Triangle Park, North Carolina; Potomac Yard Data Center in Arlington, Virginia; and at EPA headquarters in Washington, D.C. We selected these sites to maximize audit coverage while limiting travel costs, since the majority of EPA systems and applications are supported or maintained in these locations.\nWe used GAO’s Federal Information System Controls Audit Manual, which contains guidance for reviewing information system controls that affect the confidentiality, integrity, and availability of computerized information; National Institute of Standards and Technology (NIST) standards and guidance; and EPA’s policies, procedures, practices, and standards to evaluate the agency’s controls over its information systems. Specifically, we reviewed network access paths to determine if boundaries had been adequately protected; reviewed the complexity and expiration of password settings to determine if password management was being enforced; analyzed users’ system authorizations to determine whether they had more permissions than necessary to perform their assigned functions; observed methods for providing secure data transmissions across the network to determine whether sensitive data were being encrypted; reviewed software security settings to determine if modifications of sensitive or critical system resources had been monitored and logged; observed physical access controls to determine if computer facilities and resources were being protected from espionage, sabotage, damage, and theft; examined configuration settings and access controls for routers, network management servers, switches, and firewalls; inspected key servers and workstations to determine if critical patches had been installed and/or were up-to-date; reviewed media handling procedures to determine if equipment used for clearing sensitive data had been tested to ensure correct performance; and reviewed personnel clearance procedures to determine whether staff had been properly cleared prior to gaining access to sensitive information or information systems.\nUsing the requirements identified by the Federal Information Security Management Act of 2002 (FISMA), which establishes key elements for an effective agencywide information security program, and associated NIST guidelines and EPA requirements, we evaluated EPA systems and networks by analyzing EPA policies, procedures, practices, and standards to determine their effectiveness in providing guidance to personnel responsible for securing information and information systems; analyzed security plans for six systems to determine if those plans had been documented and updated according to federal guidance; examined the security awareness training process for employees and contractors to determine whether they had received training according to federal requirements; examined training records for personnel who have significant responsibilities to determine whether they had received training commensurate with those responsibilities; analyzed EPA’s procedures and results for testing and evaluating security controls to determine whether management, operational, and technical controls for six systems had been sufficiently tested at least annually and based on risk; reviewed EPA’s implementation of continuous monitoring and use of automated tools to determine the extent to which it uses these tools to manage IT assets and monitor the security configurations and vulnerabilities for its IT assets; evaluated EPA’s process to correct weaknesses and determine whether remedial action plans complied with federal guidance; and examined contingency plans for six systems to determine whether those plans had been developed and tested.\nWe also discussed with key security representatives and management officials whether information security controls were in place, adequately designed, and operating effectively.\nTo determine the reliability of EPA’s computer-processed data, we performed an assessment. We evaluated the materiality of the data to our audit objectives and assessed the data by various means, including reviewing related documents, interviewing knowledgeable agency officials, and reviewing internal controls. Through a combination of methods, we concluded that the data were sufficiently reliable for the purposes of our work.\nWe conducted this performance audit from July 2011 to July 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective.",
"",
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"In addition to the individuals named above, the following made key contributions to this report: West Coile, Anjalique Lawrence, Duc Ngo, and Chris Warweg, (assistant directors); Gary Austin; Angela Bell; Larry Crosland; Saar Dagani; Kirk Daubenspeck; Nancy Glover; Kevin Metcalfe; Mary Marshall; Sean Mays; Dana Pon; Jason Porter, Sr.; and Eugene Stevens."
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{
"question": [
"How have security control weaknesses impacted the EPA?",
"How did the EPA fail to fully implement access controls?",
"What, in addition to weakness in access controls, has the EPA struggled with?",
"What is one measure taken by the EPA to improve security that has had mixed results?",
"What is one reason for the control weakness in EPA?",
"How has EPA failed to fully implement certain elements of the information security program?",
"What is required for EPA to implement key information security practices and controls?",
"What are the effects of not having a comprehensive security program?",
"What is EPA responsible for?",
"What does EPA rely on to fulfill these responsibilities?",
"What do EPA's policies affect?",
"How is GAO helping EPA fully implement their comprehensive information security program?",
"What was EPA's response to these efforts?",
"What happened to two of GAO's recommendations?",
"What is the purpose of the 94 recommendations made by GAO in a separate report?"
],
"summary": [
"Although the Environmental Protection Agency (EPA) has taken steps to safeguard the information and systems that support its mission, security control weaknesses pervaded its systems and networks, thereby jeopardizing the agency’s ability to sufficiently protect the confidentiality, integrity, and availability of its information and systems.",
"Specifically, the agency did not always (1) enforce strong policies for identifying and authenticating users by, for example, requiring the use of complex (i.e., not easily guessed) passwords; (2) limit users’ access to systems to what was required for them to perform their official duties; (3) ensure that sensitive information, such as passwords for system administration, was encrypted so as not to be easily readable by unauthorized individuals; (4) keep logs of network activity or monitor key parts of its networks for possible security incidents; and (5) control physical access to its systems and information, such as controlling visitor access to computing equipment.",
"In addition to weaknesses in access controls, EPA had mixed results in implementing other security controls.",
"For example, EPA conducted appropriate background investigations for employees and contractors to ensure sufficient clearance requirements had been met before permitting access to information and information systems.",
"An underlying reason for the control weaknesses is that EPA has not fully implemented a comprehensive information security program. Although EPA has established a framework for its security program, the agency has not yet fully implemented all elements of its program.",
"Specifically, it did not always finalize policies and procedures to guide staff in effectively implementing controls; ensure that all personnel were given relevant security training to understand their roles and responsibilities; update system security plans to reflect current agency security control requirements; assess management, operational, and technical controls for agency systems at least annually and based on risk; and implement a corrective action process to track and manage all weaknesses when remedial actions were necessary.",
"Sustained management oversight and monitoring are necessary for EPA to implement these key information security practices and controls.",
"Until EPA fully implements a comprehensive security program, it will have limited assurance that its information and information systems are adequately protected against unauthorized access, use, disclosure, modification, disruption, or loss.",
"EPA is responsible for protecting human health and the environment by implementing and enforcing the laws and regulations intended to improve the quality of the nation’s air, water, and lands.",
"In addition, it relies extensively on networked computer systems to collect a wealth of environmental data and to disseminate much of this information while also protecting other forms of sensitive or confidential information.",
"The agency’s policies and programs affect virtually all segments of the economy, society, and government.",
"GAO is making 12 recommendations to the Administrator of EPA to fully implement elements of EPA’s comprehensive information security program.",
"In commenting on a draft of this report, EPA’s Assistant Administrator generally agreed with GAO’s recommendations.",
"Two of GAO’s recommendations were revised to incorporate EPA’s comments.",
"In a separate report with limited distribution, GAO is also making 94 recommendations to EPA to enhance access and other information security controls over its systems."
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CRS_RL34400
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{
"title": [
"",
"The Demand and Supply for Business Loans",
"Demand for Loans",
"Supply of Loans",
"Debt and Equity",
"How Do Small and Large Businesses Differ?",
"Likely Impact of Economic Fluctuations on Small Business Borrowing",
"Monitoring Small Business Borrowing",
"Policy Analysis",
"Conclusion"
],
"paragraphs": [
"",
"Most economic and financial analysts view the market for business loans in the U.S. economy in a traditional supply and demand framework that takes into consideration alternative ways to finance a business and various ways for those controlling capital to invest. A business—large or small—with a project it thinks will meet its profit requirements considers internal and external funding sources. Many times, these businesses weigh borrowing money (debt) against selling an ownership (equity) stake. Those with money to lend—the current owners, friends of the current owners, banks, pension funds, hedge funds, trusts, mutual funds, etc.—examine the financial returns and risks on a loan, compare what one company offers against the offers of other firms, and examine alternatives to business loans such as consumer loans or government bonds. This report analyzes the factors influencing the decision to borrow for businesses in general and for small businesses in particular.",
"A business undertakes the projects expected to most increase its value. It does this by proceeding with the projects that have the greatest risk-adjusted rate of return. A risky project should be anticipated on average to produce a greater yield than would a riskless investment, such as U.S. Treasury bonds, to compensate for the risk of a loss (or less than expected profit). When there are a large number of projects that are expected to be profitable after adjusting for risk, a company will typically desire to borrow more money than when it finds fewer projects that are profitable after adjusting for risk.\nAs the economy fluctuates, the supply and demand for loans change. When the economy is growing rapidly, a typical company will find many more projects that would be profitable than when the economy is growing slowly or shrinking. Changes in specific business sectors increase or decrease the supply and demand for capital in those business sectors.\nAll economic sectors (consumers, businesses, and government) at times compete with each other to borrow for various purposes. Businesses borrow long term to finance plant and equipment and short term to obtain working capital to meet payrolls or finance inventory. Business borrowing is sensitive to interest rates, other loan terms (such as the life of the loan, any collateral, and any other restrictions), and the economic outlook. Interest rates matter because the cost of borrowing can be critical in determining whether a project will be profitable. The economic outlook is more important for long-term borrowing because of its impact on a project's profitability. Frequently, these two factors work together. An increase in interest rates or a deteriorating economic outlook can impact some sectors, such as new home construction, more than others, such as fast food. Some other factors influencing business demand are the cost of investment goods, the durability of the goods, and tax treatment of investments. These factors are discussed in more detail in \" Likely Impact of Economic Fluctuations on Small Business Borrowing .\"\nA business's alternatives to finance a project may depend in part on its size. Many lenders, whether banks, other corporations, individuals, or governments, have minimum- and maximum-size loans that they will make. Some loans could be too small for a large lender to process and service. Some lenders have application or processing fees that could make borrowing small amounts uneconomical. These concerns are one reason that the Small Business Administration (SBA) created its microloan program. Large loans could exceed the financial capacity or legal limits on lending.\nIf a firm decides to finance through debt, it can take out a loan or sell bonds to the public (in some cases by private placement). The advantage to those who purchase bonds is that, unlike many business loans, they can be sold in the secondary market. For some companies there is a ready, liquid market for bonds. The disadvantage of bonds is that they have high fixed costs; as a result, bond issues typically are for tens of millions of dollars. This size makes it uneconomical for small businesses to issue bonds.\nConsumers and governments compete with businesses to borrow money. Consumers frequently borrow to purchase homes and consumer durables, such as cars and large home appliances. Consumers also borrow to meet short-term needs or shortfalls in income. In general, household income is the largest determinant of consumer borrowing. Other factors that influence the demand for consumer loans include fluctuations in income, seasonal factors, interest rates, and expectations about the future.\nGovernments (federal, state, local, and foreign) borrow to allow spending to exceed revenues. The federal government is relatively insensitive to changes in interest rates. State and local governments, especially those required to balance their budgets, can be sensitive to interest rates. Foreign governments are sensitive to inflation, interest, and exchange rates.",
"The same sectors—individuals, companies, or governments—that borrow also lend funds. Sometimes, this is done to take advantage of differences in interest rates, and in other cases timing differences are important. In general, the motivation to save depends on current interest rates, current and expected future inflation, and the timing of future income and expenditures. Financial intermediaries like banks regularly borrow money for the purpose of lending to others. For example, one business model used by banks is to offer the Federal Deposit Insurance Corporation's (FDIC's) guarantee to collect inexpensive, relatively small deposits that are then combined into much larger loans.\nBusinesses lend money to other businesses for a variety of purposes, including financing the purchase of goods and services from the first firm. Profitable companies may accumulate funds for possible future investment. For example, in 2011, Microsoft bought Skype Communications, a telecommunications firm, for $8.5 billion, and in 2012, it invested $605 million in Barnes & Noble, a book retailer.\nConsumers supply money for lending through deposits in banks and other financial intermediaries. In addition to traditional deposits, such as checking accounts, savings accounts, and certificates of deposit, consumers have specialized tax-favored vehicles like Individual Retirement Accounts (IRAs) and Section 529 college savings accounts.\nGovernments use financial intermediaries to lend either short or long term. For example, local tax revenues might be put into a certificate of deposit for several months before they are used to pay salaries or other expenses. Foreign governments put their money in other countries for a variety of reasons, including the desire to hold reserves in \"stronger\" currencies and greater security. Over the past few decades, many governments have created sovereign wealth funds (SWFs) to invest internationally.",
"An alternative to borrowing to finance projects is to find investors to purchase ownership shares or equity. There are numerous differences between debt and equity. Holders of common stock (usually just called stockholders) do not have a claim on a specific amount of money. They are entitled to a share of profits (usually called dividends), but management may decide to retain the profits so that the firm can take advantage of a good opportunity in the future. Shareholders unhappy with a management decision have little recourse unless they can convince the board of directors to change its policy.\nSome companies issue preferred stock, which combines some characteristics of debt and equity. Preferred stock promises to pay a certain dividend; it has a lower claim on company revenues than bonds, but a higher claim than common stock. Preferred stockholders cannot force a firm into bankruptcy for failure to pay dividends, but common stockholders cannot receive a dividend unless the preferred stockholders are paid.\nLenders, whether through loans or bonds, are contractually entitled to specified interest payments for a specified time period. The principal is repaid according to the loan agreement. If a company fails to make its payments, lenders can force it into bankruptcy and seize the company's assets to pay off the loan. Sometimes lenders require collateral to secure the debt. A company might agree to set aside money in a sinking fund that is pledged to pay the interest or principal. Lenders to small businesses sometimes require an SBA 7(a) or 504 guarantee to reduce the loan's risk to an acceptable level. The SBA seeks, but does not require, to have the business owners pledge real estate or other assets as collateral. The SBA requires holders of at least 20% of the ownership of a company to personally guarantee the loan.\nBusiness interest payments are tax deductible from corporate profits, which are subject to corporate income taxes. Dividends and interest are taxable to their recipients.\nThe SBA's Small Business Investment Company (SBIC) program is designed to stimulate private equity investments and long-term loans to small businesses. The Jumpstart Our Business Startups Act (JOBS Act; P.L. 112-106 ) makes it easier for certain small firms to sell stock to investors.",
"For many purposes, the Small Business Administration defines a small business as one with 500 or fewer employees. Small businesses by their nature have fewer employees than do large firms. They have fewer assets, less equipment, and undertake smaller projects. As a result, a representative small business needs to raise less money than a large business in the same industry. On the one hand, small businesses are unable to take advantage of economies of scale in raising capital such as bonds. For example, a small business borrowing $10,000 may pay a higher interest rate than an equally risky large business borrowing $10 million. On the other hand, large businesses may find only a few lenders who can accommodate their financing needs, whereas small businesses may borrow from any of several lenders.\nThose who are concerned about the availability of credit to small businesses frequently suggest a number of reasons that small businesses may pay a higher interest rate or face more requirements to get a loan than an equally creditworthy larger business. These include the following:\nSmall businesses are thought to be more affected by swings in the economy and consequently are riskier. Small businesses have a higher failure rate than comparable larger businesses and consequently are riskier. Potential lenders have a harder time assessing how creditworthy a small business is. There are great differences between small businesses in the same industry and many reasons for borrowing money. This variation makes it difficult to develop general standards that can be applied to all small businesses. There is limited reliable financial information on many small businesses. Many small businesses are young, have a short credit history, and have not been through a full business cycle. Most small businesses are privately owned and do not publish current, detailed financial information. Many small businesses use staff instead of independent accountants to create financial reports. Small businesses have less collateral to pledge for a loan than do large businesses. This can lead to lenders (and the SBA) requiring owners to pledge personally owned real estate as collateral.\nFinancial institutions, such as commercial banks, that have ongoing relationships with a small business are considered by many to have an advantage in lending because of their experience working with the small business. The history between a small business and the bank that serves it gives the bank information on the owners, managers, markets, and potential of the loan applicant that is not available to other lenders. This can lead to better lending decisions and may facilitate monitoring the business's financial health, which reduces the risk to the lender.",
"Over a business cycle, small business borrowing is likely to fluctuate. Normally, as the economy slows down, lending (including to small businesses) declines. Business lending tends to pick up during an economic recovery.\nAn economic slowdown (recovery) could have several impacts on small business borrowing.\nAs lenders become more (less) risk averse, they could decline (agree) to make loans that they would have made in other times. SBA loan guarantees might offset this caution during a slowdown and help small businesses to expand. An economic slowdown (recovery) could reduce (increase) the risk-adjusted profitable opportunities for small businesses to invest, reducing (increasing) small businesses' demand for loans. Small businesses might become more (less) risk averse and decline (decide) to undertake projects with risk and profit characteristics that previously would (not) have been undertaken. The 2007-2012 decline in house prices is likely to have reduced the collateral value of any real estate owned by a small business and of the business owner's home. The SBA seeks, but in general does not require, collateral for its guarantees.\nFigure 1 illustrates the supply and demand for capital during times of economic prosperity and slowdown. The prevailing interest rate and the total dollar volume of loans made are determined by the intersection of the supply and demand curves. Economists refer to the interest rate where the supply and demand for business loans is equal as the equilibrium interest rate.\nThe supply curve, which shows the amount of capital (measured on the horizontal axis) that is available in the economy at the interest rates (measured on the vertical axis), shifts to the left during a slowdown indicating that less capital is available at the same interest rate. The demand curve, which shows the volume of loans (also measured on the horizontal axis) that business would obtain at various interest rates (also measured on the vertical axis), shifts to the left during a slowdown illustrating that fewer business loans are desired at the same interest rate.\nThe graph shows the interest rate declining, but this depends on the steepness of the supply and demand curves and the amount that each shifts. If the supply curve shifts more to the left during a slowdown than is drawn, or if the demand curve shifts less to the left than is drawn, interest rates could rise. In this case, although supply and demand have both decreased, supply declined more than demand. In both cases, however, loan volume falls.\nFigure 1 represents the overall market for business loans. Most businesses will pay a higher or lower rate depending on their relative riskiness. A more risky loan carries a higher interest rate. This risk premium can change as lenders' attitudes toward risk change.",
"Information on small business borrowing is available from several sources. Statistics on the SBA's two largest business loan guarantee programs—7(a) and 504/CDC Loan Guaranty programs—can be found in CRS reports.\nThe SBA's Office of Advocacy publishes research based on surveys concerning small business loans, annual reports on small business lending, and occasional reports on other small business issues. The SBA makes certain unpublished data available upon congressional request.\nThe Federal Reserve also publishes occasional research from surveys. The Federal Reserve's Senior Loan Officer Opinion Survey on Bank Lending Practices is conducted quarterly, in January, April, July, and October. It asks those surveyed about changes in lending terms to small businesses (defined as those with annual sales volume of $50 million or less). It also asks about the demand for small business loans. Given that the Federal Reserve does not use the SBA's industry based definition of \"small,\" the results are more indicative than an exact measure of what is happening to small business lending as viewed by the SBA.\nThe Federal Reserve administers a quarterly Survey of Business Lending on loans made by various types of banks to businesses. Some of the information is broken down by the size of the loan ($3,000 to $99,000; $100,000 to $999,999; $1,000,000 to $9,999,000; and $10,000,000 and more). The survey is released in the last month of the quarter (March, June, September, and December).",
"Analysis of how different events affect small business lending can provide different guidance on policy options. For example, if lending standards are becoming stricter, it may, or may not, be the case that this is an appropriate reaction to the economic conditions and recent experience with loan performance.\nIn general, there can be many reasons for declining employment by small businesses.\nIt could be that small businesses could expand and hire more workers, but that problems in other parts of the economy are discouraging lending to small businesses. In this case, expanding SBA loan guarantees might help. In a recession, consumers purchase less and the problem faced by small businesses is usually a lack of demand for their products, not an inability to obtain loans. In this case, expanding SBA loan programs is likely to have little impact. It could be that the market is not purchasing the products made by certain small businesses, resulting in layoffs. Here the problem might be changing consumer tastes. Loans to expand production would not be helpful, but loans to update products or enter new markets might be useful.\nEconomic analysis usually concludes that competitive markets are beneficial for the national economy because they deliver the goods that consumers want at the lowest cost. Markets with less competition deliver less at a higher price, and government intervention is sometimes justified to correct this reduced competition, which economists term market failures . One policy challenge is to correct the market failure without overcorrecting, which would result in diverting resources from other more productive uses.",
"A number of factors affect the supply and demand for small business loans, independent of the SBA's guarantee. Forecasting the impact of the business cycle on the demand for SBA guarantees on loans to small businesses is particularly difficult for two reasons. First, the impact on SBA guarantees of declining small business investment may or may not be offset by an increase in lenders seeking to avoid risk. Second, there is only limited information on which to base such a forecast."
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"question": [
"How are small businesses defined?",
"What difficulties are small businesses faced with?",
"Why might these businesses have trouble obtaining loans?",
"How does the Small Business Administration assist small businesses?",
"How does guaranteeing loans by the private sector make lenders look more favorably on small business loan requests?",
"What happens to the volume of small business loans over time?",
"What is the business cycle's effect on SBA guarantees?",
"How does a growing economy impact the demand for SBA loan guarantees?",
"How does an expanding economy impact lenders?",
"What causes lenders to tighten loan standards?",
"How do slowdowns impact the demand for SAB loan guarantees?",
"What do small business owners often pledge as collateral for business loans?",
"How did the 2007-2009 recession affect small business owners who had pledged their personal residences as collateral for business loans?"
],
"summary": [
"Small businesses (usually defined as companies with 500 or fewer employees) are an important part of the nation's economy.",
"At various times during the business cycle, concern is voiced about the difficulties that small businesses have obtaining loans.",
"There can be many reasons for periodic declines in small business lending over the business cycle: loan standards change, the quality of projects to be financed changes, and small businesses' demand for loans fluctuates with anticipated customer demand.",
"Congress created the Small Business Administration (SBA) to assist small businesses in many ways, including by guaranteeing loans made by the private sector.",
"This guarantee reduces a lender's potential loss on a small business loan and should make lenders look more favorably on small business loan requests.",
"Nevertheless, there are several reasons why the volume of small business loans varies over time despite the availability of the SBA's guarantee.",
"The business cycle's impact on the volume of SBA guarantees is not clear.",
"When the economy is growing, demand for SBA loan guarantees can increase as small business expands to take advantage of opportunities or small businesses might reduce their demand because they can obtain loans without the SBA's guarantee.",
"In an expanding ecomomy, lenders are more willing to make loans on more favorable terms.",
"In slowdowns, concern over potential losses leads lenders to tighten all loan standards, perhaps affecting small businesses disproportionately.",
"The demand for SBA loan guarantees can increase as small businesses are unable to obtain loans without the government's backing or interest in SBA loan guarantees can fall because there are fewer reasons to borrow.",
"Even with an SBA guarantee, small business owners frequently pledge their personal residences as collateral for business loans.",
"Even with an SBA guarantee, small business owners frequently pledge their personal residences as collateral for business loans. During the 2007-2009 recession, the widespread decline in home prices reduced owners' abilities to provide such credit enhancement."
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CRS_R41482
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{
"title": [
"",
"Background",
"Political Situation",
"Fernández Administrations (2004-2012)",
"Medina Administration",
"Key Priorities",
"Ruling by the Constitutional Tribunal of the Dominican Republic",
"Naturalization Law and Regularization Plan",
"Relations with Haiti",
"May 2016 Elections",
"Economic and Social Conditions",
"Economic Trends",
"Energy Challenges and Opportunities",
"Social and Economic Development Programs",
"U.S. Relations",
"Foreign Aid",
"Security Cooperation",
"Trade Issues",
"Agriculture and Labor Issues",
"Human Rights",
"Outlook"
],
"paragraphs": [
"",
"The Dominican Republic is situated on the eastern two-thirds of the Caribbean island of Hispaniola, which it shares with Haiti (see Figure 1 ). A population of about 10.3 million occupies an area about the size of New Hampshire and Vermont combined. Between 900,000 and 1.2 million of the people currently living in the Dominican Republic are undocumented; many of them are Haitians or descended from Haitians. With a per capita gross domestic product (GDP) of roughly $5,770 (2013), the Dominican Republic is classified by the World Bank as an upper middle-income country. This stands in sharp contrast to neighboring Haiti, a low-income country with a per capita GDP of just $810 (2013) that was struggling economically even before a devastating earthquake hit the country in January 2010. The two countries had similar GDP per capita levels in 1960, but while growth in Haiti has stagnated and its per capita GDP has shrunk by half since that time, the Dominican Republic has posted one of the fastest growth rates in Latin America, and its per capita GDP has quadrupled.\nAfter fighting to achieve its independence from Spain in 1821 and then from Haiti in 1844, the Dominican Republic embarked upon a bumpy road toward its current democratic form of government characterized by frequent coups, dictatorships, and U.S. interventions (including 1916-1924 and 1965-1966). Rafael Trujillo ruled the country as a dictator from 1930 to 1961, often employing violent tactics to quell political opposition. Despite his brutality, Trujillo's strong anticommunist stance earned him tacit support from the United States. His acolyte, Joaquín Balaguer, then served as president from 1960-1962, 1966-1978, and 1986-1996. As a result of the dominance of these caudillo (strongman) leaders, the Dominican Republic did not develop into a modern democracy until the 1990s. In 1994, an agreement commonly referred to as the \"Pact for Democracy\" removed the aging Balaguer from power and paved the way for the country's first truly free and fair elections to be held in 1996.\nSince the mid-1990s, the Dominican Republic has, for the most part, continued to post solid economic growth (see Figure 2 below) and developed democratic institutions, albeit with very high levels of corruption. In 1996, Leonel Fernández of the center-left Dominican Liberation Party (PLD) succeeded Joaquín Balaguer as president and presided over a period of strong economic growth fueled by expansion in tourism and free trade zones. In the 2000 presidential elections, after top PLD officials were charged with misusing public funds, Hipólito Mejía (2000-2004), an agrarian engineer of the populist Dominican Revolutionary Party (PRD), defeated the PLD candidate, Danilo Medina. He lost support, however, by spending excessively and deciding to bail out all deposit holders after three massive bank failures in 2003. Leonel Fernández defeated Mejía easily in 2004 to garner a second four-year term.",
"",
"During his last two terms, Leonel Férnandez restored confidence in the Dominican economy, enacted significant political reforms, and played a key role in regional politics. As a result of sound economic management, record foreign investment, infrastructure spending, and a successful diversification of the economy, Férnandez helped the Dominican Republic resume its position as one of the fastest-growing economies in Latin America (GDP growth averaged 7% per year from 2005-2011). Rapid growth combined with significant reductions in inflation helped reduce the percent of Dominicans living in poverty from 43% in 2004 to 34% in 2010—a rate that economists maintained was still rather high for the country's income level.\nFormer President Férnandez also scored a number of political victories that will likely ensure his party's dominance for years to come. In May 2010, Férnandez's PLD party captured 31 of 32 seats in the Dominican Senate and 105 of 183 seats in the Chamber of Deputies. It will control both chambers through May 2016. In 2009, then-President Fernández secured congressional approval of a new constitution. The new constitution, which took effect in January 2010, allows presidents to complete one term and then serve again after sitting out of office for four years, making President Fernández eligible to run again in 2016.\nAs president, Leonel Férnandez maintained close ties with the United States but also sought to diversify the Dominican Republic's trade relations and raise the country's international profile by mediating regional conflicts and supporting reconstruction efforts in Haiti. Férnandez helped resolve disputes between Colombia and neighboring Ecuador and Venezuela and supported efforts to negotiate a peaceful settlement to the 2009 political crisis that occurred in Honduras. Despite centuries of tension between the two countries, the Dominican Republic responded to the January 2010 earthquake in Haiti with an outpouring of public and private donations and emerged as a key supporter of international relief and reconstruction efforts.\nWhile some argue that Leonel Férnandez passed a strong legacy on to his successor, others maintain that his government left major problems unaddressed. At the end of Férnandez's two terms, the Dominican Republic still experienced persistent electricity shortages, high crime rates (the homicide rate stood at 25 per 100,000 people in 2011), and corruption. In addition, the Dominican Republic's weak education system, which ranked just above Haiti in a 2012 global competitiveness report, remained a major impediment to an otherwise competitive economy. The Fernández government's decision to let a stand-by agreement with the International Monetary Fund (IMF) lapse rather than reducing electricity subsidies left the country in a precarious fiscal situation.",
"",
"Danilo Medina took office for a four-year presidential term on August 16, 2012, after soundly defeating former President Hipólito Mejía of the PRD by a comfortable margin of 51.2% to 46.2%. During his inaugural address, Medina emphasized the development goals of his administration: reducing poverty and inequality; increasing spending on education to 4% of GDP as mandated by the constitution; ending illiteracy; and creating 400,000 new jobs. Observers expect his policies to be guided by the country's National Development Plan 2010-2030 , which set specific targets for boosting tax revenue, increasing education and healthcare spending and quality, and increasing electricity production. Thus far, President Medina has accomplished the first of those two development goals; a national dialogue to address the serious challenges in the electricity sector began in January 2015 (see \" Energy Challenges and Opportunities \" below).\nUpon taking office, President Medina endorsed austerity and fiscal reform. He shepherded a fiscal reform through the Dominican Congress that included a variety of tax changes aimed at boosting revenue and reducing the country's fiscal deficit. Though unpopular among Dominicans, the reforms, combined with cuts in public spending, have been praised by the IMF for helping to restore macroeconomic stability in the country. Medina also dedicated more of the budget to social programs by, for example, increasing education funding to 4% of GDP in 2013.\nBuoyed by a large congressional majority and high approval ratings (83% in a January 2015 poll), President Medina has implemented a variety of new social programs that have already yielded positive results. In his recent state of the nation address, Medina highlighted progress made in education programs that have helped 200,000 students enroll in full-day education programs, literacy programs that have benefitted nearly 800,000 people, and subsidized health initiatives that have reached 460,000 people. (See also \" Social and Economic Development Programs \" below.)\nDespite those impressive results, the Medina government's efforts to address crime and corruption remain a work in progress. President Medina launched a national security plan in 2013 and has reported on progress in terms of additional police hired, equipment purchased, and prevention programs launched. In his 2014 state of the nation address, Medina credited government efforts for contributing to a 13% reduction in homicides in 2013. The country's homicide rate fell further in 2014, from a rate of 20 per 100,000 to a rate of 18 per 100,000. Nevertheless, violent crime in the Dominican Republic has been fueled by increasing drug flows through the country and exacerbated by the complicity of corrupt police and other officials. In January 2015, the former head of the Dominican anti-drug agency was arrested and charged with robbing more than a ton of cocaine that had been confiscated.\nCorruption is an issue that President Medina did not mention in his 2015 annual address to the nation even as it remains a top concern among investors and business leaders in the country. The Dominican Republic is ranked 115 out of 175 in Transparency International's Corruption Perceptions Index. In addition to police officials, top allies (including a military official) of former President Fernández are being investigated for their role in a potential bribery scandal involving the purchase of jets from Brazil, yet the Medina government has taken few steps to support efforts to investigate or punish their alleged actions.",
"The Dominican government has long received criticism for its migration policies and general treatment of Haitians and Dominicans of Haitian descent living within its borders. A ruling in September 2013 by the Constitutional Tribunal of the Dominican Republic could render as stateless an estimated 200,000 Dominican-born persons, mostly of Haitian descent, many of whom have lived there for decades. With the ruling's retroactive effect, it has the potential to impact thousands born in the Dominican Republic.\nThe case involved Ms. Juliana Dequis Pierre, a 29-year-old Dominican-born woman and mother of four children whose Haitian migrant parents moved to the Dominican Republic decades ago. Although Ms. Dequis Pierre was registered at birth as a Dominican citizen, the Tribunal concluded she did not meet the criteria for the acquisition of Dominican nationality. The ruling essentially applied the criteria for acquiring Dominican nationality outlined in the 2010 constitution (as well as the 2004 General Law on Migration that was upheld by the Dominican Supreme Court in 2005) retroactively. As outlined in the State Department's Country Report on Human Rights Practice s covering 2013, the 2010 constitution provides that anyone born in the country is considered a Dominican citizen, except children born to diplomats, parents who are \"in transit,\" or parents who are in the country illegally. The Tribunal also requested Dominican authorities to identify similar cases of formally registered Dominicans of Haitian descent who would not meet the Tribunal's criteria for citizenship going back to 1929.\nThe Tribunal ruling runs contrary to a 2005 judgment by the Inter-American Court of Human Rights on the issue of nationality in the Dominican Republic. It also goes against recommendations made by the U.N. system, Organization of American States (OAS), foreign leaders, and human rights groups that have challenged the Tribunal's legitimacy out of concern that it violates international human rights obligations to which the Dominican Republic is party. The Inter-American Commission on Human Rights concluded that the Tribunal's ruling \"implies an arbitrary deprivation of nationality\" and \"has a discriminatory effect, given that it primarily impacts Dominicans of Haitian descent.\"",
"In May 2014, the Dominican Congress approved legislation designed by the Medina government after wide consultations with civil society to allow (approximately 24,000) individuals born in the country who grew up with Dominican identity documents that were deemed invalid by the Tribunal ruling to keep their citizenship by re-registering with the government at any time. The legislation, commonly referred to as the naturalization law, also provided an expedited path to citizenship for approximately 200,000 individuals born in the Dominican Republic to parents without legal status. This process required them to register for a foreigners' birth certificate by February 2, 2015, obtain migratory permits, and then be residents for an additional two years before being eligible for naturalization. Some 8,700 people had applied for a birth certificate as of February 2, 2015. However, according to human rights groups, the vast majority of those people have not received a birth certificate.\nMany human rights groups are concerned that those who did not meet the application deadline could face deportation even though the Dominican government has issued a decree that there will be no deportations until June. Dominican officials also maintain that those who did not get through the naturalization program can still obtain temporary residency followed by a path to citizenship through the regularization plan that runs through June 16, 2015. However, the Inter-American Court of Human Rights (IACHR) ruled in August 2014 that subjecting Dominicans of Haitian descent to submit to the type of regularization process described below would violate their rights to nationality and judicial protection. On that basis, the IACHR ruled that the September 2013 Tribunal decision should be invalidated. The Dominican Tribunal not only rejected that ruling, but also found that the Dominican government had improperly submitted to the IACHR's jurisdiction when it joined the body in 1999.\nOn June 2, 2014, the Dominican government also began implementing a regularization plan that provides a path to legal residency for undocumented migrants that apply by June 16, 2015. Dominican officials maintain that the process provides a path to citizenship and is open to those who did not make it through the naturalization plan. State Department officials maintain that, as the IACHR ruled, the regularization plan provides temporary residency to Haitians living in the Dominican Republic and does not apply to Dominicans of Haitian descent. In order to implement the plan, the Dominican government has set up 24 regularization centers around the country and allocated some $25 million. According to President Medina, more than 150,000 individuals had applied to the program, 40,000 of whom met all of its requirements by February 2015. While the process is free, it reportedly requires individuals to present several different documents, some of which have been difficult and costly to obtain (such as a Haitian birth certificate). Haiti has only opened one center to help people obtain documents; that center reportedly has an extremely long wait time.",
"The Tribunal ruling has strained relations between the Dominican Republic and Haiti (the country's neighbor and second-largest trade partner), arguably setting back progress that had occurred after the Dominican government provided support for post-2010 earthquake relief and reconstruction in Haiti. If the Dominican Republic rendered thousands of Dominicans of Haitian descent stateless and deported some of them to Haiti, the potential impact on Haiti could be significant. The Haitian government initially recalled its ambassador from the Dominican Republic in response to the Tribunal's ruling.\nHaitian and Dominican officials began convening regular bilateral talks to address migration and a range of other topics; the first round occurred in January 2014. The Dominican government said that it would not negotiate the Tribunal's decision or how it plans to implement it. Haiti reportedly recognized Dominican sovereignty on migration policy, and the Dominican government assured Haiti that \"concrete measures will be taken to safeguard the basic rights of people of Haitian descent\" living in the country.\nA second round of talks on February 3, 2014, led to agreement on several immigration issues, according to the Dominican government, including a new type of Dominican visa for workers. The Dominican Republic reviewed its rules and practices related to Haitian students. The Haitian government reportedly reaffirmed its commitment to expedite the issuance of passports and national civil registration cards at border posts and in consulates in the Dominican Republic.\nAlthough the talks have continued, Dominicans remain concerned about continued illegal immigration to their territory due to the current political instability in Haiti and the limited support the government of Haiti has given to the naturalization and regularization processes. The Dominican military has increased efforts to secure the Dominican-Haitian border and prevent new inflows of Haitian migrants. In February 2015, Haiti's Ambassador to the Dominican Republic resigned after receiving harsh criticism for failing to help Haitians in that country access the regularization program. The Haitian government remains concerned about the fate of its citizens living in the Dominican Republic. This concern, as well as anti-Dominican rallies in Haiti, increased after the violent deaths of two Haitians in February 2015 in two different Dominican cities. Those rallies, some of which have turned violent, prompted the temporary closure of Dominican consulates in Haiti.",
"As 2015 advances, attention in the Dominican Republic will increasingly turn to the upcoming 2016 presidential and legislative elections. The elections scheduled for May will mark the first simultaneous presidential and legislative elections held in the country since 1994.\nIn the presidential contest, President Medina is constitutionally barred from seeking consecutive reelection, but some 63% of Dominicans polled in February 2015 would support an amendment that would allow him to run again. Most observers do not expect Medina to support such an amendment. If Medina does not run in 2016, the PLD may again select Leonel Fernández as its standard bearer for a fourth time. Regardless, most observers are expecting the party to retain the presidency in 2016. The main opposition party—the populist Dominican Revolutionary Party (PRD)—has remained divided for several years between supporters of its leader, Miguel Vargas Maldonado (who is widely expected to seek its nomination in 2016), and those of former President Hipólito Mejía (2000-2004). Mejía seeks to run in 2016 as the candidate of a new Convergence party. Other likely candidates include Luis Abinader of the Modern Revolutionary Party and Guillermo Moreno of Alliance for the Country.\nWith the PLD predicted to dominate the legislative elections as well, some are concerned about the long-term effects of one-party dominance on the quality of democracy in the country.",
"",
"From 1995 through 2002, rapid expansion in both the tourism industry and the free-trade zone sector, which produces apparel and other nontraditional exports, boosted average annual growth rates in the Dominican Republic to more than 6% despite a decline in agricultural exports. Remittances from Dominicans living abroad contributed $1.5 billion per year to the country's stock of foreign exchange. Economic expansion was also facilitated by the passage of market-friendly economic reforms in the late 1990s. One critical reform was a 1997 law allowing the partial privatization of unprofitable state enterprises. Economic expansion did not translate into significant reductions in poverty, however, as inequality and unemployment remained high.\nIn 2003, the Dominican economy, wracked by banking scandals, economic mismanagement, and an inability to compete with cheaper Asian apparel producers, contracted by 0.3% (see Figure 2 ). The country's public finances were placed under enormous strain after then-President Hipólito Mejía bailed out the country's third-largest bank, Banco Intercontinental (Baninter), which collapsed in May 2003. The Baninter scandal occurred after bank executives defrauded depositors of $2.2 billion worth of holdings.\nEconomic recovery occurred during Fernández's second term (2004-2008), as inflation decelerated, growth resumed, and the peso more than regained its pre-crisis value. In February 2005, President Fernández signed a $665 million standby agreement with the IMF, which expired in January 2008. The IMF's review of the three-year package lauded the government's ability to bounce back from the economic crisis and efforts to bring public spending under control. However, the IMF also urged the government to reduce energy subsidies and broaden the tax base in order to have a better fiscal position and revenue available for targeted social programs. During this period, the manufacturing sector declined, but the construction, telecommunications, tourism, and other services sectors expanded.\nWith a per capita gross domestic product (GDP) of roughly $5,570 (2012), the Dominican Republic is classified by the World Bank as an upper middle-income country. The Dominican economy fared better than many other economies in Latin America during and after the 2008-2009 global financial crisis; it is now among the fastest growing economies in the region (with 7% GDP growth in 2014). The Dominican Republic has the largest stock of foreign direct investment and the most diversified export structure of any of the countries that are party to the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA). According to the Dominican Central Bank, remittances have exceeded $3.0 billion each year since 2010. High levels of foreign investment, strong performance in the mining and telecommunications sectors, and continued strength in tourism revenues have boosted growth.\nDespite its resilience and dynamism, the Dominican economy remains somewhat vulnerable to external shocks, which can cause declines in remittances, exports, or tourism inflows or increases in energy and food prices. However, recent increases in revenue from consumption taxes and tariffs on mining exports have given the government more room to maneuver in the event of external shocks than in the past. The government also reduced its debt significantly by using the proceeds from a recent bond issue to pay off $2.5 billion in outstanding debt owed to Venezuela's state oil company, Petróleos de Venezuela (PDVSA).",
"The Dominican government is seeking to reduce its reliance on foreign (primarily Venezuelan) oil imports, diversify the country's energy matrix, and address long-standing challenges in the electricity sector. In 2000, the Dominican Republic relied on oil for 93% of electricity generation. In the recent past, the country gained some relief from high global oil prices through PetroCaribe, an agreement promoted by Venezuela that provides oil to Central American and Caribbean nations at subsidized costs. Although the Dominican government continues to benefit from PetroCaribe, it appears to be planning for an increasingly possible scenario in which subsidized funding may run out if Venezuela's economic troubles continue.\nMore recently, the Dominican government has increased the percentage of energy it gets from natural gas; renewable sources; and, despite the associated environmental costs involved, coal. According to the Dominican Republic's National Energy Commission, the country had reduced its overall dependency on oil from 71% in 2000 to 36% in 2011. The IDB reports that the Dominican government generates 20% of its electricity from natural gas, 14% from coal, 4.7% from hydro, 0.5% from wind and biomass.\nA U.S. company, AES Corporation, has been operating a liquid natural gas (LNG) terminal in the Dominican Republic since 2000. The country currently imports LNG from Trinidad and Tobago, but the Dominican government is also interested in the potential of importing liquid natural gas (LNG) from the United States, some of which could potentially be transported in smaller quantities to neighboring Caribbean countries. Antillean Gas Ltd., a private Dominican corporation, announced the beginning of the construction of a second $302-million natural gas terminal in February 2014.\nIn 2007, the Dominican legislature passed legislation establishing a regulatory framework along with tax incentives to promote energy production from renewable sources; the importance of fostering alternative energies is now enshrined in the 2010 constitution. Since then, the country has received significant foreign investment for solar power, biomass, and wind energy projects; the country's first large-scale wind farm opened in 2011.\nAt the same time, the Medina government is investing $1.9 billion to build two coal-powered generators to provide additional electricity to the grid.\nProblems in the electricity sector have long constrained growth in the Dominican Republic, as electricity companies have struggled to provide adequate service to a populace angered by continued blackouts. Between 2008 and 2012, state electrical distribution companies added a million paying customers to their client base, reduced electricity losses by 15%, and reformed their internal operations to reduce payroll costs, combat corruption, and improve customer service. The government has also made some effort to target electricity subsidies only to the poorest households and to criminalize non-payment of electricity bills. Nevertheless, the grid remains fragile, electricity losses are significant, and blackouts continue. The Dominican government continues to subsidize the state distribution companies at a cost of roughly $1.2 billion in 2014.\nPresident Medina began a six-month dialogue process between government officials, private companies, and civil society to develop a national agreement to address the aforementioned electricity sector challenges. The government and private industry have each presented comprehensive energy proposals that would involve significant reforms. Analysts are hopeful that the dialogue process ends in a series of recommendations that can improve the Dominican electricity sector, which has recently been ranked as the third most unreliable in Latin America.",
"In the past, the Dominican Republic has been unable to translate rapid economic growth into significant and sustainable reductions in poverty and inequality and improvements in education and health indicators. Unemployment has remained among the highest of the CAFTA-DR countries, with youth unemployment at particularly high levels. Economic mobility, the ability to improve one's income level/social status over time, has been much lower than the average for Latin America and the Caribbean. Anti-poverty programs have, until recently, not been well targeted, which has limited their effectiveness. Nevertheless, poverty has reportedly fallen from 42% to 35.5% since President Medina took office; it remains to be seen whether that reduction can be maintained.\nSince 2005, conditional cash transfers (CCTs) provided to impoverished families in exchange for compliance with health interventions and keeping their kids in school have had positive results on nutrition outcomes and school attendance rates. Between 2009 and 2012, the World Bank and the Inter-American Development Bank (IDB) provided $370 million in loans and technical assistance to support those programs. In 2012, the government combined CCTs and another type of school-based intervention program to form the Progresando con Solidaridad , or PROSOLI (Progressing with Solidarity), program. The IDB approved an additional loan worth $100 million in September 2013 that has helped PROSOLI benefit more than 710,000 families.\nIn addition to strengthening the social safety net and improving the availability and quality of healthcare and education programs available to those with limited resources, President Medina has also sought to promote employment and boost agricultural productivity. Thus far, the Medina government maintains that it has created almost 300,000 jobs through December 2014, which is on track to meet its goal of creating 400,000 jobs over four years. President Medina has sought to promote employment and agricultural productivity through the provision of credit and subsidized loans to micro, small, and medium-sized businesses or MSMEs (which account for more than 90% of Dominican businesses and employ more than 2 million people). With support from the IDB, the Medina government also seeks to boost the productivity of those companies and improve agricultural producers' access to profitable markets. This has generated some 35,000 jobs in that sector as well.",
"The Dominican Republic enjoys a strong relationship with the United States, evidenced by extensive economic, political, and cultural ties. There are more than 1.5 million Dominicans residing in the United States, making the Dominican Republic one of the top ten countries of origin for the U.S. foreign-born population. The Dominican Republic is one of the most important countries in the Caribbean for U.S. policy because of its large size, diversified economy, and close proximity to the United States. The United States has been a strong supporter of the democratic and economic development of the country and is currently supporting the Dominican government's efforts to strengthen governance, improve the provision of social services, boost competitiveness, and address citizen security. The ongoing implementation of the Caribbean Basin Security Initiative (CBSI) and of a new bilateral extradition treaty are likely to ensure close security cooperation in the years to come, just as CAFTA-DR is likely to ensure the continuation of close economic relations.\nUpon President Medina's election, President Obama said that he looked forward to working with him on bilateral and regional issues of shared concern. Vice President Biden reiterated that message and the importance of U.S.-Dominican relations during a June 2014 visit to the country; his visit marked the first by any vice president since 1980. Nevertheless, Obama Administration officials have expressed \"deep concern\" about the aforementioned Tribunal ruling's potential impact on the status of people of Haitian descent born in the Dominican Republic. In June 2014, Vice President Biden praised President Medina for passing a naturalization law to help improve the condition of Haitians and their descendants born in the Dominican Republic but said that \"implementation [of that law] will be equally as important.\"",
"The United States is one of the largest bilateral donors to the Dominican Republic, with U.S. assistance totaling an estimated $25.3 million in FY2014 (see Table 1 below). The Administration requested another $25.7 million for the Dominican Republic in its FY2015 budget request; estimated assistance levels for FY2015 are not yet available. The Administration requested $24.4 million for the Dominican Republic in its FY2016 request.\nU.S. foreign assistance is currently focused on helping the Dominican government improve its transparency; strengthen the rule of law; raise the quality of its basic education; protect the country from the effects of climate change; and increase access to healthcare services, particularly for the prevention and treatment of people with HIV/AIDS. From FY2010 to FY2014, funding provided through the Development Assistance (DA) account to the Dominican Republic declined by more than half, while funding for global health programs (GHP) administered by the State Department and the U.S. Agency for International Development (USAID) declined less dramatically. Bilateral law enforcement aid has also been phased out as regional funding for the Caribbean Basin Security Initiative (CBSI), which is discussed below, has increased.\nIn addition to bilateral assistance, in FY2009, the Dominican Republic received a total of $5 million in assistance under the Mérida Initiative, an anticrime and counterdrug assistance package originally designed for Mexico and Central America. Mérida-funded projects in the Dominican Republic supported police professionalization programs, provided logistical support to interdiction units, and trained judicial authorities in implementing the criminal procedure code.\nIn FY2010, rather than continuing to receive this assistance through the Mérida Initiative, the Dominican Republic began to receive assistance through the Caribbean Basin Security Initiative (CBSI), a regional security initiative first announced at the April 2009 Summit of the Americas. CBSI is aimed at reducing illicit trafficking in the Caribbean, advancing public safety and security, and promoting social justice. From FY2010 to FY2014, Congress appropriated an estimated $327.0 million for CBSI programs. The Obama Administration asked Congress for $56.5 million in additional CBSI funding in its FY2015 budget request and $53.5 million for the program in FY2016.\nAccording to the Government Accountability Office (GAO), CBSI aid to the Dominican Republic totaled roughly $5.4 million in FY2010, $15.2 million in FY2011, and $11.9 million in FY2012. Total CBSI appropriations to the Dominican Republic for FY2010-FY2012 amounted to some $32.5 million (16% of all CBSI aid appropriated and the second-highest amount allocated to an individual country). CBSI-funded programs in the Dominican Republic have supported training for military, police, and prosecutors (discussed below); at-risk youth programs; local programs to combat human trafficking; and weapons destruction.",
"On September 15, 2014, President Obama again designated the Dominican Republic as one of four major drug transit countries in the Caribbean. The Dominican Republic has also been designated a jurisdiction of primary concern for money laundering. According to U.S. government estimates, the majority of the roughly 6% of U.S.- and Europe-bound cocaine that transits Hispaniola passes through the Dominican Republic, mostly using maritime routes to transship the drugs. High-profile arrests have laid bare ties between international traffickers and corrupt Dominican operatives and officials.\nThe Dominican Republic cooperates closely with the United States in counterdrug efforts through seizures, joint operations, and extraditions of drug-trafficking suspects (including 31 in 2012). In 2013, the Dominican government improved coordination between police and military units engaged in efforts to combat drug trafficking and money laundering; seizures remained high as a result of those efforts. Port security remains a problem, however, as only one of the country's 16 ports is operating in compliance with U.S. Container Security Initiative (CSI) standards. Bilateral cooperation is particularly strong with the Drug Enforcement Administration through the vetted Sensitive Intelligence Unit (SIU) and with the U.S. Southern Command, which has provided $1.5 million to build a small Dominican-manned naval base on an island in the southeast of the country for use in interdicting drugs and migrants. Efforts to improve coordination with the Haitian National Police and other Caribbean partners have continued, particularly through the Cooperating Nations Information Exchange System. CBSI funding is helping train Dominican police (1,000 of whom will be trained by Colombians each year) and prosecutors in how to investigate and prosecute cases, create a money-laundering agency, and improve port security.\nStill, obstacles exist to greater U.S.-Dominican counterdrug and anticrime cooperation. As in previous reports, the State Department's narcotics control strategy report covering 2013 asserted that corruption and impunity continue to adversely affect counterdrug efforts. Despite initiatives to root out corrupt officials, Dominican police and military personnel continue to be arrested for drug-trafficking-related crimes.\nFor its part, the Dominican government has said that it, like many receiving countries in Latin America, is ill-prepared to absorb the volume of deportees with criminal records who are arriving from the United States. In January 2014, the State Department and the Department of Homeland Security (DHS) signed an agreement to expand a Criminal History Information Sharing (CHIS) program, which has been used to share information on certain criminal deportees with Mexican law enforcement officials, to the Dominican Republic and five other countries as well. The U.S. government does not assist the Dominican government with deportee reintegration.",
"Since the 1980s, U.S.-Dominican trade and investment linkages have increased, first as a result of U.S. trade preference programs and then as a result of the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). From the mid-1980s until 2000, the Dominican Republic benefitted from the Caribbean Basin Initiative (CBI), a unilateral U.S. trade preference program. From 2000 to 2007, the Dominican Republic received expanded trade preferences through the Caribbean Basin Trade Partnership Act (CBTPA) of 2000. Both the CBI and CBTPA have been replaced by CAFTA-DR. The Dominican government, along with the governments of Costa Rica, El Salvador, Honduras, Guatemala, and Nicaragua, signed CAFTA-DR with the United States on August 5, 2004. President Bush signed implementing legislation for the agreement into law on August 2, 2005 ( P.L. 109-53 , 119 Stat. 462). The Dominican Congress ratified the agreement in September 2005 and implemented it on March 1, 2007. Under CAFTA-DR, 100% of U.S. industrial and consumer goods now enter the Dominican Republic duty free, and nearly all U.S. agricultural exports are to enter duty free by 2020.\nAs a result of CAFTA-DR, the Dominican Republic has enacted a number of reforms to improve its tax structure, strengthen intellectual property rights, and facilitate trade flows through the country (customs reform). Perhaps partially as a result of these efforts, foreign investment to the Dominican Republic has steadily increased since 2009. The country is now a leader in manufacturing and Foreign Direct Investment, matched in the region only by Costa Rica.\nThe United States remains the Dominican Republic's main trading partner, with two-way trade totaling nearly $12.5 billion in 2014. Dominican imports from the United States are up 49% from 2006 (pre-CAFTA) levels. A significant percentage of that increase is due to increasing oil imports, but declining tariffs have also favored U.S. manufacturing and agricultural producers. Dominican exports to the United States are shifting, as apparel exports to the United States decline (from 55% of U.S.-Dominican trade in 2000 to 16.5% in 2014) and more technology-intensive exports and mining exports increase. High-tech exports to the United States include medical instruments and other electrical machinery goods. The Dominican Republic still exports agricultural goods, such as sugar and tobacco, but those exports as a percentage of overall trade are declining. Even though Dominican exports to the United States have diversified, they are valued at less than they were a decade ago, since other sectors have not yet made up for declines in Dominican apparel exports.\nMore recently, the Dominican Republic and other Central American and Caribbean countries have become increasingly concerned about the potential impact of the 12-country Trans Pacific Partnership agreement (TPP) on their textile and apparel industries. All things considered, tariff preferences provided through CAFTA-DR appear to be important in keeping apparel producers in those countries competitive in the U.S. market. A TPP agreement, if one is reached, has the potential to upset this situation. If apparel produced in Asian TPP countries gains duty-free access to the U.S. market, it could displace apparel manufactured with U.S. fabric in the Dominican Republic and Central America, adversely affecting the textile and apparel industries in those countries and in the United States.",
"In addition to influencing Dominican trade and economic policies, the labor chapter (Chapter 16) of CAFTA-DR seeks to ensure that there is increasing respect for internationally recognized labor standards in the Dominican Republic. It requires that all parties to the free trade agreement enforce their own labor laws relating to the right to organize and bargain collectively; forced labor; child labor; and labor standards concerning minimum wages, hours of work, and safety and health. Pursuant to Section 403(a) of the CAFTA-DR implementing legislation ( P.L. 109-53 ), the Department of Labor (DOL) has produced two reports to Congress on progress in implementing the labor chapter of the agreement and the results of U.S.-funded labor capacity building efforts. Since CAFTA-DR took effect, DOL has funded $6.7 million in projects in the Dominican Republic and $25.6 million in regional projects that included work in the country.\nAs outlined in a May 2012 version of DOL's report to Congress, the Dominican Republic increased its Ministry of Labor's budget for enforcing labor standards by more than 40% between 2005 and 2010, resulting in an 84% increase in the number of workplace visits by labor inspectors. However, a September 2013 DOL report, issued pursuant to a CAFTA-DR complaint submitted in 2011 (discussed in greater detail below), raised significant concerns about the manner in which labor inspections are conducted, particularly in the sugar sector. Sugar, baked goods, coffee, rice, and tomatoes have been included on the DOL's International Labor Affairs Bureau's 2014 List of Goods Produced by Child or Forced Labor.\nThe labor chapter of CAFTA-DR also includes a process by which individuals or groups can submit complaints (\"submissions\") presenting evidence that a signatory country is not complying with the labor provisions of the agreement. In December 2011, DOL's Office of Trade and Labor Affairs (OTLA) received a submission alleging that the Dominican Republic had violated the labor chapter of CAFTA-DR by allowing labor abuses—including forced and child labor—to persist in the country's sugarcane plantations. A majority of the workers on the plantations are Haitians or Dominicans of Haitian descent, many of whom lack identity documents. The Dominican sugar industry and the Dominican government rejected those allegations, presented evidence to the contrary, and have since questioned the transparency and fairness by which DOL accepted the 2011 submission.\nIn September 2013, DOL issued a report responding to the submission after a lengthy review that included two missions to the Dominican Republic, as well as 71 interviews conducted directly with sugar sector workers. The DOL report cites evidence of violations of Dominican labor law in the sugar sector, such as payments below minimum wage, 12-hour work days and 7-day work weeks, lack of potable water for workers, an absence of safety equipment at work sites, child labor, and forced labor. It includes concerns about whether the sugar sector is respecting Dominican labor law on freedom of association, the right to organize, and collective bargaining. The report also identifies shortcomings in the inspection process that may undermine the government's capacity to identify labor violations. Those include inspectors interviewing no workers or only a small number of workers during inspections, communicating in Spanish with Creole-speaking workers, and questioning workers in front of their supervisors.\nThe report included 11 recommendations for the Dominican government. In a follow-up report issued in October 2014, DOL asserted that the Dominican government had \"not provided any specific or verifiable information that it has taken the measures discussed in March [2014] or any other measures that would address the concerns raised in the report.\" DOL is continuing to seek to engage with the Dominican government and the sugar industry as part of its efforts to encourage and support efforts to address the concerns identified in the report. If the Dominican Republic does not achieve acceptable progress in addressing these concerns, the United States may initiate formal dispute settlement procedures that could ultimately result in limited monetary penalties and, as a last recourse, suspension of FTA benefits.",
"According to the State Department, one of the most serious human rights problems prevalent in the Dominican Republic even before the September 2013 Tribunal ruling (addressed earlier) was \"discrimination against Haitian migrants and their descendants, including the retroactive application of immigration policy resulting in de jure and de facto statelessness for persons who have lived in the country for generations.\" Other human rights abuses cited by the State Department in recent human rights reports have included violence against women (domestic abuse, rape, and femicide); abuses by police and other justice sector authorities; and trafficking in persons (TIP). While progress has been made in some areas (creating model prisons and prosecuting human trafficking cases), setbacks have occurred in others, including the treatment of Haitians and Dominicans of Haitian descent.\nIn recent statements and in the State Department's Country Report on Human Rights Practices covering 2013, the Obama Administration has expressed concern about the potential impact of the Dominican Constitutional Tribunal's ruling on the status of Haitians and Dominicans of Haitian descent living in the Dominican Republic (see \" Ruling by the Constitutional Tribunal of the Dominican Republic \"). On December 18, 2013, a State Department spokesperson stated that the Obama Administration had \"deep concern\" about the ruling's impact on the status of people of Haitian descent born in the Dominican Republic. On March 7, 2014, senior Administration officials stated that \"the United States has engaged with the Dominican Republic [on the issue of the ruling and] … are hopeful that there will be a conclusion to this matter through legislation that will address those most affected.\" As previously mentioned, Vice President Biden praised President Medina for passing a naturalization law to help improve the condition of Haitians and their descendants born in the Dominican Republic but said that \"implementation [of that law] will be equally as important.\"\nWithout proper identity documents, individuals living in the Dominican Republic can receive basic healthcare and education, but often encounter difficulty traveling; cannot register to vote; and have only limited access to formal sector jobs, property ownership, and secondary education. According to the State Department, police abuses are most often committed against \"undocumented Haitian migrants in poor urban areas as well as along the country's border with Haiti.\" As expressed in other U.S. government reports, undocumented Haitians are at a high risk of trafficking in persons and labor abuses as well.\nViolence against women is another major human rights problem identified by the State Department human rights report and international human rights organizations as pervasive in the Dominican Republic. Despite laws criminalizing rape and domestic violence, both abuses continue to commonly occur but were rarely reported or punished. From January through November 2013, Dominican authorities received some 60,000 gender-based violence complaints. According to the National Police, more than 1,117 Dominican women died as a result of gender-based violence between January 2008 and October 2013, few of whom had ever filed a complaint against an aggressor with Dominican authorities. In response, the Attorney General's office has set up satellite offices with special services for victims of domestic violence, the police have created a female-led unit to respond to emergency calls, and the government opened two shelters.\nThe Dominican Republic is also a source, transit, and destination country for trafficking in persons. According to the U.N. Population Fund, tens of thousands of Dominican women have been trafficked around the world. Domestically, women have been trafficked into prostitution and the broader sex industry. Dominican children are also vulnerable to sex trafficking, particularly in tourist areas; forced begging; domestic servitude; and forced labor in agriculture. Labor trafficking has become evident in the construction, service, and agricultural sectors, with people of Haitian descent at a high risk of being victimized.\nIn June 2014, the State Department issued its 13 th annual, congressionally mandated report on trafficking in persons (TIP). In addition to outlining major trends and ongoing challenges in combating TIP, the report categorizes countries into four \"tiers\" according to the government's efforts to combat trafficking. The report classified the Dominican Republic as a Tier 2 country. According to the report, the Dominican Republic maintained a Tier 2 ranking as a result of progress made in prosecuting sex and labor trafficking cases and in providing temporary immigration permits for foreign victims. A lack of assistance and shelters for victims, a failure to punish public officials complicit in trafficking, and difficulty identifying TIP victims are areas that the State Department identifies as needing further improvement.\nIn recent years, reforms of police tactics and increased punishments of officers accused of misconduct have led to a general decline in extrajudicial killings carried out by security forces. Police reportedly killed 117 people from January to September 2013 (on track to be down from the 194 people killed in 2012 and 233 killed in 2011). It remains to be seen whether the Medina government's decision to deploy 4,000 military officers to support police-led public security efforts will lead to increased abuses.\nDespite laws against torture and inhumane treatment of detainees, and senior police officials' commitment to comply with those prohibitions, the National Human Rights Council has reported that some Dominican police officers and prison officials still abuse suspects and prisoners. Prison conditions in general range from \"fair to extremely harsh\"; the 17 newer correctional and rehabilitation centers (CRCs) that the government has opened in recent years are \"slightly better\" than the traditional prisons. The government continued to implement its new criminal procedures code, which only allows suspects to be held for 48 hours without being formally charged, but pretrial detentions averaging three to six months are common for suspects who have been charged with a crime. Corruption remains a major obstacle to justice sector reform.",
"The Dominican Republic continues to experience relative political stability and steady economic growth. With high approval ratings and a large congressional majority, most analysts predict that President Medina will be able to pass reforms rather easily through 2016. Over the next few months, the government's ability to finish implementing a regularization program that will comply with the Constitutional Tribunal's ruling on nationality but also assuage concerns about the rights of Haitians and Dominicans of Haitian descent could prove difficult. If the Medina Administration is able to address the nationality issue while also addressing poverty, energy shortages, and corruption, then the PLD should have a good chance of securing another presidential term in May 2016. Medina is barred from seeking consecutive reelection but could decide to run again in 2020. Relations with the United States are likely to remain strong due to the deep cultural, geographical, and economic ties between the two countries. Dominican-U.S. relations could become strained, however, due to U.S. concerns about human rights and labor issues."
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{
"question": [
"What kind of relationship is there between the Dominican Republic and Latin America?",
"What kind of trading relationship is there between the Dominican Republic and the United States?",
"What other interests do the United States have in regards to the Dominican Republic?",
"How has U.S.-Dominican cooperation on bilateral and regional issues changed since 2012?",
"What types of challenges has Medina sought to resolve?",
"How has Medina maintained high approval ratings?",
"How will the failure to implement a 2013 Dominican Constitutional Tribal ruling affect Dominican-born people?",
"What has been the international response to this?",
"What have congressional interests in the Dominican Republic focused on in recent years?",
"What type of human rights issues have been especially important to Congress?",
"How has the United States aided the Dominican Republic?",
"How else did the Domincan Republic receive aid?",
"What did the Obama administration do in FY2016?",
"How has the Dominican Republic-Central America-United States Free Trade Agreement impacted bilateral trade and investment flows?"
],
"summary": [
"The Dominican Republic, a country of roughly 10.3 million people that shares the Caribbean island of Hispaniola with Haiti, is a close U.S. trade partner and political ally in Latin America.",
"The United States is the Dominican Republic's main trading partner, with two-way trade totaling more than $12.5 billion in 2014.",
"In addition to trade, U.S. interest in the Dominican Republic has recently focused on anti-drug cooperation and governance/human rights issues, particularly as they relate to Haiti.",
"U.S.-Dominican cooperation on bilateral and regional issues intensified during Leonel Fernández's most recent terms in office (2004-2008 and 2008-2012) and has continued during the Danilo Medina Administration.",
"Inaugurated on August 16, 2012, President Medina, a former member of the Dominican Congress and minister of the presidency, has built upon his predecessors' legacy while seeking to resolve lingering challenges related to the country's fiscal situation, energy sector, and education system.",
"Medina has implemented ambitious economic and social policies that have helped him maintain extremely high approval ratings (83% in January 2015).",
"The Medina government has struggled, however, to implement a September 2013 Dominican Constitutional Tribunal ruling that many argue may place hundreds of thousands of Dominican-born persons, most of who are of Haitian descent, at risk of statelessness.",
"The ruling has been widely condemned by the international community and strained Dominican-Haitian relations.",
"In recent years, congressional interest in the Dominican Republic has focused on security, trade, and human rights issues.",
"Human rights issues, particularly the treatment of Haitians in the Dominican Republic, have also been of significant interest to Congress.",
"The United States is one of the largest bilateral donors to the Dominican Republic; in FY2014, assistance totaled some $25.3 million.",
"The Dominican Republic has also received at least $32.5 million through the Caribbean Basin Security Initiative (CBSI), a regional initiative for which Congress appropriated $327.0 million from FY2010-FY2014.",
"For FY2016, the Obama Administration requested at least $24.4 million for the Dominican Republic and $53.5 million for the CBSI program.",
"Bilateral trade and investment flows have expanded since the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) entered into force for the Dominican Republic on March 1, 2007."
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CRS_R45421
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{
"title": [
"",
"Introduction",
"Background",
"Hughes-Ryan Amendment of 1974",
"Church and Pike Committees",
"Establishment of the Select Committees on Intelligence",
"Executive Order 12036",
"Intelligence Authorization Act for Fiscal Year 1981",
"The CIA Inspector General Act of 1989",
"The 9/11 Commission Recommendations and Subsequent Reform",
"Senate Revisions",
"Senate Resolution 445",
"Improved Coordination between Intelligence and Appropriations Committees",
"House Revisions",
"Coordination between House of Representatives Intelligence and Appropriations Committees",
"Intelligence Authorization Act for Fiscal Year 2010",
"Selected Options for Further Reform",
"Establish a Joint Committee for Intelligence",
"Consolidate Authorizations and Appropriations",
"Establish Intelligence Appropriations Subcommittees",
"Establish a Stand-Alone Intelligence Appropriation",
"Provide Dedicated Intelligence Staff to HPSCI Members",
"Abolish Term Limits for HPSCI Members",
"Conclusion",
"Potential Questions for Congress"
],
"paragraphs": [
"",
"This report provides a review of congressional oversight of the Intelligence Community (IC) since establishment of the Senate Select Committee on Intelligence (SSCI) and the House Permanent Select Committee on Intelligence (HPSCI), particularly since the 9-11 Commission published its recommendations in its 2004 report. It also explores selected options for further reform, and offers questions that Congress may consider to assess the effectiveness of its oversight.\nIn legislating, confirming appointees, authorizing programs and appropriating funds, Congress enables the IC, a community of seventeen discrete intelligence elements, to conduct the business of intelligence in support of United States national security. In addition, Congress has perspective that few others outside of the IC have. Oversight of the IC enables Congress to determine whether classified intelligence programs that are restricted from public disclosure are legal, ethical, and respectful of civil liberties. When there have been perceived abuses, Congress has often intervened to conduct hearings and legislate changes in intelligence process or organization.\nSeveral competing, sometimes overlapping, perspectives exist on the purpose for conducting congressional oversight of the IC:\nSome have argued that the primary responsibility of the intelligence committees is to provide the authority and strategic direction to enable continual improvement in the performance of intelligence programs in support of the most pressing national security challenges. Others have pointed to the role of the congressional intelligence committees in counterbalancing the power of the executive branch. This could result either through monitoring the IC as it implements programs and activities that support the executive's national security policies, or through ensuring that the IC is able to function independently of occasional instances of officials in the executive branch (including the president) choosing to politicize intelligence, or influence intelligence deliverables to support assumptions underlying policy decisions. This perspective holds that the IC must be able to exercise independence to be able to speak truth to power without abusing the power that that independence implies. Another perspective of the role of congressional oversight of the IC is that it serves as an external check on the power of the IC apart from the executive branch. This perspective draws from a perception of deep-seated biases inside the IC that proponents believe may be unethical, illegal, or resistant to executive policy. Each perspective may animate the thinking of various Members of the congressional intelligence committees at any given time. To the extent that Members share a perspective on oversight of the IC, they may be more likely to share views on the ways to conduct the oversight. Significant differences of opinion among Members on the purpose for conducting intelligence oversight, however, may signal a discordant tone in Congress's relations with the IC and hamper oversight efforts. Some believe that the intelligence committees' perceived tradition of bipartisanship and objectivity is of particular importance for effective oversight and a constructive relationship with the IC. Others, both within and outside of Congress, focus on what they perceive as weaknesses in the structure and authority of the congressional intelligence committees. While the IC has experienced significant reform over the past forty years since the establishment of the HPSCI and the SSCI, some have contended that Congress could do more to change the rules governing the committee structure and authority for conducting intelligence oversight. They note, for example, the number of committees that claim jurisdiction over intelligence matters dilutes the authority of the HPSCI and SSCI. Critics also note that despite to the diffusion of responsibility for oversight of intelligence in Congress, the growth of the IC—in the size and number of its subordinate elements, as well as its budget—has outstripped Congress's ability to provide adequate checks on the power of the executive or to develop the expertise and dedicate the time to strategically influence intelligence programs and policy.",
"",
"In 1974, the Hughes-Ryan amendment of the Foreign Assistance Act of 1961 ( P.L. 93-559 §32) provided the first statutory basis for congressional oversight and notification to Congress of covert action operations. This legislation resulted from Congress not being informed of the Central Intelligence Agency (CIA) activities abroad—in Chile and Southeast Asia in particular. The Hughes-Ryan legislation prohibits the use of appropriated funds for covert action unless the President issues a finding to Congress explaining the importance of the covert action to national security.",
"In 1974, media reporting about potentially illegal domestic surveillance by the IC of the anti-Vietnam War movement prompted Congress to establish two select committees on intelligence to investigate—in the Senate, chaired by Idaho Senator Frank Church, and in the House, chaired by Representative Otis Pike. Previously, the Subcommittees on the CIA of the Senate and House Committees on Armed Services exercised nominal oversight of the IC. However, they were viewed by many to be too close to the agencies they oversaw to be objective. Many in Congress came to believe that the legal and ethical abuses by IC agencies resulted in part from an attitude characterized by some as \"benign neglect\" among the committees that had jurisdiction over intelligence matters. Senator Frank Church described the situation in the 1970s saying, \"the Intelligence Community's immunity from congressional oversight had been a basic reason for the failures, inefficiencies and misdeeds of the past.\" The work of the Church and Pike committees, therefore, provided the first formal effort to understand the scope of the IC's illegal, and unethical intelligence activities. These committees became the model for a permanent oversight framework that could hold the intelligence community accountable for spending appropriated funds legally and ethically, and in support of identifiable national security objectives.",
"In 1976, Congress established the Senate Select Committee on Intelligence (SSCI). The following year it established the House Permanent Select Committee on Intelligence (HPSCI).\nSince their establishment, however, the HPSCI and SSCI have been assisted in their oversight role by other committees that long had jurisdiction over intelligence matters related to their areas of responsibility. Intelligence and intelligence-related activities are often closely tied to foreign and defense policy, military operations, homeland security, cybersecurity, and law enforcement. Committees in both chambers for Foreign Affairs/Relations, Armed Services, Appropriations, Judiciary, and Homeland Security (after they were created), therefore, today share oversight jurisdiction of intelligence programs.\nSome observers of the IC have suggested these overlapping committee jurisdictions contribute to a perception of weak congressional intelligence committees that have relatively little authority and insufficient expertise. Others suggest that structural changes are less a concern than the degree of collegiality among members of the intelligence committees. These critics also suggest that committee members have had a tendency to focus less on forward-looking, strategic intelligence issues rather than tactical levels of intelligence.",
"On January 24, 1978, President Jimmy Carter issued Executive Order 12036, United States Foreign Intelligence Activities . In a signing statement, President Carter described the order as: \"…[ensuring] that foreign intelligence and counterintelligence activities are conducted in full compliance with the laws of the United States and are consistent with broader national security policies.\"\nUnder a section on \"Oversight of Intelligence Organizations,\" the order established that the:\n\"…[Director of Central Intelligence] and heads of departments and agencies of the United States involved in intelligence activities shall…keep the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate fully and currently informed concerning intelligence activities, including any significant anticipated activities which are the responsibility of, or engaged in, by such department or agency.\"\nCarter described these provisions as \"[instructing] the DCI and senior officers of the Intelligence Community…to report to the congressional intelligence committees in a complete and prompt manner,\" thereby strengthening the intelligence oversight process.",
"Congressional intelligence committees authorize intelligence activities through annual intelligence authorization acts. Section 504 of the National Security Act of 1947 (50 U.S. Code §3094) provides the statutory basis for authorization of specific intelligence or intelligence-related activities rather than a general authorization for intelligence activities within a department or agency.\nThe Intelligence Authorization Act for Fiscal Year 1981 ( P.L. 96-450 ) codified E.O. 12036 requirements for prior notification of Congress, specifically the requirements for the IC to keep the congressional intelligence committees \"fully and currently informed\" of intelligence activities, including any significant anticipated intelligence activities. This includes providing to the congressional intelligence committees information they might request in the course of their oversight responsibilities. It also requires IC elements to report any illegal activities or significant intelligence failures. Lastly, in the event of any covert action, the urgency of which prevents prior notification to Congress, the legislation requires the President to notify the congressional intelligence committees \"in a timely fashion\" subsequently.",
"The CIA did not have an independent IG until Congress, perceiving that the agency lacked the inclination to adequately oversee its own activities in the events leading to the Iran-Contra scandal, took action. The CIA Inspector General Act of 1989 provided for a statutory IG, appointed by the President and confirmed by the Senate, who is responsible for ensuring the congressional intelligence committees are kept \"fully and currently informed\" of \"significant problems and deficiencies as well as the necessity for and the progress of corrective actions.\" The CIA IG is required to provide semiannual reports to the congressional intelligence committees, along with copies of other reports upon request.",
"The Report of the 9/11 Commission provides a rubric for assessing the progress of congressional oversight of intelligence, and the report's recommendations have helped frame discussions of further reform. As the Commission noted, oversight reform would not be easy:\n\"Of all our recommendations, strengthening congressional oversight may be among the most difficult and important. So long as oversight is governed by current congressional rules and resolutions, we believe the American people will not get the security they want and need….Having interviewed numerous members of Congress from both parties, as well as congressional staff members, we found that dissatisfaction with congressional oversight remains widespread….When their unfamiliarity with the subject is combined with the need to preserve security, a mandate emerges for substantial change….Tinkering with the existing structure is not sufficient.\"\nSome, while acknowledging the Commission's assessment of Congress's oversight of intelligence as \"dysfunctional,\" have suggested many of its recommendations would be very difficult to implement from a political standpoint. Ultimately, however, the Commission's recommendations provoked considerable debate and led to changes in Congress's role in ensuring the IC has the resources, organization, systems, and processes to support national security more effectively. A number of the Commission's recommendations for the Senate, for example, have been implemented. Nevertheless, many have suggested more needs to be done and continue to cite the Commission's recommendations as a frame of reference for further reform.\nThe Commission recommended replacing the HPSCI and SSCI with a joint committee on intelligence. It also suggested this joint committee should include a subcommittee on oversight to provide the necessary focus on programs and activities that might otherwise be overlooked. As an alternative to a joint committee, the Commission recommended consolidating authorizations and appropriations in the HPSCI and SSCI, a reform measure that would be a direct challenge to the authority of the Appropriations Committees. The Commission also recommended separating the National Intelligence Program (NIP) appropriation from the Defense appropriation, and, to promote bipartisanship, changing committee rules to ensure the majority never exceed minority representation by more than one. Finally, the Commission recommended abolishing term limits in order to promote depth and experience among committee members.",
"",
"In October, 2004, during the 108 th Congress, the Senate adopted S.Res. 445 , an amendment of S.Res. 400 —the chamber's rules governing intelligence oversight. It included a number of the recommendations of the 9/11 Commission. This resolution to change committee rules was intended to increase the power of the SSCI as a select committee over its previous authority in relation to standing committees. S.Res. 445 , for example, gave the SSCI jurisdiction over reviewing, holding hearings, and reporting to the Senate floor presidential nominations of civilians for IC positions requiring Senate confirmation. S.Res. 445 also limited the standing committees' authority to change proposed legislation referred to them by the SSCI. Other changes included a provision to promote bipartisanship on the committee: Membership was decreased from 17 to 15, 8 members for the majority and 7 for the minority. Funding for hiring staff would be divided 60 percent to 40 percent between the majority member who chaired the committee and the minority member selected as the vice chair. Still another provision provided funds to hire a professional staff member to serve as designated representative to each SSCI member on intelligence matters. With the aim of building IC expertise among SSCI members, S.Res. 445 abolished the SSCI's eight-year term limit. In addition, one-third of members were not to have served on the committee during the preceding Congress. S.Res. 445 promoted closer ties with the Senate Armed Services Committee (SASC) by providing that the chair and ranking member of the SASC serve on the SSCI as ex officio members (with no voting authority). S.Res. 445 also created a Subcommittee on Oversight in the SSCI to enable greater focus on oversight that the 9/11 Commission and others had recommended. Lastly, Section 402 of S.Res. 445 called for the establishment of a Subcommittee on Intelligence in the Senate Committee on Appropriations.",
"In February 2007, a memorandum of agreement (MOA) was agreed by the SSCI and the Senate Appropriations Committee (SAC) and the SAC Subcommittee on Defense (SAC-D) that allowed for staff of the committees to be notified of and attend each other's hearings on intelligence. It also allowed each member of the SSCI who also served on the SAC to have SSCI staff attend appropriations hearings and markups, and to review and comment on intelligence appropriations legislation prior to a committee vote. The leadership of the SAC claimed the MOA rendered unnecessary an intelligence appropriations subcommittee. A former Vice Chairman of the SSCI, Senator Christopher Bond, was more critical of the MOA, arguing that it was \"weak and would not effect real change.\"",
"",
"In 2007, the House of Representatives in the 110 th Congress adopted H.Res. 35 to amend the Rules of the House of Representatives to establish a Select Intelligence Oversight Panel (SIOP) of the Committee on Appropriations to (1) \"review and study on a continuing basis budget request for an execution of intelligence activities\"; (2) make recommendations to appropriate appropriations subcommittees; and (3) report on an annual basis to the Defense Subcommittee to provide \"budgetary and oversight observations and recommendations\" for consideration in the classified annex to the Defense appropriations bill. The SIOP's advantage was its composite membership from the committees with the most insight on intelligence programs and activities. The panel was composed of 13 members, not more than 8 from the majority party, appointed by the Speaker of the House, to include the chair and ranking member of the House Appropriations Committee (HAC), the chair and ranking member of the House Appropriations Committee Subcommittee on Defense (HAC-D), 6 members of the HAC and 3 members of the SSCI. The HAC-D, however, rather than the SIOP, had the authority to report a bill to the HAC. The SIOP was abolished in 2011, by H.Res. 5., 112 th Congress, to be replaced by an agreement between the HPSCI and the HAC for three HAC members (2 representing the majority, 1 representing the minority party) to be able to participate in HPSCI hearings and briefings.",
"The Intelligence Authorization Act of 2010 ( P.L. 111-259 ) provided several measures to strengthen the layers of intelligence oversight. The legislation established an Inspector General (IG) within the Office of the DNI, appointed by the President and confirmed by the Senate. It also established IGs in the DOD intelligence agencies, the National Security Agency (NSA), National Geospatial-Intelligence Agency (NGA), National Reconnaissance Office (NRO), and the Defense Intelligence Agency (DIA). Although the reports of the IGs are classified, they are shared with the congressional intelligence committees, and consequently been seen to have reduced the burden of Congress's oversight responsibilities. P.L. 111-259 also strengthened congressional notification requirements for: (1) cybersecurity programs; (2) NIP systems acquisitions, including significant unforeseen cost increases; and (3) decisions by the executive branch not to provide notification to the full membership of the intelligence committees. Lastly, this legislation also reaffirmed the authority of the General Accountability Office (GAO) to conduct audits and evaluations of IC elements at the request of Congress, and report back to the congressional intelligence committees.\nIn response to Congress's reaffirmation of GAO authority to provide oversight of the IC, and to specify policy on working with the GAO, the DNI issued, on June, 30, 2011, Intelligence Community Directive (ICD) 114, Comptroller General Access to Intelligence Community Information . The directive outlines a policy of cooperation with the GAO with the exception of matters related to \"intelligence capabilities and activities.\"",
"Following is an examination of selected oversight reform proposals that could be considered in developing a framework for discussion. The 9/11 Commission recommended most of them in its report, though some, such as the idea to establish a Joint Committee on Intelligence, have a much longer history.",
"The 9/11 Commission recommended the establishment of a joint intelligence committee using the Joint Committee on Atomic Energy (JCAE) as a model. The Joint Committee on Atomic Energy (JCAE) was established by the Atomic Energy Act of 1946 (P.L. 585, 60 Stat. 772-773). It had equal representation from the House and Senate. It was seen as largely bipartisan, fostered expertise among its members, influenced policy of the executive branch, and enabled more efficient oversight of matters under its jurisdiction. Unlike any other joint committee of Congress the JCAE also had the authority to report legislation to the floor of the House and Senate. Until its termination in 1977, it had been considered by many to be one of the most powerful committees in Congress. It was terminated, however, in part due to its having developed what was perceived as a conflict of interest as both a committee that could influence policy on atomic energy uses and the oversight body for the Atomic Energy Commission.\nThe idea of a joint committee for oversight of intelligence was first proposed by the U.S. Commission on the Organization of the Executive Branch of the Government (the Second Hoover Commission ) in 1955.\nDuring the same time frame Senator Mike Mansfield of Montana proposed a joint committee in 1955 and 1956 to provide oversight of the CIA. \"Until we create some sort of 'watchdog' committee,\" Mansfield said at the time, \"we will have nothing but continued anxiety about the Central Intelligence Agency and its widespread activities.\" Mansfield's joint committee would have had six members from each chamber, three from each of the subcommittees with responsibility for intelligence under the Appropriations and Armed Services committees. In 1963, Senator Eugene McCarthy of Minnesota proposed a \"Joint Committee on Foreign Information and Intelligence.\"\nThose who support the idea of a joint committee suggest it would promote more bipartisan, streamlined, and efficient congressional oversight of the IC and, therefore, better relations with intelligence agencies. The 9/11 Commission suggested such a committee be modeled on the JCAE, and that the committee have authority to report legislation to the floor, subpoena power, no term limits, and a subcommittee dedicated to oversight. A single committee could also enable Congress to have a more focused, integrated perspective of intelligence programs and strengthen Congress's accountability of IC performance, advocates say. A more efficient oversight structure appeals to those who believe the IC is already burdened by the multiple layers of oversight outside of Congress (the ODNI, and agency IGs also exercise oversight of intelligence programs, for example). Advocates have also argued that a joint committee would allow for greater depth and understanding in Congress on intelligence matters and therefore provide greater transparency of the IC without compromising security.\nOpponents have argued that a joint committee would not be as effective in conducting oversight as the existing structure of committees in each chamber. Concentrating oversight of intelligence among a smaller number in Congress could limit Congress's perspective of intelligence programs that support multiple departments across the government. They assess the JCAE was not as effective as proponents have claimed. A joint committee also might not have the same degree of influence in either chamber as the HPSCI and SSCI do separately. Critics believe that a weak joint committee would encourage other committees to reassert jurisdiction over intelligence programs and consequently pose a greater risk of leaks of classified information. They also believe that the current structure of overlapping committee assignments for SSCI and HPSCI members with Foreign Relations/Foreign Affairs, Appropriations, Armed Services and Judiciary enable members to develop expertise and assess intelligence programs in context of their relation to the national security priorities and defense programs they support. Lastly, critics of a joint committee believe in the benefit of competitive analysis that the HPSCI and SSCI provide by virtue of their separate approaches to oversight.",
"The second recommendation of the 9/11 Commission that may be germane to improving congressional oversight of intelligence was to give the HPSCI and SSCI both authorizations and appropriations authority. Those who support this measure maintain that it would increase the power and influence of the congressional intelligence committees on par with their importance to national security. They also believe it would improve integration of disparate IC agencies and enhance accountability of intelligence programs and managers to Congress. As the 9/11 Commission co-chair, Representative Lee Hamilton put it, \"The budget is where you have power, and it's where you can make an agency or a department responsive to your interests. And if you do not have budget power, you do not have sufficient clout to bring about transformation.\"\nCurrently, the HPSCI and SSCI have jurisdiction over authorizations of the National Intelligence Program (NIP). Only the HPSCI has authorizations authority over the Military Intelligence Program (MIP), however. Senate rules allow the SSCI to provide informal recommendations on the MIP authorizations to the Senate Armed Services Committee (SASC) which has authorization authority over the entire Department of Defense budget including the MIP. In addition, House and Senate Appropriations, rather than the congressional intelligence committees, have jurisdiction over intelligence appropriations. Transfer of intelligence appropriations authority from the HAC-D and SAC-D to the HPSCI and SSCI, some maintain, would strengthen their understanding of intelligence programs and influence over intelligence policy. It could also enable a dedicated focus on intelligence programs that is impractical currently due to the time and emphasis spent on defense appropriations. Supporters of shifting appropriation authority to the intelligence committees, from the Defense Subcommittees of the Appropriations Committees, claim the latter are unable to give significant attention to the intelligence budget that represents approximately 11% of the annual national defense budget.\nThose who oppose consolidating authorizations and appropriations in the HPSCI and SSCI (or under a joint intelligence committee) believe it is politically impractical, would create an artificial separation of intelligence programs from the defense programs they support, and concentrate too much power with the HPSCI and SSCI. Critics maintain that consolidation of authorizations and appropriations authority under the HPSCI and SSCI might actually weaken oversight by reducing the checks and balances within Congress that exist with broader jurisdiction over intelligence programs. In addition, several of recommendations that the 9/11 Commission believed would be more easily accomplished through a consolidation of authorizations and appropriations were later achieved without changing the rules.\nAlthough a fundamental departure from Congress's traditional appropriations process, the Senate did introduce a measure to consolidate intelligence authorizations and appropriations in S.Res. 164 , during the 111 th Congress. This resolution, sponsored by Senators Russell Feingold of Wisconsin, John McCain of Arizona and Richard Burr of North Carolina, would have transferred appropriations authority from the SAC to the SSCI. The measure was introduced in the Senate but was not acted on following its referral to the Senate Committee on Rules and Administration.",
"A less sweeping proposal than the 9/11 Commission's recommendation to consolidate appropriations and authorizations under the congressional intelligence committees would be to establish intelligence appropriations subcommittees of the House and Senate Appropriations Committees. This would change the current structure by transferring jurisdiction over intelligence programs from the Subcommittees on Defense of the House and Senate Appropriations Committees to newly constituted Subcommittees on Intelligence. The Senate came close, on October 9, 2004, to establishing an Appropriations Subcommittee on Intelligence with overwhelming approval of S.Res. 445 . Section 402 of S.Res. 445 provided for a Subcommittee on Intelligence in the Senate that would \"have jurisdiction over funding for intelligence matters.\" However, this measure was opposed by the Subcommittee on Defense, which would lose jurisdiction over the NIP, and has never been implemented.\nIn the House, H.R. 334 was introduced on January, 9, 2007, and referred to the Committee on Rules. H.R. 334 called for the establishment of a Subcommittee on Intelligence in the appropriations committees of both chambers.\nIn 2008, S.Res. 655 , To Improve Congressional Oversight of the Intelligence Activities of the United States , was introduced in the Senate. S.Res. 655 would also have established a Subcommittee on Intelligence, but it never received a vote. The resolution, like S.Res. 445 , proposed the creation of a Subcommittee on Intelligence in the Senate Appropriations Committee. Its sponsors suggested it fulfilled the spirit of the 9/11 Commission's recommendation for consolidating appropriations and authorizations authority. No further action was taken on this measure.\nCritics of the current jurisdictions argue that the focus of the Defense Appropriations Subcommittee is the approximately 89% of the defense budget that is unrelated to intelligence. Proponents of an appropriations subcommittee dedicated to the intelligence budget suggest that it is both more politically viable than consolidating appropriations and authorizations authority in the HPSCI and SSCI and would significantly improve congressional oversight by enabling appropriators to dedicate time to understanding intelligence programs and conducting budget analysis.\nCritics of this idea claim that it would complicate appropriations for intelligence systems that have defense applications or intelligence programs that provide significant support to combat forces. As with proposals for a joint intelligence committee, a Subcommittee on Intelligence would concentrate oversight of intelligence programs among a smaller group in Congress, thereby limiting perspective of programs that have a broad impact across the government. They also note that it would be impractical to disentangle MIP from broader DOD programs that are supported by military intelligence. Others have observed that it has been very difficult to change longstanding congressional appropriations rules and organization.",
"Originally—in 1947—the intelligence budget was placed within the appropriations for the Departments of State and Defense as a precaution against budget cuts, and revealing anything about the type of activity, agency, and total amount the government was investing in intelligence. Since 1952 the intelligence budget has been placed entirely within the defense appropriation under the belief that intelligence programs under the Department of State appropriation were more difficult to shield from cuts. Since 2007, however, following a recommendation of the 9/11 Commission, Congress has required the DNI to publish the NIP top line figure. Former DNI, James Clapper, has suggested that because there is no longer a requirement to classify the intelligence budget total, there is no longer a barrier to establishing a stand-alone NIP appropriation separate from the defense appropriation. This was also a recommendation of the 9/11 Commission. It would entail separating the NIP from the DOD budget.\nAdvocates of this measure believe it would facilitate long-term planning for intelligence programs, information technology (IT), and Intelligence, Surveillance and Reconnaissance (ISR) platforms, and provide a better means for the IC and Congress to oversee budget execution. Critics believe that this is effectively already the case with the inclusion of the NIP as a separate title in the Defense Appropriations Act. They also note that although the top line figure of the NIP (and MIP) are now unclassified, most of the intelligence budget is not, which would make any floor action on a separate intelligence appropriations bill difficult. Some within the IC believe that ensconcing intelligence programs within the annual DOD appropriation has allowed the IC budget to grow exponentially without much notice, offering programs greater protection from cuts. An independent intelligence appropriation might result in greater focus on programs that otherwise escape much scrutiny.",
"As has been previously noted, the Senate, in S.Res. 445 (108 th Congress) amended S.Res. 400 —Senate rules governing the oversight of intelligence—in an effort to improve the oversight process, develop expertise, and promote bipartisanship. Among these proposed changes was to provide funding for a professional staff member to be assigned to each Member of the SSCI as the Member's \"designated representative\" on the committee. This measure was implemented to enable SSCI members to have their priorities better represented in the work of the committee.\nThose who advocate for further reform of congressional oversight of intelligence, especially those who believe committees have suffered from a shortage of experienced staff, have suggested this as a feasible next step for the HPSCI with no obvious disadvantages other than the additional funding it would require.",
"Although the Senate, with S.Res. 445 (108 th Congress), abolished term limits for members of the SSCI, following the recommendation of the 9/11 Commission, the HPSCI's rules continue to limit members' terms to eight years. Term limits were intended to prevent members from becoming too close to the agencies they oversee. Critics, however, have noted the effect term limits have had in undercutting the experience among committee members that is necessary for effective oversight. Intelligence collection and analysis, organization and process has no public interest group or pool of expertise to draw upon. Expertise comes only through exposure to the IC, either within IC agencies themselves or through service on the committee.",
"There are two main, discernible perspectives on whether reform of congressional oversight of the IC is necessary. The first emphasizes the importance of the tradition of bipartisanship among members of the congressional intelligence committees as the single greatest determinant of effective oversight. Therefore the selection of intelligence committee members and the issues that drive their agendas influence the tone and the effectiveness of the committees' relationship with the IC. The second perspective places greater emphasis upon the organization and jurisdiction of pertinent committees—the intelligence, armed services, and appropriations committees in particular—and their established relationships with each other.\nOne scholar observed that change to congressional oversight of intelligence is especially difficult due to inertia (the resistance within organizations to change), turf (the unwillingness of congressional committees to surrender jurisdiction or reorganize), and politics (partisanship that makes more difficult efforts to establish common ground). She further noted that \"History does suggest that there are game-changing junctures…And in those game- changing junctures, what makes the difference is leadership of individuals, either members of Congress or the President, and engaging with a public to force change on a change-resistant system.\"\nAnother observer noted a historical, oscillating pattern that\n…is rather desultory police patrolling by members of Congress for most of the time…Not as energetic as one would like, until there is what I call 'a shock to the system,' and by that I mean a scandal of some kind…or a terrible intelligence failure such as what preceded the 9/11 events. And when you have this 'shock,' then suddenly lawmakers become very energetic…They go and conduct the investigation; and this has happened five times: It happened with the Church Committee; it happened with the Iran/Contra scandal; it happened with the Aldrich Ames counterintelligence case; it happened with the 9/11 mistakes that occurred; it happened with the wrong hypothesis about the WMDs in Iraq…What concerns me is what happens in between these fires, and how we can avoid these fires in the first place.\nCritics characterize this change as \"tinkering , \" an approach against which the 9/11 Commission warned. Others view the cumulative change as enabling—eventually—functional, and politically pragmatic oversight of intelligence. Aside from what more might be done, a potential overarching question for Congress to frame the discussion is: Could additional changes to the rules governing congressional oversight of intelligence enable Congress to more effectively fund programs, influence policy, and legislate improvements in intelligence standards, organization, and process that would make the country safer?",
"Is current congressional oversight of the IC \"dysfunctional\" as the 9/11 Commission alleged in 2004? What criteria would so indicate? Could oversight of intelligence be further improved such that the IC would, as a result, be more effective in support of national security? Would enhancements in oversight enable Congress to measure the IC's effectiveness more effectively? To what extent have oversight reform measures been effective in promoting (1) an apolitical IC; (2) committee experience; (3) committee capacity to handle workload; and/or (4) relations with the IC? Is the JCAE model an appropriate analogy for consideration of a joint congressional intelligence committee as some have maintained? Should Congress hire additional professional staff to serve on the select intelligence committees? Would parallel intelligence structures in each chamber be conducive to improved oversight? Should the HPSCI abolish term limits and adopt the model of ensuring the majority party not exceed the minority party's representation by more than one? Would a consolidation of authorizations and appropriations authority in the congressional intelligence committees consolidate too much authority or enhance congressional oversight?"
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{
"question": [
"What did Congress not take an interest in prior to the establishment of the SSCI and the HPSCI?",
"What did Congress trust that IC could do with only minimal oversight from the CIA?",
"What prompted Congress to change this approach?",
"What did Congress do in 1975 to begin to change their approach?",
"What did the Church and Pike committees' hearing reveal?",
"What did SSCI and HPSCI's oversight contribute to?",
"What did Congress advocate for in response to this?",
"What else has congressional support been perceived as?",
"What are intelligence programs often tied to?",
"How has this affected jurisdiction over intelligence?",
"What positive comments have been made about the overlapping jurisdictions for the oversight of the IC in Congress?",
"What negative comments have been made about the overlapping jurisdictions for the oversight of the IC in Congress?"
],
"summary": [
"Prior to the establishment of the Senate Select Committee on Intelligence (SSCI) and the House Permanent Select Committee on Intelligence (HPSCI) in 1976 and 1977, respectively, Congress did not take much interest in conducting oversight of the Intelligence Community (IC).",
"The Subcommittees on the Central Intelligence Agency (CIA) of the congressional Armed Services Committees had nominal oversight responsibility, though Congress generally trusted that IC could more or less regulate itself, conduct activities that complied with the law, were ethical, and shared a common understanding of national security priorities.",
"Media reports in the 1970s of the CIA's domestic surveillance of Americans opposed to the war in Vietnam, in addition to the agency's activities relating to national elections in Chile, prompted Congress to change its approach.",
"In 1975, Congress established two select committees to investigate intelligence activities, chaired by Senator Frank Church in the Senate (the \"Church Committee\"), and Representative Otis Pike in the House (the \"Pike Committee\").",
"Following their creation, the Church and Pike committees' hearings revealed the possible extent of the abuse of authority by the IC and the potential need for permanent committee oversight focused solely on the IC and intelligence activities.",
"SSCI and HPSCI oversight contributed substantially to Congress's work to legislate improvements to intelligence organization, programs, and processes and it enabled a more structured, routine relationship with intelligence agencies.",
"On occasion this has resulted in Congress advocating on behalf of intelligence reform legislation that many agree has generally improved IC organization and performance.",
"At other times, congressional oversight has been perceived as less helpful, delving into the details of programs and activities.",
"Intelligence programs are often closely tied to foreign and defense policy, military operations, homeland security, cybersecurity, and law enforcement.",
"Committees in both chambers for Foreign Affairs/Relations, Armed Services, Appropriations, Judiciary, and Homeland Security, therefore, share jurisdiction over intelligence.",
"Others cite the overlapping responsibilities as a strength. Oversight of the IC spread over more committees can contribute to greater awareness and transparency in Congress of classified intelligence activities that are largely hidden from public view.",
"Some have suggested the current overlapping jurisdictions for oversight of the IC in Congress contribute to the perception of weak congressional intelligence committees that have relatively little authority and insufficient expertise."
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CRS_R40729
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{
"title": [
"",
"Introduction",
"Premium Conversion Basics",
"Some Background to Premium Conversion",
"Some Policy Issues",
"Retirees",
"Health Care Reform"
],
"paragraphs": [
"",
"Premium conversion allows employees to pay their share of employment-based health insurance premiums on a pre-tax basis. Although plans vary, on average employers pay about 84% of the premium for single coverage and 73% of the premium for family coverage, leaving employees to pay the remaining portion. The employer share is always excluded from the employees' income and employment taxes (i.e., Social Security and Medicare taxes). In contrast, the employee share is paid either in after-tax dollars without premium conversion or in pre-tax dollars with it. Paying with pre-tax dollars results in tax savings for both the employee and the employer.\nFor example, consider an employee whose share of the premium is $1,000. If the employee were in the 15% federal tax bracket, the employee would need to earn $1,293 in wages to have $1,000 left over after paying $194 in income taxes and $99 in employment taxes. With premium conversion, the $1,000 is not subject to taxes, reducing the taxable part of the $1,293 to $293 and income and employment taxes to $66, a tax savings of $227.\nTo some, premium conversion seems like an accounting trick. It is difficult for people who are not tax experts to follow the calculations or understand the rationale. Rules limiting its use strike some as arbitrary and unfair. Premium conversion is sometimes referred to as premium only or section 125 plans, causing further confusion.\nThis report provides more explanation of premium conversion and requirements for its use. It summarizes the statutory and regulatory background and briefly discusses whether it is sound public policy. Finally, it discusses two policy issues, whether premium conversion should include retirees and what role it might play in health care reform.",
"Premium conversion is authorized by section 125 of the Internal Revenue Code, a section entitled \"cafeteria plans.\" In general, the section allows taxpayers to choose among taxable and nontaxable benefits offered by an employer without paying taxes if they select the latter. As a rule under tax law, when taxpayers are offered a choice between taxable and normally nontaxable income they will be taxed on whichever they choose; they will be deemed to be in \"constructive receipt\" of the taxable income whether or not they take it. Section 125 makes an exception to the constructive receipt rule for benefits such as health insurance that meet the section's requirements.\nCafeteria plans can be established only by employers. They must always offer a choice of taxable and nontaxable benefits. The taxable benefit usually offered is cash, but it might include benefits normally purchased with after-tax dollars, such as group term life insurance. Allowable nontaxable benefits include accident and health insurance, health care flexible spending accounts, accidental death and dismemberment insurance, dependent care assistance, adoption assistance, and others. Certain nontaxable employer benefits may not be offered, such as scholarships, education assistance programs, and long-term care insurance or services. In addition, cafeteria plans cannot offer benefits that defer compensation to a later year aside from 401(k) account contributions. Short carryover periods (i.e., several months) are permitted.\nSome cafeteria plans offer employees choices among a number of benefits (hence the name), whereas others limit the choice to cash and one specific nontaxable benefit. Premium conversion is an example of the latter. It is possible for employers to offer both premium conversion and a separate plan with choices among other benefits.\nThe cash option may be wages. Under salary reduction agreements, employees in effect agree to work for reduced wages in exchange for having their employer provide an equivalent amount of nontaxable benefits. Premium conversion uses these agreements: employees are given the choice of receiving taxable wages or reducing their wages by their share of the health insurance premium ($1,000 in the earlier example) and having the employer use that sum to pay the premium. Taxable wages are thus converted to an employer payment for a nontaxable benefit.\nPremium conversion can apply both to health plans chosen by employers (which is the usual case) as well as insurance that individual workers obtain on their own. If employers allow the latter, they must ensure that payments they make in fact are used for health coverage.\nLike all cafeteria plans, premium conversion plans must be in writing. They must be limited to employees, though former employees may be included provided the plan is not maintained predominantly for them. Employee elections must be irrevocable for the plan year aside from changes due to changes in family status, in alternative coverage for family members, and other limited circumstances. Employers must file a report each year with the Department of Labor; separate IRS reporting requirements were suspended in 2002.\nAll cafeteria plans must meet nondiscrimination tests. Plans may not discriminate in favor of highly compensated employees with respect to eligibility to participate, nor as to employer contributions or actual use of benefits. In addition, the nontaxable benefits of key employees cannot exceed 25% of the aggregate nontaxable benefits provided all employees under the plan. Finally, cafeteria plans must comply with the nondiscrimination requirements for the benefit in question. Thus, coverage under employers' self-insured accident and health plans must meet the additional nondiscrimination standards in section 105(h). Section 125(g) includes a safe-harbor test (a simplified test providing one way to meet the standards) for all accident and health plans, and the proposed regulations include another for premium-only plans. Nonetheless, applying the rules can be complex if not all employees are allowed to participate (e.g., part-time workers), if many eligible workers do not participate, or if participants choose different benefits.\nThe complexity of nondiscrimination rules is one reason that small firms generally do not use cafeteria plans. In particular, the rule regarding key employees would preclude use by many small companies since those employees would often account for more than 25% of the nontaxable benefits. The complexity contributes to the administrative cost of establishing plans and ensuring they remain in compliance. In addition, owners of small businesses reportedly are reluctant to establish cafeteria plans if they are sole proprietors, partners, or more than 2% owners of S-corporations. These owners are not classified as employees under the tax code and thus cannot participate in employee benefit programs.",
"Section 125 was included in the Internal Revenue Code by the Revenue Act of 1978 ( P.L. 95-600 ). It has been amended a number of times, especially in the first decade after enactment. Nearly all of the current text consists of provisions dealing with qualified benefits and nondiscrimination.\nDetailed rules regarding cafeteria plans appear not in the statute but in IRS guidance, particularly proposed rules issued in 1984 and 1989. These rules were never finalized, but they remained the position of the IRS and employers relied upon them. The 1984 and 1989 rules were withdrawn when the IRS issued comprehensive proposed rules on August 7, 2007.\nBenefit choice did not originate with section 125 or the IRS guidance; instead, the statutory and regulatory rules were in response to plans starting to spread among employers. In particular, there reportedly was an increase in employers offering cash-or-deferred arrangements (CODAs), which allow workers to choose between receiving cash or having employers contribute to a qualified retirement trust without being taxed on the latter until withdrawals occur in later years. The IRS had previously issued revenue rulings supporting these arrangements, but in 1972 it proposed to tax workers at the time of the contribution if it were made in return for a reduction in wages or in lieu of an increase in wages. In response, Congress included a provision in the Employee Retirement Income Security Act of 1974 (ERISA, P.L. 93-406 ), that temporarily blocked application of the proposed rule for plans in existence on June 27, 1974, until it could study the issue. The provision was extended several times before the Revenue Act of 1978 added section 125. The conference report on ERISA explicitly states that the provision applied not just to CODAs but also to cafeteria plans.\nAlthough neither ERISA nor section 125 mentions premium conversion, they establish authority for its tax treatment. Premium conversion probably became more common after the 1970s when, in the face of rising costs, employers sought to limit health plan contributions and help employees manage their own.\nEmployers might obtain results similar to premium conversion by restricting wage growth and using the savings to increase what they pay for premiums. Many probably follow this strategy even if they are reducing the percentage of the premium they pay (i.e., they are still increasing the dollar amount of their contributions). For workers who have employer-provided health care, the effect of premium conversion and restrictions on wage growth could be roughly the same, depending on how the employer changes the wage levels (it might not be the same dollar amount for all workers). However, restrictions on wage growth would be less advantageous for workers who decline employment-based coverage, either because they do not value it highly or because they have better coverage through a spouse. Only premium conversion allows them the flexibility to individually opt out of a wage reduction that otherwise would be imposed across the board.\nWhether premium conversion is sound public policy has received little attention. It might be criticized since workers' tax savings depend upon their marginal tax rate, allowing higher-income workers to benefit more. In addition, because only employees are eligible for premium conversion, people who purchase insurance on their own cannot benefit. However, these criticisms apply generally to the exclusion for employer-provided health insurance, of which premium conversion is a minor part. If one were concerned solely about equity, one might limit or end the entire exclusion, not just premium conversion. Moreover, if only premium conversion were limited, employers could always obtain the same tax benefits for themselves and most of their employees by restricting wage growth and using the savings to pay premiums, as described in the previous paragraph.",
"In recent years, the principal premium conversion issue before Congress has been whether it should be extended to federal retirees. If health care reform were enacted, consideration may also be given to what role premium conversion might play.",
"Retirees sometimes complain that they cannot take advantage of premium conversion. The barrier is not section 125, for as indicated above cafeteria plans may include former employees provided the plan is not maintained predominantly for them. Instead, the restriction is due to an IRS determination that distributions from qualified retirement plans are always subject to taxes, aside from several minor exceptions. The IRS ruling precludes former employees from recasting pension payments as pretax income, as active workers can recast their wages.\nIt might appear that this rule is unfair to retirees since in general their income is lower than current workers who have premium conversion. The outcome seems to conflict with the equity principles underlying cafeteria plan nondiscrimination rules. However, it is important to recognize that employer payments for retiree health insurance are excluded from taxes, just as they are for active workers. For many retirees, the employer pays much of the premium and tax savings on this share would generally be two to three times the additional tax savings from premium conversion. While allowing retirees the additional advantages of premium conversion would treat them like active workers, it would then seem even more unfair to retirees without access to employer coverage. The latter retirees are likely to have lower incomes yet.\nIn the 111 th Congress, H.R. 1203 (Van Hollen) and S. 491 (Webb) would allow federal retirees to pay their share of Federal Employees Health Benefits Program (FEHBP) premiums on a pre-tax basis. Besides the equity discussion in the previous paragraph, it might seem difficult to justify extending premium conversion to federal retirees and not retirees with private sector or state or local government retiree health insurance. Extending premium conversion to other retiree groups would greatly increase the revenue loss of this proposal.",
"Massachusetts enacted a broad health care reform law in April 2006 called Chapter 58. Among other things, the law requires employers with 11 or more full-time equivalent (FTE) workers to establish premium conversion plans, which it calls section 125 plans. The plans must be set up whether or not employers offer health insurance and whether or not they contribute to the cost of coverage. As mentioned above, premium conversion is allowed for insurance that individual workers obtain provided employers ensure that payments they make (including those by premium conversion) in fact are used for that purpose.\nThe Massachusetts provision benefits workers of employers that previously had not offered premium conversion or extended it to all workers. Their employers would also save on employment taxes. The public cost of the provision is borne primarily by the federal government through reduced income and employment tax revenue, though Massachusetts would experience a small reduction in its own income tax revenue.\nChapter 58 also requires employers with 11 or more FTE workers to make a fair contribution to their health insurance costs or pay a penalty of $295 per worker. Some observers think that once the reforms are well established smaller employers may be asked to make some contribution and set up premium conversion arrangements. However, some small employers might have difficulty meeting the nondiscrimination requirements that were described above. Massachusetts cannot by itself exempt employers from federal requirements.\nA similar requirement for premium conversion might be considered in the reform legislation now before Congress. The tax savings could help employers and employees pay for the coverage that would be available through the exchanges the bills envision. Unlike Massachusetts, however, which could obtain an additional federal subsidy at little cost, the federal government would be the primary payer for this benefit. In addition, some in Congress are considering limiting the tax exclusion for employer-provided coverage, not expanding it.\nIf Congress were to require or encourage employers to adopt premium conversion, consideration may be given to enabling more small businesses to take advantage of it. Legislation introduced in the 111 th Congress by Senator Snowe ( S. 988 , the SIMPLE Cafeteria Plan Act of 2009) would remove some of the barriers discussed above.\nIf premium conversion were included in health care reform, consideration may also be given to modifying the statutory and regulatory nondiscrimination rules. As described above, premium conversion is covered by rules applying to cafeteria plans generally, though the August 2007 proposed IRS rules would allow a simplified test. These rules originate in a concern reflected in a number of parts of the tax code that people with high income or influence over employer policies can take advantage of nontaxable benefits while others cannot. For example, if low-wage workers cannot afford to give up cash wages, then most of the tax subsidy associated with nontaxable benefits would accrue to higher-paid workers. Health care reform legislation now before Congress could change these circumstances: for example, the principal proposals now being considered would require everyone to have health insurance, making it no longer an option, and lower-income taxpayers would receive premium subsidies of some sort. Congress may consider establishing separate nondiscrimination rules for premium conversion that takes account of the new proposed subsidies."
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"question": [
"Why are cafeteria plans called as such?",
"How are some cafeteria plans restricted?",
"Despite these restrictions, what do some employers also offer?",
"What new edition was there to the tax code in 1978?",
"Why did premium conversion become more popular?",
"How can employers get similar results to premium conversion?",
"What's the downside to doing this?",
"What groups in Massachusetts are required to provide premium conversion?",
"What is the next step for adoption of premium conversion nationally?",
"How can the government support small businesses in adopting premium conversion?",
"What is preventing Congress from making these changes?"
],
"summary": [
"Some cafeteria plans allow workers to choose among a number of benefits (hence the name), though others allow only a choice between cash and one nontaxable benefit.",
"Premium conversion is restricted in this manner, with cash being in the form of wages that are not given up and health insurance being the one nontaxable benefit.",
"Employers that offer premium conversion may also offer separate cafeteria plans with other choices.",
"Section 125 was included in the tax code in 1978, but it is not clear when employers began adopting premium conversion.",
"It likely became more common as rising health care costs led employers to limit their insurance contributions and to help employees manage their own.",
"Employers might obtain results similar to premium conversion by restricting wage growth and using the savings to increase what they pay for premiums.",
"However, only premium conversion allows workers the flexibility to individually choose this outcome.",
"In its 2006 health care reform legislation, Massachusetts required all employers with 11 or more full-time equivalent workers to adopt premium conversion.",
"Consideration might be given to whether a similar requirement might be included in health care reform legislation now before Congress.",
"If it is included, Congress might also consider making it easier for small businesses to establish premium conversion, as it might establishing separate nondiscrimination rules for it.",
"However, some in Congress are considering limiting the tax exclusion for employer-provided coverage, not expanding it; presumably they would not favor extending premium conversion to more employees."
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GAO_GAO-18-28
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{
"title": [
"Background",
"NASA’s Integration Approach Offers Some Benefits but Complicates Oversight and Impairs Independence",
"Integration Approach Differs from Past Human Spaceflight Programs",
"ESD’s Integration Approach Offers Some Cost Avoidance and Potential Efficiency Gains",
"ESD’s Approach Complicates Oversight Because There Is No Mechanism to Assess Affordability beyond First Mission",
"Organizational Structure Impairs Independence of Engineering and Safety Technical Oversight",
"ESD Risk Posture Has Improved, but Key Risk Areas Remain for the Integration Effort",
"ESD’s Cross-Program Risk Posture Has Improved",
"Software Development Is a Key Risk Area Facing the Integration Effort",
"Verification and Validation Will Remain Key Risk Area to Monitor as NASA Establishes and Works towards New Launch Readiness Date",
"Conclusions",
"Matter for Congressional Consideration",
"Recommendation for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Comments from the National Aeronautics and Space Administration",
"Appendix III: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"Human spaceflight at NASA began in the 1960s with the Mercury and Gemini programs leading up to the Apollo moon landings. After the last lunar landing, Apollo 17, in 1972, NASA shifted its attention to low earth orbit operations with human spaceflight efforts that included the Space Shuttle and International Space Station programs through the remainder of the 20th century. In the early 2000s, NASA once again turned its attention to cislunar and deep space destinations, and in 2005 initiated the Constellation program, a human exploration program that was intended to be the successor to the Space Shuttle. The Constellation program was canceled, however, in 2010 due to factors that included cost and schedule growth and funding gaps.\nFollowing Constellation, the National Aeronautics and Space Administration Authorization Act of 2010 directed NASA to develop a Space Launch System, to continue development of a crew vehicle, and prepare infrastructure at Kennedy Space Center to enable processing and launch of the launch system. To fulfill this direction, NASA formally established the SLS program in 2011. Then, in 2012, the Orion project transitioned from its development under the Constellation program to a new development program aligned with SLS. To transition Orion from Constellation, NASA adapted the requirements from the former Orion plan with those of the newly created SLS and the associated ground systems programs. In addition, NASA and the European Space Agency agreed that it would provide a portion of the service module for Orion. Figure 1 provides details about the heritage of each SLS hardware element and its source as well as identifies the major portions of the Orion crew vehicle.\nThe EGS program was established to modernize the Kennedy Space Center to prepare for integrating hardware from the three programs as well as processing and launching SLS and Orion and recovery of the Orion crew capsule. EGS is made up of nine major components, including: the Vehicle Assembly Building, Mobile Launcher, Launch Control Center and software, Launch Pad 39B, Crawler-Transporter, Launch Equipment Test Facility, Spacecraft Offline Processing, Launch Vehicle Offline Processing, and Landing and Recovery. See figure 2 for pictures of the Mobile Launcher, Vehicle Assembly Building, Launch Pad 39B, and Crawler-Transporter.\nNASA’s Exploration Systems Development (ESD) organization is responsible for directing development of the three individual human spaceflight programs—SLS, Orion, and EGS—into a human space exploration system. The integration of these programs is key because all three systems must work together for a successful launch. The integration activities for ESD’s portfolio occur at two levels in parallel throughout the life of the programs: as individual efforts to integrate the various elements managed within the separate programs and as a joint effort to integrate the three programs into an exploration system.\nThe three ESD programs support NASA’s long term goal of sending humans to distant destinations, including Mars. NASA’s approach to developing and demonstrating the technologies and capabilities to support their long term plans for a crewed mission to Mars includes three general stages of activities—Earth Reliant, Proving Ground, and Earth Independent.\nEarth Reliant: From 2016 to 2024, NASA’s planned exploration is focused on research aboard the International Space Station. On the International Space Station, NASA is testing technologies and advancing human health and performance research that will enable deep space, long duration missions.\nProving Ground: From the mid-2020s to early-2030s, NASA plans to learn to conduct complex operations in a deep space environment that allows crews to return to Earth in a matter of days. Primarily operating in cislunar space—the volume of space around the moon featuring multiple possible stable staging orbits for future deep space missions—NASA will advance and validate capabilities required for humans to live and work at distances much farther away from our home planet, such as on Mars.\nEarth Independent: From the early-2030s to the mid-2040s, planned activities will build on what NASA learns on the space station and in deep space to enable human missions to the vicinity of Mars, possibly to low-Mars orbit or one of the Martian moons, and eventually the Martian surface.\nThe first launch of the integrated ESD systems, EM-1, is a Proving Ground mission. EM-1 is planned as an uncrewed test flight currently planned for no earlier than October 2019 that will fly about 70,000 kilometers beyond the moon. The second launch, Exploration Mission 2 (EM-2), which will utilize an evolved SLS variant with a more capable upper stage, is also a Proving Ground mission planned for no later than April 2023. EM-2 is expected to be a 10- to 14-day crewed flight with up to four astronauts that will orbit the moon and return to Earth to demonstrate the baseline Orion vehicle capability. NASA eventually plans to develop larger and more capable versions of the SLS to support Proving Ground and Earth Independent missions after EM-2.\nAs noted above, in April 2017 we found that given the combined effects of ongoing technical challenges in conjunction with limited cost and schedule reserves, it was unlikely that the ESD programs would achieve the November 2018 launch readiness date. We recommended that NASA confirm whether the EM-1 launch readiness date of November 2018 was achievable, as soon as practicable but no later than as part of its fiscal year 2018 budget submission process. We also recommended that NASA propose a new, more realistic EM-1 date if warranted. NASA agreed with both recommendations and stated that it was no longer in its best interest to pursue the November 2018 launch readiness date. Further, NASA stated that, in fall 2017, it planned to establish a new launch readiness date. Subsequently, in June 2017, NASA sent notification to Congress that EM-1’s recommended launch date would be no earlier than October 2019.\nThe life cycle for NASA space flight projects consists of two phases— formulation, which takes a project from concept to preliminary design, and implementation, which includes building, launching, and operating the system, among other activities. NASA further divides formulation and implementation into pre-phase A through phase F. Major projects must get approval from senior NASA officials at key decision points before they can enter each new phase. The three ESD programs are completing design and fabrication efforts prior to beginning Phase D system assembly, integration and test, launch and checkout. Figure 3 depicts NASA’s life cycle for space flight projects.",
"NASA’s approach for integrating and assessing programmatic and technical readiness, executed by ESD, differs from prior NASA human spaceflight programs. This new approach offers some cost and potential efficiency benefits. However, it also brings challenges specific to its structure. In particular, there are oversight challenges because only one of the three programs, Orion, has a cost and schedule estimate for EM-2. NASA is already contractually obligating money on SLS and EGS for EM- 2, but the lack of cost and schedule baselines for these programs will make it difficult to assess progress over time. Additionally, the approach creates an environment of competing interests because it relies on dual- hatted staff to manage technical and safety aspects on behalf of ESD while also serving as independent oversight of those same areas.",
"NASA is managing the human spaceflight effort differently than it has in the past. Historically, NASA used a central management structure to manage human spaceflight efforts for the Space Shuttle and the Constellation programs. For example, both the Shuttle and Constellation programs were organized under a single program manager and used a contractor to support integration efforts. Additionally, the Constellation program was part of a three-level organization—the Exploration Systems Mission Directorate within NASA headquarters, the Constellation program, and then projects, including the launch vehicle, crew capsule, ground systems, and other lunar-focused projects, managed under the umbrella of Constellation. Figure 4 illustrates the three-level structure used in the Constellation program.\nIn the Constellation program, the programmatic workforce was distributed within the program and projects. For example, systems engineering and integration organizations—those offices responsible for making separate technical designs, analyses, organizations and hardware come together to deliver a complete functioning system—were embedded within both the Constellation program and within each of the projects.\nNASA’s current approach is organized with ESD, rather than a contractor, as the overarching integrator for the three separate human spaceflight programs—SLS, Orion, and EGS. ESD manages both the programmatic and technical cross-program integration, and primarily relies on personnel within each program to implement its integration efforts. Exploration Systems Integration, an office within ESD, leads the integration effort from NASA headquarters. ESD officials stated that this approach is similar to that used by the Apollo program, wherein the program was also managed out of NASA headquarters. Within Exploration Systems Integration, the Cross-Program Systems Integration sub-office is responsible for technical integration and the Programmatic and Strategic Integration sub-office is responsible for integrating the financial, schedule, risk management, and other programmatic activities of the three programs. The three programs themselves perform the hardware and software integration activities. This organizational structure that consists of two levels is shown in figure 5.\nESD is executing a series of six unique integration-focused programmatic and technical reviews at key points within NASA’s acquisition life cycle, as shown in figure 6, to assess whether NASA cost, schedule, and technical commitments are being met for the three-program enterprise.\nThese reviews cover the life cycle of the integrated programs to EM-1, from formulation to readiness to launch. Some of these reviews are unique to ESD’s role as integration manager, For example, ESD established two checkpoints—Design to Sync in 2015 and Build to Sync in 2016. The purpose of Design to Sync was to assess the ability of the integrated preliminary design to meet system requirements, similar to a preliminary design review and the purpose of Build to Sync was to assess the maturity of the integrated design in readiness for assembly, integration, and test, similar to a critical design review (CDR). At both events, NASA assessed the designs as ready to proceed. Key participants in these integration reviews include ESD program personnel and the Cross-Program Systems Integration and Programmatic and Strategic Integration staff that are responsible for producing and managing the integration activities.",
"ESD’s integration approach offers some benefits in terms of cost avoidance relative to NASA’s most recent human spaceflight effort, the Constellation program. NASA estimated it would need $190 million per year for the Constellation program integration budget. By comparison, between fiscal years 2012 and 2017, NASA requested an average of about $84 million per year for the combined integration budgets of the Orion, SLS, EGS, and ESD. This combined average of about $84 million per year represents a significant decrease from the expected integration budget of $190 million per year under the Constellation program. In addition, as figure 7 shows, NASA’s initial estimates for ESD’s required budget for integration are close to the actuals for fiscal years 2012-2017. NASA originally estimated that ESD’s budget for integration would require approximately $30 million per year. ESD’s integration budget was less than $30 million in fiscal years 2012 and 2013 and increased to about $40 million in fiscal year 2017—an average of about $30 million a year.\nAccording to NASA officials, some of the cost avoidance can be attributed to the difference in workforce size. The Constellation program’s systems engineering and integration workforce was about 800 people in 2009, the last full year of the program; whereas ESD’s total systems engineering and integration workforce in 2017 was about 500 people, including staff resident in the individual programs.\nESD officials also stated that, in addition to cost avoidance, their approach provides greater efficiency. For example, ESD officials said that decision making is much more efficient in the two-level ESD organization than Constellation’s three-level organization because the chain of command required to make decisions is shorter and more direct. ESD officials also indicated that the post-Constellation elimination of redundant systems engineering and integration staff at program and project levels contributed to efficiency. Additionally, they stated that program staff are invested in both their respective programs and the integrated system because they work on behalf of the programs and on integration issues for ESD. Finally, they said another contribution to increased efficiency was NASA’s decision to establish SLS, Orion, and EGS as separate programs, which allowed each program to proceed at its own pace.\nOne caveat to this benefit, however, is that ESD’s leaner organization is likely to face challenges to its efficiency in the integration and test phases of the SLS, Orion, and EGS programs. We analyzed the rate at which ESD has reviewed and approved the different types of launch operations and ground processing configuration management records for integrated SLS, Orion, and EGS operations, and found that the process is proceeding more slowly than ESD anticipated. For example, as figure 8 illustrates, ESD approved 403 fewer configuration management records than originally planned in the period from March 2016 through June 2017. According to an ESD official, the lower-than-planned approval rate resulted from the time necessary to establish and implement a new review process as well as final records being slower to arrive from the programs for review than ESD anticipated. Additionally, the official stated that the records required differing review timelines because they varied in size and scope.\nAs figure 8 shows, ESD originally expected the number of items that needed review and approval to increase and create a “bow wave” during 2017 and 2018. In spring 2017, ESD re-planned its review and approval process and flattened the bow wave. The final date for review completion is now aligned with the new planned launch readiness date of no earlier than October 2019, which added an extra year to ESD’s timeframe to complete the record reviews. While the bow wave is not as steep as it was under the original plan, ESD will continue to have a large number of records that require approval in order to support the launch readiness date. An ESD official stated that NASA had gained experience managing such a bow wave as it prepared for Orion’s 2014 exploration flight test launch aboard a Delta IV rocket and as part of the Constellation program’s prototype Ares launch in 2009, but acknowledged that ESD will need to be cautious that its leaner staff is not overwhelmed with documentation, which could slow down the review process.",
"ESD is responsible for overall affordability for SLS, Orion, and EGS, while each of the programs develops and maintains an individual cost and schedule baseline. The baseline is created at the point when a program receives NASA management approval to proceed into final design and production. In their respective baselines, as shown in table 1, SLS and EGS cost and schedule are baselined to EM-1, and Orion’s are baselined to EM-2. NASA documentation indicates that Orion’s baselines are tied to EM-2 because that is the first point at which it will fulfill its purpose of carrying crew. Should NASA determine it is likely to exceed its cost estimate baseline by 15 percent or miss a milestone by 6 months or more, NASA is required to report those increases and delays—along with their impacts—to Congress. In June 2017, NASA sent notification to Congress that the schedule for EM-1 has slipped beyond the allowed 6- month threshold, but stated that cost is expected to remain within the 15 percent threshold.\nNASA has not established EM-2 cost baselines or expected total life- cycle costs for SLS and EGS, including costs related to the larger and more capable versions of SLS needed to implement the agency’s plans to send crewed missions to Mars. GAO’s Cost Estimating and Assessment Guide, a guidebook of cost estimating best practices developed in concert with the public and private sectors, identifies baselines as a critical means for measuring program performance over time and addresses how a baseline backed by a realistic cost estimate increases the probability of a program’s success. In addition, prior GAO work offers insight into the benefits of how baselines enhance a program’s transparency. For example, we found in 2009 that costs for the Missile Defense Agency’s (MDA) ballistic missile defense system had grown by at least $1 billion, and that lack of baselines for each block of capability hampered efforts to measure progress and limited congressional oversight of MDA’s work. MDA responded to our recommendation to establish these baselines and, in 2011, we reported that MDA had a new process for setting detailed baselines, which had resulted in a progress report to Congress more comprehensive than the one it provided in 2009.\nTo that end, we have made recommendations in the past on the need for NASA to baseline the programs’ costs for capabilities beyond EM-1; however, a significant amount of time has passed without NASA taking steps to fully implement these recommendations. Specifically, in May 2014, we recommended that, to provide Congress with the necessary insight into program affordability, ensure its ability to effectively monitor total program costs and execution, and to facilitate investment decisions, NASA’s Administrator should direct the Human Exploration and Operations Mission Directorate to:\nEstablish a separate cost and schedule baseline for work required to support the SLS for EM-2 and report this information to the Congress through NASA’s annual budget submission. If NASA decides to fly the SLS configuration used in EM-2 beyond EM-2, establish separate life cycle cost and schedule baseline estimates for those efforts, to include funding for operations and sustainment, and report this information annually to Congress via the agency’s budget submission; and\nEstablish separate cost and schedule baselines for each additional capability that encompass all life cycle costs, to include operations and sustainment, because NASA intends to use the increased capabilities of the SLS, Orion, and ground support efforts well into the future and has chosen to estimate costs associated with achieving the capabilities.\nAs part of the latter recommendation, we stated that, when NASA could not fully specify costs due to lack of well-defined missions or flight manifests, the agency instead should forecast a cost estimate range— including life cycle costs—having minimum and maximum boundaries and report these baselines or ranges annually to Congress via the agency’s budget submission.\nIn its comments on our 2014 report, NASA partially concurred with these two recommendations, noting that much of what it had already done or expected to do would address them. For example, the agency stated that establishing the three programs as separate efforts with individual cost and schedule commitments met GAO’s intent as would its plans to track and report development, operations, and sustainment costs in its budget to Congress as the capabilities evolved. In our response, we stated that while NASA’s prior establishment of three separate programs lends some insight into expected costs and schedule at the broader program level, it does not meet the intent of the two recommendations because cost and schedule identified at that level is unlikely to provide the detail necessary to monitor the progress of each block against a baseline. Further, reporting the costs via the budget process alone will not provide information about potential costs over the long term because budget requests neither offer all the same information as life-cycle cost estimates nor serve the same purpose. Life-cycle cost estimates establish a full accounting of all program costs for planning, procurement, operations and maintenance, and disposal and provide a long-term means to measure progress over a program’s life span.\nIn 2016, NASA requested closure of these recommendations, citing, among other factors, changes to the programs’ requirements, design, architecture, and concept of operations. However, NASA’s request did not identify any steps taken to meet the intent of these two recommendations, such as establishing cost and schedule baselines for EM-2, baselines for each increment of SLS, Orion, or ground systems capability, or documentation of life cycle cost estimates with minimum and maximum boundaries. Further, a senior level ESD official told us that NASA does not intend to establish a baseline for EM-2 because it is not required to do so. The limited scope that NASA has chosen to use as the basis for formulating the programs’ cost baselines does not provide the transparency necessary to assess long-term affordability. Plainly, progress cannot be assessed without a baseline that serves as a means to compare current costs against expected costs; consequently, it becomes difficult to assess program affordability and for Congress to make informed budgetary decisions.\nNASA’s lack of action in regards to our 2014 recommendations means that it is now contractually obligating NASA to spend billions of dollars in potential costs for EM-2 and beyond without a baseline against which to assess progress. For example: in fiscal year 2016, the SLS program awarded two contracts to Aerojet Rocketdyne: a $175 million contract for RL-10 engines to power the exploration upper stage during EM-2 and EM-3 and a $1.2 billion contract to restart the RS-25 production line required for engines for use beyond EM-4, and to produce at least 4 additional RS-25 engines; in 2017, SLS modified the existing Boeing contract upwards by $962 million for work on the exploration upper stage that SLS will use during EM-2 and future flights; and on a smaller scale, in fiscal year 2016 the EGS program obligated $4.8 million to support the exploration upper stage and EM-2.\nAs illustrated by these contracting activities, the SLS program is obligating more funds for activities beyond EM-1 than Congress directed. Specifically, of approximately $2 billion appropriated for the SLS program, the Consolidated Appropriations Act, 2016 directed that NASA spend not less than $85 million for enhanced upper stage development for EM-2. NASA has chosen to allocate about $360 million of its fiscal year 2016 SLS appropriations towards EM-2, including enhanced upper stage development, additional performance upgrades, and payload adapters, without a baseline to measure progress and ensure transparency. The NASA Inspector General (IG) also recently reported that NASA is spending funds on EM-2 efforts without a baseline in place and expressed concerns about the need for EM-2 cost estimates. Because NASA has not implemented our recommendations, it may now be appropriate for Congress to take action to require EM-2 cost and schedule baselines for SLS and EGS, and separate cost and schedule baselines for additional capabilities developed for Orion, SLS, and EGS for missions beyond EM-2. These baselines would be important tools for Congress to make informed, long-term budgetary decisions with respect to NASA’s future exploration missions, including Mars.",
"NASA’s governance model prescribes a management structure that employs checks and balances among key organizations to ensure that decisions have the benefit of different points of view and are not made in isolation. As part of this structure, NASA established the technical authority process as a system of checks and balances to provide independent oversight of programs and projects in support of safety and mission success through the selection of specific individuals with delegated levels of authority. The technical authority process has been used in other parts of the government for acquisitions, including the Department of Defense and Department of Homeland Security. ESD is organizationally connected to three technical authorities within NASA.\nThe Office of the Chief Engineer technical authority is responsible for ensuring from an independent standpoint that the ESD engineering work meets NASA standards,\nThe Office of Safety and Mission Assurance technical authority is responsible for ensuring from an independent standpoint that ESD products and processes satisfy NASA’s safety, reliability, and mission assurance policies, and\nThe Office of Chief Health and Medical technical authority is responsible for ensuring from an independent standpoint that ESD programs meet NASA’s health and medical standards.\nThese NASA technical authorities have delegated responsibility for their respective technical authority functions directly to ESD staff. According to NASA’s project management requirements, the program or project manager is ultimately responsible for the safe conduct and successful outcome of the program or project in conformance with governing requirements and those responsibilities are not diminished by the implementation of technical authority.\nESD has established an organizational structure in which the technical authorities for engineering and safety and mission assurance (S&MA) are dual hatted to also serve simultaneously in programmatic positions. The chief engineer technical authority also serves as the Director of ESD’s Cross Program System Integration Office and the S&MA technical authority also serves as the ESD Safety and Mission Assurance Manager. In their programmatic roles for ESD, the individuals manage resources, including budget and schedule, to address engineering and safety issues. In their technical authority roles, these same individuals are to provide independent oversight of programs and projects in support of safety and mission success. Having the same individual simultaneously fill both a technical authority role and a program role creates an environment of competing interests where the technical authority may be subject to impairments in their ability to impartially and objectively assess the programs while at the same time acting on behalf of ESD in programmatic capacities. This duality makes them more subject to program pressures of cost and schedule in their technical authority roles. Figure 9 describes some of the conflicting roles and responsibilities of these officials in their two different positions.\nThe concurrency of duties leaves the positions open to conflicting goals of safety, cost, and schedule and increases the potential for the technical authorities to become subject to cost and schedule pressures. For example: the dual-hatted engineering and S&MA technical authorities serve on decision-making boards both in technical authority and programmatic capacities, making them responsible for providing input on technical and safety decisions while also keeping an eye on the bottom line for ESD’s cost and schedule; and the technical authorities are positioned such that they have been the reviewers of the ESD programmatic areas they manage—in essence, “grading their own homework.” For example, at ESD’s Build to Sync review in 2016, the engineering and S&MA technical authorities evaluated the areas that they manage in their respective capacities as ESD Director of Cross Program System Integration and ESD Safety and Mission Assurance Manager. This process relied on their abilities as individuals to completely separate the two hats—using one hand to put on the ESD hat and manage technical and safety issues within programmatic cost and schedule constraints and using the other hand to take off that hat and assess the same issues with an independent eye.\nNASA officials identified several reasons why the dual-hat structure works for their purposes. Agency officials stated that one critical factor to successful dual-hatting is having the “right” people in those dual-hat positions—that is, personnel with the appropriate technical knowledge to do the work and the ability to act both on behalf of ESD and independent of it. Officials also indicated that technical authorities retain independence because their technical authority reporting paths and performance reviews are all within their technical authority chain of command rather than under the purview of the ESD chain of command.\nAdditionally, agency officials said that dual-hat roles are a commonplace practice at NASA and cited other factors in support of the approach, including that: it would not be an efficient use of resources to have an independent technical authority with no program responsibilities because that person would be unlikely to have sufficient program knowledge to provide useful insight and could slow the program’s progress; a technical authority that does not consider cost and schedule is not helpful to the program because it is unrealistic to disregard those aspects of program management; a strong dissenting opinion process is in place and allows for issues to be raised through various levels to the Administrator level within NASA; and\nESD receives additional independent oversight through three NASA internal organizations—the independent review teams that provide independent assessments of a program’s technical and programmatic status and health at key points in its life cycle; the NASA Engineering and Safety Center that conducts independent safety and mission success-related testing, analysis, and assessments of NASA’s high- risk projects; and the Aerospace Safety Advisory Panel (ASAP) that independently oversees NASA’s safety performance.\nThese factors that NASA officials cite in support of the dual-hat approach minimize the importance of having independent oversight and place ESD at risk of fostering an environment in which there is no longer a balance between preserving safety with the demands of maintaining cost and schedule. The Columbia Accident Investigation Board (CAIB) report—the result of an in-depth assessment of the technical and organizational causes of the Columbia accident—concluded that NASA’s organization for the Shuttle program combined, among other things, all authority and responsibility for schedule, cost, safety, and technical requirements and that this was not an effective check and balance. The CAIB report recommended that NASA establish a technical authority to serve independently of the Space Shuttle program so that employees would not feel hampered to bring forward safety concerns or disagreements with programmatic decisions. The Board’s findings that led to this recommendation included a broken safety culture in which it was difficult for minority and dissenting opinions to percolate up through the hierarchy; dual Center and programmatic roles vested in one person that had confused lines of authority, responsibility, and accountability and made the oversight process susceptible to conflicts of interest; and oversight personnel in positions within the program, increasing the risk that these staffs’ perspectives would be hindered by too much familiarity with the programs they were overseeing.\nESD officials stated that they had carefully and thoughtfully implemented the intent of the CAIB; they said they had not disregarded its finding and recommendations but instead established a technical authority in such a way that it best fit the context of ESD’s efforts. These officials did acknowledge, though, that the dual hat approach does not align with the CAIB report’s recommendation to separate programmatic and technical authority or with NASA’s governance framework. Further, over the course of our review, we spoke with various high-ranking officials outside and within NASA who expressed some reservations about ESD’s dual hat approach. For example:\nThe former Chairman of the CAIB stated that, even though the ESD programs are still in development, he believes the technical authority should be institutionally protected against the pressures of cost and schedule and added that NASA should never be lulled into dispensing of engineering and safety independence because human spaceflight is an extremely risky enterprise.\nBoth NASA’s Chief Engineer and Chief of S&MA acknowledged there is inherent conflict in the concurrent roles of the dual hats, while also expressing great confidence in the ESD staff now in the dual roles.\nNASA’s Chief of S&MA indicated that the dual-hat S&MA structure is working well within ESD, but he believes these dual-hatted roles may not necessarily meet the intent of the CAIB’s recommendation because the Board envisioned an independent safety organization completely outside the programs.\nNASA’s Chief Engineer stated that he believes technical authority should become a separate responsibility and position as ESD moves forward with integration of the three programs and into their operation as a system.\nAs these individuals made clear, ensuring the ESD engineering and S&MA technical authorities remain independent of cost and schedule conflicts is key to human spaceflight success and safety. Along these lines, the ASAP previously conveyed concerns about NASA’s implementation of technical authority that continue to be valid today. In particular, the ASAP stated in a 2013 report that NASA’s technical authority was working at that time in large measure due to the well- qualified, strong personnel that had been assigned to the process. The panel noted, however, that should there be a conflict or weakening of the placement of strong individuals in the technical authority position, this could introduce greater risk into a program. Although a current ASAP official stated she had no concerns with ESD’s present approach to technical authority, the panel’s prior caution remains applicable, and the risk that the ASAP identified earlier could be realized if not mitigated by eliminating the potential for competing interests within the ESD engineering and S&MA positions.\nNASA is currently concluding an assessment of the implementation of the technical authority role to determine how well that function is working across the agency. According to the official responsible for leading the study, the assessment includes examining the evolution of the technical authority role over the years and whether NASA is spending the right amount of funds for those positions. NASA expects to have recommendations in 2017 on how to improve the technical authority function, but does not expect to address the dual hat construct. A principle of federal internal controls is that an agency should design control activities to achieve objectives and respond to risks, which includes segregation of key duties and responsibilities to reduce the risk of error, misuse, or fraud. By overlapping technical authority and programmatic responsibilities, NASA will continue to run the risk of creating an environment of competing interests for the ESD engineering and S&MA technical authorities.",
"Despite the development and integration challenges associated with a new human spaceflight capability, ESD has improved its overall cross- program risk posture over the past 2 years. Nonetheless, it still faces key integration risk areas within software development and verification and validation (V&V). Both are critical to readiness for EM-1 because software acts as the “brain” that ties SLS, Orion, and EGS together in a functioning body, while V&V ensures the integrated body works as expected. The success of these efforts forms the foundation for a launch, no matter the date of EM-1.",
"We have previously reported on individual SLS, Orion, and EGS program risks that were contributing to potential delays within each program. For example, in July 2016, we found that delays with the European Service Module—which will provide services to the Orion crew module in the form of propulsion, consumables storage, and heat rejection and power—could potentially affect the Orion program’s schedule. Subsequently, in April 2017, we found that those delays had worsened and were contributing to the program likely not making a November 2018 launch readiness date. All three programs continue to manage such individual program risks, which is to be expected of programs of this size and complexity. The programs may choose to retain these risks in their own risk databases or elevate them to ESD to track mitigation steps. A program would elevate a risk to ESD when decisions are needed by ESD management, such as a need for additional resources or requirement changes. Risks with the greatest potential for negative impacts are categorized as top ESD risks. In addition to these individual programs risks that are elevated to ESD, ESD is also responsible for overseeing cross-program risks that affect multiple programs. An example of a cross-program risk is the potential for delayed delivery of data from SLS and Orion to affect the EGS software development schedule.\nESD has made progress reducing risks over the last 2 years, from the point of the Design to Sync preliminary design review equivalent for the integrated programs to the Build to Sync critical design review equivalent. As figure 10 illustrates, ESD has reduced its combined total of ESD and cross program risks from 39 to 25 over this period, and reduced the number of high risks from about 49 percent of the total to about 36 percent of the total.\nThe ESD risk system is dynamic, with risks coming into and dropping out of the system over time as development proceeds and risk mitigation is completed. A total of 29 of the 39 risks within the ESD risk portfolio were removed from the register and 15 risks were added to the register between November 2014, prior to Design to Sync, and March 2017, after Build to Sync. Examples of risks removed over this time period include risks associated with late delivery of Orion and SLS ground support equipment hardware to EGS and establishing a management process to identify risks stemming from the programs being at differing points in development.\nNine risks remained active in the system over the 2-year period we analyzed, and NASA experienced delays in the length of time it anticipated it would take to complete mitigation of the majority of these nine risks. Three of these nine risks that have remained active in the risk system since before Design to Sync are still classified as high risk; the remaining six are classified as medium risk. Mitigation is an action taken to eliminate or reduce the potential severity of a risk, either by reducing the probability of it occurring, by reducing the level of impact if it does occur, or both. ESD officials indicated a number of reasons why risks could take longer to mitigate. For instance, risks with long-term mitigation strategies may go for extended periods of time without score changes. In addition, ESD may conduct additional risk assessments and determine that certain risks need to be reprioritized over time and that resources should be focused towards higher risks. In addition, some risk mitigation steps are tied to hardware delivery and launch dates, and as those delay, the risk mitigation steps will as well. As illustrated in table 2, we found that six of these nine risks were related to software and V&V and represented some of the primary causes in terms of estimated completion delays. On average, the estimated completion dates for these six risks were delayed about 16 months. In addition, the two V&V risks that have remained active since before Design to Sync were still considered top ESD risks as of March 2017 when we completed this analysis.",
"Software development is one of the top cross-program technical issues facing ESD as the programs approach EM-1. Software is a key enabling technology required to tie the human spaceflight systems together. Specifically, for ESD to achieve EM-1 launch readiness, software developed within each of the programs has to be able to link and communicate with software developed in other programs in order to enable a successful launch. Furthermore, software development continues after hardware development and is often used to help resolve hardware deficiencies discovered during systems integration and test.\nESD has defined six critical paths—the path of longest duration through the sequence of activities that determines the program’s earliest completion date—for its programs to reach EM-1, and three are related to software development. These three software critical paths support interaction and communication between the systems the individual programs are developing—SLS to EGS software, Orion to EGS software, and the Integrated Test Laboratory (ITL) facility that supports Orion software and avionics testing as well as some SLS and EGS testing. The other critical paths are development of the Orion crew service module, SLS core stage, and the EGS Mobile Launcher. Because of software’s importance to EM-1 launch readiness, ESD is putting a new method in place to measure how well these software efforts are progressing along their respective critical paths. To that end, it is currently developing a set of “Key Progress Indicators” milestones that will include baseline and forecast dates. Officials indicated that these metrics will allow ESD to better track progress of the critical path software efforts toward EM-1 during the remainder of the system integration and test phase. ESD officials have indicated, however, that identifying and establishing appropriate indicators is taking longer than expected and proving more difficult than anticipated.\nOne of the software testing critical paths, the ITL, has already experienced delays that slipped completion of planned software testing from September 2018 until March 2019, a delay of 6 months. Officials told us that this delay was primarily due to a series of late avionics and software deliveries by the European Space Agency for Orion’s European Service Module. The delay in the Orion testing in turn affects SLS and EGS software testing and integration because those activities are informed by the completion of the Orion software testing. Furthermore, some EGS and SLS software testing scheduled to be conducted within the ITL has been re-planned as a result of the Orion delays.\nThe Orion program indicates that it has taken action to mitigate ITL issues as they arise. For example, the European Service Module avionics and software delivery delay opened a 125-day gap between completion of crew module testing and service module testing. Orion officials indicated that the program had planned to proceed directly into testing of the integrated crew module and service module software and systems, but the integrated testing cannot be conducted until the service module testing is complete.\nAs illustrated by figure 11, to mitigate the impact of the delay, Orion officials indicated that the program filled this gap by rescheduling other activities at the ITL such as software integration testing and dry runs for the three programs. These adjustments narrowed the ITL schedule gap from 125 days to 24 days. The officials stated that they will continue to adjust the schedule to eliminate gaps.\nThe other two software critical paths—SLS to EGS and Orion to EGS software development—are also experiencing software development issues. In July 2016, for example, we found that delays in SLS and Orion requirements development, as well as the programs’ decisions to defer software content to later in development, were delaying EGS’s efforts to develop ground command and control software and increasing cost and schedule.\nFurthermore, ESD reports show that delays and content deferral in the Orion and SLS software development continue to affect EGS software development and could delay launch readiness. For example, the EGS data throughput risk that both ESD and EGS are tracking is that the ground control system software is currently not designed to process the amount of telemetry it will receive and provide commands to SLS and ground equipment as required during launch operations. EGS officials stated that, if not addressed, the risk is that if there is a SLS or Orion failure, the ground control system software may not display the necessary data to launch operations technicians. EGS officials told us that the reason for the mismatch between the data throughput being sent to the ground control software and how much is it designed to process is that no program was constrained in identifying its data throughput. These officials stated that retrospectively, they should have established an interface control document to manage the process. The officials also stated that the program is taking steps to mitigate this risk, including defining or constraining the data parameters and buying more hardware to increase the amount of data throughput that can be managed, but will not know if the risk is fully mitigated until additional data are received and analyzed during upcoming tests. For example, EGS officials stated that the green run test will provide additional data to help determine if the steps they are taking address this throughput risk. If the program determines the risk is not fully mitigated and additional software redesign is required, it could lead to schedule delays.\nESD officials overseeing software development acknowledged that software development for the integrated systems is a difficult task and said they expect to continue to encounter and resolve software development issues during cross-program integration and testing. As we have found in past reviews of NASA and Department of Defense systems, software development is a key risk area during system integration and testing. For example, we found in April 2017 that software delivery delays and development problems with the U.S. Air Force’s F-35 program experienced during system integration and testing were likely to extend that program’s development by 12 months and increase its costs by more than $1.7 billion.",
"Verification and validation (V&V) is acknowledged by ESD as a top cross- program integration risk that NASA must monitor as it establishes and works toward a new EM-1 launch readiness date. V&V is a culminating development activity prior to launch for determining whether integrated hardware and software will perform as expected. V&V consists of two equally important aspects: verification is the process for determining whether or not a product fulfills the requirements or specifications established for it at the start of the development phase; and validation is the assessment of a planned or delivered system ability to meet the sponsor’s operational need in the most realistic environment achievable during the course of development or at the end of development.\nLike software development and testing, V&V is typically complex and made even more so by the need to verify and validate how SLS, Orion, and EGS work together as an integrated system.\nESD’s V&V plans for the integrated system have been slow to mature. In March 2016, leading up to ESD’s Build to Sync review, ESD performed an audit of V&V-related documentation for the program CDRs and ESD Build to Sync. The audit found that 54 of 257 auditable areas (21 percent) were not mature enough to meet NASA engineering policy guidance for that point in development. According to ESD documentation, there were several causes of this immaturity, including incomplete documentation and inconsistent requirements across the three programs. NASA officials told us that our review prompted ESD to conduct a follow-up and track the status of these areas. As of June 2017, 53 of the 54 auditable areas were closed, which means these areas are at or have exceeded CDR level of maturity—6 months after Build to Sync was completed. NASA officials indicated that the remaining one auditable area, which is related to the test plan for the integrated communication network, was closed in August 2017.\nNevertheless, other potential V&V issues still remain. According to ESD officials, distributing responsibility for V&V across the three programs has created an increased potential for gaps in testing. If gaps are discovered during testing, or if integrated systems do not perform as planned, money and time for modifications to hardware and/or software may be necessary, as well as time for retesting. This could result in delayed launch readiness. As a result, mature V&V plans are needed to ensure there are no gaps in planned testing. ESD officials indicated that a NASA Engineering and Safety Center review of their V&V plans, requested by ESD’s Chief Engineer to address concerns about V&V planning, would help define the path forward for maturing V&V plans. V&V issues add to cost and schedule risk for the program because they may take more time and money to resolve than ESD anticipates. In some cases, they may have a safety impact as well. For example, if the structural models are not sufficiently verified, it increases flight safety risks. Each of the programs bases its individual analyses on the models of the other programs. As a result, any deficiencies discovered in one can have cascading effects through the other systems and programs. We will continue to monitor ESD’s progress mitigating risks as NASA approaches EM-1.",
"NASA is at the beginning of the path leading to human exploration of Mars. The first phase along that path, the integration of SLS, Orion, and EGS, is likely to set the stage for the success or failure of the rest of the endeavor. Establishing a cost and schedule baseline for NASA’s second mission is an important initial step in understanding and gaining support for the costs of SLS, Orion, and EGS, not just for that one mission but for the Mars plan overall. NASA’s ongoing refusal to establish this baseline is short-sighted, because EM-2 is part of a larger conversation about the affordability of a crewed mission to Mars. While later stages of the Mars mission are well in the future, getting to that point in time will require a funding commitment from the Congress and other stakeholders. Much of their willingness to make that commitment is likely to be based on the ability to assess the extent to which NASA has met prior goals within predicted cost and schedule targets.\nFurthermore, as ESD moves SLS, Orion, and EGS from development to integrated operations, its efforts will reach the point when human lives will be placed at risk. Space is a severe and unforgiving environment; the Columbia accident showed the disastrous consequences of mistakes. As the Columbia Accident Investigation Board report made clear, a program’s management approach is an integral part of ensuring that human spaceflight is as safe and successful as possible. The report also characterized independence as key to achieving that safety and success. ESD’s approach, however, tethers independent oversight to program management by vesting key individuals to wear both hats at the same time. As a result, NASA is relying heavily on the personality and capability of those individuals to maintain independence rather than on an institutional process, which diminishes lessons learned from the Columbia accident.",
"We are making the following matter for congressional consideration.\nCongress should consider requiring the NASA Administrator to direct the Exploration Systems Development organization within the Human Exploration and Operations Mission Directorate to establish separate cost and schedule baselines for work required to support SLS and EGS for Exploration Mission 2 and establish separate cost and schedule baselines for each additional capability that encompass all life cycle costs, to include operations and sustainment. (Matter for Consideration 1)",
"We are making the following recommendation to the Exploration Systems Development organization.\nExploration Systems Development should no longer dual-hat individuals with both programmatic and technical authority responsibilities. Specifically, the technical authority structure within Exploration Systems Development should be restructured to ensure that technical authorities for the Offices of the Chief Engineer and Safety and Mission Assurance are not fettered with programmatic responsibilities that create an environment of competing interests that may impair their independence. (Recommendation 1)",
"NASA provided written comments on a draft of this report. These comments are reprinted in appendix II. NASA also provided technical comments, which were incorporated as appropriate.\nIn responding to a draft of our report, NASA partially concurred with our recommendation that the Exploration Systems Development (ESD) organization should no longer dual-hat individuals with both programmatic and technical authority responsibilities. Specifically, we recommended that the technical authority structure within ESD should be restructured to ensure that technical authorities for the Offices of Chief Engineer and Safety and Mission Assurance are not fettered with programmatic responsibilities that create an environment of competing interests that may impair their independence. In response to this recommendation, NASA stated that it created the technical authority governance structure after the Columbia Accident Investigation Board report and that the dual- hat technical authority structure has been understood and successfully implemented within ESD. NASA recognized, however, that as the program moves from the design and development phase into the integration and test phase, it anticipates that the ESD environment will encounter more technical issues that will, by necessity, need to be quickly evaluated and resolved. NASA asserted that within this changed environment it would be beneficial for the Engineering Technical Authority role to be performed by the Human Exploration and Operations Chief Engineer (who reports to the Office of the Chief Engineer). NASA stated that over the next year or so, it would solicit detailed input from these organizations and determine how to best support the program while managing the transition to integration and test and anticipated closing this recommendation by September 30, 2018.\nWe agree that NASA should solicit detailed input from key organizations within the agency as it transitions away from the dual hat technical authority structure to help ensure successful implementation of a new structure. In order to implement this recommendation, however, NASA needs to assign the technical authority role to a person who does not have programmatic responsibilities to ensure they are independent of responsibilities related to cost and schedule performance. To fulfill this, this person may need to reside outside of the Human Exploration and Operations Mission Directorate and NASA should solicit input from the Office of the Chief Engineer when making this decision to ensure that there are no competing interests for the technical authority. Moreover, in its response, NASA does not address the dual-hat technical authority role for Safety and Mission Assurance. We continue to believe that similar changes for this role would be appropriate as well.\nFurther, in response to this recommendation, NASA makes two statements that require additional context. First, NASA stated that GAO’s recommendation was focused on overall Agency technical authority management. While this review involved meeting with the heads of the Office of Chief Engineer and the Office of Safety and Mission Assurance, the scope of this review and the associated recommendation are limited to ESD. Second, NASA stated “As you found, we agree that having the right personnel in senior leadership positions is essential for a Technical Authority to be successful regardless of how the Technical Authority is implemented.” To clarify, this perspective is attributed to NASA officials in our report and does not represent GAO’s position.\nWe are sending copies of this report to NASA’s Administrator and to appropriate congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.",
"This report assesses (1) the benefits and challenges of the National Aeronautics and Space Administration’s (NASA) approach for integrating and assessing the programmatic and technical readiness of Orion, SLS, and EGS; and (2) the extent to which the Exploration Systems Development (ESD) organization is managing cross-program risks that could affect launch readiness.\nTo assess the benefits and challenges of NASA’s approach for integrating and assessing the programmatic and technical readiness of its current human spaceflight programs relative to other selected programs, we reviewed and analyzed NASA policies governing program and technical integration, including cost, schedule, and risk. We obtained and analyzed ESD implementation plans to assess the role of ESD in cross program integration of the three programs. We reviewed the 2003 Columbia Accident Investigation Board’s Report’s findings and recommendations related to culture and organizational management of human spaceflight programs as well as the Constellation program’s lessons learned report. We reviewed detailed briefings and documentation from Cross-Program Systems Integration and Programmatic and Strategic Integration teams explaining ESD’s approach to programmatic and technical integration, including implementation of systems engineering and integration. We interviewed NASA officials to discuss the benefits and challenges of NASA’s integration approach and their roles and responsibilities in managing and overseeing the integration process. We met with the technical authorities and other representatives from the NASA Office of the Chief Engineer, Office of Safety and Mission Assurance, Crew Health and Safety, addressed cost and budgeting issues with the Chief Financial Officer and discussed and documented their roles in executing and overseeing the ESD programs. We also interviewed outside subject matter experts to gain their insight of ESD’s implementation of NASA’s program management policies on the independent technical authority structure. Additionally, we compared historical budget data from the now- cancelled Constellation program to ESD budget data and quantified systems engineering and integration budget savings through preliminary design review, the point at which the Constellation program was cancelled. In addition, we assessed the scope of NASA’s funding estimates for the second exploration mission and beyond against best practices criteria outlined in GAO’s cost estimating guidebook. We assessed the reliability of the budget data obtained using GAO reliability standards as appropriate. We compared the benefits and challenges of NASA’s integration approach to that of other complex, large-scale government programs, including NASA’s Constellation and the Department of Defense’s Missile Defense Agency programs.\nTo determine the extent to which ESD is managing cross-program risks that could affect launch readiness, we obtained and reviewed NASA and ESD risk management policies; detailed monthly and quarterly briefings; and documentation from Cross-Program Systems Integration and Programmatic and Strategic Integration teams explaining ESD’s approach to identifying, tracking, and mitigating cross-program risks. We reviewed Cross-Program Systems Integration systems engineering and systems integration areas as well as Programmatic and Strategic Integration risks, cost, and schedule to determine what efforts presented the highest risk to cross program cost and schedule. We conducted an analysis of ESD’s risk dataset and the programs’ detailed risk reports, which list program risks and their potential schedule impacts, including mitigation efforts to date. We examined risk report data from Design to Sync to Build to Sync and focused our analyses to identify risks with current mitigation plans to determine if risk mitigation plans are proceeding on schedule. We did not analyze risks that were categorized under “Accept,” “Candidate,” “Research,” “Unknown,” or “Watch” because these risks were not assigned an active mitigation plan by ESD. To assess the reliability of the data, we reviewed related documentation and interviewed knowledgeable agency officials. We determined the data was sufficiently reliable for identifying risks and schedule delays associated with those risks. We examined ESD integrated testing facility schedules to determine the extent to which they can accommodate deviation in ESD’s planned integrated test schedule. We also interviewed program and contractor officials on technical risks, potential impacts, and risk mitigation efforts underway and planned.\nWe conducted this performance audit from August 2016 to October 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
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"In addition to the contact name above, Molly Traci (Assistant Director), LaTonya Miller, John S. Warren Jr., Tana Davis, Laura Greifner, Roxanna T. Sun, Samuel Woo, Marie P. Ahearn, and Lorraine Ettaro made key contributions to this report."
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{
"question": [
"What is NASA attempting to accomplish?",
"What are the three spaceflight programs?",
"How will this new approach benefit NASA?",
"What is one challenge with this new approach?",
"What is an example of this challenge?",
"What did GAO recommend to solve this issue?",
"What are the consequences since NASA has not implemented the recommendations?",
"How has NASA's risk posture changed?",
"Which risk areas still remain?",
"What could still delay program readiness?",
"What is GAO's duty in this situation?",
"When are all three programs hoping to be ready by?",
"What must NASA do for program readiness for all three programs?",
"What type of programs is NASA undertaking for this project?",
"Which report included a provision regarding GAO and NASA?",
"What are the two points this report assesses?",
"What actions did GAO take in their assessment?",
"What should Congress consider doing with regards to NASA?",
"What is it recommended that NASA’s ESD organization no longer do?",
"Did NASA agree to this suggestion?",
"What did NASA fail to address?",
"What is GAO’s view of this component of the recommendation?"
],
"summary": [
"The approach that the National Aeronautics and Space Administration (NASA) is using to integrate its three human spaceflight programs into one system ready for launch offers some benefits, but it also introduces oversight challenges.",
"To manage and integrate the three programs—the Space Launch System (SLS) vehicle; the Orion crew capsule; and supporting ground systems (EGS)—NASA's Exploration Systems Development (ESD) organization is using a more streamlined approach than has been used with other programs, and officials GAO spoke with believe that this approach provides cost savings and greater efficiency.",
"To manage and integrate the three programs—the Space Launch System (SLS) vehicle; the Orion crew capsule; and supporting ground systems (EGS)—NASA's Exploration Systems Development (ESD) organization is using a more streamlined approach than has been used with other programs, and officials GAO spoke with believe that this approach provides cost savings and greater efficiency.",
"The approach makes it difficult to assess progress against cost and schedule baselines.",
"SLS and EGS are baselined only to the first test flight.",
"In May 2014, GAO recommended that NASA baseline the programs' cost and schedule beyond the first test flight.",
"NASA has not implemented these recommendations nor does it plan to; hence, it is contractually obligating billions of dollars for capabilities for the second flight and beyond without establishing baselines necessary to measure program performance.",
"NASA has lowered its overall cross-program risk posture over the past 2 years, but risk areas—related to software development and verification and validation, which are critical to ensuring the integrated body works as expected—remain.",
"NASA has lowered its overall cross-program risk posture over the past 2 years, but risk areas—related to software development and verification and validation, which are critical to ensuring the integrated body works as expected—remain.",
"For example, delays and content deferral in Orion and SLS software development continue to affect ground systems software development and could delay launch readiness.",
"GAO will continue to monitor these risks.",
"All three programs (SLS, Orion, and EGS) are working toward a launch readiness date of no earlier than October 2019 for the first test flight.",
"Because all three programs must work together for launch, NASA must integrate the hardware and software from the separate programs into a working system capable of meeting its goals for deep space exploration.",
"NASA is undertaking a trio of closely related programs to continue human space exploration beyond low-Earth orbit.",
"The House Committee on Appropriations report accompanying H.R. 2578 included a provision for GAO to assess the progress of NASA's human space exploration programs.",
"This report assesses (1) the benefits and challenges of NASA's approach for integrating these three programs and (2) the extent to which cross-program risks could affect launch readiness.",
"GAO examined NASA policies, the results of design reviews, risk data, and other program documentation and interviewed NASA and other officials.",
"Congress should consider directing NASA to establish baselines for SLS and EGS's missions beyond the first test flight.",
"NASA's ESD organization should no longer dual-hat officials with programmatic and technical authority responsibilities.",
"NASA partially concurred with our recommendation and plans to address it in the next year.",
"But NASA did not address the need for the technical authority to be independent from programmatic responsibilities for cost and schedule.",
"GAO continues to believe that this component of the recommendation is critical."
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CRS_R40118
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{
"title": [
"",
"Introduction",
"Background and Context",
"The HOME Program",
"Participating Jurisdictions",
"The Consolidated Plan",
"Eligible HOME Activities",
"Selected HOME Program Requirements",
"Income Targeting",
"Affordability and Other Requirements",
"HOME Subsidy Limits",
"Subsidy Layering",
"Community Housing Development Organizations (CHDOs)",
"HOME Program Funding",
"Annual Appropriations",
"The HOME Formula",
"Grants to States in FY2014",
"Grants to Localities and Consortia in FY2014",
"Matching Requirement",
"Leveraging",
"Uses of HOME Funds",
"Types of Units (Homeowner, Home Buyer, or Rental)",
"Types of Activities (Rehabilitation, Acquisition, New Construction, or Tenant-Based Rental Assistance)",
"Selected Characteristics of HOME Beneficiaries",
"Household Income",
"Household Type",
"Program Oversight",
"HUD's Oversight of PJs",
"PJs' Oversight of Entities Receiving HOME Funds",
"Concerns Related to Oversight of HOME Funds",
"Changes in 2013 HOME Final Rule"
],
"paragraphs": [
"",
"The HOME Investment Partnerships Program was created by the Cranston-Gonzalez National Affordable Housing Act of 1990 ( P.L. 101-625 ). HOME is a federal block grant program administered by the Department of Housing and Urban Development (HUD) that provides funding for affordable housing activities to states and certain localities through formula grants. States and localities that receive HOME grants can choose to fund a wide range of rental and homeownership housing activities that benefit low-income households in order to best meet local affordable housing needs. This report provides an introduction to the HOME program, including a brief history, an overview of allowable uses of HOME funds, and a description of certain program requirements. It also provides information on funding for the program and how that funding has been used.",
"In the late 1980s, some members of Congress expressed concern about the state of the nation's housing. This concern stemmed from an increasing awareness of a variety of problems related to housing, including homelessness, families living in sub-standard housing, and decreasing opportunities for homeownership. The concern over these issues led to a number of efforts to focus attention on housing policy, including the creation of a National Housing Task Force that included housing policy experts and industry leaders. In March 1988, the task force produced a report on its findings. Among the housing issues that the task force report identified was a diminishing supply of rental and homeownership housing that was affordable to low-income households.\nIn a 1988 hearing on the task force report, some members of the Senate Committee on Banking, Housing, and Urban Affairs suggested that federal funding for housing programs was inadequate to meet the affordable housing needs identified in the report. Most federal housing assistance distributed to states and localities at the time was restricted to specific uses, such as Section 8 vouchers or Public Housing projects. Furthermore, programs that did give communities flexibility to choose how to use their funds, such as the Community Development Block Grant (CDBG) program, were primarily meant to fund economic development and community revitalization activities and restricted the ways in which funding could be used for affordable housing (for example, CDBG funds could be used for some housing rehabilitation but could not generally be used to construct new housing units). Concerned that existing programs were not meeting the nation's affordable housing needs, members of the Housing Task Force argued to the committee that the level of federal funding specifically dedicated to affordable housing should be increased in order to fully address affordable housing issues. At the same time, task force members argued that local jurisdictions should be allowed more control over the ways in which they used any such federal affordable housing funding.\nIn 1990, Congress passed a major housing bill that responded to some of the issues raised by the Housing Task Force and other experts. The Cranston-Gonzalez National Affordable Housing Act ( P.L. 101-625 ), or NAHA, stated that the nation's housing policy was not meeting the goal of providing \"decent, safe, sanitary, and affordable living environments for all Americans\" that was first set out in the Housing Act of 1949. The law revised, amended, or repealed several existing housing programs and authorized some new programs, including the HOME Investment Partnerships Program (often just referred to as HOME).\nHOME is the largest federal block grant program that provides funding dedicated exclusively to increasing the availability of adequate, affordable housing for low-and very low-income households. The program places a particular emphasis on giving states and localities flexibility in how they achieve their affordable housing goals, and funds can be used for a variety of activities related to both rental and owner-occupied housing. HOME is also designed to expand the capacity of states and localities to meet their long-term affordable housing needs by leveraging federal funding to attract state, local, and private investment in affordable housing and by strengthening the ability of government and nonprofit organizations to meet local housing needs.\nHOME is authorized by Title II of NAHA. HUD promulgated regulations governing the program in September 1996. In July 2013, HUD issued a final rule making significant revisions to certain program requirements, representing the first substantive changes to the regulations since they were first finalized in 1996.",
"This section of the report describes the structure of the HOME program, including the requirements that states and localities must meet in order to receive their own allocations of HOME funds, eligible uses of program funds, and certain requirements that HOME-assisted housing must meet. The following section on \" HOME Program Funding \" describes the funding for the program, including appropriations for HOME and the funding formula that is used to allocate the funds to states and eligible localities.",
"Each fiscal year, Congress appropriates funding to HUD for the HOME program during the annual appropriations process. HUD then uses a formula to allocate 40% of the funds to states and the remaining 60% to eligible localities. (This is discussed in more detail in the \" HOME Program Funding \" section of this report.) States and localities that meet certain requirements to receive their own allocations of HOME funds are referred to as \"participating jurisdictions\" (PJs).\nStates are automatically eligible to become PJs and receive the greater of their formula grant amount or $3 million annually. Localities can only become PJs if they are metropolitan cities or urban counties, and if they meet two funding thresholds. First, localities must be eligible for a minimum amount of funding under the formula, usually $500,000. Once localities meet this threshold, they must also meet a second threshold: localities must dedicate a total of at least $750,000 to affordable housing activities, either by having a HOME formula grant of at least $750,000 or by making up the difference between their grant amount and the $750,000 threshold with their own funds or HOME funds provided by the state from the state's formula allocation.\nLocalities that do not meet the requirements to become participating jurisdictions may join with other contiguous localities to form consortia in order to reach the minimum funding thresholds. Localities that are not PJs can also participate in the HOME program by applying to their home state to receive a portion of the state's allocation of HOME funds. States in which no locality receives its own allocation of HOME funding have their grant amounts increased by $500,000.\nA state or locality that is otherwise eligible to receive HOME funds must submit a document describing how it plans to use HOME funds to meet its affordable housing needs for HUD's approval before it can become a PJ. (This document, called a Consolidated Plan, is described in more detail in the following subsection.) Once a state or locality has been designated a PJ, it remains one – and therefore continues to be eligible to receive its own allocation of HOME funds – unless its designation is revoked by the Secretary of HUD. The Secretary has the authority to revoke a jurisdiction's designation if he finds that the jurisdiction is not complying with program requirements, or if a locality's formula grant amount falls below certain thresholds over a specified period of time, although he is not required to do so.\nA participating jurisdiction can administer HOME funds itself, or it can designate a public agency or nonprofit organization to administer all or part of the HOME program on its behalf. Such an organization is referred to as a subrecipient. Participating jurisdictions or their subrecipients can distribute funds to a variety of organizations to undertake specific projects. These organizations can include developers, owners, and sponsors of affordable housing, Community Housing Development Organizations (CHDOs), private lenders, faith-based organizations, and third-party contractors.",
"In order to receive HOME funding, a state or locality must submit a Consolidated Plan to HUD for approval. The Consolidated Plan covers a three- to five-year period and includes a detailed description of the jurisdiction's housing needs and an explanation of how it will use HOME funding and funding from three other HUD block grant programs to meet its specific housing needs. The Consolidated Plan also describes how the jurisdiction will leverage HOME funds to attract local, private, nonprofit, or other non-federal sources of funds for affordable housing, and it prioritizes projects by type and geographic location. While many activities are eligible uses of HOME dollars, participating jurisdictions must specify in their Consolidated Plan which activities they intend to fund.\nAs part of the consolidated planning process, PJs submit annual Action Plans that describe the specific activities that a PJ plans to undertake during the year to address its housing needs and make progress towards the goals that are included in its Consolidated Plan. PJs also submit annual performance reports on their use of funds and their progress towards their goals.\nThe Consolidated Plan is meant to be the product of \"a participatory process among citizens, organizations, businesses, and other stakeholders\" in a community. The HOME regulations stress community participation, especially by low- and moderate-income individuals, in developing the Consolidated Plan, and jurisdictions must submit a \"citizen participation plan\" that describes how citizens have been included and consulted in the process.\nIn 2012, HUD implemented certain changes to the Consolidated Planning process. Specifically, HUD began providing additional data and mapping tools for PJs to utilize for planning purposes. The public can also access these data and mapping tools, which is intended to enable the community to be a more informed part of the consolidated planning process. Furthermore, HUD now requires Consolidated Plans to be submitted through a standardized template in the Integrated Disbursement & Information System (IDIS), the computer system into which PJs report their activities and uses of HOME funds. According to HUD, the new data are expected to help PJs produce better Consolidated Plans that more fully reflect local needs and to increase public participation in the process. The ability to submit plans directly to IDIS through a standard template is expected to make it easier for PJs to produce and submit Consolidated Plans, and to make it easier for HUD to track PJs' progress toward the goals that they include in their plans.",
"In the years leading up to NAHA's passage, some experts argued that local affordable housing needs varied, and that localities should be free to develop solutions that fit local conditions. HUD describes one of the purposes of the HOME program as reinforcing the principle that states and localities should have flexibility and control over how to best meet their affordable housing needs. Accordingly, a wide range of activities related to increasing the supply of affordable housing for low-income households qualifies for HOME funding. These include both homeownership and rental housing activities.\nThe eligible uses of HOME funds fall into four broad categories:\nRehabilitation of Owner-Occupied Housing . Funds may be used to help existing homeowners repair, rehabilitate, or reconstruct their homes. Assistance to Home Buyers. Funds may be used to help home buyers acquire, acquire and rehabilitate, or construct homes. For example, down payment assistance is an eligible use of funds under this category. Rental Housing Activities . Funds may be used to help developers or other housing organizations acquire, rehabilitate, or construct affordable rental housing. Tenant-Based Rental Assistance . Funds may be used to help renters with costs related to renting, such as security deposits, rent, and, under certain circumstances, utility payments. \"Tenant-based\" means that the rental assistance moves with the tenant rather than being tied to a specific housing unit.\nA participating jurisdiction may use up to 10% of the funds it is allocated in a fiscal year for administrative purposes.\nThe law requires participating jurisdictions to give preference to rehabilitation of existing rental and owner-occupied units. However, a PJ can undertake other activities if it determines that rehabilitation is not the most cost-effective way for it to increase its supply of affordable housing or that rehabilitation of the existing housing stock would not adequately meet its affordable housing needs.\nParticipating jurisdictions can disburse HOME funds in a variety of ways. Forms of assistance that may be provided with HOME funds include grants, various types of loans, loan guarantees to lending organizations, interest rate subsidies, equity investments.\nCertain activities are not eligible for funding under the HOME program. Ineligible uses of HOME funds include modernizing public housing, providing tenant-based rental assistance under the Section 8 program, supporting ongoing operational costs of rental housing, paying back taxes or fees on properties that are or will be assisted with HOME funds, and providing non-federal matching funds for any other federal program. Other uses not authorized in statute or regulation are also prohibited.",
"While PJs have much flexibility in choosing which eligible activities they will fund with HOME dollars, any projects funded through HOME must meet certain requirements in keeping with the program's stated objectives. This section describes some of the key requirements with which PJs must comply.",
"A stated purpose of the HOME program, according to the authorizing statute, is to increase the supply of decent, affordable housing for people with low incomes and very low incomes. Accordingly, all HOME funds must be used to assist low-income households, which are defined as households with annual incomes at or below 80% of area median income (AMI). Deeper income targeting requirements apply to rental housing and tenant-based rental assistance.\nOwner-Occupied Housing . All HOME funds that are used for existing owner-occupied housing or to assist home buyers must benefit units that are occupied by households with incomes at or below 80% of area median income.\nRental Housing and Tenant-Based Rental Assistance . At least 90% of HOME-assisted rental units must be occupied by households whose incomes are at or below 60% of area median income, and at least 90% of households that receive tenant-based rental assistance with HOME funds must have incomes at or below 60% of area median income. The remaining rental units or TBRA must benefit households with incomes at or below 80% of area median income.",
"The income targeting requirements described above ensure that HOME-assisted units benefit low-income households. Additionally, HOME-assisted units must be affordable to low-income households, and must continue to be occupied by low-income households and remain affordable to such households over the long term.\nIn order to achieve this goal, HOME-assisted units must meet a number of requirements. Some of these requirements govern the value of HOME-assisted units or the amounts that a household can pay to rent or purchase a unit. HOME-assisted units must also meet additional requirements, separate from the value of the home, to ensure affordability. As with income targeting, the precise requirements that must be met depend on whether HOME funding is used for assistance to home buyers, owner-occupied housing rehabilitation, or rental housing activities.\nAssistance to Home Buyers . Housing bought by home buyers with the assistance of HOME funds must meet the following requirements:\nThe home buyer must belong to a low-income family, and the family must use the home as a principal residence. The initial purchase price or value after rehabilitation must be no more than 95% of the median purchase price of homes in the area, as determined by the Secretary of HUD and adjusted as the Secretary deems necessary for different types of structures and the age of the housing. Home buyer units must continue to meet the definition of affordability described above for between five and fifteen years, depending on the per-unit amount of HOME funds expended on a project. The housing must be single-family housing. If the housing is newly constructed, it must meet energy-efficiency standards. Participating jurisdictions must impose resale or recapture restrictions on units in which they have assisted the home buyer using HOME funds. These restrictions specify that if a homeowner sells his or her home during the affordability period, he or she is required to sell it to another qualified low-income buyer (resale) or to return some of the proceeds of the sale to the PJ in order to cover the HOME funds that were invested in the home (recapture). HOME-assisted home buyers must receive housing counseling.\nHome buyer units that are not sold to eligible home buyers within nine months of the project's completion are to be rented to eligible tenants.\nResale and recapture restrictions are set by the jurisdiction and approved by the Secretary. Resale restrictions must ensure that, upon resale, (1) the housing remains affordable to low-income home buyers, and (2) the owner receives a fair return on investment. Recapture restrictions must ensure that the investment in the housing is recaptured in order to assist others who qualify for HOME-assisted housing.\nOwner-Occupied Housing Rehabilitation. Owner-occupied housing that is rehabilitated using HOME funds must meet the following requirements:\nThe owner must belong to a low-income family at the time HOME funds are committed to the project, and the family must use the housing as a principal residence. The value of the housing after rehabilitation must be no more than 95% of the median purchase price of homes in the area, as determined by the Secretary of HUD and adjusted as the Secretary deems necessary for different types of structures and the age of the housing. There are no statutory long-term affordability requirements for owner-occupied units that are rehabilitated using HOME funds. However, the PJ can choose to impose an affordability period.\nRental Housing . Rental housing that benefits from the use of HOME funds must meet the following requirements:\nHOME-assisted units must be occupied only by low-income households. Rents must not exceed HUD's published maximum rents for the HOME program. The maximum rent for a HOME-assisted rental unit is the lesser of (1) the fair market rent for comparable units in the jurisdiction, or (2) 30% of the adjusted income of a household whose income is 65% percent of area median income. If a project includes five or more HOME-assisted units, at least 20% of the HOME-assisted units must be occupied by families with incomes at or below 50% of area median income. Additionally, those families must have rents that meet one of the following requirements:\n—Rents are no higher than (1) the fair market rent for a comparable unit in the jurisdiction, or (2) 30% of 50% of area median income, whichever is lower.\n—Rents are no higher than 30% of the household's adjusted income.\nIf rental projects temporarily fail to meet the requirements governing the incomes of occupants of HOME-assisted units because of an increase in the current tenants' income, the project is still considered to be in compliance as long as vacancies are filled according to these requirements. Rental units must continue to meet these requirements for between five and twenty years, depending on the per-unit amount of HOME funds expended on a project and the type of activity for which HOME funds are used. If the housing is newly constructed, it must meet energy-efficiency standards. The housing must be available to Section 8 voucher holders.\nPJs must repay any HOME funds used for rental units that are not rented to eligible tenants within 18 months of the project being completed.",
"When using HOME funds for owner-occupied housing rehabilitation, home buyer assistance, or rental housing activities, participating jurisdictions must follow restrictions on the minimum and maximum amounts of HOME funds that they can contribute to a given project. When participating jurisdictions use HOME funds for tenant-based rental assistance, they must establish both a maximum subsidy amount and a minimum tenant contribution to the tenant's rent.\nOwner-Occupied and Rental Housing. The minimum amount of HOME funds that can be used for new construction, rehabilitation, or acquisition of owner-occupied or rental housing is $1,000 multiplied by the number of HOME-assisted units in a project. The maximum per-unit subsidy for a project varies by participating jurisdiction and is based on the Federal Housing Administration's mortgage limits for moderate-income multifamily housing.\nTenant-Based Rental Assistance. The maximum HOME subsidy amount for tenant-based rental assistance is the difference between 30% of the household's adjusted monthly income and a jurisdiction-wide rent limit established by the participating jurisdiction. The rent limit must conform to certain parameters established by HUD. Each participating jurisdiction is also required to set a minimum tenant contribution for tenant-based rental assistance. The minimum tenant contribution can either be a flat dollar amount or a percentage of tenant income.",
"HOME funds may be combined with other federal resources to support affordable housing projects. For example, a project that uses HOME funds might also use funds from other HUD programs, funds raised through the Department of the Treasury's Low-Income Housing Tax Credit (LIHTC) program, or funds from rural housing programs administered by the U.S. Department of Agriculture.\nUsing a combination of federal funds from different sources for a single project is known as subsidy layering. The HOME statute and regulations require a participating jurisdiction that plans to use both HOME funds and other federal funds for a project to certify to HUD that the aggregate amount of federal funds, including HOME funds, that is invested in a housing project is no more than is necessary to provide affordable housing.",
"As noted earlier, one of the stated purposes of the HOME authorizing legislation is to expand the capacity of nonprofit agencies to provide affordable housing for low and very-low income households. As a means of furthering this goal, the HOME statute requires each participating jurisdiction to reserve at least 15% of its HOME funding for Community Housing Development Organizations (CHDOs). CHDOs are private nonprofit organizations that meet certain legal and organizational requirements and have the capacity and experience to carry out affordable housing projects.\nCHDO reservation funds must be used for projects where the CHDO develops, owns, or sponsors affordable housing. CHDOs can engage in other eligible HOME activities using HOME funds, but any funding spent on projects in which the CHDO is not the developer, owner, or sponsor will not count toward the 15% set-aside requirement for CHDOs. For example, a CHDO could administer a TBRA program, but since the CHDO would not be developing, owning, or sponsoring affordable housing in this case the funds would not count towards the 15% of funds that must be reserved for CHDOs.\nThe HOME final rule promulgated in July 2013 to amend the HOME program regulations made several changes related to CHDOs. Among other things, the rule made changes to the requirements that an organization must meet to qualify as a CHDO, and it clarified the activities that CHDOs can undertake with a reservation of CHDO funds. It also increased PJs' oversight of CHDO reservation funds by strengthening the requirement for PJs to ensure that organizations meet the definition of a CHDO and requiring PJs to document that an organization has the necessary capacity to undertake affordable housing activities each time the CHDO receives a commitment of HOME funds. The rule also requires PJs to commit funds to CHDOs for specific projects, rather than committing funds to CHDOs for projects that have not yet been identified.\nThe 2013 rule also made changes to how a CHDO must demonstrate that it has the capacity to undertake affordable housing activities. Under the new rule, a CHDO must have paid staff with experience in the affordable housing role that the CHDO intends to play in a project (e.g., a CHDO that will develop affordable housing must have staff with development experience, and a CHDO that will own and manage affordable housing must have staff with owner and management experience). CHDOs can use consultants or volunteers to undertake some project activities, but it cannot use consultants or volunteers to demonstrate its capacity. A CHDO can use consultants to demonstrate development capacity during its first year as CHDO only, if the consultant trains the CDHO's staff to undertake affordable housing development.",
"This section describes funding for the HOME program, including its appropriations history, the formula that HUD uses to distribute funds to PJs, and the distribution of HOME funds in FY2014 (the most recent HOME funding distributed as of the date of this report). It also discusses the concept of leveraging HOME funds to attract other sources of funding for affordable housing activities.",
"Each year, during the annual appropriations process, Congress appropriates funding to the HOME account within HUD's overall appropriation. In FY1992, the first year in which HOME was funded, Congress appropriated $1.5 billion to the HOME account. From FY1993-FY1998, annual appropriations to the HOME account fluctuated between $1 billion and $1.5 billion, and from FY1999 through FY2011 appropriations fluctuated between $1.6 billion and $2 billion, reaching a high of just over $2 billion in FY2004. Since FY2012, appropriations to the HOME account have been $1 billion or below. Decreased funding for the HOME program in recent fiscal years reflects the overall fiscal environment, and may also reflect concerns about the oversight of HOME funds. (For more information on oversight issues, see the \" Program Oversight \" section of this report.)\nWhile most of the funding appropriated to the HOME account is used for formula grants to states and localities, over the years the HOME account has sometimes also included funding that was set aside for related affordable housing programs or activities. For example, in some years HOME account set-asides have included funding for technical assistance or transfers to the Working Capital Fund (which supports the development and maintenance of HUD's information technology systems). For several years prior to FY2008, two major set-asides funded through the HOME account were housing counseling (which is now funded in its own account) and down payment assistance through the American Dream Downpayment Initiative, or ADDI (which is no longer specifically funded, although down payment assistance is an eligible use of HOME funds). The former HOME account set-asides for housing counseling and ADDI are discussed in more detail in Appendix A . Since FY2012, the only set-asides funded within the HOME account have been HOME formula grants for the insular areas.\nTable 1 shows annual appropriations levels for the HOME program from FY1992 to FY2014, including the amounts appropriated for formula grants and for set-asides. The figures are not adjusted for inflation.",
"HUD distributes the funds appropriated to the HOME program to participating jurisdictions using a formula. By law, 40% of the funds are allocated to states and the remaining 60% are allocated to localities. For the purposes of the HOME program, the District of Columbia and Puerto Rico are considered to be states.\nBefore distributing funds to states and localities, HUD sets aside the greater of $750,000 or 0.2% of the total HOME appropriation for insular areas. In FY2014, the amount set aside for the insular areas was $2 million. Insular areas eligible for HOME funds are Guam, the Northern Mariana Islands, the United States Virgin Islands, and American Samoa.\nThe HOME formula takes into account six factors. Four of these factors are weighted 20%:\nThe number of occupied rental units in a jurisdiction that have at least one of four problems: (1) overcrowding, defined as more than one occupant per room; (2) incomplete kitchen facilities, defined as the lack of a sink with running water, a range, or a refrigerator; (3) incomplete plumbing, defined as the lack of hot and cold piped water, a flush toilet, or a bathtub or shower that is inside the unit and used solely by the unit's occupants; or (4) high rent costs, defined as rent that costs more than 30% of the household's income. The number of rental units in a jurisdiction that were built before 1950 and are occupied by poor households. The number of occupied rental units in a jurisdiction that have at least one of the four problems discussed above (overcrowding, incomplete kitchen facilities, incomplete plumbing, or high rent costs) multiplied by the ratio of the cost of producing housing within the jurisdiction to the cost of producing housing nationally. The number of families at or below the poverty level in a jurisdiction.\nThe remaining two factors are weighted 10%:\nThe number of rental units in a jurisdiction, adjusted for vacancies, where the head of household's income is at or below the poverty line. This number is multiplied by the ratio of the national rental unit vacancy rate over the jurisdiction's rental unit vacancy rate.\nThe jurisdiction's population multiplied by its net per capita income.\nOnce a participating jurisdiction receives its formula allocation, it has to meet several deadlines. The PJ has 24 months to commit HOME funds to specific projects (such as by signing a written agreement with a developer), and five years to expend the funds. If a PJ does not commit its funds within the time allotted, the funds will revert to HUD and be reallocated to other PJs. Furthermore, the 2013 final rule that made changes to the HOME program regulations specified that the PJ must repay any HOME funds provided to projects that are not completed within four years of the date that the funds are committed.",
"In FY2014, every state received a HOME formula grant. (This includes Washington, D.C. and Puerto Rico, which are considered states for the purposes of the HOME program.) The median state grant amount was about $6 million, and the mean grant was close to $8 million. The mean is pulled upward by a few states that received especially large formula grant allocations; for example, California received the largest state allocation at nearly $31 million. As shown in Figure 1 , nearly half of the states received less than $5 million in funding, and all but twelve states received less than $10 million.\nGiven the lower amount of funding appropriated to the HOME program in recent years compared to earlier years, the median and mean grant amounts are also lower than in some previous years. In FY2010, for example, the median state grant amount was almost $11 million and the mean was almost $14 million. Furthermore, in FY2010, ten states received grants of $5 million or less, and ten states received grants of $20 million or more (including five states with grants over $25 million). The largest state grant in FY2010 was $62 million, compared to $31 million in FY2014 (in both years, the largest state grant was to California). New York and Texas also received grants in FY2010 that exceeded the maximum grant amount awarded in FY2014.",
"In FY2014, 587 localities or consortia also received their own HOME formula grant allocations. The median grant to localities was almost $580,000 and the mean grant was just over $1 million. Again, the mean grant amount is higher than the median because some localities received especially large grants. In particular, New York City received a grant of close to $60 million, nearly three times the size of the next largest formula grant to a locality (Los Angeles was the locality with the next-largest formula grant, at almost $21 million), and nearly twice the next highest formula grant amount awarded (the grant to the state of California of nearly $31 million). Most localities (about 450) received formula grants of less than $1 million. The smallest formula grant amount to a locality was less than $72,000 and was awarded to East Orange, NJ.\nAn increasing number of participating jurisdictions and a decreasing amount of funding have meant that many cities and counties qualify for a relatively small grant amount. In FY2014, over 250 local jurisdictions received formula grants of $500,000 or less, including over 100 local jurisdictions with grants of less than $335,000. In its FY2014 and FY2015 budget submissions, the Obama Administration proposed legislative changes to the requirements for becoming and remaining a PJ that could affect the number of localities that would continue to qualify for their own formula allocations. Namely, the Administration has proposed removing the lower funding threshold to become a participating jurisdiction that applies in years when less than $1.5 billion is appropriated to the program (described in the \" Participating Jurisdictions \" section of this report) and ending the practice of allowing localities to remain PJs indefinitely after they first qualify. Instead, under the Administration's proposal, a locality that becomes a PJ would remain one for five years before having to qualify again.\nAppendix B at the end of this report shows the number of participating jurisdictions (localities and consortia) in each state in FY2014. It also shows the total combined formula grant funding that each state and its participating jurisdictions received that year, and the percentage of total HOME funding for formula grants that each state's combined allocation represents.",
"Two stated goals of the HOME program are to leverage federal affordable housing funds by encouraging state, local, and private investment in affordable housing activities, and to increase the capacity of states and localities to meet their affordable housing needs. Accordingly, the HOME statute requires participating jurisdictions to match the HOME funds that they spend in a fiscal year with their own 25% permanent contribution to affordable housing activities.\nA PJ's matching funds can come from a wide variety of non-federal sources, including state or local governments, charitable organizations, and the private sector. The matching funds must be devoted to affordable housing activities that are eligible under the HOME guidelines, but they do not necessarily have to support projects that use HOME funds. The match can also take many forms, including in-kind contributions such as labor, construction materials, and land for HOME-eligible projects. Other contributions, such as foregone taxes, other foregone fees, and infrastructure improvements, may also count toward the matching requirement if they are used specifically for projects funded by HOME dollars. The matching requirement may not be met using federal funds.\nThe matching requirement must be met in the same fiscal year that HOME funds are used, but if a jurisdiction provides more matching funds than are required in a given year, it can carry those funds forward to meet the matching requirement in subsequent years. The statute directs the Secretary to reduce or eliminate a participating jurisdiction's match requirement if the PJ certifies that it is under a condition of fiscal distress. The Secretary can choose to reduce or eliminate the match requirement if the President declares the jurisdiction to be a major disaster area.\nAlthough nearly all HOME funds are subject to the matching requirement, certain uses of funds are not required to be matched by the PJ. Funds that do not have to be matched include forgiven loans to Community Housing Development Organizations (CHDOs), funds used for administrative purposes (up to an allowable limit), and funds used to fill the threshold gap between a locality's formula allocation and its required $750,000 contribution to affordable housing activities, unless the locality obtains the latter from state HOME funds.",
"Leveraging refers to a program's ability to use its own program dollars to attract additional funding from other sources, including non-federal sources of funds. Leveraging can be an important concept for affordable housing because attracting multiple funding sources makes projects more feasible, and because the ability to attract other sources of funds could reduce the amount of federal funding that needs to be invested in a project. Attracting other types of funding for affordable housing can also help to build the capacity of organizations that might not be able to undertake projects without the assistance of HOME funds. HOME does not have a specific leveraging requirement, although PJs do have to meet the matching requirement described previously.\nHUD reports leveraging statistics for HOME. According to HUD, every dollar of HOME funds used for housing units that were completed between FY1992 (the first year in which the program was first funded) and July 31, 2014, attracted $4.16 in non-HOME funds. This amount includes other federal funding sources as well as funding from other sources (such as states, local governments, and private entities).\nIn 2008, the Government Accountability Office (GAO) released a report analyzing the leveraging statistics that HUD and the Department of the Treasury report for various programs and calculating alternative leverage measures. It found that alternative measures of a program's leverage ratio may provide a more complete picture of how effective a program is at leveraging specific types of funds. For example, according to the GAO report, for HOME-assisted units completed in FY2006, HUD's reported leverage ratio was $4 of non-HOME funding for every dollar of HOME funding. Using the same data, GAO found that for every dollar of HOME funding used in units that were completed in FY2006, HOME-assisted units used $1.92 of private spending, $1.33 of other federal spending, and $0.76 of state or local spending. Therefore, a leverage ratio that only took into account other non-federal sources of funding for HOME-assisted projects completed in 2006 would be $2.68 for every dollar of HOME funding ($1.92 of private funding and $0.76 of state and local funding).",
"HUD reports a number of HOME program performance statistics. These include statistics on the types of completed units that have been assisted with HOME funding (rental units, home buyer units, and homeowner units,), the eligible activities funded with HOME dollars (rehabilitation, new construction, acquisition, and households that have received TBRA), and characteristics of households that benefit from HOME funds.",
"Between the beginning of the HOME program in FY1992 and July 31, 2014, nearly 1.2 million units of affordable housing were constructed, rehabilitated, or acquired using HOME funding, and over 290,000 families were assisted through tenant-based rental assistance (TBRA). Together, this amounts to nearly 1.5 million completed units and TBRA-assisted households that have benefitted from HOME funds since the program's inception.\nUnits assisted with HOME funds can be homeowner units (that is, existing owner-occupied housing that is rehabilitated with HOME funds), home buyer units (owner-occupied housing where HOME funds are used to help prospective home buyers acquire, rehabilitate, or construct the home), or rental units. Of the physical units that have used HOME funds since the program's inception (that is, excluding households that received TBRA), home buyer units represent the largest share, followed by rental units. As shown in Figure 2 , 42% of all completed units to date are home buyer units (about 490,000 units), 39% are rental units (about 460,000 units), and 19% are homeowner units (about 230,000 units).\nIn FY2013 alone, HOME funds contributed to a total of about 21,000 completed housing units and tenant-based rental assistance for nearly 13,000 households.\nIn addition to statistics on completed units, HUD also reports how much HOME funding was used for each unit type. Since the program began, over $28 billion of HOME funding has been spent on units that were completed as of July 31, 2014. As shown in Figure 3 , nearly $16 billion (55%) of HOME funding that has been spent on completed units was used for rental units or TBRA, while $8 billion (27%) was used for home buyer units and $5 billion (18%) for homeowner units. Of the amounts spent on rental housing since the program began, about 95% (nearly $15 billion) has been used to develop rental housing units, while the remaining 5% (less than $1 billion) has been used for TBRA.",
"Eligible uses of HOME funds generally fall into four categories: owner-occupied housing rehabilitation activities, assistance to home buyers, rental housing development activities, and tenant-based rental assistance (TBRA). The HOME statute specifies that rehabilitation of both rental and homeowner units should be given preference over other types of eligible uses of HOME funds, such as acquiring or constructing affordable housing.\nAs shown in Figure 4 , of the nearly 1.5 million housing units and TBRA households that have been assisted using HOME funding from the program's beginning through July 31, 2014, nearly 500,000 (34%) were rehabilitated units, about 390,000 (26%) were acquired units, and about 290,000 (20%) were newly constructed units. An additional 290,000 (20%) of \"units\" were households that received TBRA rather than physical housing units.\nSome activities are more expensive than others and require a larger investment of HOME funds. Therefore, the breakdown of total HOME funding used for each eligible activity looks somewhat different than the number of units completed for each eligible activity. For example, rehabilitated units accounted for just over one-third of the completed units (including TBRA) that used HOME funds, but the funds used for rehabilitation account for nearly 43% of total HOME funds expended on completed units (a total of about $12 billion since the program's inception). Acquired units accounted for over a quarter of completed units that use HOME funds, but account for only about 15% of the funding (about $4 billion). New construction and TBRA each accounted for about 20% of completed units, but new construction accounts for nearly 40% of the funds spent (almost $11 billion) while TBRA accounts for only 3% of funds spent (less than $1 billion). Figure 5 illustrates the amount of funding that has been spent on each activity since the program began.\nThe difference between the percentage of funding going toward each activity and the percentage of completed units of each activity type reflects the difference in the average investment of HOME funds required for each activity. A newly constructed unit costs the most, on average: a newly constructed unit costs an average of $38,000 in HOME funds, while the average cost of rehabilitating a unit is $24,000 in HOME funds and the average cost of acquiring a unit is about $11,000 in HOME funds.\nWhether a PJ uses HOME funds for rehabilitation, acquisition, or new construction depends in part on the types of programs it is administering and the housing needs it is trying to meet. As shown in Figure 6 , about three quarters of home buyer units that receive HOME funds use those funds for acquisition costs (such as down payment assistance). A relatively small number of home buyer units use HOME funds for rehabilitation or new construction. In contrast, virtually all owner-occupied units with HOME investments use those funds for rehabilitation activities. For rental units that use HOME funds, about half of the units are rehabilitated. Most of the remaining HOME rental units are newly constructed, with just a small number of rental units receiving HOME funds for acquisition costs.",
"HUD reports on certain characteristics of the households that benefit from HOME funds, including household income and household type (e.g., two-parent households, single-parent households, elderly households, etc.).",
"As required by statute, all HOME funds benefit families with incomes at or below 80% of area median income. Not surprisingly, HOME funds used for rental activities (including tenant-based rental assistance and the construction, acquisition, and rehabilitation of rental housing) benefit a lower-income population than funds used for homeowner and home buyer units. As explained earlier in this report, HOME funds used for rental activities must target a lower-income population than funds used for homeowner or home buyer activities. Households at the lowest end of the income spectrum are also more likely to rent than to own their homes.\nFigure 7 shows the share of units for each unit type (homeowner, home buyer, rental, or TBRA) that has benefitted households at different income levels. As of July 31, 2014, HUD reported that nearly 80% of HOME-assisted TBRA households were families with incomes at or below 30% of area median income (AMI), as were nearly 44% of occupants of HOME-assisted rental units. In contrast, less than one-third of HOME-assisted homeowner units benefitted households with incomes at or below 30% of area median income, and only 6% of HOME-assisted home buyer units benefitted households with incomes in this range.",
"Overall, about 30% of HOME-assisted units (including households that receive TBRA) are occupied by single-parent households. Nearly another 30% are occupied by single, non-elderly households. About 18% apiece are occupied by elderly households and two-parent households, and about 5% of households are categorized as \"other.\"\nAs shown in Figure 8 , different types of units are more or less likely to serve specific types of households. Specifically:\nRental units assisted with HOME funds are most likely to be occupied by single, non-elderly households or elderly households, followed closely by single-parent households. Two-parent households are less likely to live in HOME-assisted rental units. HOME-assisted home buyer units are most likely to be occupied by single parents or two-parent households, followed by single, non-elderly households. Not surprisingly, few home buyer units are occupied by elderly households. By contrast, HOME-assisted owner-occupied units are most likely to be occupied by elderly households, as elderly households might be the most likely to seek HOME funds for repairs to their existing housing. HOME-funded TBRA is most commonly received by single-parent households, followed by single, non-elderly households.",
"Oversight of the HOME program involves monitoring both processes and outcomes. Monitoring processes includes ensuring that HOME funds are committed and expended according to the timelines specified in statute and regulation and that program requirements are followed. Monitoring outcomes includes ensuring that investments of program funds ultimately help to achieve the program's goal, namely, providing housing that is affordable to low-income households.\nGiven HOME's structure as a block grant program, participating jurisdictions (PJs) bear much of the responsibility for ensuring that subrecipients adhere to HOME program requirements and that specific projects result in their intended outcomes. Nonetheless, HUD is ultimately responsible for overseeing PJs' use of HOME funds to ensure that HOME funds are spent properly.",
"HUD's oversight of PJs includes activities that occur both before and after funds are granted to PJs. Before granting funds to PJs, HUD must approve PJs' Consolidated Plans. As described earlier in the \" The Consolidated Plan \" section of this report, PJs submit Consolidated Plans to HUD describing their affordable housing needs and specifying how HOME funds will be used to meet those needs. Prior to approving a PJ's Consolidated Plan, HUD reviews the plan to ensure that it is complete, consistent with the purposes of the HOME statute, and meets all regulatory requirements.\nAfter funds are granted to PJs, HUD's oversight includes ensuring that PJs' activities match their Consolidated Plans and monitoring how and when PJs spend their funds. PJs report their commitments and expenditures of HOME funds to HUD through a computer system known as the Integrated Disbursement & Information System (IDIS), along with the activities to which funds are committed or expended. HUD uses this system to track PJs' commitments and expenditures of HOME funds and the progress of projects that are using HOME funds. HUD also publishes a number of reports related to PJs' activities and the status of HOME funds on its website.\nThe HOME statute and regulations include provisions requiring PJs to lose or repay HOME funds to HUD if they are not spent in a timely manner or are not used for housing that meets the HOME requirements. HOME funds that are not committed by PJs within 24 months will expire, and those funds will be reallocated by formula to eligible PJs. PJs must expend HOME funds within five years. PJs are required to repay HOME funds used for any activities that do not meet the affordability period requirements or for activities that are terminated before project completion. PJs must also repay any funds spent on projects that are not completed as of four years of the date the funds were committed. The Secretary of HUD also has the authority to impose penalties on PJs that misuse HOME funds, such as preventing PJs from drawing down HOME funds, restricting PJs' activities, or removing PJs from formula allocations.",
"While HUD is responsible for overseeing PJs, PJs are responsible for ensuring that their HOME-funded activities meet program requirements. PJs oversee subrecipients and any other entities that receive HOME funds from the PJ, and are supposed to monitor performance and address any problems. Participating jurisdictions must also comply with record-keeping and monitoring requirements to ensure that they are using funds appropriately, making progress toward their housing goals, and generally funding activities in line with their Consolidated Plans.\nBefore disbursing any HOME funds to an entity (including a subrecipient, a contractor, or a household), a PJ must enter into written agreement with that entity. These written agreements may vary based on the project type and the entity's role, but all must ensure compliance with HOME program requirements. Certain minimum provisions that must be included in different types of agreements are described in the HOME program regulations at 24 CFR §92.504.\nPJs must review the performance of subrecipients and contractors on an annual basis. PJs must also perform on-site inspections of HOME-assisted projects when a project is completed and, for HOME-assisted rental housing, throughout the affordability period. HOME-assisted rental units must be inspected at least every three years during the affordability period (or more frequently if problems related to health and safety are discovered) and the property owner must certify annually that the project and the HOME-assisted units are \"suitable for occupancy.\" Units occupied by households receiving HOME-funded TBRA should be inspected by the PJ annually. PJs must also examine the financial viability of HOME-assisted rental projects with ten or more units at least annually during the affordability period.",
"Over the past several years, several concerns have been raised about whether PJs have adequately overseen projects that use HOME funds and, ultimately, whether HUD has adequately monitored PJs' uses of HOME funds.\nSome concerns related to HUD's oversight of PJs have been raised by HUD's Office of the Inspector General (OIG). A 2009 OIG report questioned several aspects of HUD's monitoring of program funds, including whether HUD's methodology for tracking when PJs had spent their funds was appropriate; whether the IDIS system allows HUD to adequately monitor information reported by PJs; and whether funds had been expended on projects that should have been classified as terminated. Other OIG reports have raised questions about whether HUD has ensured PJs' compliance with program rules. For example, a 2010 OIG audit report found that, in some cases, HUD had not ensured that PJs included appropriate resale and recapture provisions in projects that used HOME funds. The OIG has also reported conducting over 60 external audits of specific PJs in recent years, some of which were undertaken at the request of HUD.\nAnother source of concern about HUD's oversight of the HOME program was a series of investigative articles published in the Washington Post beginning in the spring of 2011. These articles focused on PJs' alleged mismanagement of HOME funds used for rental housing developments and problems with HUD's oversight of PJs. The articles suggested that nearly 15% of HOME-assisted rental projects were experiencing significant delays, and that almost 700 rental housing projects that had been awarded a total of $400 million in HOME funds over the program's life had since stalled and were either incomplete or unoccupied. The article also claimed that HUD did not properly oversee funds that are awarded to PJs in order to identify such stalled or abandoned projects, that it had difficulty tracking program funds, and that it did not adequately demand reimbursement from PJs for misused funds.\nIn response to the articles, HUD maintained that the Post' s methodology for identifying troubled projects was flawed and that the amount of funds that were mismanaged or committed to stalled projects was much smaller than the Post articles suggested. It also noted that some stalled projects were the result of a weak economy rather than mismanagement or other problems. HUD argued that its oversight of the program was adequate and that it had de-obligated HOME funds from PJs that did not meet commitment and expenditure deadlines and recovered additional funds that were spent improperly by PJs.\nQuestions about HUD's oversight of HOME funds led Congress to hold hearings on the topic in 2011, during which several Members of Congress expressed concern about HUD's ability to ensure that HOME funds are used in a way that produces the program's intended results. Congress also included a number of provisions related to the oversight or use of HOME funds in both the FY2012 and FY2013 HUD appropriations laws, the Consolidated and Further Continuing Appropriations Act, 2012 ( P.L. 112-55 ) and the Consolidated and Continuing Appropriations Act, 2013 ( P.L. 113-6 ). (These provisions only apply to the HOME appropriations included in those laws, not HOME funds appropriated in other fiscal years.)\nThe 2013 HOME program final rule, described next, included a number of provisions to better ensure that HOME funds were being spent properly, including similar provisions to those that were included in the FY2012 and FY2013 appropriations laws. The provisions in the 2013 final rule apply to all HOME funds, rather than just the funds that were appropriated within a specific appropriations law.",
"In December 2011, HUD published a proposed rule in the Federal Register revising several aspects of the HOME program regulations. The final rule was promulgated in July 2013 and represented the first substantive changes to the HOME regulations since 1996.\nThe stated purposes of the rule are to \"address many of the operational challenges facing participating jurisdictions; improve understanding of HOME program requirements, update property standards to which housing funded by HOME funds must adhere, and strengthen participating jurisdictions' accountability for both compliance with program requirements and performance.\" To achieve these aims, the rule makes several changes to the HOME program. Some aspects of the rule are specifically concerned with oversight and would strengthen existing requirements or impose new requirements to attempt to enhance the accountability of states and localities that receive HOME funds. Other aspects of the rule would codify existing administrative requirements or best practices as identified by HUD.\nSeveral major provisions of the 2013 final rule are described here. Some of these provisions are also discussed elsewhere in this report, and the description of program requirements throughout the report reflects relevant changes made in the 2013 rule.\nAmong other things, the final rule does the following:\nRequires PJs to adopt written policies to improve program oversight and monitoring of recipients of HOME funds, Updates the property standards that HOME-assisted housing must meet, Requires PJs to conduct annual examinations of the financial condition of rental projects with at least 10 HOME-assisted units, Requires repayment of HOME funds used for rental projects that are not rented to eligible tenants within 18 months, and Requires HOME-assisted home buyers to receive housing counseling.\nThe rule also includes several provisions that are similar to those that were included in the FY2012 and FY2013 HUD appropriations laws. These provisions specify the following:\nHOME funds used for projects that are not completed within four years of the date the funds are committed are to be repaid by the PJ. The Secretary of HUD can extend this deadline by one year if he determines that the delay was caused by circumstances outside of the PJ's control. PJs cannot commit funds without conducting an underwriting review of the proposed project, assessing the developer's capacity and fiscal soundness, and examining market conditions. Home buyer units that are not sold to eligible home buyers within nine months of the project's completion are to be rented to eligible tenants. In order for CHDOs to demonstrate that they have the capacity to carry out housing activities, they must have paid staff with experience in the housing role the CHDO expects to play. Volunteers and donated staff cannot be used to demonstrate capacity (although they may assist with CHDO activities). Furthermore, a CHDO cannot rely on consultants to demonstrate capacity to undertake housing development, except in an organization's first year as a CHDO if the consultant trains the CHDO's staff.\nThe 2013 rule also included several additional provisions related to CHDOs. Some of these provisions were described in the \" Community Housing Development Organizations (CHDOs) \" section of this report.\nMost of the provisions in the final rule became effective on August 23, 2013, with some exceptions. While the provisions in the FY2012 and FY2013 appropriations laws only applied to projects that used HOME funds appropriated in those years, these provisions now apply to all HOME funds committed after the effective date, regardless of the year the funds were appropriated.\nAppendix A. Select Programs Formerly Funded Within the HOME Account\nFor several years prior to FY2008, two major HOME account set-asides provided funding for the American Dream Downpayment Initiative and HUD's housing counseling program. However, neither of these programs is currently funded through the HOME account. Housing counseling is now funded through its own account, and Congress has not appropriated funding for the American Dream Downpayment Initiative since FY2008. Each of these programs is described briefly below.\nAmerican Dream Downpayment Initiative\nThe American Dream Downpayment Initiative (ADDI) was funded in the HOME account from FY2003 through FY2008. Congress has chosen not to fund ADDI in FY2009 or subsequent years.\nADDI was created by the American Dream Downpayment Act ( P.L. 108-186 ), signed into law on December 16, 2003. The program aimed to increase homeownership, especially among low-income and minority populations, by providing formula funding to all 50 states and qualified local jurisdictions for down payment and closing cost assistance for first-time home buyers. States and localities could use ADDI funds to provide closing cost and down payment assistance up to $10,000 or 6% of a home's purchase price, whichever was greater. Additionally, up to 20% of ADDI funds could be used to assist homeowners with rehabilitation costs, as long as the rehabilitation was completed within a year of the home's purchase.\nThe formula used to award ADDI funds to states was based on the number of low-income households residing in rental housing in the state relative to the nation as a whole. For localities, the grant amount was based on the number of low-income households residing in rental housing in the jurisdiction relative to the entire state. In order for a local jurisdiction to receive its own allocation of ADDI funds, it had to have a population of at least 150,000 or be eligible for a minimum grant of $50,000 under the ADDI formula.\nWhile supporters of ADDI held that the program played an important role in increasing homeownership, critics argued that it was duplicative because states and localities could already choose to use their HOME funds for down payment assistance. ADDI was originally authorized to receive $200 million annually through FY2007, but the program never received more than $86 million in appropriations. The Consolidated Appropriations Act, 2008 ( P.L. 110-161 ) appropriated $10 million to ADDI and extended the program through the end of FY2008. President Bush's budget requested $50 million for ADDI in FY2009; however, the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ) did not include funding for ADDI, and the program has not been funded in subsequent years.\nHousing Counseling\nFrom FY1997 through FY2008, funding for HUD's housing counseling program was appropriated as a set-aside in the HOME account. Through the housing counseling program, authorized under section 106 of the Housing and Urban Development Act of 1968 (P.L. 90-448), as amended, HUD competitively awards funding to HUD-approved agencies that provide counseling on a range of housing issues.\nFor several years in the 2000s, President Bush requested that housing counseling be funded through its own account, but until FY2009 Congress continued to fund housing counseling as a set-aside in the HOME account. In FY2009, Congress appropriated funding for housing counseling in its own account rather than as a set-aside within HOME, and has continued to do so in subsequent fiscal years. For more information on the housing counseling program, including information on appropriations, see CRS Report R41351, Housing Counseling: Background and Federal Role , by [author name scrubbed].\nAppendix B. Distribution of Participating Jurisdictions and Total HOME Funding by State"
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"question": [
"How are HOME funds doled out each year?",
"In what proportions are the funds distributed?",
"What factors does the distribution formula use?",
"What are \"participating jurisdictions\"?",
"How much must participating jurisdictions provide to use the HOME funds?",
"What else must these jurisdictions do to receive funds?",
"How can participating jurisdictions administer funds?",
"What can HOME funds be used for?",
"What requirements must HOME projects meet?",
"In regards to area median income, what guidelines are there for HOME projects?",
"What kind of affordability requirements are there?",
"How did the funding for home change over the years?",
"Which areas received funding in FY2014?",
"What were the median grant amounts in 2014?"
],
"summary": [
"Funds for HOME are appropriated annually to the Department of Housing and Urban Development (HUD), which in turn distributes funding to states and certain localities by formula.",
"Forty percent of HOME funds are allocated to states and 60% are allocated to localities.",
"The formula takes into account six factors, including the number of units in a jurisdiction that are substandard or unaffordable, the age of a jurisdiction's housing, and the number of families living below the poverty line in the jurisdiction.",
"States and localities that receive HOME funds are known as \"participating jurisdictions.\"",
"Participating jurisdictions must match the HOME funds they spend with their own 25% permanent contribution to affordable housing activities.",
"They also must submit a Consolidated Plan to HUD that identifies the community's housing needs and describes in detail how HOME and other HUD block grant funds will be used to meet those needs.",
"Participating jurisdictions can administer HOME funds themselves, or they can designate public agencies or nonprofit organizations to administer all or part of the HOME program on their behalf.",
"HOME funds can be used to finance a wide variety of affordable housing activities that generally fall into four categories: rehabilitation of owner-occupied housing; assistance to home buyers; acquisition, rehabilitation, or construction of rental housing; and tenant-based rental assistance.",
"Projects that use HOME funding must meet certain income targeting and affordability requirements.",
"Specifically, all HOME-assisted housing units must benefit households with incomes at or below 80% of area median income. Additionally, 90% of occupants of HOME-assisted rental units and households that receive tenant-based rental assistance must have incomes at or below 60% of area median income.",
"HOME-assisted housing must also meet certain definitions of affordability and must continue to remain affordable to low-income households for a specified period of time. The specific affordability requirements vary according to the type of activity for which funds are used and the amount of HOME funding contributed to the project.",
"Funding for HOME fluctuated between $1.5 billion and $2 billion for several years before falling to $1 billion in FY2012-FY2014. (The FY2013 appropriation was about $950 million after accounting for sequestration.)",
"In FY2014, all 50 states and 587 localities received HOME formula grants, along with the District of Columbia, Puerto Rico, and four insular areas.",
"The median state grant amount (including the District of Columbia and Puerto Rico) was about $6 million, and the median locality grant amount was about $580,000."
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CRS_R42835
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{
"title": [
"",
"Introduction",
"History and Overview of the Judgment Fund",
"Basic Framework for Litigating Against the United States",
"Awards Prior to the Creation of the Judgment Fund",
"Creation of the Judgment Fund",
"Changes in Administration from 1956 to Present",
"How Does the Judgment Fund Operate Today?",
"Overview",
"When Is the Judgment Fund Appropriately Used?",
"When Is the Judgment Fund Inaccessible?",
"Who Administers the Judgment Fund?",
"Costs Allowable Under Awards Paid from the Judgment Fund",
"Payment of Attorneys' Fees from the Judgment Fund",
"Payment of Interest from the Judgment Fund",
"Illustrations of the Judgment Fund",
"The Equal Access to Justice Act",
"Contract Disputes Act and No FEAR Act",
"Tribe-Specific Judgment Funds",
"Recent Legislative Proposals"
],
"paragraphs": [
"",
"The Judgment Fund (or Fund) is a permanent appropriation enacted by Congress in 1956. The Fund is an unlimited amount of money set aside to pay judgments against the United States. It is only accessible when the United States has waived its sovereign immunity and certain statutory conditions are met. The Fund has evolved in administration and function over the last half century and has been subject to limiting principles. Most importantly, the Judgment Fund cannot be used in place of a specific appropriation. The Fund remains a source of continued controversy and discussion, especially in the current fiscal environment. During the budget uncertainties in the 1990s, federal agencies became increasingly concerned about the Judgment Fund's solvency, as statutory and constitutional constraints precluded the agencies from obligating funds where appropriated money is not available.\nThis report reviews the history of the Judgment Fund, which has been administered through different agencies and with variable levels of congressional oversight since its inception. This report also outlines specific instances in which the Fund may be accessed, and when costs other than the principal award may be paid. Finally, this report provides examples of how and when the Judgment Fund may be accessed, as well as instances of when tribal judgment funds are implicated.",
"",
"The U.S. government has sovereign immunity, meaning it cannot be sued unless it has waived immunity or consented to suit. Article III, Section 2 of the U.S. Constitution immunizes federal officials from lawsuit, disallows suits against the federal government by the states, and has been interpreted to prohibit suits against the federal government generally. Under limited circumstances, the United States has waived sovereign immunity; it has done so in a constitutional provision, by express statutory authority, or through a contract. Therefore, the United States can be sued pursuant to certain statutes, most commonly the Federal Tort Claims Act. The Tucker Act, the Military Personnel and Civilian Employees Claims Act, and the Federal Employees Compensation Act are other examples of sovereign immunity waivers passed in the last century. These statutes often contain substantial limiting principles and have been narrowly construed by courts.\nCongress must make provisions to pay judgments when suits against the United States are successful. Appropriated funds may not be used to satisfy claims unless there is specific statutory authority that allows the claim to go forward and provides a source of funds to pay any award. In the wake of several legislative enactments waiving the United States' sovereign immunity, Congress enacted the Judgment Fund in an effort to reduce the need to allocate specific appropriations for payment of claims.",
"While waiver of sovereign immunity was less common in the early Republic than it is today, determining and settling claims against the United States occupied a substantial amount of Congress's time since its first session. As early as the Continental Congress, the legislature established committees to audit and settle claims against the United States. The structure and staffing of these committees left most of them with an overwhelming workload, as claims from the War for Independence multiplied and dragged on.\nTherefore, one of Congress's first priorities after the ratification of the Constitution was establishing an executive branch agency that could manage payments of claims against the United States. In its first session, Congress established the Treasury Department in the Treasury Bill of 1789, with an extremely detailed enabling statute that left Congress with substantial control over monetary policy but little ministerial responsibility. Among other things, the act authorized the Treasury Department to settle all claims and accounts, delegating to the Auditor the duty to examine claims and to the Comptroller the duty to approve or disapprove of the Auditor's finding. In the event a claim was disputed by the government, the Treasury Department disallowed the claim and accepted the government's facts. If the claim was denied by the Treasury Department, the claimant could petition Congress directly. Congress, in turn, made specific appropriations for each claim validated by the department or through the petition process. This resulted in many claims waiting in limbo, where the Auditor and Comptroller had agreed to pay the claim, but where Congress had yet to make an appropriation to satisfy the judgment.\nBy 1855, Congress was still dedicating a large portion of its resources to passing appropriations to satisfy claims against the United States, and hearing petitions from claims that were denied by the Treasury Department. In order to reduce its workload, Congress established the Court of Claims, which served in an advisory capacity. Rather than issuing binding decisions, the court simply considered the merits of claims filed against the United States, and recommended appropriations to Congress. At President Lincoln's urging, Congress subsequently empowered the Court of Claims to issue binding decisions, though the Supreme Court found that the Treasury Department could decline enforcement of the decisions. Once Congress repealed this authority, the Supreme Court could hear appeals from the Court of Claims, and the Court of Claims' decisions carried finality and enforcement on par with other Article III courts. Congress also clarified that certifications from the Treasury Department were final and conclusive.\nHowever, in 1921, desiring a tighter hold on the payment of claims, Congress again changed the administration of the settlement process. In the Budget Accounting Act of 1921, Congress transferred authority to the General Accounting Office (GAO) for all claims settlement duties previously held by the Treasury Department. GAO, in turn, sought appropriations from Congress, so that Congress could strengthen controls over expenditures. This allowed Congress to regain structural control over the payments process. However, Congress was left with considerable involvement in appropriating funds for each claim, which encumbered committees and ultimately proved untenable.",
"In 1956, Congress passed the Judgment Fund enabling statute, a permanent and indefinite appropriation available to pay all judgments against the United States not covered by a specific appropriation. Congress aimed to reduce the time lapse between judgments entered against the United States and actual payment, so that agencies would pay less post-judgment interest on awards. Originally, the Fund was available only for judgments for claims of less than $100,000 entered in the Court of Federal Claims or a U.S. district court. Congress anticipated that the Fund would cover over 98% of all claims, thereby drastically reducing the need for individual appropriations and also streamlining the payment process. The House report accompanying the bill indicates that a permanent appropriation \"will permit a simplification of the payment procedure, will provide uniformity in interest computation, and will serve to reduce the total amount of interest paid by the government.\" The Senate report underscored the limitations in the bill on what payments could be made from the Judgment Fund, emphasizing the audit, review, and finality requirements.",
"Administration of payments from the Fund changed significantly in the latter 20 th century. In 1961, Congress authorized payment from the Judgment Fund for settlements negotiated by the Department of Justice on behalf of the United States, where litigation could have resulted in a monetary judgment. In addition, the Judgment Fund could also pay for judgments against the United States from state and foreign tribunals subject to certification by the Attorney General. By the mid-1970s, the Fund's $100,000 payment ceiling proved too low to cover many settlements and judgments, and Congress raised the allowable damages to avoid making specific appropriations for larger awards. In 1996, Congress transferred certification of payment from the Judgment Fund from GAO to the Financial Management Service in the Department of the Treasury. GAO retained administrative settlement authority for settlement of non-litigative claims. In recent years, Congress has taken an interest in the amount of money that has been spent from the Judgment Fund. Generally, these bills deal with transparency and improved agency accountability, including the Judgment Fund Transparency Act and proposed amendments to the No FEAR Act. In 2011, the Financial Management Service, the bureau in charge of administering the Fund, published a 2011 fiscal report, which included information about payments made from the Judgment Fund.",
"",
"The Judgment Fund is a permanent, indefinite appropriation. By definition, it requires no further congressional action and does not expire at the close of any fiscal year. The appropriation makes an unlimited amount of funds available for payment of certain judgments against the United States. Awards are only paid out of the Judgment Fund when payment is not otherwise provided for in a specific appropriation. All judgments must be final, meaning the award will not be overturned on appeal. In addition, all settlements paid out of the Judgment Fund must represent the final and comprehensive award for the actual or threatened litigation, negotiated and agreed to by the Department of Justice. Finally, the Judgment Fund may be used to pay certain costs to the prevailing party in litigation, as enumerated in 28 U.S.C. §1920. These costs typically include court fees and compensation for court-appointed experts.",
"The Judgment Fund statute sets out four requirements for accessing the Fund. First, the Fund may only be used to pay judgments or settlements involving money judgments. For example, if a court ordered an agency to hire a consultant to implement fair employment practices, the Judgment Fund could not be used to pay costs and fees associated with fulfilling this requirement.\nThe judgment must also be final, so that payments are not made from the Fund when there is a chance the award could be changed or overturned. This has been interpreted to mean that the judgment must come out of action by the court of last resort or that the parties have declined to seek further review. Most often, the time for appeal simply expires before payment from the Judgment Fund. However, the statute exempts payment for an \"irreducible minimum amount,\" meaning an amount that has been assessed as final. For example, in Trout v. Garrett , the D.C. Circuit Court of Appeals found that payment from the Judgment Fund was proper for interim attorneys' fees in a Title VII employment discrimination action against the government. The court found that the Judgment Fund statute was intended to serve as a mechanism for payment rather than to interfere with the ordinary course of litigation.\nThe Judgment Fund may not be used for payments if the award is otherwise provided for, by appropriation or statute. For example, courts have held that annual appropriations to the Land and Water Conservation Fund must be used where there is a land condemnation judgment against the U.S. Park Service. Courts look for an appropriation that has programmatic specificity, regardless of the agency's use of the funds. The actual funding level is irrelevant; so long as the appropriation exists, it precludes payment from the Judgment Fund. For example, if an agency had already spent an appropriated sum on other litigation or expended the money elsewhere, the Judgment Fund still could not be used. Under these circumstances, the agency would have to seek an additional appropriation from Congress.\nLastly, the Judgment Fund is limited to litigative awards, meaning awards that were or could have been made in a court. Litigative awards are distinguished from administrative awards because the latter are provided for by statute and are paid from the agency's appropriation. These include EEOC claims, awards under the Military Claims Act, and Merit Systems Protection Board matters. The primary exception to this rule is claims under the Federal Tort Claims Act that are over $2,500, which Congress exempted in the statute. Permissible awards include the principal amount, some attorneys' fees, allowable costs, and interest as stated in the judgment or settlement. For settlement awards to be considered litigative, the settlement must be negotiated by the Department of Justice (or any person authorized by the Attorney General) and based on a claim that could have resulted in a monetary judgment in court.",
"There are nearly 100 statutes that impact payment from the Judgment Fund, 17 of which specifically dictate denial of payment from the Fund. For example, administrative awards less than $2,500 arising under the Federal Tort Claims Act may not be paid from the Judgment Fund. When there is a specific appropriation, the Judgment Fund may not be used. The most common example of an award against the United States to which the Judgment Fund is inapplicable is tax judgments. Congress makes special, term-limited appropriations to pay tax refunds and judgments, and therefore, they may not be paid out of the Judgment Fund. Neither judgments against the Postal Service, nor those against government corporations, such as the P ension Benefit Guaranty Corporation, are payable from the Judgment Fund. This is in part because government corporations segregate their revenues from the general fund and operate largely without appropriated funds. Therefore, the rationale for using the Judgment Fund, which was intended to reduce the need for Congress to make appropriations, would be inapplicable. In addition, the Judgment Fund may not be used for land condemnation judgments or certain court-awarded contempt citation awards.",
"Since 1996 , the Judgment Fund has been administered by the Financial Management Service (FMS) in the Treasury Department. Once a party has received a final court judgment or negotiated settlement, FMS requires the responsible agency to submit a request for certification of payment from the Fund. FMS considers the proposed payment in light of the aforementioned rules, d etermining whether payment out of the Fu nd is proper or whether it is an obligation chargeable to agency funds. In this respect, FMS is the primary enforcer for the limits on the Judgment Fund 's use. FMS also determines whether the judgment is final, and calculates interest subject to the above limitations. If the payee is indebted to the United States, FMS may offset that amount before payment. Generally, unless the claim arises under the Contract Disputes Act (CDA) or the No FEAR Act, the agency does not reimburse the Judgment Fund; therefore, payment ends the process.\nThe certification and payment is pr imarily a ministerial function. A t no point in the process does FMS consider the nature or merit of the underlying action except to the extent necessary to determine the propriety of payment from the Fund . FMS makes a payment directly to the plaintiff, without an intermediary. This substantially ends the agency's involvement. However, if FMS does not render payment to the correct party, this does not discharge the United States' obligation.\nIn the event FMS refuses to make payment, the submitting agency is notified , and it may alter and resubmit claims as appropriate. Most commonly, rejections result from errors in the submission forms, absence of underlying documents , or other technical issues. A claim is only denied if, during administration, FMS determines that payment from the Judgment Fund is not proper. Claims are most commonly denied because payment has been provided for by a specific appropriation or the award is less than the legal thresholds for statutes such as the Military Justice Act.",
"Federal courts have some discretion when deciding at the end of litigation whether to charge the losing party with costs for the prevailing party . However, the categories of costs that may be awarded are strictly circumscribed and the subject of considerable debate . Under 28 U.S.C. § 1920, the clerk of the court may award costs for court fees, transcripts, fees related to witnesses, materials for presentation in the case, compensation for court-appointed experts , and docket fees. To obtain costs for suc h items in payment fro m the Judgment Fund, the submitting agency must include a bi ll of costs or the c ourt's order awarding costs with the request for payment. Courts have limited payment to the enumerated items in §1920 and the specific exemptions in applicable statutory authority when awarding costs. Payments of interest and attorneys' fees have caused considerable debate with respect to this issue.",
"As a preliminary matter, the U.S. legal system does not generally allow recovery of attorneys' fees by the prevailing party. Termed the \"American Rule,\" this approach distinguishes the U.S. system, making each party responsible for payment of their own legal fees, regardless of the result, unless specifically authorized by statute or contract. In most legal systems around the world, the losing party pays the prevailing party's legal fees as part of the damages award.\nThe American Rule applies with two major common law exceptions and numerous statutory provisions exempting certain classes of cases. The common benefit rule allows federal courts to award attorneys' fees when a party prevails in a suit at his own expense that benefits a large class of other persons. This shifts the cost of attorneys' fees to those who benefit from the suit, not the opposing party. This allows for so-called private attorneys general to effectuate policy in litigation, benefitting a large class of people, with the added incentive that attorneys' fees will be paid if they prevail. The bad faith exception allows a federal court to award counsel fees to a successful party when his opponent acted vexatious or for oppressive reasons, making the award of fees punitive. This requires proof of malice and a showing that the claim had virtually no chance of success.\nSpecific statutory exemptions, called fee-shifting provisions, make the federal government responsible for attorneys' fees in a wide variety of suits. Statutes that allow for award of attorneys' fees often do so with an eye towards equalizing two unevenly matched parties, and often apply to environmental and consumer protection litigation. This has the effect of implementing public policy through private litigation. In some instances, statutes specifically limit the awards of attorneys' fees. For example, the Federal Tort Claims Act allows for attorneys' fees up to 20% for administrative settlements and up to 25% for judicial awards . The Freedom of Information Act statute limits attorneys ' fees to actual litigation (as opposed to administrative remedies). When attorneys ' fees are statutorily authorized, payment may generally be authorized from the Judgment Fund , unless otherwise provided by law. The parties may not alter the source of payment by stipulation or other agreements in the settlement.",
"Payment from the Judgment Fund includes principal awards and, in limited cases, post-judgment interest. However, payment of interest must be considered in light of special considerations for awards entered against the United States. In Library of Congress v. Shaw , the Supreme Court held that interest cannot be recovered in a suit against the government unless Congress has expressly waived sovereign immunity for an award, and has specifically contemplated an award of interest on damages. Prejudgment interest is considered in the calculation of damages, and is not awarded separately. Historically, courts have treated post-judgment interest as a separate element of damages unrelated to the substantive claim, and therefore awarded only upon agreement of the parties. Because the United States is immune from suit absent its consent, this rule especially applies in awards against the government. With respect to the Judgment Fund, payment of interest is authorized in certain instances. If a district court award is awaiting appeal by the government, the Judgment Fund statute authorizes payment of interest if the plaintiff sends a trial transcript to the Treasury Department and payment is limited to the period from the date Treasury receives the transcript until judgment is mandated or affirmed.\nIn Library of Congress v. Shaw , the Court also identified two widely recognized exceptions to the no-interest rule, which are not drawn from specific statutes but have been found to be a constitutional waiver of sovereign immunity. The Fifth Amendment provides that private property shall not be taken for public use without \"just compensation.\" Courts have determined that this exception inherently recognizes interest in order to make the person whole. However, courts have not been receptive to the Fifth Amendment as a means to obtain interest when a takings claim is not otherwise involved. The second constitutional exception where interest may be allowed is the commercial venture exception, set out in Standard Oil Company v. United States , whereby a plaintiff may recover attorneys' fees from a commercial government enterprise. The commercial venture exception requires that the government entity involved in the suit have a sue-and-be-sued clause. Therefore, the commercial venture exception is limited to litigation where the agency has been opened to suit by statute and is engaged in a primarily commercial, as opposed to governmental, function.\nTherefore, to determine whether interest is payable from the Judgment Fund, a plaintiff bringing suit against the government must engage in a three-step analysis. First, the statute under which suit was brought should first be considered. If the statute authorizes payment of interest, then it may be payable from the Fund. For example, if a plaintiff prevailed under the Back Pay Act, the Fund would pay interest on the claim from the date of the withdrawal or reduction of pay, because this is specifically authorized in the statute. Second, if the case was pending appeal, the plaintiff should consider the interest allowance in 31 U.S.C. §1304(b). If a plaintiff won in district court, and filed a transcript of judgment with the Treasury Department, interest may be paid in the time between the judgment and when the government decides not to appeal. Finally, a plaintiff should determine whether the cause of action amounts to a taking under the Fifth Amendment or falls under the commercial venture exception.",
"As discussed above, the Judgment Fund enabling statute limits an agency's ability to access the Fund. This section provides examples of statutes that prevent an agency from relying on the Judgment Fund as the source of payment, and briefly outlines the legislative intent of these statutes.",
"The Equal Access to Justice Act (EAJA) provides for award of attorneys' fees for individuals and small entities that prevail in cases against the federal government. EAJA applies only when the claimants are the \"prevailing party,\" or when they are successful on a significant issue in the litigation. The party must also show that the result of the lawsuit was not a gratuitous act by the government. The act also contains specific size requirements, so that larger entities may not recover under the act.\nSince the passage of EAJA, agencies have disputed whether payments under the act must be made out of their appropriations or whether attorneys' fees may be charged to the Judgment Fund. In Cienega Gardens v. United States , the Federal Circuit ordered an award for the plaintiffs, finding that amendments to the Department of Housing and Urban Development's (HUD's) low income housing program constituted a taking. EAJA provides for payment, by directing that a fee award \"be paid by any agency over which the party prevails from any funds made available to the agency by appropriation or otherwise.\" However, the plaintiffs sued the United States, instead of the agency, and HUD argued that they should not be liable because the Department of Justice did not seek review on a facially questionable ruling. HUD proposed that no agency should be responsible under these rare facts, and therefore, payment under EAJA should be made from the Judgment Fund instead of the agency's appropriations. The Treasury Department countered that the Judgment Fund is not responsible for payment when the party prevails over the agency, and denied payment.\nIn an opinion by its Office of Legal Counsel (OLC), the Justice Department concluded that the Judgment Fund could not pay the award for attorneys' fees, because HUD was the agency over which the party prevailed. OLC had previously concluded that an agency could only seek payment from the Judgment Fund when payment of attorneys' fees would constitute a heavy financial blow to the agency, a loophole that was closed in a subsequent version of EAJA. The opinion looked to congressional intent underlying EAJA, which was in part to create agency accountability when taking a regulatory or adverse action which was not substantially justified. In addition, Congress left no statutory mechanisms for payment of EAJA claims from the Judgment Fund. The opinion did not leave open the possibility that agencies could be reimbursed for awards made pursuant to EAJA from the Judgment Fund and strongly suggested they would have to use their own appropriations.",
"Congress has passed two statutes that require agencies to reimburse the Judgment Fund for payment of claims. The Contract Disputes Act of 1978 (CDA) allows payment from the Judgment Fund when a contractor for an agency wins a judgment from a court or a contract appeals board, or reaches a settlement with an agency on a contract dispute. The agency must then reimburse the Judgment Fund from its operating appropriations. If the agency has insufficient funds available to reimburse the Funds, CDA requires that the agency seek additional funding from Congress. Congress wanted to incentivize agencies to engage in settlement talks and keep them accountable for the costs of judgments.\nThe Notification and Federal Employee Antidiscrimination and Retaliation Act of 2002 (No FEAR Act) covers whistleblower and employment discrimination suits for federal employees, creating a cause of action for federal employees who have been subjected to harassment or discrimination in the workplace. The act requires the agency to reimburse the Judgment Fund within a reasonable time.\nIn 2008, the GAO released a report on reimbursements to the Judgment Fund from CDA and No FEAR payments. The report concluded that, while virtually all agencies have reimbursed the Fund for No FEAR payments since it was made mandatory in 2002, CDA payments are considerably less consistent. Typically, CDA payments are much larger, perhaps keeping agencies from reimbursing the Fund. GAO recommended that the FMS take steps to make agency payments more transparent, and that it report to Congress periodically on the status of payments.",
"Congress created a separate but similar system for payment of judgments awarded to tribes under Title XXV of the U.S. Code. The Indian Tribal Judgment Funds Use or Distribution Act created a trust to be administered by the Secretary of the Interior, which would distribute all funds appropriated in judgments in favor of tribes. Courts have held this is the exclusive trust for all such payments, and that no additional congressional action is necessary. The Interior Department holds funds in trust until Congress makes an appropriation to the tribe. When two or more tribes benefit from a single judgment, the Bureau of Indian Affairs submits a plan to Congress recommending a division of the funds, prior to the appropriation.",
"The Judgment Fund has changed many times in its over-50-year history, and recent legislative proposals in Congress could again alter certain payments and processes. In the 113 th Congress, the Judgment Fund Transparency Act of 2013 has been introduced to amend the Judgment Fund enabling statute. The act would require the Secretary of the Treasury to post on a publicly accessible website the claimant, agency, fact summary, and payment amount for each claim from the Judgment Fund, within 30 days after the payment was made, unless a law or court order otherwise prohibits the disclosure of such information. Recently, FMS released its 2011 Fiscal Report, which included all of the information from the Transparency Act except for fact summaries, pursuant to the House Appropriations Committee's recommendations that accompanied the Financial Services and General Government Appropriations Act of 2012. The committee instructed FMS to report online each claim paid from the Judgment Fund in the given fiscal year.\nIn the 112 th Congress, the Government Transparency and Recordkeeping Act of 2012 was introduced but not enacted. The bill would have amended the Judgment Fund enabling statute to require the Secretary of the Treasury to publicly report all Judgment Fund payments since 2003, and report all future payments from EAJA. The bill's provisions called for the disclosures to be made online and include those required under the Judgment Fund Transparency Act, as well as specific details about attorneys' fees and interest paid from the Judgment Fund.\nLegislation in the 110 th and 111 th Congress would have amended the No FEAR Act to require agencies to reimburse the Judgment Fund for payments for claims within two years of a final finding of discrimination. Claims under the No FEAR Act are paid from the Judgment Fund; however, the law does not specify a definitive period for agencies to reimburse the Fund. The stated purpose of the legislation was to \"encourage timely resolution or settlement of complaints.\" These bills saw no action."
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{
"question": [
"What is the Judgment Fund?",
"What protection does the United States generally have regarding judgments against it?",
"What problem grew out of the waiver process?",
"What was created so to solve this problem?",
"What was the process for judgments prior to the Judgment Fund?",
"Who are the main bodies that control the Fund?",
"What claim amount was the Fund originally limited to?",
"Who took authority over the Fund later on as the payments grew in size?",
"Who administers the Fund today?",
"When can an agency NOT access the Fund?",
"What kind of monetary awards can the fund be used for?",
"What kind of items does the Fund pay for?",
"Under which statutes can various costs and fees be recovered with the fund?",
"What other costs are payable?",
"Which acts that payments by the fund can be made under does this report cover?"
],
"summary": [
"The Judgment Fund is a permanent, indefinite appropriation that was created by Congress in 1956 to pay judgments entered against the United States.",
"Generally, the United States cannot be sued unless it has waived its sovereign immunity.",
"Prior to the creation of the Judgment Fund, the number of claims grew rapidly, taking up an increasing amount of Congress's time and resources.",
"Eventually, the Judgment Fund was created to reduce Congress's workload, so that individual appropriations were not needed for each award entered.",
"Originally, such waivers were rare, so individual claims were assigned to congressional committees, which in turn appropriated funds to satisfy the judgments.",
"The Fund's administration has changed substantially since its inception, with varying degrees of control and oversight by Congress, the Government Accountability Office, and the Treasury Department.",
"Originally, the Fund was limited to claims of less than $100,000, entered by the Court of Federal Claims or a U.S. District Court.",
"As payments grew in size, Congress transferred authority to the Justice Department to make payments on behalf of the United States, as certified by the Attorney General.",
"Today, the Fund is administered by the Financial Management Service in the Treasury Department and is only accessible when certain closely circumscribed statutory requirements are met.",
"Most importantly, an agency may not access the Fund when there is another appropriation that may be applied or when the plaintiff prevailed through an administrative remedy.",
"In addition, the fund can only be used for monetary awards that are final, meaning the award cannot be changed or overturned. The awards must result from claims that were or could have been litigated in court.",
"Although primarily used for the payment of principal awards, attorneys' fees and interest on awards may also be paid from the Fund.",
"At the court's discretion, certain costs enumerated in 28 U.S.C. §1920 may be awarded to the prevailing party. In addition, certain statutes, such as the Federal Tort Claims Act, provide that attorneys' fees may be recovered by the prevailing party.",
"In addition, interest that accrues after the judgment may also be payable from the Fund.",
"This report provides examples of how the payments from the Fund may be made under the Equal Access to Justice Act, Contract Disputes Act, Notification and Federal Employee Antidiscrimination and Retaliation Act of 2002 (No FEAR Act), and through tribe-specific judgment funds."
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CRS_R43472
|
{
"title": [
"",
"Overview",
"Budget Cycle3",
"Budget Baseline Projections",
"Spending and Revenue Trends",
"Federal Spending",
"Federal Revenue",
"Deficits, Debt, and Interest",
"Budget Deficits",
"Budget Deficit for FY2014",
"Federal Debt and Debt Limit",
"Net Interest",
"Recent Budget Policy Legislation and Events34",
"Budget Control Act of 201136",
"American Taxpayer Relief Act of 201237",
"Appropriations and Government Shutdown",
"The Bipartisan Budget Act of 2013",
"Budget for FY2015",
"Obama Administration's FY2015 Budget",
"Deficit Projections in the FY2015 Budget",
"What Do These Baselines Reflect?",
"The FY2015 Budget Resolution",
"House Budget Resolution",
"Considerations for Congress",
"Addressing Ongoing Budget Issues",
"FY2015 Appropriations",
"Debt Limit",
"Economic Considerations",
"Long-Term Considerations",
"Appendix. Budget Documents"
],
"paragraphs": [
"The federal budget is central to Congress's ability to exercise its \"power of the purse.\" Federal budget decisions also express Congress's priorities and reinforce Congress's influence on federal policies. Making budgetary decisions for the federal government is a complex process and requires balancing competing goals. Recent economic turmoil put a strain on the federal budget due to declining revenues and increasing spending levels. Subsequently, policies enacted to restrain spending, along with a recovering economy, have improved the budget outlook, at least in the near term.\nIn August 2011, budget negotiations resulted in the enactment of the Budget Control Act of 2011 (BCA; P.L. 112-25 ), which contained provisions to reduce the budget deficit by about $2 trillion over the next decade. Since that time, various legislative changes to the law have lessened the impact on certain types of federal spending. In addition, the long-term costs of federal health care programs and the effects of the baby boom generation's retirement continue to put pressure on the federal budget and have yet to be addressed. Operating these programs in their current form may pass on substantial economic burdens to future generations. Congress and the President may consider proposals for additional deficit reduction as fiscal issues may remain a key component of the legislative agenda.\nThis report will provide an overview of federal budget issues, focusing on recent fiscal policy changes. It will also discuss the major policy proposals contained in the President's FY2015 budget and the House and Senate budget resolutions. Finally, it also addresses major short- and long-term fiscal challenges. This report will track legislative events related to the federal budget and will be updated as budgetary legislation moves through Congress.",
"Each fiscal year Congress and the President undertake a variety of steps intended to set levels of spending and revenue and to make policy decisions. This section provides a brief summary of the budget cycle along with an explanation of how budget baselines are constructed. Budget baselines are used to measure how legislative changes affect the budget outlook and are integral to making these policy choices.",
"A single year's budget cycle takes roughly three calendar years from initial formation by the Office of Management and Budget (OMB) until final audit. The executive agencies begin the budget process by compiling detailed budget requests in the calendar year before the President's budget submission. Many agencies start working on their budgets during the spring and summer—about a year and a half before the fiscal year begins. OMB oversees the development of these agency requests. The President submits a budget to Congress, which is based on work by OMB and federal agencies, typically around the first Monday in February or about eight months before the fiscal year begins.\nCongress typically begins formal consideration of the budget resolution once the President submits his budget request. The budget resolution sets out a plan, agreed to by the House and Senate, that establishes the framework for subsequent budgetary legislation. Because the budget resolution is a concurrent resolution, it is not sent to the President for approval.\nCongress does not always complete action on a budget resolution. In years when Congress is late in adopting, or does not adopt, a budget resolution, the House and Senate independently may adopt \"deeming resolution\" provisions for the purpose of enforcing certain budget levels. The last time the House and Senate agreed to a budget resolution was for FY2010. The FY2010 budget resolution was agreed to on April 29, 2009.\nHouse and Senate Appropriations Committees and their subcommittees typically begin reporting discretionary spending bills after the budget resolution is agreed upon. Appropriations Committees review agency funding requests and propose levels of budget authority (BA). Appropriations acts passed by Congress set the amount of BA available for specific programs and activities. Authorizing committees, which control mandatory spending, and committees with jurisdiction over revenues also play important roles in budget decision making.\nDuring the fiscal year, which begins on October 1, Congress and OMB oversee the execution of the budget. Once the fiscal year ends on the following September 30, the Treasury Department and the Government Accountability Office (GAO) begin year-end audits.",
"Budget baseline projections are used to measure how future legislation would affect the budget picture. They are not meant to be predictions of the future budget outlook. Due to the nature of projections, slight changes in assumptions can lead to large effects in outyear totals. Therefore, it is important to understand what projections include and the assumptions on which they are based. Baseline projections are included in both the President's budget and the congressional budget resolution.\nThe Congressional Budget Office (CBO) computes current law baseline projections using assumptions set out in budget enforcement legislation. Since Congress and the President have resolved certain questions related to expiring tax policy and have enacted specific policies set to control discretionary spending over the next decade, there are fewer policy uncertainties affecting the baseline levels under current law. More specifically, the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ; see additional discussion below) permanently set into law many individual tax rates and tax policy provisions. On the spending side, baseline discretionary spending levels are largely constrained by the caps and automatic spending reductions enacted as part of the Budget Control Act of 2011 (BCA; P.L. 112-25 ) and further modified by the Bipartisan Budget Act (BBA; P.L. 113-67 ; see additional discussion below). In addition to these current law assumptions, macroeconomic assumptions, specifically of gross domestic product (GDP) growth, inflation, and interest rates, will also affect the baseline estimates and projections.\nHowever, the CBO baseline also incorporates certain assumptions currently in law, but that have historically been revised prior to the policy change actually taking effect. Specifically, the CBO baseline assumes that sharp reductions in Medicare's payment rates for physician services will take effect as scheduled in April 2015 and that certain expired and expiring tax provisions will not be extended. The projections in the baseline also contain additional uncertainty, particularly as it relates to future federal borrowing and healthcare costs. Minor changes in the economic or technical assumptions that are used to project the baseline also could result in significant changes in the outyear deficit levels.\nCurrent baseline projections show continued reductions in the budget deficit over the next several years, from 4.1% of GDP in FY2013 to 2.6% of GDP in FY2015, and roughly similar deficits as a percentage of GDP through FY2018. These declining deficit figures, relative to the past few fiscal years, are primarily due to continued improvements in the economy, restraints on discretionary spending, and certain assumptions used in constructing the baseline (i.e., certain tax provisions will expire as scheduled under current law). This would result in budget deficits that slightly reduce the level of debt held by the public as a percentage of GDP through FY2018. In other words, these budget deficits would be fiscally sustainable. However, after FY2018, deficit levels are projected to rise again, reaching 4.2% of GDP by FY2022 and 4.0% of GDP by FY2024. Under the baseline assumptions, budget deficits are projected to average 3.5% of GDP over the FY2015 to FY2024 period. (See Table 1 below.)\nCBO also provides projections based on alternative policy assumptions, which illustrate the levels of spending and revenue if current policies continue, rather than expire as scheduled under current law. If Medicare payment rates for physician services remain the same, expiring tax provisions are extended, and the provisions of the Budget Control Act's automatic spending reduction process do not remain in effect for FY2015 and beyond, CBO projects a cumulative increase in the budget deficit by more than $2.3 trillion relative to the current law baseline, including increased debt service costs, over the FY2015 to FY2024 period. Beyond the 10-year forecast window, federal deficits are expected to grow unless major policy changes are made. This is a result of increased outlays largely attributable to health care costs and baby boomer retirements.",
"Over the last four decades, on average, federal spending accounted for approximately 20% of the economy (as measured by gross domestic product), while federal revenues averaged roughly 17% of GDP. Since FY2002, spending exceeded revenue in each fiscal year resulting in budget deficits. Over the last several fiscal years, spending and revenue have deviated significantly from historical averages primarily as a result of the economic downturn and policies enacted in response to financial turmoil. As the economy recovers, the budget deficit continues to fall. In FY2013, the U.S. government spent $3.5 trillion and collected $2.8 trillion in revenue resulting in a budget deficit of 4.1% of GDP, the lowest imbalance in five years. The trends in revenues and outlays between FY1970 and FY2013 are shown in Figure 1 .",
"Federal outlays are often divided into the broad categories of discretionary and mandatory spending, and net interest. Discretionary spending is controlled by annual congressional appropriations acts. Mandatory spending encompasses spending on entitlement programs and spending controlled by laws other than annual appropriation acts. Entitlement programs such as Social Security, Medicare, and Medicaid make up the bulk of mandatory spending. Congress sets eligibility requirements and benefits for entitlement programs, rather than appropriating a fixed sum each year. Therefore, if the eligibility requirements are met for a specific mandatory program, outlays are made automatically. Net interest comprises the government's interest payments on the debt held by the public, offset by small amounts of interest income the government receives from certain loans and investments.\nIn FY2000, total outlays equaled 18.2% of GDP. In FY2009, outlays peaked at 24.4% of GDP. Outlays have fallen since then, but remain at levels above the historical average. In FY2013, total outlays were 20.8% of GDP. Under the CBO baseline, total outlays are projected to be 22.4% of GDP in FY2024. Figure 2 shows the level of federal spending as a percentage of GDP, broken into the discretionary, mandatory, and net interest categories, between FY2000 through FY2024, as projected in the CBO baseline.\nDiscretionary spending peaked in FY2010 at 9.1% of GDP. In FY2013, discretionary spending totaled 7.2% of GDP. Since FY2000, discretionary spending as a share of GDP has increased 5.3% a year, on average. Increases in discretionary spending over this period have largely been a result of increases in security spending and, more recently, the funding provided in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ). On average, from FY2000 to FY2013, defense discretionary outlays grew 5.9% per year in nominal terms, while non-defense discretionary outlays grew 4.6% per year in nominal terms. However, by FY2018, according to CBO's baseline projections, discretionary spending will fall to 5.8% of GDP, its lowest level ever. Discretionary spending in FY2024 is projected to total 5.2% of GDP. The projected decline in discretionary spending in the baseline over the next decade is largely due to the reductions under current law contained in the Budget Control Act.\nMandatory spending totaled 12.2% of GDP in FY2013, up from 9.7% of GDP in FY2000, as shown in Figure 2 . Mandatory spending peaked in FY2009 at 14.5% of GDP. Mandatory spending levels have been elevated mainly as a result of increases in outlays for income security programs. Though the economic recovery is expected to lower mandatory spending on certain programs over the next few fiscal years, the growth in mandatory spending is projected to resume its upward trend towards the end of the decade due to increases in certain entitlement programs. As a result, under current law, CBO projects that mandatory spending will total 13.9% of GDP in FY2024, higher than the FY2013 level.\nIn addition to their size relative to the economy, the components of federal spending can also be examined relative to each other. In FY2013, mandatory spending totaled 58.8% of total outlays, discretionary spending totaled 34.8% of total outlays, and net interest comprised the remaining 6.4% of total outlays. The largest mandatory programs, Social Security, Medicare, and the federal share of Medicaid, constituted 48.0% of all federal spending in FY2013. By FY2024, mandatory and net interest spending are projected to increase, thereby reducing discretionary spending's share of total outlays. Mandatory spending is projected to rise to 62.3% of total outlays while discretionary spending's share is projected to fall to 23.1% in that year. Net interest spending is projected to rise to 14.7% of total outlays in FY2024.\nBecause discretionary spending represents roughly one-third of total federal outlays, some budget experts contend that to achieve significant reductions in federal spending, reductions in mandatory spending are needed. Other budget and social policy experts contend that cuts in mandatory spending would cause substantial disruption to many households, because mandatory spending comprises important parts of the social safety net. Even though the budget deficit has recently been declining, future projections of increasing deficits and resulting high debt levels still warrant further action to restore fiscal health over the long term.",
"Revenue collection has remained depressed over the last few fiscal years as the result of the economic downturn and certain tax relief provisions. In FY2009 and FY2010, revenue collection totaled 14.6% of GDP. In FY2013, federal revenue collection totaled 16.7% of GDP, which remains below the historical average.\nPolicies enacted during the 112 th Congress enhanced certainty with respect to the revenue outlook. The American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ) permanently extended existing tax rates for most income groups, while raising tax rates for upper-income households beginning in calendar year 2013. Under the CBO baseline, revenues are projected to total 18.4% of GDP in FY2024.\nIndividual income taxes have long been the largest source of federal revenues, followed by social insurance (payroll) and corporate income taxes. In FY2013, individual income tax revenues totaled 7.9% of GDP. Social insurance tax revenue accounted for 5.7% of GDP, and corporate income tax revenues equaled 1.6% of GDP in FY2013. Figure 3 shows revenue collections between FY2000 and FY2024, as projected in the CBO baseline.",
"The annual differences between revenue (i.e., taxes and fees) that the government collects and outlays (i.e., spending) result in the budget deficit (or surplus). Annual budget deficits or surpluses determine, over time, the level of publicly held federal debt and affect the growth of interest payments to finance the debt.",
"Between FY2009 and FY2012, annual budget deficits as a percentage of GDP were sharply higher than deficits in any period since FY1945. The unified budget deficit in FY2013 was $680 billion, or 4.1% of GDP—the lowest level since FY2008. The unified deficit, according to some budget experts, gives an incomplete view of the government's fiscal condition because it includes off-budget surpluses. Excluding off-budget items (Social Security benefits paid net of Social Security payroll taxes collected and the U.S. Postal Service's net balance), the on-budget FY2013 federal deficit was $720 billion.",
"The February 2014 CBO baseline estimated the FY2014 budget deficit at $514 billion or 3.0% of GDP. The decline in the estimated budget deficit for FY2014 is mainly the result of increased revenues due to higher individual and corporate tax collections. Outlays for FY2014 are estimated to be slightly lower, as a percentage of GDP, than FY2013. In October 2014, the Treasury Department and Office of Management and Budget reported a final deficit level for FY2014 of $483 billion or 2.8% of GDP.",
"Gross federal debt is composed of debt held by the public and intragovernmental debt. Intragovernmental debt is the amount owed by the federal government to other federal agencies, to be paid by the Department of the Treasury. This amount largely consists of money contained in trust funds, such as the Social Security trust fund, that has been invested in federal securities as required by law. Debt held by the public is the total amount the federal government has borrowed from the public and remains outstanding. This measure is generally considered to be the most relevant in macroeconomic terms because it is the debt sold in credit markets.\nChanges in debt held by the public generally track the movements of the annual unified deficits and surpluses. Whether or not the movements of gross federal debt will follow those of debt held by the public depends on how intragovernmental debt changes.\nHistorically, Congress has set a ceiling on federal debt through a legislatively established limit. The debt limit also imposes a form of fiscal accountability that compels Congress, in the form of a vote authorizing a debt limit increase, and the President, by signing the legislation, to take visible action to allow further federal borrowing when nearing the statutory limit. Since February 2013, however, three consecutive pieces of legislation have suspended the debt limit accompanied by specific dates upon which the suspension expires. The debt limit is currently suspended as a result of the Temporary Debt Limit Extension Act ( P.L. 113-83 ) through March 5, 2015. It should be noted that the debt limit by itself has no effect on the borrowing needs of the government. The debt limit, however, can hinder the Treasury's ability to manage the federal government's finances when the amount of federal debt approaches this ceiling. In those instances, the Treasury has had to take unusual and extraordinary measures to meet federal obligations, leading to inconvenience and uncertainty in Treasury operations at times. At the end of FY2013 (September 30, 2013), federal debt subject to limit was approximately $16,699 billion, of which $11,976 billion was held by the public.",
"In FY2013, the United States spent $221 billion or 1.3% of GDP on net interest payments on the debt. What the government pays in interest depends on market interest rates as well as on the size and composition of the federal debt. Currently, low interest rates have held net interest payments as a percentage of GDP below the historical average despite increases in borrowing to finance the debt. Some economists, however, have expressed concern that federal interest costs could rise once the economy fully recovers, resulting in future strain on the budget. Interest rates are projected to gradually rise in the CBO baseline resulting in net interest payments of $880 billion or 3.3% of GDP in FY2024. If interest costs rise to this level, they will be higher than the historical average.",
"During the 112 th and 113 th Congresses, several legislative actions and events have affected the fiscal outlook. In August 2011, negotiations over increasing the debt limit resulted in the enactment of the Budget Control Act of 2011 (BCA). Subsequently, two pieces of legislation have revised this law. First, the American Taxpayer Relief Act of 2012 (ATRA) was enacted in January 2013 to deal with numerous expiring tax provisions, the BCA's across-the-board spending cuts (i.e., sequester), and other short-term considerations that were scheduled to take effect at the very end of 2012 or in early 2013. This combination of policies was referred to by some as the \"fiscal cliff.\" During October 2013, certain activities of the federal government ceased operation (i.e., shutdown) due to a lapse in appropriations. Several months after the shutdown, the second piece of legislation modifying the BCA, the Bipartisan Budget Act of 2013 (BBA), was enacted (December 2014). It contained new discretionary spending levels for FY2014 and FY2015 replacing the old levels as prescribed by the BCA. These actions are discussed in more detail below.",
"The Budget Control Act of 2011 (BCA; P.L. 112-25 ) was enacted on August 2, 2011. The BCA contained a variety of measures intended to reduce the deficit by at least $2.1 trillion over the FY2012-FY2021 period, along with a mechanism to increase the debt limit. The deficit reduction provisions included $917 billion in savings from statutory caps on discretionary spending and the establishment of a Joint Select Committee on Deficit Reduction (Joint Committee) to identify further budgetary savings of at least $1.2 trillion over 10 years. Because the Joint Committee was unable to reach an agreement, an automatic spending reduction process was triggered to begin in FY2013. This automatic process was intended to reduce spending levels further in the absence of other legislation to implement these changes.",
"As the BCA's additional spending reductions were set to take effect in early 2013, the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ) was signed into law by President Obama on January 2, 2013. ATRA included a number of spending provisions. First, ATRA postponed the start of the FY2013 BCA spending reductions until March 1, 2013. ATRA also reduced the FY2013 BCA spending reductions implemented via the automatic process by $24 billion (i.e., two months' worth of reductions), to roughly $85 billion equally divided between defense and non-defense. These provisions were offset by other changes in spending or revenue. Other spending changes unrelated to the BCA included an extension of certain unemployment benefits, prevention of reductions in Medicare physician payment rates, and a one-year extension of the 2008 farm bill.\nIn addition, ATRA made a variety of changes to tax policy, including the permanent extension of the 2001 and 2003 tax cuts on both ordinary income and capital gains and dividends for taxpayers with taxable income below $400,000 ($450,000 for married taxpayers filing jointly). For taxpayers with taxable income above these thresholds, the marginal tax rate on ordinary income rose from 35% to 39.6% on the portion of their income above these thresholds, and the top tax rate on long term capital gains and dividends rose from 15% to 20%. ATRA also reinstated the personal exemption phase-out (PEP) and limitation on itemized deductions (Pease) for taxpayers with adjusted gross income (AGI) above $250,000 ($300,000 for married couples filing jointly), allowing these limitations to expire for those with AGI below these thresholds. ATRA also extended the tax changes to a variety of tax credits, provided marriage tax penalty relief, and modified certain education-related tax incentives. ATRA also included a permanent \"patch\" for the alternative minimum tax and provided permanent estate and gift tax rules. Expiring provisions commonly known as \"tax extenders\" were extended through the end of 2013. The 113 th Congress may choose to address these \"extenders\" again in 2014.",
"On October 1, 2013, the federal government experienced a funding gap and partial shutdown after appropriations to fund many departments and agencies were not enacted by the beginning of FY2014. The funding gap and associated shutdown ended on October 17, 2013, with the enactment of the Continuing Appropriations Act, 2014 ( P.L. 113-46 ). The act provided interim appropriations through January 15, 2014. As part of the negotiations related to the passage of the Continuing Appropriations Act, the House and Senate agreed to go to conference on the FY2014 budget resolution. On December 9, 2013, Senator Patty Murray and Representative Paul Ryan released an agreement on discretionary spending caps for the remainder of the current fiscal year (FY2014) and the next fiscal year (FY2015), which was later enacted into law as the Bipartisan Budget Act of 2013.",
"The Bipartisan Budget Act of 2013 (BBA; P.L. 113-67 ) replaced a portion of the BCA's automatic spending process reductions for FY2014 ($45 billion) and FY2015 ($18 billion) with other deficit reduction provisions. These changes allow for more discretionary spending than was provided under the BCA for FY2014 and FY2015. Various deficit reduction measures were included to offset the cost of the increased discretionary spending.",
"The Obama Administration released its FY2015 budget in two parts—the first on March 4, 2014, and the second on March 10, 2014. The President's budget lays out for Congress the Administration's views on national priorities and policy initiatives. Congress has also begun its consideration of the FY2015 budget.",
"In his budget for FY2015, President Obama presented his policy agenda, largely focused on providing funding for various investments through the \"Opportunity, Growth, and Security Initiative,\" increasing infrastructure investment, and providing additional funding for early childhood education programs. These measures are paid for through a variety of proposals to increase taxes and reduce other spending over the next 10 years. The budget also proposes enactment of comprehensive immigration reform, tax reform, and other changes to federal health programs to achieve additional deficit reduction. Overall, the proposed budget would reduce the deficit from an estimated $649 billion (3.7% of GDP) in FY2014 to $434 billion (1.6% of GDP) in FY2024, averaging 2.2% of GDP over the next decade.\nThe President's budget proposes a variety of tax and spending measures intended to pay for the initiatives discussed above, as well as other deficit reduction to replace some of the Budget Control Act's automatic spending reduction process (often referred to as the Joint Committee sequester or Joint Committee enforcement). In August 2011, the Budget Control Act placed limits on spending via discretionary spending caps and included provisions for additional spending cuts to be implemented via an automatic process (for more information see the section titled \" Recent Budget Policy Legislation and Events \"). The budget proposes to eliminate the sequester on mandatory programs in FY2015. For the years beyond FY2015, the budget proposes to replace most of the automatic cuts (i.e., most of the reductions to the discretionary spending caps and all of the mandatory sequester) with spending cuts and tax increases. Table 2 , below, compares the discretionary spending levels in current law to those in the President's budget proposal, before any adjustments.\nIn his budget, President Obama proposes an \"Opportunity, Growth, and Security Initiative\" to provide additional funding for unspecified discretionary programs in FY2015. This additional funding would be offset by changes to mandatory spending and revenue to be achieved over the FY2015-FY2024 period. The additional spending in FY2015 would be paid for over the next decade. The largest of these proposals include a reduction in agriculture subsidies and limiting the total accrual of tax-favored retirement accounts.\nSavings are also generated from increasing the tax on tobacco products, eliminating various tax provisions to raise revenue, making changes to Medicare, Medicaid, and other federal health programs, and enacting tax and immigration reform proposals. The budget also proposes reductions in spending on Overseas Contingency Operations (OCO) through the implementation of spending caps. Together, these deficit reduction proposals total $2,167 billion relative to the Administration's Adjusted Baseline between FY2015 and FY2024.\nFinally, the President's Budget also includes a Cuts, Consolidations, and Savings section that contains proposed changes to 136 discretionary and mandatory programs, which would save approximately $17 billion in FY2015 if enacted.",
"Consistent with the presentation of previous budgets, the Obama Administration provided three separate deficit projections. First, OMB projected a Balanced Budget and Emergency Deficit Control Act (BBEDCA) baseline as required by statute. The BBEDCA baseline assumes that discretionary spending remains constant in real (i.e., inflation-adjusted) terms and revenue and mandatory (or direct) spending continue as under current law. Under this scenario, the FY2015 deficit is projected to total $568 billion.\nThe Obama Administration also projected an Adjusted Baseline, which in its view, provides a more transparent and realistic reflection of the federal government's current fiscal situation. This methodology is used to provide a basis for understanding how new policy choices would affect the fiscal outlook, essentially replacing the current BBEDCA baseline. The Administration's Adjusted Baseline assumes that discretionary spending will be limited by the discretionary caps put in place as part of the Budget Control Act and Medicare payments to physicians will not be reduced under the Sustainable Growth Rate (SGR) formula. The deficit under this scenario is projected to reach $561 billion in FY2015.\nThe final deficit projection, the Proposed Budget, illustrates the impact on the budget outlook if all of the policies proposed in the budget are implemented. In FY2015, the Administration projects that the deficit will reach $564 billion. Both the Adjusted Baseline and the Proposed Budget project deficits throughout the 10-year budget window. Under the Proposed Budget, the deficit would fall from 3.1% of GDP in FY2015 to 1.6% of GDP by FY2024. The deficit levels in the Proposed Budget scenario in the outyears are lower than both the BBEDCA baseline and the Adjusted Baseline figures.",
"As stated above, the Adjusted Baseline assumes that certain policies due to expire will be continued. The President's budget views the Adjusted Baseline as the most realistic projection of the budget deficit, and it is used as their benchmark to measure the impact of their budget proposals. The Proposed Budget, however, is the one that illustrates the resulting budget outlook if all of the policies proposed by the President were implemented. Whether or not a certain policy proposal increases or decreases the deficit depends on which baseline is used as the starting point. Ultimately, the question of whether or not the amount of deficit reduction is sufficient can only be measured by actual budget outcomes (i.e., whether the budget deficit is higher or lower in the future relative to today) and whether or not the budget is on a sustainable path.\nThere are no real limits on what assumptions can be used to construct the Adjusted Baseline as opposed to the BBEDCA baseline, whose parameters were set by legislation. The Adjusted Baseline in the FY2015 budget assumes, for example, increases in spending as a result of eliminating the reduction in Medicare physician payments under the SGR formula. Because this policy serves to increase the deficit, this policy has no cost in the Administration's Proposed Budget when it is measured against the constructed Adjusted Baseline. If it were measured under the BBEDCA baseline, the SGR fix would increase the deficit. In other words, because the Administration assumes that Medicare physician payments would be maintained at current year levels in its Adjusted Baseline, at a cost of $110 billion between FY2015 and FY2024, this proposal does not increase the deficit in the Proposed Budget.\nA similar methodology can be used in understanding how the funding for Overseas Contingency Operations is being accounted for in each baseline. Both the Adjusted Baseline and BBEDCA baseline assume that OCO funding will continue at current year levels, adjusted for inflation. In the Proposed Budget, the Administration assumes a reduction in OCO funding. As a result, the Proposed Budget allocates a reduction in the deficit of $695 billion over the FY2015-FY2024 period for reduced OCO costs relative to the Adjusted Baseline and the BBEDCA baseline.",
"The budget committees in the House and Senate each work to develop a budget resolution as they receive information and testimony from various sources, such as the Administration, CBO, and congressional committees with jurisdiction over spending and revenues. For FY2015, the Bipartisan Budget Act (BBA) contained a provision directing the House and Senate Budget Committee Chairmen to file spending and revenue levels in the Congressional Record that would be enforceable in the same manner as a concurrent budget resolution. However, nothing would preclude Congress from acting on a budget resolution for FY2015 even after levels have been filed.\nAs specified by the BBA, levels would be filed in this manner if the House and Senate do not agree to a budget resolution for FY2015 by April 15, 2014. The levels would include spending levels for the House and Senate Appropriations Committees (302(a) allocations) consistent with the discretionary spending caps ($521 billion for defense and $492 billion for non-defense) and mandatory spending and revenue levels \"consistent with the most recent baseline of the Congressional Budget Office.\" Such action would be similar to prior years when the House and Senate could not reach agreement on the budget resolution and both took action to \"deem\" enforceable budgetary levels. In the past, deeming resolutions have also been used when the House and Senate are late in reaching final agreement on a budget resolution. It has been reported that Senate Budget Committee Chairwoman Patty Murray has signaled that the provisions contained in the BBA make a budget resolution for FY2015 unnecessary.",
"On April 2, 2014, the House Budget Committee reported a budget resolution ( H.Con.Res. 96 , 113 th Congress) by a vote of 22-16. On April 10, 2014, the resolution was agreed to by the House by a vote of 219 to 205. The resolution provided for revenue levels of $3,305 billion and outlays of $3,664 billion in FY2015 for a deficit of $380 billion, or approximately 2.1% of GDP. By FY2024, the budget is projected to reach a surplus of $5 billion. This includes a \"macroeconomic fiscal impact\" of $74 billion in FY2024, without which there would be no budget surplus in that year. Debt held by the public is projected to rise in nominal terms from $13,213 billion in FY2015 to $15,176 billion by FY2024.\nThe budget proposal contains several policy changes affecting spending. Under the House budget resolution, overall discretionary spending would be reduced from its current law levels. Through FY2021, the BCA's caps constrain discretionary spending. The House budget resolution would reduce the non-defense discretionary spending caps under current law and would reduce non-defense discretionary spending relative to the CBO baseline between FY2022 and FY2024. The defense discretionary spending caps would be increased in each fiscal year through FY2021 and defense discretionary spending would be increased between FY2022 and FY2024 relative to the CBO baseline. The reductions to non-defense discretionary spending ($791 billion over the FY2015 to FY2024 period) would more than offset the increases in defense discretionary spending ($483 billion over the FY2015 to FY2024 period).\nIn addition to these changes to spending, the budget resolution also proposes other changes to mandatory programs, specifically to Medicare and Medicaid, and proposes to replace the Patient Protection and Affordable Care Act (ACA). Overall, the budget resolution proposes to reduce spending by $5.9 trillion between FY2015 and FY2024 relative to the current CBO baseline. Spending levels would average roughly 19.0% of GDP between FY2015 and FY2024 under the policies of the resolution.\nOn the revenue side, the House Budget Committee recommends no changes to the overall revenue levels under current law. However, in the report accompanying the budget resolution, the committee recommends implementation of comprehensive tax reform with the ultimate goal of replacing the current system with two tax brackets of 10% and 25% and repealing the Alternative Minimum Tax. The corporate tax rate would also be reduced from 35% to 25%. Revenue collection would average roughly 18.1% of GDP between FY2015 and FY2024 under the policies of the resolution.",
"Ongoing budgetary challenges remain, which may result in Congressional action. In the short term, issues related to deficit reduction and the slow economic recovery may continue to dominate the policy debate. Over the long term, increased spending on entitlement programs, as currently structured, will likely contribute to rising deficits and debt, placing ever-increasing focus on how to achieve fiscal sustainability.",
"Various budget issues may feature prominently in the Congressional debate in the near-term. Ongoing discussions over the budget resolution, FY2015 appropriations levels, and the Budget Control Act and related legislation may highlight the agenda. As discussed above, the Bipartisan Budget Act of 2013 (BBA) put into place new discretionary spending caps for FY2014 and FY2015. As the FY2015 budget and appropriations process continues, the BBA levels were intended to serve as an agreement on the amount of discretionary spending to be provided for these fiscal years. Beyond that however, discretionary spending levels for FY2016 to FY2021 remain as prescribed in the BCA. Therefore, it is possible that Congress and the President may work to change discretionary spending levels in future years.",
"On September 19, 2014, the President signed a continuing resolution into law ( P.L. 113-164 ) providing appropriations for FY2015 through December 11, 2014. Further appropriations will need to be enacted on or before that date to avoid a funding lapse.",
"Though discussions may continue over spending levels, the debate over the debt limit is not expected to resume until spring 2015. This is a result of legislation to suspend the debt limit, which was enacted on February 15, 2014, and suspends the debt limit through March 15, 2015 ( P.L. 113-83 ). This is the third consecutive measure suspending the debt limit.",
"The economy is still recovering from the most recent recession, which lasted from December 2007 to June 2009. Growth remains moderate, primarily due to slack in the labor and capital markets. Most economists expect unemployment rates to remain elevated for the medium term. During the recession and for several subsequent years, the budget deficit grew largely as a result of government actions taken to combat the economic downturn as well as significantly lower revenue and higher spending levels directly attributable to the economic conditions. CBO's projections, however, assume steady economic growth over the next 10 years, taking into account that changes in economic conditions will average out over the period. A recession over the budget window is likely and, if it should actually occur, would temporarily worsen the deficit relative to the baseline. In other years, an expansion could result in a lower deficit relative to the baseline. Other unforeseen events could also change the fiscal outlook.\nAs the economy continues to recover, revenue should remain on an upward trajectory as unemployment continues to fall and income tax collections continue to rise. Spending should stabilize due to decreased reliance on federal programs meant to provide assistance during economic downturns. This should lead to a period of more sustainable budget deficits. The resulting large budget deficits and high debt levels will have an effect for many years, though many argued that fiscal stimulus and other actions were needed to help the economy recover.\nMany budget analysts are concerned about future levels of federal debt and acknowledge that the current spending and revenue collection cannot continue at current or projected future levels. However, significant deficit reduction at this time may be harmful to the ongoing economic recovery. On the other hand, the longer that the country continues without a plan to stabilize its fiscal future, the more costly reform (i.e., more severe reductions in spending or larger increases in taxes) may ultimately be. In addition, the likelihood of a severe fiscal crisis caused by an unwillingness of private investors to continue financing unsustainable deficits may increase, and, if that occurs, reforms may be forced by events rather than being deliberate and planned.",
"Occasional deficits, in and of themselves, are not necessarily problematic. Deficit spending can allow governments to smooth outlays and taxes to shield taxpayers and program beneficiaries from abrupt economic shocks in the short term, while also temporarily boosting GDP when the economy is underperforming. Persistent deficits, however, lead to growing levels of federal debt that may lead to higher interest payments and may also have adverse macroeconomic consequences in the long term, including slowing investment and lowering economic growth. Since the debt cannot grow faster than GDP indefinitely, large deficits will eventually need to be reduced through increases in taxes, reductions in spending, or both.\nThe federal government faces long-term budget challenges. Some measures of fiscal solvency in the long term indicate that, under current policy, the United States faces major future imbalance, specifically as it relates to rising health care costs and the likely impact on government-financed health care spending. Even as Congress and the President worked to enact deficit reduction legislation (i.e., the BCA), legislators are seen not to have made significant changes to the part of the budget that is projected to grow. Therefore, many budget analysts believe that additional savings are required to put the budget on a sustainable path over the long term. Further, over the last two years, many of those deficit reduction provisions have been softened. Under the current law baseline, deficits continue to be projected over the budget window.\nCBO, GAO, and the Administration agree that the current mix of federal fiscal policies is unsustainable in the long term. The nation's aging population, combined with rising health care costs per beneficiary, may keep federal health costs rising faster than per capita GDP. CBO projected in September 2013 that under current policy, federal spending on federal health programs (including Medicare, Medicaid, CHIP, and exchange subsidies) would grow from 4.7% of GDP today to 7.6% of GDP in 2035, and 13.5% by 2085. The 2013 Economic Report of the President also projected that future federal spending on Medicare and Medicaid would rise significantly under current law projections. Though these forecasts are highly uncertain, it seems probable that spending on these programs will rise as a share of GDP over time.\nIn addition, growing debt and rising interest rates are projected to consume a greater share of future federal spending. Under current law, CBO projects that spending to finance the federal debt will grow rapidly from 1.3% of GDP today, to 4.5% of GDP in FY2035, and 11.4% of GDP in FY2085. GAO's recent long-term fiscal simulations, under an alternative policy scenario, projected that debt held by the public as a share of GDP would exceed the post-World War II historical high in about 15 years.\nKeeping future federal outlays at 20% of GDP, or approximately at its historical average, and leaving fiscal policies unchanged, according to CBO projections, would require drastic reductions in all spending other than that for Medicare, Social Security, and Medicaid, or reining in the costs of these programs. As shown in Table 3 below, under CBO's extended baseline, maintaining the debt to GDP ratio at today's level (73%) through FY2038 would require an immediate and permanent cut in non-interest spending or revenues or some combination of the two in the amount of 0.9% of GDP (or about $150 billion in FY2014 alone) in each year. Maintaining this debt-to-GDP ratio beyond FY2038 would require additional savings. If policy makers wanted to lower future debt levels relative to today, the annual spending reductions or revenue increases would have to be larger. For example, in order to bring debt as a percentage of GDP in FY2038 down to the same level it was in FY2008 (39% of GDP), spending reductions or revenue increases or some combination of the two would need to total roughly 2.1% of GDP (or $360 billion in FY2014 alone) in each year.\nAs the economic recovery continues, Congress may focus more effort on reducing the deficit and reining in the debt. This would require less spending, more revenue, faster-than-average economic growth, or a combination of these things. Debt requires interest payments that can strain budgets if debt levels and interest rates are high. High debt levels could limit the government's flexibility in meeting its obligations or in responding to emerging needs of its citizens. Ultimately, failing to take action to reduce the projected growth in the debt might lead to future insolvency.",
"CBO Documents\nThe Congressional Budget Office (CBO) provides data and analysis to Congress throughout the budget and appropriations process. Each January, CBO issues a Budget and Economic Outlook that contains current-law baseline estimates of outlays and revenues. In March, CBO typically issues an analysis of the President's budget submission with revised baseline estimates and projections. These documents can be delayed as a result of the legislative agenda or if the President's Budget is off schedule. In late summer, CBO issues an updated Budget and Economic Outlook with new baseline projections.\nIn these documents, CBO sets a current-law baseline as a benchmark to evaluate whether legislative proposals would increase or decrease outlays and revenue collection. Baseline estimates are not intended to predict likely future outcomes, but to show what spending and revenues would be if current law remained in effect. CBO typically evaluates the budgetary consequences of legislative proposals and the Joint Committee on Taxation (JCT) evaluates the consequences of revenue proposals.\nCBO also releases other periodic publications focusing on the future fiscal health of the United States. In their publication, The Long-Term Budget Outlook , CBO makes projections on the state of the federal budget over the next 75 years. They discuss spending and revenue levels and the related issues that they expect will arise under different policy assumptions. In their Budget Options volumes, they provide specific policy options and the impact they will have on spending and revenues over a 10-year budget window. They also provide arguments for and against enacting each policy.\nOMB Documents\nThe President's Budget contains five major volumes: (1) The Budget ; (2) Historical Tables ; (3) Analytical Perspectives ; (4) Appendix ; and (5) Supplemental Materials . These documents lay out the Administration's projections of the fiscal outlook for the country, along with spending levels proposed for each of the federal government's departments and programs. The Historical Tables volume also provides significant amounts of budget data, much of which extends back to 1962 or earlier. Along with the Administration's budget documents, the Department of the Treasury also releases its Green Book , which provides further detail on the revenue proposals that are contained in the budget."
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"question": [
"Who is the federal budget important to?",
"What do Congress and the President do each year?",
"What does this report track?",
"What has helped to reduce budget deficit in recent years?",
"What was the purpose of the BCA?",
"Which two modifications have been made to the BCA?",
"What do these pieces of legislation change?",
"What provision did the BBA include when considering FY2015 budget?",
"What does that provision essentially make unnecessary?",
"Could Congress still act after the BBA provision is enacted?",
"What was the budget resolution vote result in the House?",
"What do CBO, GAO, and the Administration agree on regarding federal finances?",
"In order to put the federal budget on a good path, what would be required?",
"What would such an agreement result in?"
],
"summary": [
"The federal budget is central to Congress's ability to exercise its \"power of the purse.\"",
"Each fiscal year Congress and the President undertake a variety of steps intended to set levels of spending and revenue and to make policy decisions.",
"The purpose of this report is to provide an overview and background on the current budget debate. This report will track legislative events related to the federal budget and will be updated as budgetary legislation moves through Congress.",
"In recent years, policies enacted to restrain spending, along with a stronger economy, have led to reductions in the budget deficit.",
"The BCA contained a variety of measures intended to reduce the deficit by at least $2.1 trillion over the FY2012-FY2021 period, along with a mechanism to increase the debt limit.",
"Two subsequent pieces of legislation have modified the BCA since it was enacted—the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240) and the Bipartisan Budget Act of 2013 (BBA; P.L. 113-67).",
"Both pieces of legislation allow for more discretionary spending than was provided under the BCA for FY2013, FY2014, and FY2015. Various deficit reduction measures were included to offset the costs of the changes to spending levels in both ATRA and the BBA.",
"The BBA contained a provision directing the House and Senate Budget Committee chairmen to file spending and revenue levels in the Congressional Record that would be enforceable in the same manner as a concurrent budget resolution for FY2015 if an agreement on a budget resolution could not be reached by April 15, 2014.",
"It has been reported that Senate Budget Committee Chairman Patty Murray has signaled that the provisions contained in the BBA make a budget resolution for FY2015 unnecessary.",
"However, nothing would preclude Congress from acting on a budget resolution for FY2015 even after those levels have been filed.",
"On April 10, 2014, the House agreed to a budget resolution (H.Con.Res. 96, 113th Congress) by a vote of 219 to 205.",
"Though the federal budget deficit has fallen in recent years, CBO, GAO, and the Administration agree that current federal fiscal policies are unsustainable in the long term.",
"Projections indicate that putting the federal budget on a sustainable long-term path will require an agreement on additional deficit reduction.",
"Such an agreement could include increases in revenues, changes to large spending programs, or some combination of the two."
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CRS_R43316
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{
"title": [
"",
"Introduction",
"Article III Lower Courts",
"U.S. Courts of Appeals",
"U.S. District Courts",
"Length of Time from Nomination to Confirmation for Judicial Nominees Across Recent Presidencies",
"U.S. Circuit Court Nominees",
"U.S. District Court Nominees",
"Possible Consequences of Longer Waiting Times from Nomination to Confirmation",
"Increase in Vacancy Rates of Circuit and District Court Judgeships",
"Detrimental Effects on Judicial Administration",
"Fewer Highly Qualified Nominees",
"Excessive Emphasis on the Ideological or Partisan Predisposition of Nominees",
"Other Potential Consequences",
"Policy Options for Shortening the Time from Nomination to Confirmation",
"Imposition of Time Tables on the Confirmation Process",
"Fast-Track Certain Nominations",
"Treat District Court Nominations Differently than Circuit Court Nominations",
"Conclusion"
],
"paragraphs": [
"",
"In recent years a subject of continuing interest to Senators has been the length of time taken for lower federal court nominations to receive Senate confirmation. Senate debate often has concerned whether a President's judicial nominees, relative to the nominees of other recent Presidents, encountered more difficulty or had to wait longer before receiving consideration by the Senate Judiciary Committee or up-or-down floor votes on confirmation. Of related concern to the Senate have been recent increases in the number and percentage of vacant judgeships in the federal judiciary and the effect of delays in the processing of judicial nominations on filling such vacancies.\nThis report seeks to inform the current debate in three ways: first, by providing an overview of the time taken by the Senate during recent presidencies to confirm U.S. circuit and district court nominees; second, by identifying potential consequences of a protracted confirmation process for such nominees; and third, by identifying policy options the Senate might consider to shorten the length of time from nomination to confirmation for U.S. circuit and district court nominees. It is comprised of four sections:\nA first section provides background information related to U.S. circuit and district courts, the two types of lower federal courts to which a President frequently makes nominations. A second section provides the average and median lengths of time from nomination to confirmation for circuit and district court nominees of the five most recent Presidents (i.e., Presidents Reagan to Obama). The average and median waiting times from nomination to confirmation, the section concludes, generally increased from one presidency to the next for both circuit and district court nominees. This section also discusses the adoption of a new standing order in the 113 th Congress that might serve to facilitate negotiations arranging for floor consideration of district court nominees (and, thus, might also shorten the length of time district court nominees wait to have their nominations considered by the full Senate). A third section identifies possible consequences of the relatively longer periods of time lower federal court nominees have waited, once nominated, to be confirmed by the Senate. A fourth section identifies and analyzes three policy options the Senate might consider in order to shorten the time from nomination to confirmation for at least some circuit and district court nominees.\nThis report does not take the position that all judicial nominations should be processed relatively quickly by the Senate. There might be instances in which heightened scrutiny of U.S. circuit and district court nominees by the Senate is warranted, leading to relatively long waiting times from nomination to confirmation for these nominees. Additionally, given that there are no minimal qualifications or term limits for Article III judges, some Senators might argue that the emphasis of the confirmation process should be to avoid \"rubber stamping\" judicial nominations submitted by the President, even if, presumably, such deliberate processing by the Senate leads to longer wait times for nominees to be confirmed.",
"Article III, Section I of the Constitution provides, in part, that the \"judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.\" It further provides that Justices on the Supreme Court and judges on lower courts established by Congress under Article III have what effectively has come to mean life tenure, holding office \"during good Behaviour.\" Along with the Supreme Court, some other courts that constitute Article III courts in the federal system are the U.S. courts of appeals, the U.S. district courts, and the U.S. Court of International Trade.\nAs mentioned above, this report concerns nominations to the U.S. circuit courts of appeals and the U.S. district courts (including the territorial district courts). Outside the report's scope are nominations to the U.S. Supreme Court and the occasional nominations that Presidents make to the nine-member U.S. Court of International Trade.",
"The U.S. courts of appeals take appeals from federal district court decisions and also review the decisions of many administrative agencies. Cases presented to the courts of appeals are generally considered by judges sitting in three-member panels. Courts within the courts of appeals system are often called \"circuit courts\" (e.g., the First Circuit Court of Appeals is also referred to simply as the \"First Circuit\"), because the nation is divided into 12 geographic circuits, each with a U.S. court of appeals. One additional nationwide circuit, the Federal Circuit, hears certain specialized legal claims. Altogether, 179 appellate court judgeships for these 13 courts of appeals are currently authorized by law. The First Circuit (comprising Maine, Massachusetts, New Hampshire, Rhode Island, and Puerto Rico) has the fewest number of authorized appellate court judgeships, 6, while the Ninth Circuit (comprising Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) has the most, 29.\nIn this report, nominations to U.S. courts of appeals judgeships are frequently referred to as \"circuit court nominations.\"",
"U.S. district courts are the federal trial courts of general jurisdiction. There are 91 Article III district courts: 89 in the 50 states, plus one in the District of Columbia and one more in Puerto Rico. Each state has at least one U.S. district court, while some states (specifically California, New York, and Texas) have as many as four. Altogether, 673 Article III U.S. district court judgeships are currently authorized by law. Congress has authorized between 1 and 28 judgeships for each district court. The Eastern District of Oklahoma has 1 judgeship (the smallest number among Article III district courts), while the Southern District of New York and the Central District of California each have 28 judgeships (the most among Article III district courts).\nAdditionally, there are three U.S. territorial courts established by Congress pursuant to its authority to govern the territories under Article IV of the Constitution. Judicial appointees to these courts serve 10-year terms, with one judgeship each in Guam and the Northern Mariana Islands, and two in the U.S. Virgin Islands.\nIn sum, references throughout this report to U.S. district court judgeships include a total of 677 judgeships (673 Article III judgeships, of which 10 are temporary, and 4 territorial judgeships).",
"This section provides statistics related to the length of time it has taken for circuit and district court nominees, once nominated by the President, to be confirmed by the Senate. Figure 1 tracks by President, from Reagan to Obama, the mean (average) and median number of days from nomination to confirmation for all circuit and district court nominees confirmed during a President's tenure in office (whether one or two terms). In general, the average and median time from nomination to confirmation has increased during each presidency since President Reagan.\nIf a nominee was nominated more than once by a President, prior to the nominee's eventual confirmation by the Senate, the first date on which he or she was nominated was used to calculate the days elapsed from nomination to confirmation. Note that the average and median number of days from nomination to confirmation can reflect various factors, including opposition by the minority party in the Senate, committee and floor scheduling decisions unrelated to partisan opposition to the nomination, and delays in receiving requested background information from nominees.",
"As shown in Figure 1 , President George W. Bush's circuit court nominees who were confirmed during his two terms waited, on average, the longest period of time from first nomination to confirmation (350.6 days). As of November 1, 2013, President Obama's nominees waited, on average, the second-longest period of time (257 days) followed by the circuit court nominees of Presidents Clinton (238.2 days), George H.W. Bush (103.7 days), and Reagan (68.7 days).\nPresident G.W. Bush's circuit nominees waited, on average , the longest period of time from nomination to confirmation while President Obama's circuit court nominees have, thus far, had the longest median wait time from first nomination to confirmation (229 days). This statistic is interpreted to mean that half of the circuit court nominees who have been confirmed during President Obama's time in office (as of November 1, 2013) waited more than 229 days from nomination to confirmation, while the other half waited less than 229 days.\nThe circuit court nominees who were confirmed during President G.W. Bush's tenure had the second longest median wait time (216 days) followed, in decreasing order, by the circuit court nominees of President Clinton (139 days), G.H.W. Bush (85.5 days), and Reagan (45 days).",
"Turning again to Figure 1 , President Obama's confirmed nominees for district courts waited, on average, 220.8 days from nomination to confirmation. President G.W. Bush's district nominees waited, on average, 178.8 days. The district court nominees confirmed during President Clinton's two terms waited an average of 135 days while the nominees of Presidents G.H.W. Bush and Reagan waited on average 103.8 and 67.9 days, respectively.\nThe median waiting times from nomination to confirmation for district court nominees ranged from a high of 215 days, thus far, during President Obama's time in office to a low of 41 days during President Reagan's two terms. The median waiting times from nomination to confirmation for district court nominees of the remaining three Presidents were 141.5 days (G.W. Bush), 99 days (Clinton), and 93 days (G.H.W. Bush).\nPerhaps in response to the relatively longer waiting times experienced by President Obama's district court nominees, the Senate adopted a new standing order in the 113 th Congress that might serve to facilitate negotiations arranging for floor consideration of district court nominations (and, thus, might serve to shorten the length of time district court nominees wait to have their nominations considered by the full Senate once their nominations are reported by the Judiciary Committee).\nThe standing order provides for a new procedure in effect for just the 113 th Congress by which the Senate could move more quickly to final action on district court nominations supported by at least three-fifths of the Senate. Specifically, if cloture is invoked on a district court nomination in accordance with Rule XXII of the Senate, post-cloture consideration is reduced from a maximum of 30 hours to 2 hours. Generally, district court nominations are considered pursuant to unanimous consent agreements. The majority leader, when the new standing order was approved, indicated that the intent is to continue to negotiate unanimous consent agreements for the consideration of such nominations —which might be facilitated by the alternative provided by the standing order.\nAs of November 2013, an insufficient number of district court nominations have been considered since the beginning of the 113 th Congress to measure whether the standing order has been effective in shortening the length of time to confirm such nominations. If it is determined in the future that the standing order is useful in shortening the time from nomination to confirmation for district court nominees, the Senate might consider renewing it on a temporary basis for future congresses (or making it permanent).",
"In recent years, scholars and others concerned with the judicial appointment process have identified possible consequences of relatively long waiting times from nomination to confirmation experienced by judicial nominees. Five of the more notable possible consequences are discussed below.",
"A protracted confirmation process might contribute to an increase in vacancy rates for U.S. circuit and district court judgeships as well as an increase in the number of vacancies considered \"judicial emergencies\" by the Judicial Conference of the United States. In recent years there have been several episodes of \"historically high\" vacancy rates for U.S. circuit and district court judgeships. Such periods in which vacancy rates have increased to historically high levels have occurred during presidencies in which, as shown in Figure 1 , the length of time it takes to confirm circuit and district court nominees has similarly increased.\nAdditionally, as reported previously by CRS, President Obama is the only White House occupant since at least President Reagan for whom the district court vacancy rate increased during a presidential first term unaccompanied by the creation of new district court judgeships. Such an increase in the vacancy rate coincided, during President Obama's first term, with historically high average and median waiting times from nomination to confirmation for U.S. district court nominees.",
"If longer waiting times from nomination to confirmation are associated with higher vacancy rates, then longer waiting times might also have a detrimental effect on the management of the federal courts, and on caseload management in particular. Such an effect might disproportionately impact those courts with relatively heavier caseloads.\nSuch a relationship between longer waiting times and a decline in the quality or efficiency of judicial administration has been suggested by Chief Justice John G. Roberts, Jr., as well as by his predecessor, Chief Justice William Rehnquist. Chief Justice Roberts, noting that vacancies are not evenly distributed across judicial districts, has stated that \"a persistent problem has developed in the process of filling judicial vacancies.... This has created acute difficulties for some judicial districts. Sitting judges in those districts have been burdened with extraordinary caseloads.\" Consequently, he has argued that there is \"an urgent need for the political branches to find a long-term solution to this recurring problem.\"\nSimilarly, former Chief Justice Rehnquist argued that \"[j]udicial vacancies can contribute to a backlog of cases, undue delays in civil cases, and stopgap measures to shift judicial personnel where they are most needed. Vacancies cannot remain at such high levels indefinitely without eroding the quality of justice that traditionally has been associated with the federal judiciary.\" He emphasized the need to more quickly fill judicial vacancies, arguing \"[T]o continue functioning effectively and efficiently, our federal courts must be appropriately staffed. This means that judicial vacancies must be filled in a timely manner with well-qualified candidates.... We [the judiciary] simply ask that the President nominate qualified candidates with reasonable promptness and that the Senate act within a reasonable time to confirm or reject them.\"",
"Fewer qualified individuals might be willing to be nominated because of the protracted length of time it takes to be confirmed. A relatively lengthy time from nomination to confirmation might interfere with professional and personal obligations of potential nominees. Such interference might cause some qualified individuals to forgo the opportunity to serve on the federal bench.\nSuch interference might be particularly problematic for nominees working in private practice. As Justice Rehnquist noted, \"[A] drawn-out and uncertain confirmation process is a handicap to judicial recruitment across the board, but it most significantly restricts the universe of lawyers in private practice who are willing to be nominated for a federal judgeship.... for lawyers coming directly from private practice, there is both a strong financial disincentive and the possibility of losing clients in the course of the wait for a confirmation vote.\"\nAnother observer argues that, in terms of the protracted periods of time that some recent nominees have waited for a Senate vote after being reported by the Judiciary Committee, \"[T]he cost to nominees is real. They and their families find it stressful. For nominees in private practice, the delay is expensive as their work dries up. For nominees who are serving as state or magistrate judges, there is also a cost to the efficiency of the courts on which the nominees are sitting at the time of nomination, as the delay creates uncertainty and difficulty for their litigants.\" Such difficulties might lead some individuals, who would otherwise be highly qualified nominees for the federal bench, to pass on the opportunity to be nominated.",
"Longer waiting times from nomination to confirmation might politicize the confirmation process in a way that leaves the public with the impression that the ideological or partisan predisposition of the nominee is the primary consideration in determining how the nominee will approach his or her work on the bench. A former chief judge of the Fifth Circuit Court of Appeals, for example, has argued as much, stating that \"a highly partisan or ideological judicial selection process conveys the notion to the electorate that judges are simply another breed of political agents, that judicial decisions should be in accord with political ideology, all of which tends to undermine public confidence in the legitimacy of the courts.\"\nFor district court nominees in particular, the impression by the public that trial judges routinely act based on their partisan or ideological predisposition might be at odds with the reality of the type of work they typically do while on the bench. For example, former Attorney General Nicholas Katzenbach has argued that \"[m]ost trial lawyers will say that the political or ideological views of a trial judge are not very important. What is important is his experience with litigation, his demeanor on the bench, and the fairness of his rulings on evidence.\"",
"Finally, a confirmation process characterized by longer waiting times might adversely affect the Senate in ways not directly related to the confirmation process itself. For example, a protracted confirmation process characterized by partisan or ideological rancor might have a \"spill-over\" effect of politicizing issues related to the judiciary that might otherwise enjoy bipartisan support, such as \"legislation that could affect the independent operation of the federal courts (court funding, judicial salaries, jurisdiction),\" as well as leading to \"substantive [congressional] intrusions on adjudicatory functions ... \"",
"This section discusses three proposals to shorten the amount of time, generally, from nomination to confirmation for U.S. circuit and district court nominees. These proposals are not mutually exclusive and any policy adopted by the Senate to shorten the length of time from nomination to confirmation for judicial nominees might incorporate elements of more than one of the proposals.\nAs the scope of this report includes only the time from nomination to confirmation, this section does not include proposals that have been offered to reform or change the pre-nomination stage of the judicial confirmation process. This section, furthermore, does not provide an exhaustive list or description of potential policies that might be adopted by the Senate to shorten the time from nomination to confirmation for lower federal court nominees.",
"The Senate might consider adopting a time table for one or more stages of the nomination process. Such time tables would establish deadlines for Senate action on judicial nominations.\nBoth Presidents G.W. Bush and Obama, for example, have offered such proposals. Specifically, in 2002, President G.W. Bush proposed two deadlines: a nominee would (1) receive a hearing before the Senate Judiciary Committee within 90 days of being nominated, and (2) receive an up-or-down vote in the Senate within 180 days of being nominated. President Bush, in proposing the deadlines, argued that a \"strict deadline is the best way to ensure that judicial nominees are promptly and fairly considered. And 90 days is more than enough time for the committee to conduct necessary research before holding a hearing.\" Additionally, he maintained that the 180 days deadline for final Senate action \"is a very generous period of time that will allow all the Senators to evaluate nominees and have their votes counted.\" For his part, President Obama has not offered a deadline for nominees to receive a hearing but instead called for a Senate rule that would require all judicial (and executive) nominees to receive an up-or-down vote by the full Senate within 90 days of being nominated.\nSuch proposals have not come solely from Presidents. In 2004, Senator Arlen Specter of Pennsylvania introduced a resolution providing for a series of time tables or deadlines for Senate action on judicial nominations. The three deadlines proposed by Senate Specter required (1) the Judiciary Committee to hold a hearing on the nomination within 30 days after the nomination was submitted to the Senate; (2) the committee to act on the nomination within 30 days of the hearing; and (3) the full Senate act on the nomination within 30 days after the committee reported out the nomination. The proposal also authorized the committee chair and the Senate majority leader to extend the period for committee and full Senate action, respectively, by up to an additional 30 days for cause. Presumably, however, the maximum amount of time from nomination to final Senate action for most nominees would not exceed 90 days.\nOne concern that the Senate might have in adopting time tables is the question of enforcement (i.e., how would the Senate ensure that such time tables are followed and would there be any consequences if deadlines are not met?) Second, the Senate might be concerned that, by committing itself to certain deadlines, it would give a President greater leverage or influence in the selection of judicial nominees. During the G.W. Bush presidency, for example, CRS noted that streamlining the confirmation process with various timelines \"could tip the balance of power on the selection of [judicial] nominees toward the President.\" Another concern might be that time tables would, instead, result in lengthening the time from nomination to confirmation for some nominations. For example, Jane Kelly, a recent nominee to the Eighth Circuit Court of Appeals, was confirmed by the Senate on April 24, 2013—83 days after being nominated by President Obama on January 31, 2013. The imposition of a rigid time table on nominations such as the Kelly nomination (which are uncontroversial) might have the unintended result of lengthening the amount of time from nomination to confirmation for such nominees.",
"In addition to imposing deadlines on various stages of the confirmation process, the Senate might also consider mechanisms that would enable some judicial nominations to be more quickly acted upon by the full Senate (i.e., receive \"fast-track\" treatment after the nomination is submitted by the President). Such fast-track treatment might involve the Senate (by statute, standing order or rule) committing to process certain nominations within a certain amount of time after they are submitted by the President.\nOne proposal involves giving fast-track consideration to nominees recommended by bipartisan commissions in their home states. If the President selects an individual from a list of candidates recommended by a bipartisan commission, then the nominee would be given fast-track \"protection\" during the confirmation process. If, however, the President selects someone not recommended by a bipartisan commission, the nomination would not be given fast-track consideration by the Senate. While such bipartisan commissions are currently used by some Senators, the empirical evidence from President Obama's first term does not suggest that nominees selected by commissions are confirmed more quickly than nominees from states without such commissions.\nAnother option available to the Senate is to consider some judicial nominations as \"privileged nominations\" for the purpose of potentially shortening the time from nomination to confirmation. Such an approach was recently adopted by the Senate during the 112 th Congress for nominations to 272 positions across various Cabinet agencies, oversight boards and advisory councils, and independent agencies. Specifically, S.Res. 116 , approved by the Senate on June 29, 2011, provides for an alternative confirmation process of nominations to these particular positions. This new approach allows these nominations to bypass formal committee consideration unless a single Senator objects to using the expedited process. The positions included in the resolution tend not to be those associated with controversy and their nominations in the past typically have required little individual floor debate for confirmation.\nThe specific provisions of S.Res. 116 provide that once the Senate receives a nomination to one of the specified 272 positions, it is placed on the Senate's Executive Calendar as a \"privileged nomination.\" Although the nomination is not formally referred to committee, the committee is still responsible for gathering biographical and financial information used to evaluate the nominee. After the chair of the committee of jurisdiction notifies, in writing, the Senate's executive clerk that all the information requested has been received, the nomination remains on the list of \"privileged nominations\" for 10 session days before being moved to the list of \"nominations\" on the Executive Calendar .\nAt any time from when the Senate receives the nomination to when the nomination is placed on the list of \"nominations\" on the calendar (i.e., while the nomination is still pending on the \"privileged nominations\" list), any Senator can request that the nomination be referred to committee, and not be considered using the new process. The nomination then proceeds using the existing confirmation process, beginning with referral to committee. In this manner, S.Res. 116 utilizes the existing practices of the Senate's unanimous consent process, where objection from even one Senator will prevent the new process from being used.\nAdopting such a resolution for some judicial nominations might have the effect of shortening the time from nomination to confirmation. While the Senate Judiciary Committee would retain its information-gathering function (and Senators on the committee would be able to signal to other Senators their approval or disapproval of the nominations through informal discussions and floor speeches), removing the committee's need to act on these nominations might expedite the process for nominations that are uncontroversial and would receive unanimous support by the full Senate.\nThe most likely Article III judicial nominations that would be suitable for such an approach are nominations to U.S. district court judgeships. The Senate might afford privileged status using any number of criteria, including whether the nomination was recommended by a bipartisan commission in the nominee's home state; whether the nomination has the support of at least one home state Senator of the opposite party as the President; or whether the nomination is for a vacancy qualifying as a \"judicial emergency\" by the Judicial Conference of the United States. The Senate might also decide to allow a fixed percentage of U.S. district court nominations to go through the confirmation process as privileged nominations. The Senate, for example, might allow 25% of all district court nominations during any given year to be submitted as privileged nominations; such an approach might, across different presidencies, provide for uniformity, predictability, and relatively speedy Senate approval of certain nominations that are uncontroversial and are supported by all Senators.\nTreating some judicial nominations as privileged nominations, however, might raise concerns for at least some Senators. First, some Members might be concerned about preserving the role of the Judiciary Committee in having its say on every judicial nomination submitted by the President, including those considered routine or uncontroversial. Second, Senators might not want to signal potential problems with a judicial nomination by requesting that it be taken off the list of privileged nominations on the Calendar and instead be sent to committee. Third, a Senator desiring to lengthen the regular confirmation process for a nominee could do so by waiting to object to the new process until the nomination had been listed for nine days of session on the Calendar as a privileged nomination (and for which all information had been received). The objection would re-start the confirmation process to its initial stages, referral to committee, well after the Senate had received the nomination, instead of immediately upon receipt of the nomination. Nonetheless, such concerns might be addressed in any agreement to expedite the confirmation process for nominations qualifying as privileged nominations (including requiring more than one Senator to object to a nomination being listed on the Calendar as a privileged nomination).",
"Another option the Senate might consider is to treat, during various stages of the confirmation process, district court nominations differently than circuit court nominations. One proposal rests on the premise that the \"best mechanism to relieve the mounting pressure on the district courts is to decouple the district judge nomination process from the deeply politicized circuit court nomination process\" and that \"the whole problem with district judges is that the process has been bound up with practices for circuit judges.\"\nAlong these lines, the proposal includes three specific changes that might shorten the time from nomination to confirmation for district court nominees. First, the Senate could, for district court nominees, streamline the Judiciary Committee questionnaire so that it is mostly limited to questions related to the nominee's legal experience. The rationale underlying this proposed change is that, arguably, the only consequential questions for a district court nominee are those describing cases that the nominee decided as a judge or handled as a lawyer. Additionally, such questions would still require nominees to provide contact information for judges and counsel involved with the cases on which they have worked.\nSecond, the Senate could eliminate routine committee hearings on district court nominations. The rationale behind this change is that \"the hearing generally has served to bog down progress through the Committee of unobjectionable district judge nominations. And, even when both sides have good will in moving nominations forward, the hearing is the variable that injects most uncertainty into the confirmation schedule.\" Instead, \"[w]ithout a hearing, a committee rule could be set with a minimum referral time to the Committee of sixty or ninety days, to be followed by a vote at the next business meeting (or whenever the blue slips have been returned, whichever is later) absent exceptional circumstances in which the majority and minority agree that a special hearing or investigation is required.\"\nAs the proposal emphasizes, this would be very similar to the process by which nominees to U.S. attorney positions are considered by the Judiciary Committee. Like district court judges, U.S. attorneys, it has been argued, \"are key officers in the day-to-day operations of the federal legal system. Yet they receive no hearing, ordinary issues are handled promptly, and nominees are reported speedily.\" The primary defense of retaining the hearing, it is suggested, \"is the opportunity of a conscientious Senator to impress upon nominees the importance of genuine issues of law.\" However, the proposal considers the \"odds that the hearing becomes just another tool of delay are overwhelming,\" outweighing the need for Senators to emphasize particular concerns or issues to district court nominees.\nFinally, the proposal emphasizes expediting floor consideration of district court nominations. To this end, it would amend Senate rules to ensure a vote on such nominations shortly after being reported by the Judiciary Committee. One possible way to expedite the process is for the majority leader to be given the privilege \"after a district judge nomination has laid over on the floor for one week, to call for an 'expedited' confirmation vote under a procedure requiring some higher threshold—perhaps the greater of sixty Senators or three-quarters of those present and voting. Nominations meeting the threshold would be confirmed; others would be returned to the Senate Executive Calendar for consideration under current rules, by unanimous consent or invocation of cloture.\" Such a procedure might be useful in reducing the leverage individual Senators have when they withhold their consent to proceed to a district court nomination (particularly those considered uncontroversial), an issue that some Senators have considered especially problematic in recent years.\nOne possible concern with the above proposals for treating district court nominations differently than circuit court nominations is that they are modest in nature (and, thus, may not succeed in significantly reducing the amount of time from nomination to confirmation for many, if not most, district court nominees). Additionally, Senators might consider routine hearings for district court nominees to be of value and, thus, might be reluctant to eliminate them altogether.",
"The Senate, if it determines that the lengthening judicial confirmation process is a problem, might consider various policy options to shorten the process. The Senate, for example, could create time frames for one or more stages of the confirmation process by establishing deadlines for acting on a nomination. Such time frames might have the effect of shortening the confirmation process for judicial nominees as well as standardizing (as much as possible) the process across presidencies. Some potential drawbacks of using time frames include the issue of enforcement (i.e., what happens if a time frame is not followed?) as well as giving the President greater leverage or influence in the selection of judicial nominees.\nThe Senate might also fast-track certain nominations. Some nominations, for example, might be classified as \"privileged\" nominations and, thus, be acted upon by the Senate in a relatively expedited manner. Such privileged nominations might include U.S. district court nominations for vacancies considered judicial emergencies and/or nominations considered uncontroversial. There might, however, be some drawbacks to fast-tracking some nominations, including the concern of some Members in preserving the role of the Judiciary Committee in having its say on every judicial nomination submitted by the President.\nFinally, the Senate might treat district court nominations differently than circuit court nominations by streamlining the Judiciary Committee questionnaire for district court nominees, eliminating routine committee hearings for district court nominees, and expediting floor consideration of district court nominees by adopting an amendment to Senate rules that would ensure a vote on such nominations shortly after being reported by the Judiciary Committee. While treating district court nominations differently than circuit court nominations might make sense given differences in the nature of the work done by trial judges versus appellate judges, Senators might, for various reasons, be reluctant to change the process for district court nominees (e.g., Senators might consider routine hearings for district court nominees as valuable in assessing nominees' professional competence or temperament)."
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{
"question": [
"What topic regarding judicial nominees is oft debated by the Senate?",
"How does this report address the judicial debate?",
"What process in this report is Congress interested in?",
"How did the length of time for the judicial selection process change over time?",
"How did Reagan and George W Bush's time elapsed statistics compare?",
"How did Regan and Obama’s time elapses statistics compare?",
"Which time frames and steps of the nominee process are utilized?",
"How can the nomination process be sped up?",
"What category do such procedures fall under?",
"What do all these changes result in?"
],
"summary": [
"Recent Senate debate over judicial nominations has frequently concerned whether a particular President's judicial nominees, relative to the nominees of other recent Presidents, waited longer for their nominations to be considered by the Senate.",
"This report addresses this issue by (1) providing a statistical analysis of the time from nomination to confirmation for U.S. circuit and district court nominees from Presidents Reagan to Obama; (2) identifying possible consequences of a protracted confirmation process for circuit and district court nominees; and (3) identifying policy options the Senate might consider to shorten the length of time from nomination to confirmation for lower federal court nominees.",
"The process by which lower federal court judges are nominated by the President and considered by the Senate is of continuing interest to Congress.",
"In general, the mean (average) and median number of days from nomination to confirmation increased during each presidency since President Reagan.",
"For circuit court nominees confirmed during a President's time in office (whether one or two terms), the average number of days elapsed from nomination to confirmation ranged from 68.7 days during the Reagan presidency to 350.6 days during George W. Bush's presidency.",
"The median number of days from nomination to confirmation for circuit court nominees confirmed ranged from 45 days (Reagan) to 229 days (Obama).",
"Utilizing time frames for various stages of the confirmation process for U.S. circuit and district court nominees, including the length of time from nomination to committee hearing as well as the length of time from committee report to final Senate action.",
"Expediting the confirmation process for judicial nominations using \"fast-track\" procedures.",
"Such procedures might include classifying some judicial nominations as \"privileged nominations\" as is currently done to expedite Senate consideration of nominations to some positions in the executive branch.",
"Such changes might result in shortening the time from nomination to confirmation for district court nominees."
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GAO_GAO-17-426
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{
"title": [
"Background",
"Federal Agencies Spent Over $1.6 Billion in 5 Recent Fiscal Years to Purchase a Variety of Vehicles across the United States",
"Federal Agencies Spent Over $1.6 Billion between Fiscal Years 2011 and 2015 to Purchase Approximately 64,500 Vehicles through GSA",
"Federal Agencies Purchased a Variety of Vehicles for Use in Diverse Locations",
"Agencies Selected a Variety of Options when Purchasing Vehicles",
"Agencies Requested 102 Waivers to Purchase Vehicles from a Non-GSA Source, GSA Approved about Half",
"Two of Three Selected Agencies Did Not Follow Policies to Identify Underutilized Vehicles, Spending Millions of Dollars on Vehicles without Determining Their Utilization",
"CBP Did Not Determine if 81 Percent of Selected Vehicles Were Utilized in Fiscal Year 2015",
"NRCS Did Not Determine If 9 Percent of Its Selected Vehicles Were Utilized in Fiscal Year 2015",
"Navy Determined All Selected Vehicles Were Utilized in Fiscal Year 2015",
"Officials from Three Selected Agencies Identified a Variety of Challenges to Managing the Costs of their Vehicle Fleets",
"Alternative Fuel Vehicle Requirements Can Increase Costs for Owned Vehicle Fleets",
"Inaccurate and Fragmented Data Can Require Additional Personnel Resources",
"Budget Restrictions Can Increase Fleet Costs",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Selected Agencies’ Procedures for Purchasing New or Replacing Existing Vehicles",
"Appendix III: Vehicles Purchased by Departments with Selected Approved GSA Waivers from 2013-2015",
"Appendix IV: GAO Contacts and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments",
"Appendix V: Agency Comments from the Department of Homeland Security"
],
"paragraphs": [
"Federal agencies owned more than 446,000 non-tactical vehicles in fiscal year 2015, according to the Federal Fleet Report. Five departments owned approximately 89 percent of these vehicles, as shown in Table 1.\nAgencies acquire vehicles through purchase or lease and are responsible for making decisions about the number and type of vehicles they need. Agencies obtain almost all of their vehicles through GSA. Specifically, by purchasing through GSA’s Vehicle Purchasing program or leasing a vehicle through GSA Fleet. GSA is a mandatory source for purchase of new vehicles for federal executive agencies and other eligible users. According to federal guidelines, when deciding what vehicle to buy, agencies should purchase vehicles that meet their mission and represent the best value by considering price, when the vehicle can be delivered, fuel economy, lifecycle cost, past performance, and other considerations. GSA Vehicle Purchasing offers an array of non-tactical vehicles and options at a savings from the manufacturer’s invoice price, including traditional vehicles (such as pickup trucks and sedans) and specialized vehicles (such as firetrucks and utility trucks). GSA develops annual vehicle standards that establish the types and sizes of vehicles and general equipment it will offer through the GSA Vehicle Purchasing program. GSA also maintains an on-line procurement tool—known as AutoChoice—that allows the purchasing agency officials to view the standard vehicle models, choose equipment options, view side-by-side comparisons of vehicle models from different manufacturers, place their orders, and track delivery. The order is then recorded in a GSA procurement database called ROADS. If GSA cannot meet an agency’s needs for a specific vehicle, agencies can apply to GSA for a waiver. If approved, agencies may then purchase a vehicle directly from a non-GSA source, such as a dealership.\nIn some cases, agencies are required to or directed to acquire vehicles with a lower environmental footprint. For example, the Energy Policy Act of 1992 requires that 75 percent of agencies’ light-duty vehicle acquisitions be alternative-fuel vehicles (AFVs). In addition, the Energy Independence and Security Act of 2007 prohibits agencies from acquiring any light-duty motor vehicle or medium-duty passenger vehicle that is not a low greenhouse-gas emitting vehicle. Executive Order 13693, issued in March 2015, directed that agencies plan for zero emission vehicles or plug-in hybrid vehicles to make up 20 percent of all new agency passenger vehicle acquisitions by December 31, 2020, and 50 percent of all new agency passenger vehicle acquisitions by December 31, 2025.\nAgencies are responsible for managing their vehicles’ utilization in a manner that allows them to fulfill their missions and meet various federal guidelines and directives, such as by completing a vehicle allocation methodology (VAM). The VAM process is designed to help agencies identify the optimal size and composition of their respective fleets. Under GSA guidance, agencies are directed to complete a VAM survey, which measures the usage of each vehicle in the fleet, at least every 5 years. GSA guidance further advises agencies on how to complete the VAM process. For example, agencies are instructed to have standards for the minimum amount of use of a vehicle—called utilization criteria—that are appropriate for their missions. Agencies define their own utilization criteria—which may include mileage, number of trips, or other metrics— and decide which vehicles, if any, to eliminate from their fleets.\nFederal agencies determine when to replace or dispose of vehicles based on federal vehicle replacement standards and their mission and program needs. GSA has established minimum standards in federal regulations that call for agencies to retain agency-owned vehicles for at least a requisite number of years or miles before replacing them. For example, an agency should keep a sedan or station wagon for at least 3 years or 60,000 miles, whichever occurs first. It may keep the vehicle beyond the minimum years and miles if the vehicle can be operated without excessive maintenance or substantial reduction in resale value. Conversely, the agency may replace a vehicle that has not yet met the threshold if the vehicle needs body or mechanical repairs that exceed the fair market value of the vehicle. Federal regulations allow agencies to dispose of vehicles they no longer need and have been declared excess, even if the vehicles have not met the minimum replacement standards for years and mileage. Agencies may dispose of vehicles by exchange, sale, transfer to another agency, or donation.",
"Based on our analysis of ROADS data, federal agencies spent more than $1.6 billion from fiscal years 2011 through 2015 to purchase a wide variety of vehicles though GSA. Included in the $1.6 billion is approximately $2.5 million that agencies spent on vehicle options such as power seats and remote keyless start. In less than 1 percent of purchases during this time frame, agencies received approval to acquire a vehicle from a source other than GSA. In those cases, agencies purchased a variety of vehicles that included ambulances and modified passenger vehicles.",
"From fiscal year 2011 through fiscal year 2015, federal agencies purchased 64,522 passenger vehicles and light trucks through GSA at a total cost of over $1.6 billion. Agencies used these vehicles to meet a wide variety of mission needs, including supporting operations on the U.S. border, transporting veterans, accessing remote locations, and hauling repair equipment, among other functions. The annual number of new passenger vehicle and light trucks purchased decreased from approximately 14,400 in fiscal year 2011 to approximately 13,300 in fiscal year 2015. See appendix II for information on selected agencies’ procedures for purchasing vehicles.\nFive departments (DHS, the Department of Justice, USDA, DOD, and the Department of the Interior) purchased 90 percent of the vehicles purchased through GSA during this 5-year time period, and spent a comparable percentage of the associated funds. (see fig. 1).\nThe average purchase prices for passenger vehicles and light trucks among these five departments were relatively comparable, ranging from $24,163 to $28,101. Similarly, the average price for such vehicles purchased by other federal agencies in our analysis was $26,107. The most expensive of these vehicles was a cargo van purchased by the Department of Justice for $158,191 in fiscal year 2012, for use by the FBI. The least expensive vehicle was purchased for $11,855 in fiscal year 2011 by the Department of Agriculture’s Forest Service.",
"Federal agencies purchased a variety of passenger vehicles and light trucks during this time period. Relatively large vehicles, such as pickup trucks, made up the majority of acquisitions and had higher average costs than sedans. For example, of the 64,522 vehicles purchased from fiscal years 2011 through 2015, four-by-four (4x4) pickup trucks and 4x4 sport utility vehicles (SUV) accounted for more than half of the purchases, while sedans accounted for about 15 percent. On average, these 4x4 SUVs cost approximately $7,600 more than a sedan, while 4x4 pickup trucks cost approximately $5,000 more (see table 2).\nAccording to available data, at least 52 percent of the passenger vehicles and light trucks purchased during fiscal years 2013 through 2015 were capable of running on alternative fuel. Fuel type information was available for approximately 83 percent of vehicle purchases during that time. According to GSA officials, the fuel type for a vehicle is not reported in the purchase data if manufacturers do not voluntarily specify the fuel type. Manufacturers reported a fuel type for fewer than 10 percent of vehicle purchases in fiscal years 2011 and 2012. As previously discussed, a variety of laws and directives instruct agencies to increase their acquisition of low-greenhouse-gas-emitting, hybrid, or zero-emissions vehicles.\nAgencies purchased vehicles during fiscal years 2011 through 2015 for locations throughout the continental United States and other areas. Some concentrations of spending were for vehicles delivered in and around the Washington, DC, capital region (see fig. 2). Another concentration of spending was for vehicles delivered in states such as Texas and California.",
"Each year, GSA publishes standards for vehicles, including what features will be included with particular base models. When making a purchase, agencies may change these standard vehicle features by selecting “options.” According to federal regulations, when agencies opt for additional systems or equipment to be added to vehicle purchases, these systems and equipment should be selected for purposes related to overall safety, efficiency, economy, and suitability (i.e., mission) of the vehicle.\nBased on our analysis of ROADS data, agencies added approximately 350 different types of options to passenger vehicles and light trucks purchased from fiscal year 2011 through fiscal year 2015. In approximately 41 percent of the instances that an agency added an option to a vehicle, the option increased the vehicle cost. In approximately 45 percent of instances, adding an option did not change the cost. In approximately 14 percent of instances, the selection resulted in a cost reduction.\nIn analyzing these options, we were not able to determine if six of these types of options were related to safety, efficiency, economy, suitability, or administrative functions. These six option types included power seats, video entertainment systems, and heated or leather seats, among others (see table 3). Agencies added at least one of these six options to 7,344 vehicles (approximately 11.4 percent of the passenger vehicles and light trucks purchased through GSA during fiscal years 2011 to 2015) at a total cost of over $2.5 million. In some cases, agencies added multiple options to one vehicle. While these six options accounted for approximately 1.9 percent of all instances of options selected, they accounted for approximately 3.4 percent of the total cost of options. GSA does not determine for what purpose an agency may select a particular option. GSA officials discussed some instances of when these six options may have been related to the agency’s mission or could be considered a safety feature. For example, according to GSA officials, remote keyless start could be a safety feature when a vehicle is operated in an extreme climate.",
"From fiscal years 2011 through 2015, agencies submitted 102 waiver requests to GSA, requesting permission to purchase a total of approximately 550 vehicles through non-GSA sources (see table 4). According to GSA officials, vehicles purchased with a waiver account for less than 1 percent of annual purchases in any given year. DOD submitted almost 40 percent of the 102 waiver requests. Cumulatively, the five departments—DOD, Interior, DHS, Veterans Affairs (VA), and the Department of Justice (DOJ)—submitted approximately 80 percent of the requests.\nIn reviewing these 102 waiver requests, GSA: approved 56 (approximately 55 percent), denied 32 (approximately 31 percent), and did not ultimately process the remaining 14 (approximately 14 percent), in some cases, according to GSA officials, directing agencies to other services or letting them know a waiver was not required.\nWe selected 17 approved waivers from fiscal years 2013 through 2015 for additional review. For these 17 approved waivers, we found agencies purchased vehicles ranging from ambulances to passenger vehicles to dump trucks, with an average cost of approximately $117,000. See appendix III for more details on the vehicles purchased with these 17 waivers. Some agency examples include:\nArmy purchased a truck with a number of upgrades for $167,427, to be used for recruiting purposes, according to officials (see figure 3). Army officials noted that the upgrades contributed to its success as a recruiting tool, and that the truck was purchased as a replacement for six Hummers.\nDHS purchased a pair of leather-appointed Chevrolet Suburbans for approximately $67,000 each to transport the CBP Commissioner and dignitaries.\nVA purchased a minivan that was adapted to allow injured veterans to operate it, at a total cost of $50,515 (See fig. 4).",
"According to federal standards for internal control, management should design control activities, such as policies and procedures, to achieve objectives and respond to risks. DHS, USDA, and Navy have policies aimed at achieving the objective of determining if vehicles are utilized and mitigating the risk of retaining vehicles that are not needed. However, as discussed below, we found that two agencies—CBP and NRCS—did not follow their respective departments’ policies for assessing vehicle utilization. Specifically, CBP did not assess the utilization of vehicles that fell below DHS’s mileage minimums, and NRCS did not use USDA’s utilization criteria or annually assess vehicles’ utilization. As a result, these two agencies could not determine if 2,441 of the 12,175 vehicles we selected (20 percent) were fully utilized. Cumulatively, these two agencies incurred an estimated $13.5 million in depreciation and maintenance costs for these vehicles during fiscal year 2015 (see table 5). While these estimated costs might not be equal to the cost savings if all vehicles with undetermined utilization were determined to be underutilized and eliminated, the amount provides insight into the potential scope of the issue. Based on our review of policies and agency-provided data, we found that the Navy uses criteria and justification processes to determine if a vehicle is utilized and was able to determine that all of the 3,652 vehicles we selected for our review were utilized.",
"DHS’s fleet policy requires that agencies determine if their vehicles are justified. DHS defines a fully justified vehicle as one that either (1) travels a minimum number of miles per year (12,000 miles for sedans and 10,000 miles for light trucks), (2) meets alternative vehicle utilization criteria developed by the agency to reflect their mission needs, or (3) has an individual written justification if the vehicle did not meet DHS’s minimum mileage criteria or any of the alternative criteria developed by the agency.\nOf the 2,300 CBP vehicles that we examined, 1,862—81 percent—either did not achieve the DHS mileage utilization criteria or did not have sufficiently accurate mileage data to determine if the vehicle met the DHS mileage minimums. CBP officials told us that DHS’s mileage criteria are not always an appropriate utilization metric for their diverse fleet. But CBP has not developed its own alternative criteria to determine if the vehicles that did not meet the DHS mileage criteria are utilized. While DHS policy instructs agencies to individually justify vehicles that did not meet DHS’s or agency-developed utilization criteria, CBP officials could not provide justifications for these 1,862 vehicles, and one official stated that CBP does not develop such justifications. CBP incurred an estimated $12.7 million in maintenance and depreciation costs for these vehicles during fiscal year 2015. Because CBP did not determine if these vehicles are utilized, some of this cost may have been for vehicles that the agency did not need.\nCBP officials explained that it would not be efficient or cost-effective to manually collect the data needed to establish criteria appropriate for CBP, such as “engine run time.” Furthermore, even if criteria were to be established, the lack of readily available data would make it difficult to measure vehicle performance against such criteria. However, officials stated that CBP has begun to install “telematics” devices in many of its vehicles. These devices can measure and transmit data on the vehicle’s use. CBP officials plan to have the devices installed in approximately 60 percent of its fleet by March 2017. Officials reported that once these devices are fully deployed, a variety of new data points may become available, including engine hours and idle time. Officials stated that they have begun collecting data from the telematics devices installed to date to support the eventual development of appropriate utilization criteria; however, they have not yet developed a specific plan that outlines how they will use the data to develop appropriate utilization criteria and evaluate vehicles against those criteria. Officials also reported that while they intend to eventually install telematics on the remaining 40 percent of CBP’s fleet, there is currently no funding plan or timeline to do so, and CBP does not have a specific plan that details how it will assess the utilization of vehicles not equipped with telematics.\nCBP officials stated that given the large number of vehicles that did not meet the DHS mileage criteria, it was too difficult to develop individual justifications. If CBP developed utilization criteria that were appropriate for a large percentage of their vehicles’ missions, the number of vehicles requiring individual justifications could substantially decrease. In turn, this decrease in vehicles needing individual justification could facilitate CBP’s compliance with DHS’s policy that requires justifications for vehicles that do not meet utilization criteria.",
"A 2012 USDA policy memo requires that all vehicles be utilized. The memo specifies utilization criteria as either a function of mileage or days used, as shown in the table 6 below, although agencies can request changes to these requirements: In addition to setting forth utilization criteria, the policy memo allows agencies to individually justify vehicles’ falling below the utilization minimums (for example, law enforcement vehicles or vehicles with a unique mission). Furthermore, the memo outlines USDA’s expectation that NRCS and other agencies will annually identify vehicles that did not meet the utilization criteria or have an individual justification documenting why the vehicle should be retained.\nNRCS did not follow the USDA policies on annual utilization and justification because key officials were not aware of these policies. Specifically, all of the USDA and NRCS fleet managers we spoke to were unaware of this policy memo, which officials from USDA said had not been re-circulated since 2012. According to USDA officials, the utilization policy and the requirement for annual justifications were not widely discussed or shared. Thus, NRCS did not apply USDA’s utilization criteria to its vehicles to determine if the vehicles were utilized. In addition, NRCS does not have a process for annually justifying its vehicles. NRCS conducted a VAM survey, which agencies must conduct at least every 5 years, in fiscal year 2015 (the year covered in our review). As a part of that survey, NRCS developed individual justifications for its vehicles. As a result, NRCS determined that 91 percent of the 6,223 vehicles we selected for this review were utilized. For the remaining 9 percent of the selected vehicles (579), NRCS was unable to determine if the vehicles were utilized. While the VAM survey provided justifications for fiscal year 2015, NRCS officials reported that they did not plan to conduct an annual VAM survey because the surveys cover every vehicle in the fleet and are resource intensive. If NRCS followed USDA policies on annual utilization and justification, the annual process would be less resource intensive than the VAM because the annual process would not need to cover vehicles that met USDA’s utilization criteria. NRCS retained all of the vehicles for which it could not determine if the vehicles were utilized and incurred approximately $750,000 in maintenance and depreciation costs in fiscal year 2015 for the 579 vehicles that were retained.",
"DOD has established criteria for minimum annual mileage (either 7,500 or 10,000 annual miles for trucks—depending on vehicle characteristics— and 12,000 annual miles for sedans). According to Navy officials, Navy has additional criteria to assess the utilization of each vehicle based on mission needs and has a process to annually review the usage and justification of one third of its fleet to determine if the vehicles are utilized and still needed.\nNavy reported all 3,652 vehicles we selected for review met the DOD mileage criteria or had an individual justification in fiscal year 2015. Navy has a process to individually review its entire fleet within a 3-year cycle even if some vehicles meet the DOD mileage requirements. These triannual justifications—known as the TRIO process—are considered valid by the Navy until the vehicles are reassessed again in 3 years. Through this process, each vehicle has its own requirement criteria and justification for retention. According to Navy officials, the TRIO process will be replaced by annual reviews within the next few years.",
"During panel discussions and individual interviews, fleet management officials from three selected agencies—CBP, Navy, and NRCS—identified several key challenges to managing the costs of their fleet. These challenges included alternative fuel vehicle requirements, fragmented data systems, and budget constraints.",
"Agency officials from CBP, Navy, and NRCS reported that the requirements for purchasing alternative fuel vehicles and using alternative fuel make it challenging to manage fleet costs. Some officials reported that complying with these requirements sometimes involves purchasing more expensive vehicle models. According to data from GSA’s 2016 Model AFV Guide, in some cases acquisition costs for alternative fuel vehicles were substantially more expensive than the gasoline-powered model. For example, an electric-only sub-compact car costs approximately 82 percent more than the standard gasoline-only model. Similarly, the plug-in electric hybrid version of a subcompact car costs approximately 99 percent more than the gasoline-only model. However, in other cases, acquisition costs for alternative fuel vehicles were the same as those of their gasoline-powered counterpart (see table 7).\nSelected agency fleet management officials also reported that complying with AFV requirements involves installing and maintaining the infrastructure required for AFVs, a process that can be costly. For example, supporting AFVs can require electric charging stations, which agency officials reported to be costly and difficult to manage, given the outdated condition of some agencies’ facilities and the need to ensure National Electric Code standards compliance. In addition, one official noted that if an agency’s fleet involves a variety of different alternative fuel sources—such as E-85, electric vehicles, and compressed natural gas—the agency would need to incur the cost of developing and maintaining infrastructure that supports each type of fuel source if it is not commercially available. We previously reported similar findings related to the costs of alternative fuel requirements. Specifically, in 2013, we reported that some agency officials found commercial vendors to be reluctant to install alternative fuel tanks when the return on investment was not promising. In addition, we noted that agencies found it difficult to meet certain energy requirements in a constrained budget environment due to the potential for related additional costs.\nOfficials from the three selected agencies also reported that administrative tasks associated with meeting AFV requirements can be difficult and resource-intensive. For instance, these officials reported that it can be time-consuming for fleet managers to ensure that drivers of dual-fueled vehicles, which can run on gasoline or an alternative fuel, use the required alternative fuels when reasonably priced and available, which is defined as within a 5 mile or 15 minute drive. Similarly, agency officials reported that completing paperwork associated with the AFV requirements can take up costly staff time. For example, one official stated that an agency’s mission may require the use of certain vehicle types—such as pickup trucks— that do not meet the Energy Independence and Security Act of 2007’s requirement to purchase only low-greenhouse-gas-emitting vehicles, resulting in the need for an agency to certify that no low-greenhouse-gas-emitting vehicle is available to meet the functional needs of the agency. The official explained that it was very time-consuming for his staff to complete the required paperwork for each vehicle in the fleet that was not a low-greenhouse-gas-emitting vehicle.",
"Officials from the three selected agencies reported that limitations of their fleet management information systems—including manual data entry and recording fleet data in multiple systems—can lead to increased costs in the form of staff time and missed opportunities to analyze the available information. Officials also reported that efforts to address these limitations by adopting more sophisticated technology typically involve obstacles such as the complications associated with cybersecurity.\nOfficials for each selected agency said that their systems require the manual entry of some data, which is resource intensive. For example, one official said users needed to complete some forms by hand before the data were manually entered into the system. Officials also said users sometimes manually enter data in non-standard formats, which can increase the amount of time needed to analyze the data.\nIn addition, according to agency officials, when fleet data are recorded in multiple systems that do not communicate with each other, it requires more staff time to accomplish fleet management tasks. One official stated that in some cases, agencies within the same department may not use the same data systems, a situation that complicates internal processes such as transferring a vehicle from one agency to another.\nSeveral officials said that they are interested in adopting new technologies that have the potential to streamline the collection and improve the accuracy of fleet data, such as using scanners to collect data from bar codes. However, officials cautioned that it can be costly and time-consuming to adopt new technologies and integrate them into existing systems and processes. For example, an official within Navy said that his office paid a local vendor to run diagnostics on their vehicles’ engines —a costly process. In an attempt to minimize these costs, his office identified an available software program that could perform these diagnostics at a potential savings of $200–300 per test. The official said that as of October 2016 the Navy was 8 months into the process of evaluating the program for potential use. Similarly, officials from Navy reported challenges in adopting telematics. Specifically, according to Navy officials, telematics have been installed in approximately 700 owned vehicles in Navy’s fleet, at an estimated cost of approximately $300,000; however, they have not yet been able to activate 674 of those 700 installed telematics systems due to cybersecurity reviews to ensure that the vehicles cannot be manipulated by outside sources. Navy officials said that while telematics offer information that benefits some vehicles and missions, installing telematics in their vehicle fleets required a substantial initial investment.",
"` Some officials said that when budgets are tight they retain vehicles that need to be replaced beyond the standard replacement timeframe of three years or 60,000 miles for sedans and station wagons, which can lead to higher overall fleet costs. Officials explained that maintenance costs increase as vehicles age, so the overall lifecycle costs of owning older vehicles is higher. According to the fiscal year 2015 Federal Fleet Report, the average age of owned passenger vehicles was 5.8 years for DHS, 5.4 years for USDA, and 5.2 years for Navy. According to officials, some agencies perform vehicle lifecycle cost analyses which help determine when vehicles are no longer cost effective to retain, among other decisions. However, one official said they were not always able to replace vehicles when their analyses suggested the vehicle should be replaced due to budget constraints. Moreover, by using more of their fleet funds on maintenance, agencies have even fewer available resources to purchase new vehicles. Officials said that this cycle can make it challenging for fleet managers to contain costs. According to officials, to help address the costs of aging owned vehicles, Navy and NRCS are planning to increase their use of GSA-leased vehicles. An official from CBP reported that converting their fleet from owned to leased vehicles was generally not financially feasible because CBP installs mission-specific special systems and equipment and operates in conditions that would be likely to damage vehicles.",
"Given the billions of dollars spent annually to operate and maintain federally owned vehicles and the government-wide emphasis on efficient fleet management, it is critical for agencies to have sound fleet management practices. The three departments in our review have established policies to appropriately use vehicles and facilitate the removal of unnecessary vehicles. Nonetheless, our finding that millions of dollars are being spent on vehicles that are potentially underutilized indicates action is needed.\nBecause CBP does not view DHS criteria to be appropriate in all cases for its diverse fleet and does not individually justify vehicles, CBP management cannot determine which vehicles, if any, are being properly utilized by CBP staff, and the agency may be spending millions of dollars on vehicles that are not needed. While new telematics devices are capable of providing vehicle usage information, CBP risks losing the opportunity to use these new data to identify and remove underutilized vehicles because CBP has not developed a plan to determine how it will use this usage data to improve its utilization assessment processes, including processes for vehicles without telematics devices.\nAdditionally, because key NRCS and USDA officials were unaware of USDA’s policies on utilization and assessment, staff did not have necessary information to guide retention decisions for vehicles that cost more than $750,000 annually. Awareness of this policy would provide important information to NRCS officials to determine which vehicles, if any, may be underutilized and could be removed from their fleet. It is important for departments to ensure that all of their fleet management staff, including those in each agency within a department, are aware of and comply with departmental policies.",
"To facilitate the removal of underutilized vehicles, we recommend that the Secretary of Homeland Security direct the Commissioner of Customs and Border Protection to develop a written plan for how CBP will use newly available usage data to improve its utilization assessment processes. Such a plan would define utilization criteria that reflect CBP’s mission and describe how CBP will review and individually justify vehicles that do not meet the utilization criteria established by either DHS or CBP.\nTo enhance awareness of NRCS’s utilization assessment process and facilitate the elimination of unnecessary vehicles, we recommend that the Secretary of the Department of Agriculture communicate USDA’s policy on vehicle utilization to USDA’s fleet management staff to ensure staff are aware of USDA policy. This communication could include redistributing the 2012 utilization policy memo.",
"We provided a draft of this report to the departments of Agriculture, Commerce, Defense, Energy, Homeland Security, Interior, Justice, and Veterans Affairs and to GSA for review and comment. The Departments of Defense, Energy, Justice, and Veterans Affairs did not have comments. The Departments of Agriculture, Commerce, Homeland Security, and the Interior, as well as GSA, provided technical comments which we incorporated as appropriate. In its written comments, reproduced in appendix V, DHS stated that it concurred with our recommendation. A Program Analyst in the Office of the Chief Financial Officer provided emailed comments on behalf of USDA’s Office of Procurement and Property Management. In these emailed comments, USDA did not agree or disagree with our findings, but noted that the Department will address the recommendation.\nWe are sending copies of this report to interested congressional committees, the Secretaries of the departments of Agriculture, Commerce, Defense, Energy, Homeland Security, Interior, Justice, and Veterans Affairs, and the Administrator of GSA. In addition, this report is available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at 202-512-2834 or rectanusl@gao.gov. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV.",
"This report covers: (1) the types and locations of vehicles recently purchased across the federal government and the associated costs; (2) the extent to which selected agencies determine what vehicles are utilized; and (3) any challenges that selected agencies face in managing the costs of their owned vehicle fleets.\nTo determine the types, locations, and costs of vehicles recently purchased across the federal government, we analyzed purchase data from the General Services Administration’s (GSA) ROADS database, the primary repository for information on vehicle purchase transactions. Specifically, we analyzed information on more than 64,500 passenger vehicles and light trucks purchased by federal agencies through GSA from fiscal year 2011 through fiscal year 2015 (the most recent, complete fiscal year at the time of the request), including information such as: the quantity of vehicles purchased; the type of vehicle, such as a pickup truck or sedan; the agencies that acquired vehicles; the cost of the vehicles purchased; and the location of where the purchased vehicles were delivered.\nWe also used the ROADS data to analyze the options that agencies purchased with these vehicles, as options provide additional insight into the characteristics of the vehicles purchased. Agencies selected 346 unique options for the passenger vehicles and light trucks purchased during this 5-year time period. In order to describe the purpose of these options, we categorized the options into six groups. The first four groups were derived from the Federal Property Management Regulations (FPMR): 1. Safety: We defined this category as options that serve to prevent collisions, vehicle or other damage, injury, or theft of the vehicle. This includes protecting occupants in the event of a collision and supporting the recovery of a vehicle if it is stolen. Lane-departure warning systems and backup cameras are examples of options we placed in the safety category. 2. Economy: We defined this category as options that remove features, or options that reduce the size, power, or features to be included in a vehicle. Reducing the engine size or eliminating air conditioning, thus potentially reducing vehicle’s cost, are examples of options we placed in the economy category. 3. Efficiency: We defined this category as options that could increase the fuel efficiency of a vehicle (including supporting use of alternative fuels) as well as options that facilitate vehicle maintenance and optimal operation (including reducing operating costs). An engine capable of running on compressed natural gas is an example of an option we placed in the efficiency category. 4. Suitability: We defined this category as options that could reasonably be determined to be necessary to accomplish an agency’s mission. Pre-wired police equipment is an example of an option we placed in the suitability category.\nIn addition, we created two additional categories: 5. Administration: We defined this category as including options that were related to the purchase, delivery, or warranty of the vehicle (such as the option to send a vehicle overseas). 6. Undetermined: We used this category to group options that did not meet any of the five defined categories, including options with unclear descriptions.\nWe then conducted a content analysis to categorize all 346 options into each of these categories. In order to conduct this analysis, two analysts independently coded each of the options into the six categories, and then met to discuss and resolve any coding discrepancies. After this initial categorization, 48 options were categorized as “undetermined”. We subsequently discussed our categorizations with GSA officials and asked them for any examples of why agencies might select these undetermined options for any of the other five categories. After reviewing GSA’s responses, we placed 38 of the previously undetermined options into one of the five other categories. The remaining 10 options were still categorized as “undetermined” because GSA’s response did not provide assurance that the option belonged in one of the other five categories. For example, GSA replied that power seats could be selected for drivers with mobility impairments, but we found that agencies selected power seats over 5,000 times. Similarly, GSA suggested that remote keyless entry could be a safety feature for vehicles operated in extreme climates, but it is unclear what climates would constitute “extreme”. When we randomly selected zip codes to determine where 10 of the vehicles with remote keyless entry were delivered, we found that they were delivered to Maryland, North Carolina, and Virginia, among other locations. We subsequently reported the cost and frequency of these remaining options, combining some similar options (i.e., leather seats and heated front leather seats), which resulted in the six options we analyzed.\nWe also analyzed information on the number of waivers that agencies submitted to GSA during this time frame in order to purchase vehicles from a non-GSA source. We examined all 17 waivers that GSA approved from fiscal year 2013 through fiscal year 2015 for an executive agency to either purchase one vehicle or to purchase executive vehicles. For each of these waivers, we requested purchase orders and other relevant information from the agencies that received these waivers to determine what vehicles were purchased.\nTo determine how selected federal agencies identify what vehicles are utilized, we judgmentally selected three federal agencies for review: the U.S. Navy (Navy); U.S. Department of Agriculture’s Natural Resources Conservation Service (NRCS); and U.S. Department of Homeland Security’s Customs and Border Protection (CBP). We made our selection after considering the following criteria about their respective departments: among the largest owned fleets in fiscal year 2015, at least 10,000 non law enforcement designated vehicles, and a majority of domestic vehicles in their overall fleet.\nWe then selected the agencies from these three selected departments that reported among the largest number of domestic, non-law enforcement passenger vehicles and light trucks in response to a GAO request for this information. We selected these fleets to broadly discuss the experiences and practices across a section of the federal fleet. These results are not generalizable to their overarching departments or other federal agencies.\nWe reviewed the selected agencies’ policies on utilization and interviewed officials. To estimate the costs associated with potentially underutilized vehicles, we conducted a multi-step analytical process. First, we focused on a selected population of vehicles, which included: light trucks or passenger vehicles, because these two categories comprise the majority of federal-owned vehicle fleets (approximately 55 percent and 15 percent respectively); vehicles that are still in the selected agencies’ inventories as of November 2016; and vehicles that were acquired prior to fiscal year 2015, so that the agencies were fully accountable for the selected vehicles’ utilization over the entire fiscal year 2015 time period.\nWe defined passenger vehicles and light trucks using vehicle descriptions in GSA’s Federal Automotive Statistical Tool (FAST) database, as shown in table 8.\nWe excluded tactical, law-enforcement, and emergency-responder vehicles from the selected vehicle population as well as vehicles located outside of the continental U.S., due to the differences in reporting and management processes that can be associated with these characteristics. We also excluded vehicles that were procured through non-appropriated funds, such as user fees, as any savings associated with eliminating those vehicles would not accrue to the federal government.\nWe then requested data from the three selected agencies on all of the relevant vehicles in our defined population. After receiving the data from the selected agencies, we conducted various diagnostic analyses of these data to assess their reliability and performed logic procedures to address obvious data issues. For example, we examined VIN numbers and acquisition cost values and removed any vehicles with errors from the population of analysis, removing approximately 12,900 vehicles in total across the three agencies. We received over 25,000 vehicle records from the three agencies that we reviewed for reliability and data issues, and 12,175 vehicle records met our selection criteria for analysis. In total, the selected vehicles from these agencies accounted for about 3 percent of the federally owned fleet. The findings from our analysis of these vehicle records are not generalizable to all vehicles at the agencies or to agencies beyond those we selected.\nNext, we sent to each selected agency a list of their selected vehicles and requested that they group the vehicles into one of the categories described below and depicted in figure 5, so that we could determine how many vehicles were utilized, underutilized, or of unknown utilization. Specifically, groups 3, 5, and 7 reflect shortcomings in agency efforts to identify and remove underutilized owned vehicles. We focused on determining the costs associated with the vehicles in these groups.\nGroup 1: Vehicle must be a law enforcement, emergency response, or tactical vehicle or located outside of the United States or no longer in the agency’s owned inventory. These vehicles are excluded from our population of analysis.\nGroup 2: Vehicle must have met at least one agency utilization criteria, specifically defined in the agency’s policy or guidance documents in fiscal year 2015. This group did not apply to agencies that do not have utilization criteria written in their policy.\nGroup 3: The agency must have specific utilization criteria defined in agency policy or guidance documents AND be unable to determine whether the vehicle met this standard in fiscal year 2015. Example: The agency has mileage-based utilization criteria, but the mileage data are either missing or clearly incorrect (negative mileage).\nGroup 4: For this category, for the vehicle’s retention, there must be a written justification that was considered valid by the agency in fiscal year 2015 in lieu of meeting criteria defined in agency policy or guidance. If the agency does not have utilization criteria, then the vehicles would need to have written justifications in regards to vehicle retention in order to be placed in this category.\nGroup 5: The agency is unable to determine whether there is a written record verifying that in fiscal year 2015, the vehicle’s continued use was justified and approved.\nGroup 6: Vehicle must NOT have met any agency utilization criteria for fiscal year 2015 (or there are no criteria in agency policy) that was specifically defined in agency policy or guidance documents, AND there was no written justification for the vehicle’s retention that was considered valid by the agency in fiscal year 2015. AND the vehicle was reassigned, repurposed, or given other tasks within the agency in fiscal years 2015 or 2016.\nGroup 7: Vehicle must NOT have met, for fiscal year 2015, any agency utilization criteria (or there are no criteria in agency policy) that was specifically defined in agency policy or guidance documents, AND there was no written justification for the vehicle’s retention that was considered valid by the agency in fiscal year 2015. AND the vehicle was not reassigned, repurposed, or given other tasks within the agency in fiscal years 2015 or 2016.\nAgencies were responsible for categorizing each of the vehicles. We provided the agencies with each vehicle’s VIN number, make, model, and other identifying information to assist in the process. We did not verify whether agencies categorized vehicles correctly as some of the information necessary for these categorizations was contained within agency systems and records (for example, if the vehicle met an agency’s defined criteria or if the vehicle was repurposed). However, to evaluate the overall reliability of agencies’ vehicle justification reporting, we selected a random sample of 20 vehicles from each agency that placed vehicles into group 4 and then requested the written justifications for those vehicles.\nTo determine the cost savings that could be achieved through the reduction of potentially underutilized vehicles (groups 3, 5, and 7), we first determined what factors drove cost for the selected agencies in managing their owned vehicles. After conducting agency interviews, we determined that the main drivers of cost for agencies were depreciation, maintenance, and fuel. While there are other drivers of cost, agency officials reported that they did not collect information on the indirect costs associated with owned vehicle fleets such as fleet manager salaries or the costs to garage the vehicles. Although fuel is a main driver of cost, any reduction in fuel costs by removing these underutilized owned vehicles would most likely be offset to a large extent by an increase in fuel costs for other vehicles in the agency’s fleet in order to complete the agency’s mission. Thus, we determined that potential cost savings of underutilized vehicles would be achieved through determining the aggregate depreciation—which represents foregone cost avoidance— and maintenance costs for fiscal year 2015.\nAgencies used different methods to calculate depreciation, so we used GSA’s simplified straight-line depreciation method to calculate a consistent average annual depreciation cost per vehicle for each agency. We asked each agency to provide the average capitalized value, average salvage value, and average useful life (in years) for vehicles in their respective fleets. We then used these values to calculate average annual depreciation per vehicle and multiplied that cost to the number of vehicles that were potentially underutilized. This calculation represented the total depreciation of all potentially underutilized vehicles in each agency’s fleet for fiscal year 2015. However, because vehicles typically have greater depreciation during their first few years in operation, the straight-line depreciation method underestimates the actual loss of value for relatively new vehicles but overestimates the actual loss for vehicles nearing the end of their useful lives. The actual total cost savings—in the form of avoiding loss of value—from removing vehicles is difficult to estimate because it depends on many factors specific to each individual vehicle such as age and model, and economic factors such as the fluid market value for used vehicles.\nTo calculate the total maintenance cost for potentially underutilized vehicles, we asked the agencies to provide all maintenance transaction records by vehicle for fiscal year 2015. While NRCS and Navy could provide this information, CBP could only provide an unknown percentage of their total fleet maintenance transactions. This response is due to the fact that 60 percent of CBP’s fleet has access to agency-owned maintenance garages. CBP does not record asset-level maintenance transactions for their agency-owned maintenance garages. To address this issue, we asked CBP to provide the total maintenance cost incurred to the agency in fiscal year 2015 as well as the total number of vehicles in its fleet for fiscal year 2015. After CBP provided this information, we were able to calculate its average vehicle maintenance cost for fiscal year 2015, and we multiplied this average to the number of potentially underutilized vehicles in its fleet. Although the average per-vehicle maintenance costs are substantively lower for NRCS vehicles (groups 5 and 7) than those of CBP, high maintenance costs are consistent with CBP officials’ statements that their vehicles drive in difficult terrain. Given the potential for harsh driving conditions, we determined that their calculated total costs are reliable for reporting purposes.\nTo gather information related to challenges agencies face in managing the costs of their owned vehicle fleets, we spoke with fleet management officials from our three selected agencies: Navy, CBP, and NRCS. We conducted two discussion groups with fleet management officials in October 2016. We recruited participants by requesting volunteers from each agency’s fleet management pool, and then judgmentally selected the eventual participants in order to achieve a balance of representation among all three of the selected agencies. A total of 17 fleet management officials participated in our discussions, with at least one representative from each agency in each group. We also conducted individual interviews with upper management officials from each of the three selected agencies to discuss the challenges agencies face in managing the costs of their fleets. Findings from our discussion groups and interviews, while illustrative, are not generalizable to the full population of fleet management officials at these three agencies or the federal government.\nWe conducted this performance audit from March 2016 to April 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"Customs and Border Protection (CBP), Natural Resources Conservation Service (NRCS), and Navy have various processes to add an additional vehicle to their fleet or to replace an existing vehicle, specifically:\nDepartment of Homeland Security (DHS) fleet policy requires agency fleet managers to submit an annual Fleet Management Plan to the DHS Fleet Manager. According to DHS officials, upon approval by DHS, agencies may purchase vehicles based on available funding, up to the maximum number of vehicles approved. When ordering a replacement for an existing vehicle, CBP officials are to its established vehicle replacement criteria (which include mileage and age minimums) and, according to officials, ensure at least one of these standards are met before replacing a vehicle.\nWhen ordering a vehicle, NRCS officials are to determine the appropriate type of vehicle to purchase within each state and request vehicle replacements or new acquisitions from a centralized office, called Personal Property Services (PPS). PPS is responsible for purchasing all vehicles once the projected acquisitions are approved by USDA headquarters.\nAccording to Navy officials, Navy is subject to Department of Defense’s purchasing guidelines as well as its own policies. To purchase a new vehicle, users must submit a requirement form with a written justification for the vehicle. The justification may include descriptions such as vehicle type, required mileage, and anticipated number of times the vehicle will be used in a day. To order replacement vehicles, users must assess and justify the continued need for the vehicle to be replaced.",
"Transport Truck (Mack)\nHeavy Equipment Transport Truck (CT660S)\nTruck (Ford F650 Crew Cab XLT 4x4) Brush Fire Truck (Ford F550 Crew Cab 4x4 Truck, with bed conversion)\nHeavy Haul Tractor (T-30)\nSUV (Chevrolet Suburban)\nPassenger Van (Chevrolet Express 2500)\nAmbulance (PL Custom Classic 170 Dodge 4500 4WD) (2) SUVs (Chevrolet 1500 Suburbans)\nDump Truck (Hook Lift with Flat Bed and 8 Yard Dump Box) (2) Minivans (Dodge Grand Caravans) Ambulance (Ford E450) Truck (Toyota Tacoma, 4WD)\nDump Truck (Mack Model GU713)\nPassenger Bus (Turtle Top Odyssey XLT with Freightliner M2)\nSUV (Ford Explorer Limited)",
"",
"",
"In addition to the contact named above, John W. Shumann (Assistant Director), Alison Snyder (Analyst-in-Charge), Margaret Hettinger, Terence Lam, Jerome Sandau, Candace Silva-Martin, Michelle Weathers, Crystal Wesco, and Elizabeth Wood made key contributions to this report.",
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"question": [
"How did GAO source their data for their review?",
"To what extent was this data sampled uniformly across all government agencies?",
"How did GAO further supplement the raw vehicular data?",
"To what extent can the findings be applied to all agencies?"
],
"summary": [
"GAO analyzed government-wide data on approximately 64,500 light trucks and passenger vehicles purchased through GSA from fiscal years 2011 through 2015, the most recent available.",
"To assess utilization efforts, GAO selected three agencies (using factors such as fleet size), and reviewed agency utilization information on over 12,000 owned vehicles from fiscal year 2015.",
"GAO also interviewed federal officials.",
"These findings are not generalizable to all agencies but provide insight into the practices of agencies that procure thousands of vehicles."
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CRS_RS21573
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{
"title": [
"",
"Introduction",
"Background",
"Flexible Spending Accounts",
"Health Reimbursement Accounts",
"Health Savings Accounts",
"Medical Savings Accounts",
"ACA Market Reforms and Tax-Preferred Accounts",
"Account Usage",
"Accessibility",
"Enrollment"
],
"paragraphs": [
"",
"Four types of tax-advantaged accounts can be used to pay for qualifying unreimbursed medical expenses: Health Care Flexible Spending Accounts (FSAs), Health Reimbursement Accounts (HRAs), Health Savings Accounts (HSAs), and Medical Savings Accounts (MSAs). Qualifying medical expenses typically include deductibles, copayments, and goods and/or services not covered by insurance. (More details are given below.) This report describes current law surrounding these accounts and provides a side-by-side comparison of their key features. The report also provides an indication of the relative prevalence of the accounts.\nThere are two broad categories of tax provisions that can lower an individual's tax liability because of qualifying medical expenses. First, qualifying medical expenses can be a tax deduction. Tax filers can itemize medical expenses incurred by him- or herself, spouse, and dependents if these expenses are over the legislative minimum.\nSecond, tax filers can use one (or occasionally more) of the tax-advantaged accounts discussed in this report. Although the accounts differ in many ways, each account contains contributed income that the account holder uses to pay for qualifying medical expenses. Each account provides tax savings to the account holder because the money contributed to the account is not considered a part of the individual's adjusted gross income. Therefore, no taxes are paid on this income, and for those arrangements where the income is placed in an account, no taxes are paid on interest earned on the income in the account. Moreover, the tax filer does not need to itemize deductions to receive tax savings from the account.\nItemized deductions cannot be funded through a tax-advantaged account, and expenses funded through an account cannot be declared as itemized deductions. In other words, \"double counting\" is prohibited.",
"In general, qualifying medical expenses are defined in the Internal Revenue Code (IRC) at Section 213(d) and typically include deductibles, copayments, and goods and/or services not covered by insurance. The goods and/or services can include medical services rendered by physicians, surgeons, dentists, and other medical practitioners. The costs of equipment, supplies, devices, and prescription drugs are also qualifying expenses. To qualify, the medical care must be primarily used to alleviate or prevent a physical or mental defect or illness. Care used to benefit general health (e.g., exercise equipment, vitamins, and vacations) is not a qualifying medical expense. Some examples of qualifying medical expenses are breast reconstruction surgery, disabled dependent care expenses, fertility enhancement (as specified), hospital services, lifetime care—advance payments, long-term care, psychiatric care, special education, and transplants. Some examples of expenses that are not qualifying medical expenses are cosmetic surgery, funeral expenses, health club dues, and household help. Over-the-counter medications are not qualified medical expenses unless prescribed by a physician. Finally, insulin is always a qualifying medical expense, whether or not it is purchased with a prescription.\nTable 1 provides a more detailed side-by-side comparison of the laws and regulations governing each account. In each case, the reimbursement is for qualifying medical and dental expenses not covered by insurance. The beneficiaries for all accounts are the employee, spouse, and dependents.",
"FSAs are employer-established arrangements that reimburse employees for qualifying expenses. FSAs are usually funded through salary reduction agreements in compliance with Section 125(i) of the IRC, under which employees receive lower monetary wages in exchange for equivalent contributions to their flexible spending accounts. For example, employees may forgo $100 a month in their 2013 paychecks, which will result in a $1,200 annual contribution to their FSA. The entire annual amount of an FSA must be made available to employees at the beginning of the year. Suppose the above employee had surgery during February, and incurred over $1,500 in unreimbursed qualifying medical expenses. The employee could use the full $1,200 annual FSA contribution to help pay for these expenses, even though he or she may have contributed only $200 into the account by that point in the year.\nBeginning in 2013, contributions are limited to $2,500 per employee. If each member of a married couple is eligible to enroll in an FSA, then each member can contribute up to $2,500. The FSA limits are adjusted for inflation yearly using the Consumer Price Index for All-Urban Consumers (CPI-U). Prior to 2013, the IRS did not set a maximum annual contribution. Plans typically had a dollar or percentage maximum for elective contributions from salary reductions. Within these limits, employees choose how much to put into their accounts, and this amount can vary from year to year.\nEmployers can choose one of three mutually exclusive policies for the treatment of contributions in any given year that were not used to reimburse qualifying medical treatment in that year:\nemployees forfeit unused balances at the end of the year, employees have a grace period for additional claims of up to 2½ months after the end of the year (i.e., so medical expenses incurred by March 15, 2013, could be reimbursed from the FSA from the 2012 contribution), or employees have a carry-over period where they can transfer up to $500 in unused contributions into an FSA for the next plan year; the employer may specify a lower carry-over amount.\nThis third option is newly available for plan-years beginning in 2013 or later.\nWhile compensation received as wages is subject to income taxes, as well as Social Security and Medicare taxes, compensation received as FSA contributions is not subject to these taxes. For this reason, employees who anticipate having health expenses not covered by insurance may prefer FSAs over monetary wages.\nAs mentioned above, many FSAs are funded by salary reduction agreements. These FSAs are governed by Section 125 of the IRC, which exempts contributions from taxes even though the employees have the choice to receive taxable wages. However, if FSAs are funded by nonelective employer contributions then their tax treatment is not governed by the cafeteria plan provisions in Section 125; in this situation, the employee does not have a choice between receiving cash and a normally nontaxable benefit. Instead, the benefits are nontaxable since they are directly excludable under some other provisions of the Code. For example, nonelective employer-funded FSAs for health care are tax-exempt under Sections 105 and 106.\nMost rules regarding FSAs are not spelled out in the IRC; they were initially included in proposed regulations issued by the Internal Revenue Service (IRS) in 1984 and 1989, and have been subsequently modified.",
"HRAs are employer-established accounts used to reimburse employees and in some instances former employees for qualifying medical expenses. Health reimbursement accounts are sometimes termed health reimbursement arrangements . As is the case with FSAs, contributions are not subject to either income or employment taxes. However, contributions cannot be made through the employees' salary reduction agreements; only employers may contribute.\nHRAs differ from FSAs in several important respects. Employers may restrict the types of medical and health services that are eligible for reimbursement from the list of qualified medical expenses. For example, an employer may choose not to reimburse expenses associated with acupuncture treatments even though the IRS considers acupuncture a qualifying medical expense. Employers need not actually fund HRAs until employees draw upon them, and the total reimbursement amount for a coverage period need not be available at all times during the period. In addition, the coverage period for the reimbursement amount may be less than a year, and HRAs reimbursements can be limited to amounts previously contributed.\nUnused HRA balances may be carried over indefinitely, although employers may limit the aggregate carryovers and the carryovers must be used for qualified medical expenses. Finally, employees who change jobs or retire may take the funds in their HRA with them, if their employer has set up an account which allows for this. The provisions in this paragraph, however, are optional (not required) for the employer.\nHRAs are governed by Section 105 of the IRC, which allows health plan benefits used for medical care to be exempt from taxes, and Section 106 of the IRC, which allows employer contributions to those plans to be tax-exempt. Rules regarding HRAs were spelled out by the IRS in 2002.",
"HSAs are tax-exempt accounts that are used to pay for qualifying medical expenses. Unlike FSAs and HRAs, they are established by individuals with an insurance plan meeting certain criteria. In particular, the individual must have a high deductible health (insurance) plan (HDHP). For those individuals with employer-sponsored insurance, the employer must offer an HSA-qualified plan for the employee to be eligible for an HSA. An individual may also purchase an HSA-qualified insurance plan through the individual insurance market.\nTo be HSA-qualified, the HDHP must meet certain requirements. In 2013, an HDHP must have a deductible of at least $1,250 for self-only coverage and $2,500 for family coverage. The deductible is indexed annually for inflation using the CPI-U. There are other criteria including that the plan holder have no other major medical health insurance policy.\nIn 2013, HSA contributions are limited to $3,250 for self-only coverage and $6,450 for family coverage. These limits are indexed annually by the CPI-U. An additional annual contribution of $1,000 is allowed for people who were age 55 and older at the end of their last tax year and not enrolled in Medicare as of the current month; this contribution is not indexed for inflation. HSA holders cannot contribute to their account in any month they do not have qualifying HDHPs as of the first day of the month. On the other hand, HSA holders can draw funds from their accounts even if they are not permitted to contribute.\nHSAs can carry significant tax advantages. Contributions made by employers are exempt from income and employment taxes. Account owners may deduct contributions they make from adjusted gross income; in other words, owners do not have to itemize deductions to take advantage of this tax savings. Withdrawals for qualifying medical expenses are not taxed; those used for any non-medical purpose are taxable. In addition, withdrawals for non-medical purposes are subject to a 20% penalty except in cases of disability, death, or attaining age 65. Unused balances may be carried over from year to year without limit.\nHSAs were first authorized by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173 ). Most statutory rules are in Section 223 of the IRC. The Treasury Department provides revenue guidance as well.",
"MSAs, also known as Archer MSAs, are a precursor to HSAs. Like HSAs, MSAs can be established and contributions made only when insurance plan holders have an HDHP and no other coverage, with some exceptions. Contributions made by employers are exempt from income and employment taxes. Contributions made by account owners (allowed only if the employer does not contribute) are deductible for income-tax purposes even if the account owner does not itemize deductions. Withdrawals are not taxed if used for medical expenses; those used for non-medical purposes are taxable and are subject to a 20% penalty except in cases of disability, death, or attaining age 65. Unused balances may be carried over from year to year without limit.\nThe principal difference between HSAs and MSAs is that MSA eligibility is limited to people who are self-employed or employed by a small employer (50 or fewer employees, on average). In addition, the MSAs' minimum deductible levels are higher and the contribution limits are lower.\nMSAs were first authorized by the Health Insurance Portability and Accountability Act of 1996 (HIPAA, P.L. 104-191 ). HIPAA limited the total number of MSAs that could be created by all employers. With one exception, no MSAs could be created after December 31, 2007, although MSAs existing at that time were grandfathered. The exception is that an employee who begins to work for an employer that already sponsors MSAs is permitted to open an MSA. Most statutory rules governing MSAs are in Section 220 of the IRC.",
"The Patient Protection and Affordable Care Act (ACA, P.L. 111-148 , as amended) specified that health insurance plans cannot include a cap on benefits. Because HRAs do cap benefits, some have questioned whether HRAs are permitted after the ACA market reforms take effect on January 1, 2014. The IRS has ruled that HRAs are permitted when they are integrated with the other employer-provided coverage, and are not permitted when they are stand alone accounts. An integrated HRA is one where the employees are enrolled in the primary group health plan coverage and no one but the employees are permitted to enroll in the primary group health plan coverage.\nMost other HRAs are stand-alone HRAs and will not be permitted coverage on or after January 1, 2014. For example, it is not permitted for an employer to provide employees with HRA funding to purchase coverage on the individual market.",
"Data limitations make it difficult to compare measures of account usage across the four accounts. Nevertheless, this section provides a brief overview of the available information, distinguishing between the accessibility of the account and the enrollment in the account. It is easier for each individual employer to report whether it offers one of these accounts than to report the number of employees actually enrolled. For this and perhaps other reasons, published data are more readily available on access than on enrollment. Because very few new MSAs are being created, and because the number of MSAs has always been limited, there are almost no data available on their number. The report also presents measures of the enrollment in each of the four account types. It should be emphasized that the data are not comparable across the accounts.",
"The National Compensation Survey, a survey of employers conducted by the Bureau of Labor Statistics (BLS), reports the percent of workers who have access to health care FSAs. According to the BLS survey, 40% of all civilian workers in 2012 had access to a health care FSA. When viewed by firm size, 53% of civilian workers in firms with 100 or more workers had access to an FSA. The accounts were not as common for civilian workers in small businesses. In establishments with fewer than 100 employees, 20% of the workers had access to a health care FSA.\nThe definition of accessibility is not as straightforward for HSAs and HRAs. Unlike with FSAs, those who hold HSAs must have HDHPs. One measure of HSA accessibility is therefore possession of an HDHP that qualifies for an HSA. According to a survey of private employers conducted by the Kaiser Family Foundation and the Health Research & Educational Trust (KFF/HRET) in 2012, 26% of firms offering health benefits offered an HSA-qualified HDHP. This percent was 12% in 2010 and 18% in 2011. Workers in larger firms were more likely to have access to an HDHP than those in smaller firms. Although employers are not required to restrict HRA benefits to employees with HDHPs, most employers chose to do so. Of employers offering health benefits, there was no discernible upward or downward trend in the percent who offered an HDHP and an HRA; the percentage was 4% in 2010, 7% in 2011, and 5% in 2012.",
"The Employee Benefit Research Institute conducts annual internet surveys of adults ages 21 to 64, inclusive. The survey measures the number of adults with either an HSA or an HRA. The results are then extrapolated. The research concluded that the combined number of adults with either an HSA or an HRA was 4.8 million in 2009, 5.4 million in 2010, 8.5 million in 2011, and 11.6 million in 2012. A substantial majority of these individuals are likely to be HSA holders."
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"To what extent are the four accounts similar?",
"How does this report compare the accounts?",
"What do all accounts reimburse?",
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"How widespread are civilian healthcare flexible accounts?",
"How does this compare to civilian access to HSA-qualified HDHPs?"
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"summary": [
"Although these four tax-advantaged health accounts share some common features, they also differ in important respects.",
"This report provides brief summaries of the tax-exempt accounts and compares them with respect to eligibility, contribution limits, use of funds, and other characteristics for tax year 2013. A basic discussion of the four accounts is followed by a side-by-side comparison of their key features.",
"The accounts can be summarized as follows, where all accounts reimburse qualifying medical and dental expenses not covered by insurance.",
"The report concludes with a brief discussion of the usage in these four accounts. Comparing usage is difficult because no single data source contains comparable information on all four accounts and the years of data availability differ across data source.",
"In broad terms, 40% of all civilian workers in 2012 had access to a health care flexible spending account.",
"Of those private firms offering health benefits in 2012, 26% offered an HSA-qualified HDHP."
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CRS_R45397
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"title": [
"",
"Introduction",
"How the Official Poverty Measure Is Computed",
"Historical Perspective",
"Poverty for Demographic Groups9",
"Family Structure",
"Age",
"Race and Hispanic Origin12",
"Work Status",
"Poverty Rates by State18",
"Supplemental Poverty Measure",
"How the Official Poverty Measure Was Developed",
"Motivation for a Supplemental Measure",
"Official and Supplemental Poverty Findings for 201725"
],
"paragraphs": [
"",
"In 2017, approximately 39.7 million people, or 12.3% of the population, had incomes below the official definition of poverty in the United States. The poverty rate (the percentage that were in poverty), fell from 12.7% in 2016, while the number of persons in poverty showed no discernible change.\nIn this report, the numbers and percentages of those in poverty are based on the Census Bureau's estimates. While this official measure is often regarded as a statistical yardstick rather than a complete description of what people and families need to live, it does offer a measure of economic hardship faced by the low-income population: the poverty measure compares family income against a dollar amount called a poverty threshold , a level below which the family is considered to be poor. The Census Bureau releases these poverty estimates every September for the prior calendar year. Most of the comparisons discussed in this report are year-to-year comparisons. This report only considers a number or percentage to have changed from the previous year, or to be different from another number or percentage, if the difference has been tested to be statistically significant at the 90-percent confidence level.\nHowever, in addition to the most recent year's data, this report presents a historical perspective as well as information on poverty for demographic groups (by family structure, age, race and Hispanic origin, and work status) and by state.\nOver the past several decades, criticisms of the official poverty measure have led to the development of an alternative research measure called the Supplemental Poverty Measure (SPM), which the Census Bureau also computes and releases. Statistics comparing the official measure with the SPM are provided at the conclusion of this brief.\nThe SPM includes the effects of taxes and in-kind benefits (such as housing, energy, and food assistance) on poverty, while the official measure does not. Because some types of tax credits are used to assist the poor, as are other forms of assistance, the SPM may be of interest to policymakers. However, the official measure provides a comparison of the poor population over a longer time period, including some years before many current anti-poverty assistance programs had been developed. In developing poverty-related legislation and conducting oversight on programs that aid the low-income population, policymakers may be interested in these historical trends.",
"The Census Bureau determines a person's poverty status by comparing his or her resources against a measure of need. For the official measure, \"resources\" is defined as total family income before taxes, and the measure of \"need\" is a dollar amount called a poverty threshold. There are 48 poverty thresholds that vary by family size and composition. If a person lives with other people to whom he or she is related by birth, marriage, or adoption, the money income from all family members is used to determine his or her poverty status. If a person does not live with any family members, his or her own income is used. Only money income before taxes is used in calculating the official poverty measure, meaning this measure does not treat in-kind benefits such as the Supplemental Nutritional Assistance Program (SNAP, formerly known as food stamps), housing subsidies, or employer-provided benefits as income.\nThe poverty threshold dollar amounts vary by the size of the family (from one person not living in a family, to nine or more family members living together) and the ages of the family members (how many of the members are children under 18 and whether or not the family head is 65 years of age or older). Collectively, these poverty thresholds are often referred to as the \"poverty line.\" As a rough guide, the poverty line can be thought of as $25,094 for a family of four, $19,515 for a family of three, $15,877 for a family of two, or $12,488 for an individual not living in a family, though the official measure is actually much more detailed.\nThe threshold dollar amounts are updated annually for inflation using the Consumer Price Index. Notably, the same thresholds are applied throughout the country: no adjustment is made for geographic variations in living expenses.\nThe official poverty measure used in this report is the federal government's definition of poverty for statistical purposes, such as comparing the number or percentage of people in poverty over time. A different definition of poverty, the poverty guidelines published by the Department of Health and Human Services (HHS), is used for administrative purposes such as eligibility criteria for assistance programs and will not be discussed in this report.",
"Figure 1 shows a historical perspective of the number and percent of the population below the poverty line. The number in poverty and the poverty rates are shown from the earliest year available (1959) through the most recent year available (2017). Because the total U.S. population has grown over time, poverty rates are useful for historical comparisons because they control for population growth.\nPoverty rates fell through the 1960s. Since then, they have generally risen and fallen according to the economic cycle, though during the most recent two expansions poverty rates did not fall measurably until four to six years into the expansion. Historically notable lows occurred in 1973 (11.1%) and 2000 (11.3%) . Poverty rate peaks occurred in 1983 (15.2%), 1993 (15.1%), and 2010 (15.1%).\nPoverty rates tend to rise during and after recessions, as opposed to leading economic indicators such as new housing construction, whose changes often precede changes in the performance of the overall economy. The poverty rate's lag is explainable in part by the way it is measured: it uses income from the entire calendar year.\nNotably, the poverty rate in 2017 registered a third consecutive annual decrease since the most recent recession, though it remained higher than the rate in 2000, the most recent low point.",
"The drop in the U.S. poverty rate (from 12.7% in 2016 to 12.3% in 2017) affected some demographic groups more than others, notably the population ages 18 to 64, people of Hispanic origin, and part-time workers; it was not a broad-based decline. Details for selected demographic groups are described below.",
"Because poverty status is determined at the family level by comparing resources against a measure of need, vulnerability to poverty may differ among families of different compositions. In this section, poverty data by family structure are presented using the official poverty measure, along with a definition of \"family\" that the Census Bureau has used in the CPS ASEC for nearly four decades. In the \" Supplemental Poverty Measure \" section of this report, a different definition will be used.\nFamilies with a female householder and no husband present (female-householder families) have historically had higher poverty rates than both married-couple families and families with a male householder and no wife present (male-householder families). This remained true in 2017: female-householder families experienced a poverty rate of 25.7%, compared with 4.9% for married-couple families and 12.4% for male-householder families. None of these groups registered a significant decrease from 2016, although families as a whole (i.e., all family types together) did—from 9.8% in 2016 to 9.3% in 2017, a drop of 0.4 percentage points after rounding).\nAmong individuals not living in families, the poverty rate was 20.7% in 2017, not distinguishable from the previous year. Poverty rates of families in 2017 are shown in Figure 2 .",
"When examining poverty by age, three main groups are noteworthy for distinct reasons: under 18, 18 to 64, and 65 and older. People under age 18 are typically dependent on other family members for income, particularly young children below their state's legal working age. People ages 18 to 64 are generally thought of as the working-age population and typically have wages and salaries as their greatest source of income. People 65 years and older, referred to as the aged population, are often eligible for retirement, and those who do retire typically experience a change in their primary source of income.\nFor the working-age population, the poverty rate, but not the number of persons in poverty (22.2 million), registered a decline. In 2017, 11.2% of the working-age population was in poverty (down from 11.6% in 2016). Neither children nor the aged registered any significant changes in their poverty rate or number in poverty from 2016. Among children, 12.8 million (or 17.5%) were poor; among the aged population, 4.7 million (or 9.2%) were poor.\nFrom a historical standpoint, the poverty rate for those 65 and over used to be the highest of the three groups. In 1966, the aged had a poverty rate of 28.5%, compared with 17.6% for those under 18 and 10.5% for working-age adults. By 1974, the poverty rate for people 65 and over had fallen to 14.6%, compared with 15.4% for people under 18 and 8.3% for working-age adults. Since then, people under 18 have had the highest poverty rate of the three age groups, as shown in Figure 3 .",
"Poverty rates vary by race and Hispanic origin, as shown in Figure 4 . In surveys, Hispanic origin is asked separately from race; accordingly, people identifying as Hispanic may be of any race. The poverty rate fell for Hispanics (from 19.4% in 2016 to 18.3% in 2017). Among blacks (21.2%), Asians (10.0%), and non-Hispanic whites (8.7%), the poverty rate did not change discernably from 2016.",
"While having a job reduced the likelihood of being in poverty, it did not guarantee that a person or his or her family would avoid poverty. Among the 18 to 64 year old population living in poverty, 36.6% had jobs in 2017. However, workers were less likely to be in poverty in 2017 (5.3%) than they were the year before (5.8%). Among full-time year-round workers, 2.2% were poor in 2017, not measurably changed from the previous year. Among part-time or part-year workers, 13.4% were poor, down from 14.7% in 2016. No change was detected among those who did not work at least one week in 2017 (30.7% were poor).\nBecause poverty is a family-based measure, the change in one member's work status can affect the poverty status of his or her entire family. Among all 18 to 64 year olds who did not have jobs in 2017, 58.1% lived in families in which someone else did have a job. Among poor 18 to 64 year olds without jobs, 19.1% lived in families where someone else worked.",
"Poverty is not equally prevalent in all parts of the country. The map in Figure 5 shows states with relatively high poverty rates across parts of the Appalachians, the deep South, and the Southwest, with the poverty rate in Mississippi (19.8%) among the highest in the nation, and not statistically different from the rates in New Mexico (19.7%), Louisiana (19.7%), and West Virginia (19.1%). The poverty rate in New Hampshire (7.7%) was lowest. When comparing poverty rates geographically, it is important to remember that the official poverty thresholds are not adjusted for geographic variations in the cost of living—the same thresholds are used nationwide. As such, an area with a lower cost of living accompanied by lower wages will appear to have a higher poverty rate than an area with a higher cost of living and higher wages, even if individuals' purchasing power were exactly the same in both areas.\nThe District of Columbia and 20 states experienced poverty rate declines from 2016 to 2017: six in the Midwest (Illinois, Indiana, Iowa, Michigan, Missouri, and Ohio), three in the Northeast (Maine, New York, and Pennsylvania); eight in the South (District of Columbia, Florida, Georgia, Kentucky, Mississippi, North Carolina, Tennessee, and Texas); and four in the West (Arizona, California, Colorado, and Idaho). Delaware and West Virginia were the only states to experience increases, and 28 states, as well as Puerto Rico, experienced no significant change.",
"Criticisms of the official measure have led to the development of the Supplemental Poverty Measure (SPM). Described below are the development of the official measure, its limitations, attempts to remedy those limitations, the research efforts that led to the SPM, and a comparison of poverty rates based on the SPM and the official measure.",
"The poverty thresholds were originally developed in the early 1960s by Mollie Orshansky of the Social Security Administration. Rather than attempt to compute a family budget by using prices for all essential items that low-income families need to live, Orshansky focused on food costs. Unlike other goods and services such as housing or transportation, which did not have a generally agreed-upon level of adequacy, minimum standards for nutrition were known and widely accepted. According to a 1955 U.S. Department of Agriculture (USDA) food consumption survey, the average amount of their income that families spent on food was roughly one-third. Therefore, using the cost of a minimum food budget and multiplying that figure by three yielded a figure for total family income. That computation was possible because USDA had already published recommended food budgets as a way to address the nutritional needs of families experiencing economic stress. Some additional adjustments were made to derive poverty thresholds for two-person families and individuals not living in families to reflect the relatively higher fixed costs of smaller households.",
"While the official poverty measure has been used for over 50 years as the source of official statistics on poverty in the United States, it has received criticism over the years for several reasons. First, it does not take into account benefits from most of the largest programs that aid the low-income population. For instance, it uses money income before taxes – meaning that it does not necessarily measure the income available for individuals to spend, which for most people is after-tax income. Therefore, any effects of tax credits designed to assist persons with low income are not captured by the official measure. The focus on money income also does not account for in-kind benefit programs designed to help the poor, such as SNAP or housing assistance.\nThe official measure has also been criticized for the way it characterizes families' and individuals' needs in the poverty thresholds. That is, the method used to compute the dollar amounts used in the thresholds, which were originally based on food expenditures in the 1950s and food costs in the 1960s, do not accurately reflect current needs and available goods and services. Moreover, the official measure does not take account of the sharing of expenses and income among household members not related by birth, marriage, or adoption. And, as mentioned earlier, the official thresholds do not take account of geographic variations in the cost of living.\nIn 1995, a panel from the National Academy of Sciences issued a report, Measuring Poverty: A New Approach, which recommended improvements to the poverty measure. Among the suggested improvements were to have the poverty thresholds reflect the costs of food, clothing, shelter, utilities, and a little bit extra to allow for miscellaneous needs; to broaden the definition of \"family;\" to include geographic adjustments as part of the measure's computation; to include the out-of-pocket costs of medical expenses in the measure's computation; and to subtract work-related expenses from income. An overarching goal of the recommendations was to make the poverty measure more closely aligned with the real-life needs and available resources of the low-income population, as well as the changes that have taken place over time in their circumstances, owing to changes in the nation's economy, society, and public policies (see Table 1 ).\nAfter over a decade and a half of research to implement and refine the methodology suggested by the panel, conducted both from within the Census Bureau as well as from other federal agencies and the academic community, the Census Bureau issued the first report using the Supplemental Poverty Measure (SPM) in November 2011.",
"Compared with the official measure, the SPM takes into account greater detail of individuals' and families' living arrangements and provides a more up-to-date accounting of the costs and resources available to them. Because the SPM recognizes greater detail in relationships among household members and geographically adjusts housing costs, it provides an updated rendering, compared with the official measure, of the circumstances in which the poor live. In that context, some point out that the SPM's measurement of taxes, transfers, and expenses may offer policymakers a clearer view of how government policies affect the poor population today. However, the SPM was developed as a research measure, and the Office of Management and Budget set the expectation that it would be revised periodically to incorporate improved measurement methods and newer sources of data as they became available; it was not developed for administrative purposes. Conversely, the official measure's consistency over a longer time span makes it easier for policymakers and researchers to make historical comparisons.\nUnder the SPM, the profile of the poverty population is slightly different than under the official measure. After rounding, the SPM was about 1.6 percentage points higher in 2017 than the official poverty rate (13.9% compared with 12.3%, a figure that includes foster children under age 15, who are not normally included in the official measure. See Figure 6 ). More people ages 18 to 64 are in poverty under the SPM (13.2% compared with 11.2% under the 2017 official measure), as are people ages 65 and over (14.1%, compared with 9.2% under the official measure). The poverty rate for people under age 18 was lower under the SPM (15.6% in 2017) than under the official measure (17.5%, with foster children included). Again, the SPM uses a different definition of resources than the official measure: the SPM includes in-kind benefits which generally help families with children; subtracts out work-related expenses, which are often incurred by the working-age population; and subtracts medical out-of-pocket expenses, which are incurred frequently by people age 65 and older.\nWith the geographically-adjusted thresholds, the poverty rate in 2017 was lower under the SPM than under the official measure for the Midwest (10.7% compared with 11.4%), while it was higher than the official measure for the Northeast (14.2% compared with 11.4%), the West (15.1% compared with 11.8%), and the South (14.8% compared with 13.6%)."
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"question": [
"How prevalent is poverty in the United States?",
"Why are poverty statistics important?",
"How is the standard of poverty calculated in the United States?",
"How did the poverty rate change from 2016 to 2017?",
"To what extent does this follow a trend in poverty-rate changes?",
"How do poverty rates among different householder combinations vary?",
"How have the poverty rates in these groups changed since 2016?",
"How have poverty rates changed among the working-age populations?",
"How does this change compare to the change for children and seniors?",
"How have the poverty rates of all three groups changed over time?",
"To what extent is poverty uniformly spread across the US?",
"How does the SPM differ from the official measure?",
"Why is the SPM of interest to policymakers?",
"How do the poverty rates calculated by SPM and the official measure differ?",
"How do the measures differ for different age groups?",
"Why are both measures still in use?",
"How might these historical trends be used?"
],
"summary": [
"In 2017, approximately 39.7 million people, or 12.3% of the population, had incomes below the official definition of poverty in the United States.",
"Poverty statistics provide a measure of economic hardship.",
"The official definition of poverty for the United States uses dollar amounts called poverty thresholds that vary by family size and the members' ages. Families with incomes below their respective thresholds are considered to be in poverty.",
"The poverty rate (the percentage that was in poverty) fell from 12.7% in 2016.",
"This was the third consecutive year since the most recent recession that the poverty rate has fallen.",
"The poverty rate for female-householder families (25.7%) was higher in 2017 than that for male-householder families (12.4%) or married-couple families (4.9%).",
"None of these poverty rates registered a discernible change from 2016.",
"Among the working-age population (18 to 64 year olds), the poverty rate fell to 11.2% in 2017, down from 11.6% in 2016.",
"Neither children (people under 18) nor the aged (people ages 65 and older) had discernible changes to their poverty rates over the period.",
"Of the three age groups—children, the working-age population, and the aged—the latter used to have the highest poverty rates but now has the lowest: 28.5% of the aged population was poor in 1966, but 9.2% was poor in 2017. People under 18, in contrast, have the highest poverty rate of the three age groups: 17.5% were poor in 2017.",
"Poverty is not equally prevalent in all parts of the country. The poverty rate for Mississippi (19.8%) appeared to be the highest but was in a statistical tie with New Mexico (19.7%), Louisiana (19.7%), and West Virginia (19.1%). New Hampshire's poverty rate (7.7%) was the lowest in 2017.",
"The SPM includes the effects of taxes and in-kind benefits (such as housing, energy, and food assistance) on poverty, while the official measure does not.",
"Because some types of tax credits are used to assist the poor (as are other forms of assistance), the SPM may be of interest to policymakers.",
"The poverty rate under the SPM (13.9%) was about 1.6 percentage points higher in 2017 than the official poverty rate (12.3%). Under the SPM, the profile of the poverty population is slightly different than under the official measure.",
"Compared with the official measure, poverty rates under the SPM were lower for children (15.6% compared with 17.5%) and higher for working-age adults (13.2% compared with 11.2%) and the population age 65 and older (14.1% compared with 9.2%).",
"While the SPM reflects more current measurement methods, the official measure provides a comparison of the poor population over a longer time period, including some years before many current anti-poverty assistance programs had been developed.",
"In developing poverty-related legislation and conducting oversight on programs that aid the low-income population, policymakers may be interested in these historical trends."
],
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-1,
-1,
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-1,
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-1,
4
],
"summary_paragraph_index": [
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}
|
CRS_R40705
|
{
"title": [
"",
"Introduction",
"Current Practices and Initiatives in Home Visiting",
"Review of Selected Home Visiting Models",
"Target Population",
"Age of Child When Service Begins and Ends",
"Length of Home Visits",
"Staff Qualifications and Training",
"Goals",
"Implementation of Home Visiting by States",
"Current ACF Home Visiting Initiative",
"Status of the ACF Home Visiting Initiative",
"Existing Federal, State, and Local Funding Streams for Home Visiting25",
"Federal Funding Sources",
"State and Local Funding Sources",
"Funding Sources by Home Visiting Model",
"Current Investment In and Estimated Costs of Home Visiting",
"Research and Evaluation of Existing Home Visiting Programs",
"Methods for Evaluating Program Models",
"Research Findings by Desired Program Outcomes",
"Findings in the Maternal and Child Health Domain",
"Maternal Mental Health and Substance Abuse",
"Number and Frequency of Subsequent Pregnancies",
"Healthy Birth Weight",
"Adequacy of Preventative Health Care",
"Need for Urgent Care or Hospitalization",
"Findings in the Child Social, Emotional, and Cognitive Development Domain",
"School Readiness and Achievement",
"Examining Child Development Outcomes by Program Strategies",
"Findings in the Family/Parent Functioning Domain",
"Preventing Abuse and Neglect",
"Improved Parenting Behaviors",
"Family Self-Sufficiency",
"Recent Administration and Congressional Proposals to Support Home Visiting",
"Home Visiting Program Proposed by the Obama Administration",
"FY2010 Budget Resolution",
"Proposed Grants to States for Home Visitation in Health Care Legislation",
"",
"Proposed Nurse Home Visitation Services Under Medicaid",
"Hearing on Proposals to Support Early Childhood Home Visitation"
],
"paragraphs": [
"",
"Home visiting is a strategy for delivering support and services to families or individuals in their homes. While home visiting may also be used to address needs of the chronically ill or elderly, this report deals exclusively with home visiting as a service strategy for families with young children or those who are expecting children. Further, as used in this report, the terms \"home visitation\" or \"home visiting programs\" refer to structured models of interaction with families and children; these programs have specific child and family goals, involve regular home visits over a sustained period of time, and have established components or curricula to be covered during those visits. Further, this kind of home visitation is typically implemented as a primary prevention strategy—home visiting is offered before any specific \"problem\" (e.g., abuse or neglect of children, early childhood developmental delays) has been identified. At the same time, many home visitation models discussed in this report target services to families with certain risk factors (e.g., low income, low social support) for poor child outcomes. In addition, some home visiting programs implement intervention strategies meant to prevent recurrence of a poor outcome or to limit any ongoing negative consequences.\nThere are a variety of early home visiting models. These models typically seek to positively impact one or more child or family outcomes across three main domains: maternal and child health; early childhood social, emotional, and cognitive development; and family/parent functioning. Some estimates suggest that, at any point in time, as many as 400,000 to 500,000 families may be receiving early childhood home visitation services. This equals about 3% of all families with children under the age of six (17.4 million families), or a little more than 7% of those same families with income below 200% of the poverty line (7.0 million families). Depending on the particular model of early childhood home visitation being used, the visitors may be specially trained nurses, other professionals, or paraprofessionals; visits may begin during a woman's pregnancy or later; and the visits may continue, regularly, until the child reaches his/her second birthday or enters school. Participation of families is voluntary.\nEarly childhood home visitation is currently undergoing a phase of broad popularity. This appears to be driven in some part by newer research on how the human brain develops and, specifically, the significance of the prenatal and early childhood environments to later life. To a large extent, parents shape their children's earliest experiences, and because most home visiting programs seek to help parents understand their own child's development, advocates see these programs as an opportunity to enhance child development, thereby achieving long-term positive benefits for the children, their parents, and society. Further, at least since the 1960s, a variety of early childhood home visiting models have undergone many assessments and evaluations intended to test how effectively they achieve their goals. While the results of these evaluations have been mixed, some models, or aspects of models, have been shown to be particularly effective. Overall, while researchers have cautioned that home visiting is not a panacea, they have generally encouraged its use as part of a range of strategies intended to enhance and improve early childhood.",
"There are many \"models\" used to provide voluntary prenatal and early childhood home visitation. At the state and community level, implementation of early childhood home visitation models can vary greatly. Some states and communities rely on established models, others blend components from more than one model, and some develop their own models. In addition, many states support more than one model of home visiting. These models may target different groups of families, have different primary goals, and/or operate in different parts of the state.\nThe Administration for Children and Families (ACF), an agency of the U.S. Department of Health and Human Services (HHS), is currently carrying out a competitive grant initiative intended to assist grantees in implementing home visitation models that have been proven effective. Apart from this research effort (described below), the federal government currently supports some ongoing programs in which home visitation is a primary strategy for achieving program goals (e.g., Early Head Start), others in which support for home visiting is explicitly permitted or strongly suggested by the program's statutory authority (e.g., Maternal and Child Health Block Grant and Promoting Safe and Stable Families), and still others where the broad purposes of the program allow use of funds for some or all of the activities supported by home visitation programs (e.g., Temporary Assistance for Needy Families (TANF), Medicaid).",
"Home visiting models can be differentiated by, among other things, who they intend to serve, the intensity and duration of services, staff qualifications and training, specific program goals, and the exact services or curricula they use in working with families. Some program characteristics of six early childhood home visitation models—Healthy Families America, Parents as Teachers, Nurse-Family Partnership, Home Instruction for Parents of Preschool Youngsters, the Parent-Child Home Program, and SafeCare—are discussed below as examples of early childhood home visitation programs. Each of these home visitation models was privately originated, has established core program components and specific training standards, and has been evaluated with results published in peer-reviewed journals. Further, each of these models has available materials and other resources that may be used to replicate the model. Readers should be aware, however, that there are other models in existence that meet some or all of the criteria discussed above (e.g., Maternal and Infant Health Outreach Worker ). Therefore, the discussion of these models is meant to be illustrative rather than exhaustive.",
"Early childhood home visitation is typically understood as a primary prevention strategy rather than an intervention strategy. Accordingly, in most of the home visiting models reviewed here services are made available to families before any \"problem\" has been identified. For example, services are typically available before a family is reported as having abused or neglected a child, or before any particular developmental delay is found in a child. At the same time, some models target families with specific demographic features that suggest additional family support may be needed or useful. The Nurse Family Partnership model focuses exclusively on low-income, first time mothers who are identified during their pregnancy. The Healthy Families model typically targets a broader set of families, including pregnant women or families with pre-school age children who are identified as \"at-risk\" using a standardized assessment tool. However, individual sites where the Healthy Families model is being implemented may choose to serve only particular subgroups within that broader target population. By contrast, the Parents as Teachers model espouses a principle of universal access for families with young children (including pregnant women). Finally, the SafeCare model is more narrowly focused, and is primarily directed at families where a report of child abuse or neglect has been made. Thus while it intends to prevent additional maltreatment, it is specifically designed to intervene in families where a problem (report of child abuse or neglect) has already been identified.",
"As noted above, several models are being used to provide home visitation programs to pregnant women or to families with young children. These programs may continue for the length of time it takes to cover a specific model's curriculum or they may continue until the child reaches a certain age. For example, both the Healthy Families America and the Parents as Teachers models may begin visitation during pregnancy or after birth of a child and generally continue until the child is enrolled in kindergarten. By contrast, the Home Instruction for Parents of Preschool Youngsters (HIPPY) and Parent-Child Home Program models do not begin until a child is approximately 2 or three years of age, but also typically end around the time of the child's enrollment in preschool or kindergarten. Separately, the Nurse Family Partnership model requires that services begin during the first-time mother's pregnancy and end with the child's second birthday. The SafeCare model is implemented after the birth of a child and continues only for the length of time it takes to cover the program curriculum (typically four or five months).",
"Visits may occur weekly, biweekly, or on a monthly basis. In some models, visits may occur less often as the family progresses through the program. Both the HIPPY and Parents as Teachers models include group meetings (outside the home and with other families) as part of their program model. Home visits typically last one hour, although some models include 30-minute visits and others suggest that a single visit may continue for up to 90 minutes.",
"The Nurse Family Partnership program is the only model discussed here that requires a specific education degree; home visitors in this model must be registered nurses. In all of the other program models, individuals of any education level may become visitors provided they successfully complete training under the program model. Home visitors in these models may have bachelor's or higher level education degrees, though this is not always required. The Healthy Families model stresses the home visitor's ability to establish rapport with families as critical. Some program models (e.g., Parents as Teachers, HIPPY, Parent-Child Home Program) prefer that home visitors be from the local community—or even that they be alumni of the home visiting program—as a way to help establish credibility or a connection between home visitors and families. Finally, the SafeCare model identifies willingness to implement a structured service delivery protocol as a key criterion for its home visitors.",
"Primary goals also vary by program model, as do the kinds of activities used by each model to achieve those goals. Some program models focus more heavily on the school-readiness aspect of early childhood development (e.g., HIPPY, Parent-Child Home Program) while others are more broadly focused on child development issues, as well as maternal and child health, and family functioning. Across all program models, a variety of methods (some very structured, others less so) are used to offer parents information about their child's growth and development.\nTable 1 outlines goals and other characteristics of the six home visiting program models discussed above.\nTable 2 shows the presence of five of these program models by state, including the number of locations in which the model operates within the state. Please note that the number of sites for a given model are not necessarily comparable because they may be of very different sizes (both geographically and in terms of the number of families served). Data shown are based on information provided on the websites of the given program. State-by-state information was not available on the program website for SafeCare. (However, the SafeCare website does indicate that the model has been implemented statewide in Oklahoma, is undergoing statewide implementation in Georgia, and has also been implemented in one or more locations in California, Washington, and Maryland.)",
"Currently many states and localities have implemented home visiting programs as part of a range of family support and/or early childhood interventions or services. Among 46 states that responded to a 2007 survey conducted by Columbia University's National Center on Children in Poverty (NCCP), 40 indicated the presence of one or more \"state-based\" home visiting programs. The survey defined \"state-based\" to include any distinct program model that was administered by the state (in most instances) or otherwise coordinated by state agencies (excluding Early Head Start, Healthy Start, and the Infants and Toddlers Program funded under Part C of the Individuals with Disabilities Education Act). The survey separately noted that in 24 states, at least 32 distinct programs operated under a state legislative mandate or with some state-legislated program content.\nThe NCCP survey indicated that most publicly funded home visiting programs targeted low income families with certain risk factors. Further, the survey showed that the most commonly identified program goals for state-based home visiting programs were related to parenting and children's early health and development. Around 70% of the state-based programs included in the 2007 survey identified program goals in those categories. Just above half of all programs identified outcomes related to pregnancy (e.g., increased time interval between pregnancies). Reduction of government services related to child abuse was cited as a program goal in a little more than 40% of the programs.\nAs used in the NCCP survey, a single state-based \"program\" refers to a particular home visiting model that might be in operation at one or many sites in the state. Many of the states responding to the survey had more than one distinct \"state-based\" home visiting program in place. Further, the survey showed that while some of those programs were based on well-known home visiting models, most were not. Of the 70 state-supported, administered, or coordinated programs identified in 40 states, only 17 (identified by 14 states) were implementing one of the well-known home visiting models, such as Healthy Families, Nurse Family Partnership, Home Instruction Program for Preschool Youngsters (HIPPY), and Parents as Teachers. Separately, 14 of the state-supported, administered, or coordinated programs (in 14 states) used more than one of those well-known home visiting models or some combination of different elements from those models (e.g., a \"blended design\"). However, the majority (the remaining 39) of these state-funded, administered, or coordinated programs reported using \"homegrown\" models. The use of blended or homegrown models may reflect efforts by states to address particular needs of a specific target population, to vary intensity of service by identified family need, to offer the amount of services they can financially support, and/or to provide a level of service that will be locally accepted.\nIn a 2006 report reflecting on implementation of home visiting programs in several states, researcher Miriam Wasserman observed that in most locations there was not a deliberate effort to identify a program with the most evidence of success. Typically, she writes, statewide programs—of whatever model—were launched in one or more sites based on response to specific, locally identified needs. This attracted the notice and interest of other sites in the state (along with some entrenched local interests), which in turn led to more secure federal or state funding, and ultimately to greater proliferation of that program model. Noting that grassroots efforts have been critical, she also cites the importance of influential champions of a particular model. These might be legislators or other state leaders. As examples, she cites the importance of a 1991 early childhood initiative by then Indiana Governor Evan Bayh in the development of a statewide Healthy Families network in that state; the efforts of Michele Ridge, wife of former Pennsylvania Governor Tom Ridge, in the spread of Nurse Family Partnership in Pennsylvania; support of then Arkansas first lady Hillary Clinton in spreading the HIPPY model in Arkansas; and the arrival of the Parents as Teachers model in Idaho, which she credits to the relationship between Senator \"Kit\" Bond of Missouri—where the Parents as Teachers model was first demonstrated and then broadly replicated—and former Idaho Senator Dirk Kempthorne, who subsequently became governor of that state.",
"As part of its FY2008 Budget Request, the Bush Administration sought $10 million (as a set aside within the discretionary activities account of the Child Abuse Prevention and Treatment Act, CAPTA) for competitive grants to encourage and enable states to invest existing funding streams in a range of \"administrative mechanisms\" that are \"needed to successfully implement and sustain high quality, evidence-based home visitation programs that have strong fidelity to a proven effective model\" and to support a national cross-site evaluation to examine factors associated with successful replication or expansion of \"proven-effective models.\" Congress provided an initial $10 million dollars for this purpose as part of its FY2008 appropriations process ( P.L. 110-161 ) and on September 30, 2008, the Administration for Children and Families (ACF) at HHS awarded cooperative agreements to 17 grantees in 15 states to support \"state and local infrastructure needed for the high quality implementation of existing evidence-based home visiting programs to prevent child maltreatment.\"\nThe grants are valued at $500,000 per year and, if appropriations are available, are expected to continue for five years. The successful grantees are implementing (or enhancing) and studying a variety of home visiting models (alone or in combination). These models include the Nurse Family Partnership, Healthy Families America, Parents as Teachers, and SafeCare models, as well as the Positive Parenting Program (Triple P) and a separate model known as Family Connections. In addition to these cooperative agreements, HHS/ACF awarded funds to Mathematica Policy Research, Inc., and the Chapin Hall Center for Children to conduct a cross-site evaluation of the funded programs, to include study of model implementation, fidelity, outcomes, and costs. Mathematica and Chapin Hall are also charged with providing technical assistance to grantees and their local evaluators, and they must establish and coordinate a peer learning network to allow grantees, federal staff, and other stakeholders to share information.\nRecipients of the cooperative agreement award spent the majority of the first year under the agreement (i.e., most of FY2009) engaged in collaborative planning efforts. Among other things, the collaborative planning effort was meant to ensure that \"all relevant programs and funding streams are identified and included\" in the coordination efforts. Ultimately, the plan was expected to lay out the necessary infrastructure for widespread adoption, implementation, and continuation of evidence-based home visiting programs and it will serve as a roadmap for the implementation phase of the cooperative agreement. Because it is \"very interested in interagency collaborative efforts across various disciplines,\" HHS/ACF (through its Children's Bureau) has required that the planning and implementation process for these home visitation projects must include the state or local child welfare agency and the state's designated lead agency for the Community-Based Child Abuse Prevention Program (CBCAP, authorized under Title II of the Child Abuse Prevention and Treatment Act (CAPTA), which is administered by the Administration for Children and Families of HHS). (For more information on CBCAP, see \"Selected Federal Programs That Provide or Support Home Visitation,\" Appendix A .) The Children's Bureau also \"strongly recommended\" collaboration with grantees under two other federally supported efforts related to improving outcomes for young children. These are the State Maternal and Child Health Early Childhood Comprehensive Systems (ECCS) grantees (competitive grants administered by the Health Resources and Services Administration of HHS and currently funded in as many as 47 states) and Linking Actions for Unmet Needs in Children's Health (or \"Project LAUNCH\" competitive cooperative agreements, now in place in seven locations and administered by the Substance Abuse and Mental Health Services Administration of HHS). (For more information on these and other \"Federal Initiatives Related to Coordination of Early Childhood Programs and Services,\" see Appendix B .)",
"Funding provided in years two through five of the ACF home visiting initiative are to be used for plan implementation. In P.L. 111-8 , Congress directed that $13.5 million be set aside to continue the home visitation initiative for a second year. However, no specific funding for the initiative was included in the FY2010 Consolidated Appropriations Act ( P.L. 111-117 ). The statement of the managers on the FY2010 appropriations bill ( H.Rept. 111-366 ) suggests that the conferees did not necessarily expect the current ACF home visiting initiative to end. Instead, it stated that they \"anticipate that mandatory funding will be provided for this activity in fiscal year 2010 as proposed by the Administration.\" As part of its FY2010 budget request, the Obama Administration sought continued funding for the current ACF home visiting initiative, while it separately requested legislative authority to establish a new state grant program that would support home visits to low-income mothers and pregnant women. For the newly proposed program, the Obama Administration sought mandatory (capped entitlement) funds. As noted above, both the House-passed ( H.R. 3962 ) and the Senate-passed ( H.R. 3590 ) health care reform bills would establish a state grant program to support evidence-based home visiting programs for low-income families with young children and those expecting children. Nothing in the current health care reform proposals would require states that receive funds under the new grant program to continue support of the ACF home visiting grantees. However, neither bill would necessarily preclude a state from providing that support. In its FY2011 budget justifications for Congress, the Administration notes that a third year of funding was not appropriated for this initiative under the CAPTA discretionary activities account. However, it notes that, as discussed above, the conference report to the FY2010 appropriations act anticipated mandatory funding would be available for this purpose.",
"Most home visiting programs now in operation use a blend of federal and state funding streams, with some additional support coming from local public funds or private sources. For example, support for Healthy Families America (HFA) programs in 2004 came from an average of 2.4 federal funding sources, 2.0 state funding sources, and 2.7 local funding sources by state.",
"Current and/or past sources of federal funding for home visiting have come from programs administered by several different federal agencies, most commonly the U.S. Department of Health and Human Services (HHS) and the U.S. Department of Education (ED). Support from existing federal programs comes in several different ways. Some programs, such as Early Head Start, operate what amounts to their own home visiting model. For other programs, such as the Maternal and Child Health Block Grant, home visiting services are explicitly permitted by statute, but as one of a range of activities eligible to receive a share of program funding. Finally, there is a larger pool of federal programs, including Medicaid and Temporary Assistance for Needy Families (TANF), which may support early childhood home visitation under broadly stated program authorities. In the latter case, the statute does not explicitly focus on home visiting; rather, some or all of the activities provided under home visiting programs can be considered to be appropriate, allowable strategies for accomplishing the program's overall goals.\nHHS programs that have or may be used to support home visiting programs include a number authorized under the Social Security Act as well as other acts. Social Security Act programs that have been used to support home visiting include Temporary Assistance for Needy Families (TANF, Title IV-A), Stephanie Tubbs Jones Child Welfare Services (Title IV-B, Subpart 1), Promoting Safe and Stable Families (Title IV-B, Subpart 2), Maternal and Child Health Block Grant (Title V), Social Services Block Grant (SSBG, Title XX), Medicaid (Title XIX), and the Children's Health Insurance Program (CHIP, Title XXI). Programs authorized in other acts include the Community-Based Child Abuse Prevention Program (CBCAP, Title II of CAPTA), Early Head Start (Head Start Act), the Child Care and Development Fund (Child Care and Development Block Grant Act and Title IV-A of the Social Security Act), the Community Services Block Grant (Community Services Block Grant Act), Healthy Start (Section 330H of the Public Health Service Act), and the Adolescent and Family Life Care Demonstration Grants (Title XX of the Public Health Service Act).\nAmong the ED programs that support home visiting are the Infants and Toddlers Program authorized by Part C of the Individuals with Disabilities Education Act, as well as several programs that are authorized under the Elementary and Secondary Education Act (ESEA). ESEA programs that may support home visiting include Even Start (Title I, Part B), Education for the Disadvantaged (Title I, Part A), and the Parental Information and Resource Centers (PIRC, Title V, Part D).\nIn addition to HHS and ED, several other federal agencies administer programs that have provided financial support for home visiting programs. Among these are the Office of Juvenile Justice and Delinquency Prevention (OJJDP) at the U.S. Department of Justice, which has supported home visiting through initiatives such as Safe Start; the Corporation for National and Community Service, an independent agency which supports home visiting through AmeriCorps programs; and the Department of Defense, which funds home visiting efforts as part of its New Parent Support Program for families with children ages 0-3.\nTable 3 parses these federal programs into one of two categories based on how home visiting activities relate to the program goals or statute. The first category lists programs for which home visitation is either a mandatory program component (e.g., Even Start ) or an explicitly permitted (or recommended) activity for achieving the program's goals. The latter refers to programs like Early Head Start, for which home-based programs are a primary strategy for achieving program goals and are explicitly detailed in statute and regulation. This first category also includes programs such as Community-Based Child Abuse Prevention grants, for which \"voluntary home visiting\" services are considered one of several possible core resource and support services for families. The second category includes a selection of programs that have broadly stated goals and authorities; while home visiting is not explicitly required or permitted for these programs, their expansive and flexible nature may allow them to fund some or all home visiting services. For instance, home visiting services could be funded through Temporary Assistance for Needy Families (TANF) programs as a strategy to meet the program's goal of providing \"assistance to needy families so that children may be cared for in their own homes or in the homes of relatives.\" While programs in this category may support home visiting activities, it is not necessary for them to do so. Moreover, even if funds from these programs are used to support home visiting activities, they may account for only a very small portion of total spending.\nThe list of federal programs in Table 3 is illustrative only. It is not meant to be exhaustive, nor is it meant to be an exact typology. Rather, it is intended to suggest how strongly home visiting may be linked to current programs, either through common practice or program rules. Descriptions of the programs listed in the first category of the table are included in Appendix A of this report.",
"State funding sources for early childhood home visiting programs include state general revenues, TANF maintenance of effort (MOE) funds, and state funds allocated to match federal grant programs. One study published in 2001 found that 44% of the reported home visiting program budget dollars came from state revenues. In addition, programs often tap into state tobacco settlement dollars to support home visiting programs. This may be due to fortuitous timing, as the tobacco settlement of 1998 awarded funding to 46 states at a time when home visiting programs were rapidly emerging across the country. The tobacco settlement required five tobacco manufacturers to make annual payments to states (allocated by formula) in perpetuity. Approximately 13 bills were then enacted by state legislatures targeting children's services with tobacco settlement funds, and home visiting organizations have encouraged programs to tap into these resources when seeking state funds.\nWhile federal and state sources typically provide the largest contributions to program budgets, local public funds (such as county taxes or school funds) and private funds (such as those from charitable foundations) also support home visiting efforts.",
"Most home visiting programs are funded by multiple sources. In addition, funding sources appear to vary by program model and, in some cases, within program models over time.\nFor instance, a 2004 Healthy Families America (HFA) survey found that 54% of program funding came from the federal government, 38% came from the state, and 8% came from local sources. This is a change from 2002 and 2003, when HFA survey data suggested that a greater share of the total funding came from state, rather than federal, funding streams. In 2004, the bulk of federal funding for Healthy Families America programs came from TANF (86%), with smaller contributions from Title IV-B programs (e.g., Child Welfare Services, Promoting Safe and Stable Families), CAPTA, and other federal sources. This reported composition of federal funding sources also represents a change from prior years. HFA data indicate that in FY2003 the sources of federal funding were more balanced, with Title IV-B programs representing about 35% and TANF accounting for about 28% of total federal funding. Results from these annual Healthy Families America surveys also suggest that funding for HFA programs has decreased over time, from nearly $296 million in FY2002 to almost $185 million in FY2004. Notably, results from these surveys represent only a subset of all HFA programs (due to a response rate of about 73%).\nWhile these survey data may provide useful insight into Healthy Families America budgets, they should not be interpreted as reflecting a comprehensive picture of HFA funding. Moreover, the results of these HFA surveys should not be generalized to other home visiting program models, as the sources of federal funding may differ across programs, depending on the program model's origin and primary focus. Healthy Families America, for example, was launched in 1992 by Prevent Child Abuse America with an explicit emphasis on preventing child abuse and neglect. Thus, it is not surprising that many Healthy Families America sites appear to receive more support from HHS human services programs (e.g., Title IV-B programs, TANF, CAPTA), while programs like the Nurse Family Partnership, by contrast, report significant support from public health programs at HHS (e.g., Medicaid, Maternal and Child Health Block Grant).\nIn fact, the original Nurse Family Partnership (NFP) trial study, launched in Elmira, NY, in 1978, was funded by the Maternal and Child Health Bureau within the Health Resources and Services Administration (HRSA) at HHS. In subsequent years, the Maternal and Child Health Bureau remained a common source of funding for Nurse Family Partnership programs, though federal support grew to include grants offered by the National Institutes of Health, as well as programs such as TANF and Medicaid. Recently, David Olds, founder of the Nurse Family Partnership, reported during congressional testimony that Medicaid was a growing source of funding for NFP programs, while the use of TANF funds was decreasing. He indicated that states had used TANF funds more during the program's start-up phase, but that they now rely more on Medicaid funding. In his testimony, Olds also pointed to the Maternal and Child Health Block Grant as a common source of federal support for NFP programs.\nIn contrast to both Healthy Families America and the Nurse Family Partnership, Parents as Teachers (PAT) and Home Instruction for Parents of Preschool Youngsters (HIPPY) have both reported significant financial support from ED programs, such as Education for the Disadvantaged, Even Start, and Parent Information Resource Centers (all three programs are funded under the Elementary and Secondary Education Act). For instance, the 2005-2006 HIPPY USA End-of-Year Report notes that 120 HIPPY sites received federal funding from ED programs, compared to only eight sites that reported federal support from HHS (this split is roughly consistent with data in prior year reports). The Parents as Teachers model, meanwhile, originated largely due to support from the education community. PAT started in 1981 with a pilot project in Missouri, funded by the state Department of Elementary and Secondary Education and the Danforth Foundation. Four years later, the Missouri Department of Elementary and Secondary Education had expanded the PAT program to all school districts across the state. Today, more than 160 Local Education Agencies (LEA) are using Title I funds from ED to support PAT programs.\nIn fact, both Parents as Teachers and HIPPY programs are referenced by name in the authorizing statute for three programs in the Elementary and Secondary Education Act (ESEA). Education for the Disadvantaged (Title I, Part A) requires that local education agencies coordinate and integrate their parental involvement strategies under Title I with those provided under other programs, such as Parents as Teachers and HIPPY. Organizations receiving grants through Parent Information Resource Centers (Title V, Part D) are required to use at least 30% of the funds they receive in each fiscal year to \"establish, expand, or operate Parents as Teachers programs, Home Instruction for Preschool Youngsters programs, or other early childhood parent education programs.\" The Even Start (Title I, Part B) statute allows for the provision of funds to \"eligible organizations\" for program improvement and replication activities. The statute defines eligible organizations as \"any public or private nonprofit organization with a record of providing effective services to family literacy providers\" and goes on to list Parents as Teachers and HIPPY as examples of such organizations.",
"Largely because there is such variety in home visiting program models and the sources that fund them, it is difficult to estimate the current level of national investment in home visiting programs. Partial information provided by some states support the assertion that no less than $250 million is currently being spent each year on home visitation and one researcher has estimated total annual spending for this purpose (from all sources) at \"perhaps $750 million to $1 billion.\"\nBased on reporting from 31 states in the study conducted by the National Center for Children in Poverty (NCCP), the aggregate annual level of support for home visiting programs in responding states in 2007 was more than $250 million (covering about 55 programs). This figure represents only a partial accounting of spending for early childhood home visitation, however, because it does not include funding for programs operating in states that did not respond to this survey question and it does not capture spending on programs that did not meet the definition of \"state-based\" used in the NCCP report.\nA survey of state appropriations for \"parent education and home visiting\" programs (including some Healthy Families America, Nurse Family Partnership, HIPPY, and Parents as Teachers programs) conducted by the National Conference of State Legislatures (NCSL) found that among the 26 responding states a total of about $250 million was appropriated for FY2007 and $281 million for FY2008. Of this total, it appears that federal funding sources account for roughly 15% of total appropriations, with most federal contributions attributed to TANF or Medicaid. The NCSL report is likely to under-represent federal contributions, as not all federal programs require state legislative action in order to be directed toward services at the state or local level.\nTaking a broader view of home visiting programs across the United States, home visitation researcher Deanna Gomby estimated in a 2005 report that annual costs for these programs are \"perhaps $750 million to $1 billion.\" Gomby's estimate assumes a range of $1,000 to $3,000 per family per year and is based on the number of children enrolled in seven selected home visiting programs operating nationally.\nEstimating costs for home visiting is also difficult because costs may vary significantly by program model and site, as demonstrated in Table 1 . For example, Healthy Families America estimates that their programs spent from $1,950 to $5,768 per family in FY2004, with costs averaging about $3,348 per family in that year. This was up from an average cost of $2,764 in FY2003, when spending ranged from $1,550 to $4,500 per family. The Nurse Family Partnership offers more current numbers in a 2009 fact sheet, indicating that their typical costs range from $2,914 to $6,463 per family per year. Variation in costs across program models and sites can be attributed to a number of factors, including the intensity of services provided (e.g., number of visits), the qualifications and salary requirements of staff, the differences in cost of living for communities across the country, and the variety and scope of services offered. Typically, the more comprehensive the program, the higher the cost. The average cost for a slot in Early Head Start, for instance, is estimated to exceed $11,000 annually (though this average is based on all Early Head Start programs, which include center-based, home-based, and combination programs).",
"Looking at findings across multiple home visiting studies, researchers conclude that home visiting can provide benefits to children and their parents, including preventing potential child abuse and neglect, enhancing cognitive development, improving parenting attitudes and parenting behaviors (e.g., discipline strategies), and increasing maternal education. They caution, however, that while all of those positive effects for home visiting programs were statistically significant, the size of the effect is small. (That is to say, the difference between observed outcomes for home visited as opposed to not-visited parents and children is small.) Further, while one or more individual studies may have shown positive effects with regard to many other desired outcomes, those effects have not necessarily been studied and/or achieved across more than one study or program site. Efforts to better understand the components of successful home visitation and to find additional effective methods for meeting a range of family and child needs continue with newer research providing additional information on positive outcomes.\nIn sum, most researchers seem confident that early childhood home visitation can be effective in improving outcomes for families and children, although they differ on how strong they think this evidence is across the range of program models and across the variety of outcomes. Other researchers caution that to be effective (regardless of program model or goal) a home visitation program's goals must be aligned with the program's content (e.g., if you want to prevent child abuse and neglect you have to focus on the aspect(s) of the home visit that will accomplish this), and that home visitors must appropriately and adequately deliver the services. They also make clear that home visiting is not a silver bullet strategy that can solve all prevention needs. Instead they suggest it will be most successful if it is integrated into a broader set of services that are focused on supporting families and ensuring positive outcomes for young children. These include quality center-based education for preschoolers, preventive health care as part of medical homes for all children, parenting support groups, and clinical mental health and other treatment services for parents who need them. Finally, they seek continued study of programs to understand what is most effective and they urge that programs be implemented in a manner that permits continuous quality improvement.",
"There is a fairly large and growing body of research looking at a variety of home visiting programs. Some of these studies have been designed as randomized control trials. Findings generated from these experiments, provided they are well designed and implemented, can demonstrate the level of effectiveness. In this kind of program evaluation, study participants are randomly assigned to a \"treatment\" or \"experimental\" group, while others are randomly assigned to a \"control\" group. Families assigned to the \"treatment\" group subsequently receive home visiting services; families assigned to the control group do not. The outcomes for both groups are tracked and tested for statistically significant differences. To ensure that the findings accurately reflect what is achieved, however, these studies must have a participant pool that is large enough to allow researchers to draw conclusions that are statistically significant. Finally, the experiment should be carried out in more than one site and the findings of the study should be consistent (or replicated) across those multiple sites. Follow-up studies (longitudinal analysis) of the original may be used to determine if any initial positive effects are maintained over time and/or to measure later effects (e.g., academic success in grade school of home visited versus not-visited infants and toddlers).\nOther studies that have been used to evaluate home visitation programs are referred to as \"quasi-experimental.\" Although they do not randomly assign participants, quasi-experimental studies are designed so that outcomes for the group of families and children receiving the treatment (e.g., home visiting) may be compared to a group of families who did not receive these services. Ideally, the characteristics of this comparison group closely match those of the group receiving the treatment (home visiting services) so that any differences are fairly attributed to the treatment received rather than to differences in the groups studied. As with randomized control tests, findings from quasi-experimental studies that use larger participant pools and test outcomes in more than one location are considered of greater merit than those not meeting these standards.\nFinally, some evaluations of home visitation programs look at changes across time (e.g., pre-test, post-test) but only among the group of families who were served. This kind of program feedback can be important in implementing a program—particularly if consistent data are regularly collected and reviewed as part of a structured and continuous program improvement process. However, this type of study is considered \"non-experimental\" because it lacks a contemporaneous comparison group, and some of the changes observed could have occurred even without implementing home visiting.\nRandomized control studies may provide the clearest evidence of a home visiting program's effects, and some researchers call for continued implementation of these studies to ensure effectiveness of home visiting models. Others note that randomized control studies are expensive and time consuming, and that they require social service providers to withhold what may be valuable family support from \"control group\" members. Reflecting on their own efforts to implement a randomized control trial of a particular service strategy for children and families, two researchers at the Michigan State University Child Health Care Clinic note that these trials are based on three assumptions—standardized interventions, equal groups, and equal environments—and that \"most if not all, of these assumptions are difficult to meet in the complex environment of practice.\" Some researchers and home visitation advocates cite the wide range of family needs and circumstances as dictating that more than one model of home visiting is necessary and they further argue that each of those iterations can not be tested, practically, in a random trial. Instead, these researchers assert that the overall efficacy of home visiting has been proven and therefore efforts should be placed on fine tuning existing program models to ensure their quality and monitor outcomes.",
"As discussed above, home visiting programs have goals that cross several major domains, including maternal and child health; early childhood social, emotional, and cognitive development; and family/parent functioning. Programs may identify one or more desired outcomes across one or more of these main domains. In the maternal and child health domain, desired program outcomes may include decreased infant mortality and improved infant health and physical development; improved perinatal maternal health and health behaviors; a reduced number of subsequent pregnancies and/or a longer time interval between pregnancies; and prevention of child injuries, intentional or unintentional. In the early childhood development domain, desired program outcomes may include improved parent-child interaction to enhance and ensure children's social/emotional and cognitive development; enhanced school readiness for children and longer-term academic success. Finally, in the domain of family/parent functioning, home visitation programs may seek to improve parenting skills, knowledge, and behaviors; reduce the incidence of child abuse or neglect; and increase maternal education attainment and family self sufficiency.\nA variety of factors have been cited as important to the effectiveness of home visiting generally without regard to the model being employed or outcome sought. These include, but are not limited to, clear program goals that are tied to program content; educational status and training of the home visitors; intensity and duration of service provision, including the ability to attract and retain families; and integration of the program with other kinds of parenting support programs and early childhood programs related to children's health, education, and socio-emotional development.\nThere is a large and still growing body of research on home visitation programs. Some of the findings to date are discussed below.",
"A number of home visiting studies have considered the effectiveness of these programs in improving maternal and child health outcomes, including maternal mental health and substance abuse (during or after pregnancy), the number and spacing of subsequent pregnancies, the incidence of preterm and low birth weight babies, use of preventive/well-child care, and frequency of emergency room treatment or injuries among children.\nA 2004 meta-analysis found that home visiting programs could be effective in reducing, for children, the number of emergency room visits, injuries or ingestions treated, and accidents requiring medical attention. In her 2005 review of the research on home visitation, however, Deanna Gomby concluded that home visitation programs had not been shown to increase the use of preventive health care. With regard to outcomes for mothers, some home visitation programs, discussed below, have been shown to reduce the number of subsequent pregnancies or to increase the time interval between pregnancies. Researchers have identified maternal depression, substance abuse, and intimate partner violence as critical issues that home visitors have not necessarily known how to identify or address, and that may, in turn, reduce the effectiveness of home visitation on other outcomes.",
"Maternal mental health and substance abuse can have significant implications for both mother and child. For instance, research shows that clinical depression can be a barrier to employment and that it can affect interactions between mother and child. In fact, poor maternal mental health has been linked to higher rates of behavioral, academic, and health problems among children. Meanwhile, studies have shown that prenatal exposure to alcohol or drugs can increase the risk of preterm birth, miscarriage, and birth defects, including physical, cognitive, and behavioral disorders. Despite this, data from the combined 2006-2007 National Survey on Drug Use and Health show that substance usage among pregnant women ages 15 to 44 is prevalent, with an average of 5.2% reporting use of illicit drugs in the past month, 16.4% indicating cigarette use in the past month, and 11.6% reporting current alcohol use.\nA randomized trial study of the Hawaii Healthy Start Program (generally acknowledged as the prototype for Healthy Families America) concluded that there were positive maternal mental health outcomes for participating mothers compared to the control group in one of the three Hawaii Healthy Start programs operating in Hawaii. The same Hawaii Healthy Start Program study found that home visitation had no statistically significant effect on maternal substance abuse. However, when isolating families receiving a higher dose of services, this study concludes that, compared to control group mothers, those who received a higher dose of home visiting services did demonstrate reduced maternal \"problem alcohol use.\" This suggests that intensity and duration of services may be critical factors in determining program success.\nResults from a randomized control trial of the Nurse Family Partnership model in Denver, CO, concluded that two years after the program of home visits was completed, mothers who had been visited by paraprofessionals exhibited better mental health (on a standardized scale) than did control group mothers in the study. However, there was no statistically significant difference for nurse-visited mothers (compared to control group mothers) on mental health outcomes. Neither nurse-visited nor paraprofessional-visited mothers in Denver showed statistically significant outcomes that were different from control group mothers with regard to substance abuse. The nine-year follow-up to the NFP's program in Memphis, TN, found that nurse-visited mothers used fewer substances. However, this evaluation found no statistically significant effect on maternal depression.",
"Some researchers argue that \"rapid successive pregnancies\" can negatively affect mothers' educational and workforce achievements. Several studies have looked at the effectiveness of home visiting programs on maternal health outcomes.\nResearch on the Nurse Family Partnership site in Elmira, NY, found that by the child's fourth birthday (two years after program ended) nurse-visited mothers had fewer subsequent pregnancies. Results from studies at the NFP site in Memphis found that four years after the program ended nurse-visited mothers had experienced fewer subsequent pregnancies. This study also found evidence of longer intervals between births of the first and second child. The follow-up to this study found that nine years after the intervention, these results held; on average, nurse-visited women had longer intervals between the births of first and second children and fewer cumulative subsequent births per year. Notably, while both sites showed effects on reducing subsequent pregnancies, the effect size was much larger in Elmira (67% reduction) than in Memphis (23% reduction). A study from the Denver NFP site found that, among the nurse-visited mothers who had at least one additional child (within four years of their first pregnancy), there was a greater interval between that pregnancy and the first one, compared to the control group. However, this same study found no statistically significant difference for paraprofessional-visited mothers (compared to control group mothers) in birth intervals and that neither nurse-visited nor paraprofessional-visited mothers showed statistically significant outcomes that were different from control group mothers with regard to the number of subsequent pregnancies.\nA randomized control trial among teen mothers in California of the Parents as Teachers home visiting model found that significantly fewer home visited mothers had multiple pregnancies during the study period than did control group mothers (1.4% versus 4.8%). By contrast, the randomized trial evaluation of the Hawaii Healthy Start program showed no effects on repeat births.",
"Birth weight can be another important indicator of maternal and child health. Low birth weight is a leading cause of infant deaths and childhood illnesses and disabilities. Several home visiting studies have looked at outcomes in this area. For instance, nurse-visited young adolescents (ages 14 to 16) in the Nurse Family Partnership's Elmira study had babies who were an average of 395 grams heavier than the babies of adolescents in the comparison group. In the nine-year follow-up of the Memphis site, researchers found a significantly lower number of subsequent low birth weight infants (0.18 versus 0.27).\nThe randomized control trial of teen mothers in California found that among those who entered the study while pregnant, mothers in the PAT-only group had marginally lower rates of low birth weight babies than did mothers in the control group (4% versus 8%). In addition, a study of the Healthy Families America program in New York found that, of those who began participating in the Healthy Families America program at least two months prior to the birth of their children, control group mothers were significantly more likely to deliver low birth weight babies than were participating mothers. The rate of low birth weight was two-and-a-half times higher for the control group (8.3%) than it was for participating mothers (3.3%). However, it is worth noting that this study found no significant program effects on the rate of premature births or the percentage of babies requiring neonatal intensive care.",
"Many home visiting studies have looked at outcomes related to children's health, including access to health insurance, primary care physicians, well-child visits, and immunization rates.\nA study of the New York Healthy Families America program found that parents in the control group were significantly less likely than participating parents to have health insurance for their children as of the first-year follow-up interview (90.4% compared to 93.9%). There was no program effect, however, on the parents' likelihood of having health insurance coverage for themselves. There were also no significant differences between the participating families and control group families in outcomes related to the child having a regular health care provider, the child ever having been without needed medical care, the number of well-child visits, and completion of all immunizations.\nMeanwhile, results from the second-year follow-up on the random trial study of the Hawaii Healthy Start Program indicate that participating parents were statistically more likely to describe themselves as having a primary care provider who handles most of their child's health care needs and understands their concerns about their child's health. However, this same study found no differences in the rates of immunization or well-child visits for participating children compared to control group children. By contrast, in a third-year follow-up of a randomized control study of the Parents as Teachers program (one site only), participating children were significantly more likely to be fully immunized than control group children.\nTo gain the most health benefits for young children, researchers have also looked at the importance of linking home visiting with quality pediatric care, including establishment of a medical home for all children.",
"Child health and safety can also be linked to need for urgent care, hospitalization, or frequency of ingestions or injuries. Research on the Nurse Family Partnership site in Elmira, NY, found that at the program's end (when children were two years old), children in nurse-visited homes had fewer emergency room visits for injuries and ingestions than did children in homes of control group mothers, as well as fewer emergency room visits overall when compared to those children. Results from the Memphis NFP site suggest that at the end of the program (when the child was two years old) nurse-visited children had fewer health care encounters for injuries and ingestions compared with control group children.\nBy contrast, the Hawaii Healthy Start study reported that children participating in the program experienced no beneficial effect with respect to emergency room use, hospitalization, and need for urgent medical care when compared to children in the control group.",
"A number of studies of home visiting programs have evaluated program effectiveness in enhancing children's social, emotional, and cognitive development. Among other things, these outcomes may be manifested in early language skills and behaviors, as well as school-aged academic achievement, and matriculation rates. Overall, most analyses conclude that cognitive and socio-emotional outcomes were stronger for home visited children than for control group children. However, researchers caution that the effect sizes for child development outcomes were usually small to medium at best, noting that home visited children might see improved scores on a standardized intelligence test of only a few points.",
"As reported in Deanna Gomby's 2005 paper, some studies of home visiting programs such as Parents as Teachers, HIPPY, or the Parent-Child Home Program have demonstrated that home visited children outperform other children in the community through the 4 th , 6 th , or 12 th grades, respectively, in measures such as school grades and achievement test scores on reading and math, suspensions, or high school graduation rates. However, large cognitive benefits such as these are not always demonstrated reliably in high-quality randomized control trials of home visiting programs.\nMany evaluations of Nurse Family Partnership programs do not assess child cognitive development outcomes. However, some studies of the randomized control trials in Elmira, NY, and Memphis, TN, suggest very limited to no significant program effects on children's cognitive development and intellectual functioning. By contrast, the nine-year follow-up study of participants in the Nurse Family Partnership's program in Memphis found that nurse-visited children born to low-resource mothers had grade point averages (GPAs) that were equivalent to those of control group children who were born to high-resource mothers. In contrast, control group children with low-resource mothers had the lowest GPAs in the study. This same study found that nurse-visited children had fewer failures in conduct during the first three years of elementary school than control group peers.\nSixteen to twenty years after their participation in the randomized control study, high school drop out rates for children who were assigned to participate in the Parent-Child Home Program were found to be lower than those for children assigned to the control group. (This result was just below statistical significance. Some outside researchers have described it as \"marginally significant,\" while others have argued that the effect may have been due to chance rather than to the program. ) At the time of their enrollment in the study, both PCHP participants and control group children were considered \"at-risk\" based on the presence of certain child or family factors, including parental unemployment, welfare receipt, low child IQ, single parenting, and/or poverty status. The study's researchers noted that the high school graduation rates for PCHP participants were 30% higher than those of the control group that remained in the community and over 20% higher than low-income students nationally.",
"Controlled trials of Nurse Family Partnership programs have found mixed results with respect to child development, sometimes concluding that these programs produced \"few effects on children's development,\" while at other times finding that home visited children of mothers with \"low psychologic resources\" (i.e., low-functioning mothers, based on levels of intelligence, mental health, and coping abilities) experienced home environments that were more \"conducive to early learning\" than control group counterparts.\nIn an attempt to better parse effects, some studies have raised the issue of linking program quality to program outcomes. For instance, the Nurse Family Partnership controlled trial in Denver looked at differential outcomes for children based on whether or not the home visitor was a registered nurse or a paraprofessional. In Denver studies, the paraprofessional program for low-resource mothers was statistically linked to home environments that were more supportive of early learning than the control group. However, the paraprofessional program had no statistically significant effects on children's language, executive functioning, or behavioral adaptation. By contrast, the nurse program for low-resource mothers was linked to statistically significant, positive effects on the home learning environment, as well as language development, executive functioning, and behavioral adaptation during testing, compared to the control group.\nSome of the literature has suggested that child-focused strategies may be more successful than parent-focused strategies in generating large benefits in a child's cognitive development. A meta-analysis conducted by Abt Associates in 2001 compares the effect of home visiting and center-based early childhood education on cognitive development, and concludes that home visiting services generate an effect size for cognitive development of 0.26, but programs with early childhood education components generate effects almost twice as large (0.48). Others have suggested that the center-based preschool education component accounted for 63% of the variance in cognitive outcomes during the preschool years. In fact, there is a body of research which suggests that to generate lasting cognitive and other developmental benefits for children, home visiting should be linked with high-quality center-based child care and/or enrollment in a high-quality preschool.\nResults from Early Head Start (which has center-based programs, home-based programs, and programs that combine center-based and home-based services) research have found that, compared to control groups, participation in center-based programs has consistently enhanced cognitive development and, by age three, reduced negative aspects of children's social-emotional development. On the other hand, not all home-based Early Head Start programs have demonstrated positive effects on cognitive development. In fact, one study reports that \"home-based programs had few significant impacts\" compared to center-based programs and programs combining center-based and home-based services. However, recent studies have found that full implementation of HHS performance standards can affect program effectiveness. For instance, HHS reports that when home-based Early Head Start programs fully implemented performance standards, they demonstrated positive impacts on child cognitive development at the three-year mark (suggesting that previous studies may have shown no effect because the performance standards were not being rigorously implemented). Studies have found that some of the largest gains from Early Head Start programs occur in the programs that combine center-based and home-based services, with some effects in the 20-30% range. Moreover, combination programs consistently demonstrated enhanced language development and aspects of social-emotional development among children, as well as improved parenting behaviors and participation in self-sufficiency oriented activities among parents. This held true, even at the three year mark, for participating children and families.",
"Home visitation programs often seek to affect parenting behaviors to, among other things, reduce child abuse and neglect. They may also seek to encourage family self-sufficiency through higher educational attainment and increased work attachment.",
"Among other activities, providing parents with information about their children's developmental needs and abilities as well as communicating positive parenting skills are typical home visitation activities intended to reduce the incidence of child maltreatment. The assumption that improved parenting practices and attitudes may prevent child abuse and neglect is supported by research suggesting that a lack of parenting knowledge may serve as one predictor of child maltreatment.\nIn randomized control trials of home visiting, researchers have been more likely to find indications of changed parenting behaviors or attitudes—which suggest less harsh or abusive parenting—than to find a significant difference in rates of reported or substantiated child abuse or neglect. In a randomized control trial, the Nurse Family Partnership (NFP) showed reduced substantiated child abuse and neglect reports in one site (Elmira), although this difference was not shown as statistically significant until a number of years after the program ended. Any difference in substantiated child abuse and neglect reports between treatment and control group families was not tested at other NFP evaluation sites (Memphis and Denver). A randomized trial involving parents who had already been reported for abuse and neglect found that home visited parents who completed all three SafeCare training modules were less likely to recommit child maltreatment than those in the control group. Other studies have shown no statistically significant results. Implementers of Healthy Families America home visitation programs were encouraged early on by some quasi-experimental studies in Hawaii that showed much higher rates of abuse and neglect in families where home visiting had not occurred (18%) compared to those where it had occurred (1%). However, a subsequent randomized control study of the program did not find any significant program effect with regard to rates of child maltreatment. Similarly, some evaluations of the Parents as Teachers model where the number of child maltreatment reports were compared between control and treatment groups found no significant differences. In one study of teenage mothers, however, those who received PAT services combined with case management were less likely to be investigated for child maltreatment than were mothers in the control group who received no services. This study found no statistically significant difference, however, in this measure between teen mothers who received PAT-only services and those in the control group.\nFor a variety of reasons, it may be that the number of substantiated (or all reported) cases of child maltreatment (studied at the individual level) is not a strong measure of program effectiveness related to children's experiences of abuse or neglect. The overall incidence of substantiated abuse or neglect is relatively low across the population. Generally, this means that to show a \"statistically significant\" effect, a fairly large number of participants must be included in a study. If the number of participants is relatively small, even what appears to be a large difference in the proportion of children abused among the control group and the treatment group may not be statistically significant. Differing definitions of child abuse and neglect by state as well as varied state policies for how investigators are to determine whether child abuse or neglect has occurred also complicate any national or multisite effort that uses substantiated child abuse and neglect reports to measure program effectiveness. Finally, families who are regularly visited by a nurse or other family worker are subject to a high degree of surveillance and may thus be more likely to be reported to the Child Protective Services (CPS) agency. Testing this common sense proposition, a recent study in New York state found that mothers who participated in the Healthy Families program and who admitted to having committed acts of serious abuse and neglect were nearly twice as likely to have a CPS report than were control group parents who admitted to having committed serious abuse or neglect.",
"Other measures have sometimes been used as proxies for the effect of a home visiting program on child abuse or neglect. These include the number of health care or emergency department visits that are tied to injuries or ingestions (see \" Findings in the Maternal and Child Health Domain \"), and parental self reports of abusive actions, discipline strategies, or other relevant parenting practices. A randomized control study of the Healthy Families New York model found that home visited mothers reported engaging in fewer abusive practices (i.e., fewer instances of neglect, severe physical abuse, minor physical aggression, and psychological aggression against their children) than did control group mothers. The researchers also noted that the positive effects were stronger among only the subgroup of participants who were first-time mothers under age 19 and enrolled in the prenatal period. An evaluation of SafeCare implementation found that parents receiving the training were more likely to engage in positive parent behaviors.\nEffectiveness of home visitation in changing parenting behaviors and/or reducing child abuse or neglect may be related to home visitors' recognition of and response to additional family stress factors and/or to provision of opportunities for peer support and interaction. In a randomized control study of a statewide home visiting program in Hawaii (Hawaii Healthy Start, considered the predecessor of the Healthy Families America program), researchers found a trend toward less neglectful behavior from home visited mothers compared to those in the control group. Overall, however, they concluded that the program did not prevent child abuse or promote use of nonviolent parenting. Among the critical issues cited by the researchers as hindering program effectiveness was the frequent failure of home visitors to identify and address family risk factors (e.g., domestic violence, mental health needs). In a large meta-analysis of family support programs, including many that used home visiting as the primary means of providing services and others that did not, researchers found that efforts to improve parenting behaviors, attitudes, and practices were most successful when they specifically focused on developing parents' skills as effective adults—their self-confidence, self-empowerment, family management, and parenting—and included opportunities for peer support (e.g., parent mutual support groups meeting outside the home). The Parents as Teachers home visiting model includes, as a core part of its program, parent group meetings and other opportunities for parents to share information with and learn from each other, and the HIPPY model also includes regular group meetings.",
"Many home visitation programs seek to improve family self-sufficiency over the longer term by ensuring increased educational attainment and labor force participation among visited families. A study comparing at-risk PAT families (40) to a comparison group in Binghamton, NY, found that welfare dependence doubled for both groups in the year following the child's birth, but that between the first and second birthday \"marginally significant differences\" emerged, with welfare dependence declining in the visited group and increasing among the control group. In the initial NFP test in Elmira, NY, nurse-visited first-time mothers had greater labor force participation than did control group mothers two years after the evaluation ended (i.e., at child's fourth birthday). Thirteen years after the Elmira evaluation ended (by the child's 15 th birthday), nurse-visited mothers who were unmarried and from low socioeconomic backgrounds at the time of program enrollment had spent less time receiving public aid (including cash aid and Food Stamps) than comparable mothers in the control group who did not receive nurse visits. Similar findings related to public assistance use were found among first-time at-risk mothers both four years and seven years after an NFP trial in Memphis ended: nurse-visited mothers spent less time receiving public assistance than did control group mothers who were not visited. In a third NFP trial, this one in Denver, comparisons were made between low-income mothers who received home visits by nurses, those who receive home visits by paraprofessionals, and those who received no visits. Two years after the trial ended, paraprofessional-visited mothers worked more than mothers in the control group. There was no significant difference between nurse-visited mothers and control group mothers with regard to workforce participation. Finally, neither nurse-visited nor paraprofessional-visited mothers showed statistically significant outcomes that were different from control group mothers with regard to their own educational achievement or use of welfare two years after the trial ended.",
"The President's FY2010 budget request included a proposal to provide mandatory funding to states for home visitation programs, and the FY2010 budget resolution ( S.Con.Res. 13 ) supports increased federal funding for these programs provided this can be done in a \"deficit neutral\" manner. A number of legislative proposals to provide more support for home visitation programs have been offered, and the health care reform proposals passed by the House in November 2009 ( H.R. 3962 ) and Senate in December 2009 ( H.R. 3590 ) would both establish a program of, and provide funding for, grants to states to support the expansion of home visiting to families with young children and those expecting children . The FY2011 budget does not make specific reference to establishing a home visiting program.",
"As part of its FY2010 budget request the Obama Administration proposed a new capped entitlement program to support formula grants to states, territories, and tribes for the establishment and expansion of \"evidence-based\" home visitation programs for low-income mothers and pregnant women. It expected the program to \"create long-term positive impacts for children and their families, as well as generate long-term positive impacts for society as a whole.\" Outcomes the Administration cited that may be achieved by home visitation include reductions in child abuse and neglect, improvements in children's health and development and their readiness for school, and improvements in the ability of parents to support children's optimal cognitive, language, social-emotional, and physical development. Further, it noted that one model of home visitation, which used nurses to visit low-income first-time mothers, was found to reduce Medicaid costs in several randomized control trials. Accordingly the Administration assumed that expanding proven effective home visitation programs would result in savings to the Medicaid program (via reductions in preterm births, emergency room use, and subsequent births) totaling $77 million in the first five years and $664 million over the entire 10 years.\nMandatory funding for the newly proposed home visitation program was proposed at $124 million in budget authority ($87 million in \"outlays\" ) for FY2010, rising each year to $790 million in budget authority ($710 million in outlays) by year five of the program (FY2014) and to $1.837 billion in budget authority ($1.753 billion in outlays) in year ten (FY2019). This funding was expected to allow home visiting services to 50,000 families in the initial year of the program, rising to 450,000 new families by FY2019.\nUnder the Administration's proposal, states would be expected to provide some matching funds to receive federal home visitation grants. Further, the Administration would give priority to funding for models \"that have been rigorously evaluated and shown to have positive effects on critical outcomes for families and children.\" Accordingly, states, territories, and tribes seeking grants under the proposed home visitation program would be required to submit a plan describing, among other things, the program model they will follow, evidence for the effectiveness of the program model, and how the state will ensure that the proven program model is adhered to (model fidelity). Funding related to programs with strong research evidence demonstrating their effectiveness would include technical assistance, monitoring, and evaluation to ensure fidelity of the model and for \"evaluating effectiveness of these models as conditions change over time.\" The Administration also anticipates that additional funds will support \"promising programs\" such as those based on some research evidence and those that are adaptations of previously evaluated programs. Funding for these programs would also include technical assistance, monitoring, and evaluation that focuses on developing these promising models and on \"rigorous (random assignment) evaluations of effectiveness.\" Finally, the Administration proposed that no less than 5% of the program's overall funding be reserved for research, evaluation, training, technical assistance, monitoring, and administration.\nBased on its inclusion in the Administration for Children and Families (ACF) budget justifications, the Obama Administration expected this HHS agency to administer the new home visiting state grant program. At the same time, the FY2010 budget request noted an effort to coordinate planning for the proposal across HHS agencies to ensure the most effective program structure. It also added that \"a coordinated strategy\" involving the Centers for Disease Control and Prevention (CDC), the Centers for Medicare and Medicaid Services (CMS), the Health Resources and Services Administration (HRSA), and ACF will \"enable HHS to respond to varying approaches that States may wish to use to implement this initiative.\"",
"In late April 2009, the House and Senate approved a conference agreement on the FY2010 budget resolution ( S.Con.Res. 13 ), which reconciles separate FY2010 budget resolution proposals passed earlier that month by the House ( H.Con.Res. 85 ) and Senate ( S.Con.Res. 13 ). The FY2010 budget resolution is designed to set federal funding priorities across all purposes for the upcoming fiscal year. According to the conference report on the budget resolution ( H.Rept. 111-89 ), the agreement includes a \"deficit neutral reserve fund\" for establishing or expanding home visitation programs.",
"Health care reform bills passed, separately, in the House and in the Senate would establish a program of grants to states to support expanded delivery of evidence-based home visitation services to families with young children and those expecting children. The Affordable Health Care for America Act ( H.R. 3962 ), as passed by the House on November 7, 2009, would appropriate $750 million over five years (FY2010-FY2014) for the new grant program it authorizes. On the Senate side, the Patient Protection and Affordable Care Act ( H.R. 3590 ), as passed by the Senate on December 24, 2009, would appropriate $1.5 billion over five years (FY2010-FY2014) for the home visiting grants it authorized.\nTable 4 below compares major similarities and differences in these proposals. There is no current law program that provides grants to states exclusively for the purpose of funding home visiting programs. The first column of the table lists general provisions and primarily describes the substantively similar approaches taken. The second and third columns describe aspects of the House and Senate bills, respectively, that are related to that general provision but differ, to some degree, from each other. Differences may be substantive (e.g., different funding levels or different requirements), may be primarily a difference in wording (e.g., one bill more explicit or detailed than the other on purposes of the grant program) or may reflect a different approach to the same issue (e.g., both bills support home visiting provided on voluntary basis only, but one bill requires a state to have a procedures to ensure participation is voluntary and another simply provides that states may not seek federal payment for services not provided on a voluntary basis).",
"",
"Separately, the proposal passed by the House ( H.R. 3962 ) would amend Medicaid to clearly permit states to claim federal reimbursement for \"nurse home visitation services\" provided to certain Medicaid eligible individuals. The Senate-passed bill ( H.R. 3590 ) does not include a comparable amendment to Medicaid.\nSection 1713 of the House bill ( H.R. 3962 ), would create a new optional Medicaid benefit called \"nurse home visitation services,\" and would permit states to seek federal reimbursement at their Federal Medical Assistance Percentage (or FMAP) rate (which may range from 50%-83%) for providing these services. The bill would define \"nurse home visitation services\" as home visits by trained nurses to families with a first-time pregnant woman or a child (under two years of age) and who are otherwise eligible for Medicaid, but only if HHS determines that there is evidence that these services are effective in one or more of the following areas: (1) improving maternal or child health and pregnancy outcomes or increasing birth intervals between pregnancies; (2) reducing the incidence of child abuse, neglect, and injury, improving family stability (including reductions in domestic violence), or reducing maternal and child involvement in the criminal justice system; and (3) increased economic self-sufficiency, employment advancement, school readiness and other educational achievement, or reducing dependence on public assistance.\nFederal reimbursement for this new optional Medicaid benefit would be effective for services offered on or after January 1, 2010. H.R. 3962 would stipulate that creation of this new optional Medicaid benefit must not be construed to prevent states from continuing to claim federal reimbursement for home visitation services under currently authorized Medicaid care coordination and case management activities (as an administrative activity or a benefit).",
"On June 9, 2009, the Subcommittee on Income Security and Family Support of the House Ways and Means Committee held a hearing on proposals to provide funds to states for early childhood home visitation programs. Witnesses included researchers, an administrator of state funding for home visitation programs, a former participant and current home visitor, and a nurse consultant.\nThe witnesses generally supported broader implementation of early childhood home visitation programs that are informed by evidence on efficacy. Most witnesses appeared to support availability of home visitation services to any family, without regard to any specific demographic or family risk factors, although one witness clearly favored providing services to low-income mothers. At the same time, in responding to a question regarding which families they would target if limited funds were available, at least one witness cautioned against using demographic markers to select families, but suggested the importance of engaging families early, perhaps during pregnancy (via prenatal clinics or obstetric offices) or at birth (via hospital). Another witness stressed first-time young mothers as an important group, and one where research to date has shown the greatest level of successful outcomes.\nIn their written testimony, at least two of the witnesses, both researchers, cautioned that supported programs—regardless of any prior demonstrated level of evidence—must have certain attributes to succeed. Both mentioned the need for (1) clearly linking program activities to expected program goals, (2) providing services (engaging family) with sufficient frequency and for a sufficient length of time to have an impact, and (3) employing well-trained home visitors whose work is evaluated/supervised on an ongoing basis. Other factors given as important to program success included solid organizational capacity and linkages to other community resources and supports.\nAppendix A. Selected Federal Programs That Provide or Support Home Visitation\nAs discussed in the section on \" Existing Federal, State, and Local Funding Streams for Home Visiting ,\" a number of federal programs are already being used to support early childhood home visitation efforts. Federal statute for these programs may require some amount of home-based services (e.g., Even Start), explicitly permit home visiting as a possible activity (e.g., Maternal and Child Health Block Grant), or allow home visiting under broad authorities or program goals (e.g., Medicaid). Selected programs, arranged alphabetically, are briefly described below.\nCommunity-Based Grants for the Prevention of Child Abuse and Neglect (CBCAP)\nTitle II of the Child Abuse Prevention and Treatment Act (CAPTA) authorizes grants to support community-based services for the prevention of child abuse and neglect. CBCAP grants are distributed by formula to a lead entity in all states (which may be a public agency, a quasi-public entity, or a nonprofit private organization). The lead entity is charged with developing a continuum of community-based services for children and families that are designed to strengthen and support families to prevent child abuse and neglect. Core family resource and support services to be provided by community-based programs include voluntary home visiting services, parent education, community and social services referrals, and respite care services, among others. In their FY2007 program summaries, the majority of state CBCAP contacts indicated explicit support of home visiting services. For FY2010, the CBCAP program received funding of approximately $42 million ( P.L. 111-117 ). CBCAP is administered by the Office of Child Abuse and Neglect within the Children's Bureau of the Administration for Children and Families at HHS.\nEarly Head Start\nEarly Head Start is a federally funded community-based program for low-income expectant parents and families with infants and toddlers that seeks to (1) promote healthy prenatal outcomes; (2) enhance the development of infants and toddlers; and (3) promote healthy family functioning. Nationwide, there are more than 650 Early Head Start programs providing child development and family support services, serving approximately 62,000 children under the age of three annually. Grantees select an Early Head Start service delivery option (typically center-based, home-based, or a combination) to meet the needs of the children and families in their communities. In 2006, about half (51%) of Early Head Start slots were center-based, while 41% were in home-based programs. Children and families enrolled in center-based programs receive comprehensive child development services in a center-based setting, supplemented with limited home visits by the child's teacher and other Early Head Start staff (a minimum of two home visits a year to each family). In home-based programs, children and their families are supported through weekly home visits of at least 90 minutes and bimonthly group socialization experiences. Combination programs provide a blend of center class sessions and 90-minute home visits (regulations specify acceptable combinations of minimum numbers of class sessions and corresponding home visits).\nHome visits are conducted by professionals who receive training in child development, family development, and community building. In FY2008, the majority of Early Head Start teachers (54%) and home visitors (66%) held a degree in early childhood education (or a related field). Legislation that reauthorized the program in 2007 ( P.L. 110-134 ) required HHS to develop standards for Early Head Start home visitors related to staff training and qualifications, as well as to conduct of home visits.\nFor FY2010, HHS estimated that Early Head Start programs would receive about $690 million out of the total appropriation provided for Head Start ( P.L. 111-117 ). In addition, Early Head Start programs are expected to receive funds in FY2010 that were appropriated in the previous fiscal year as part of the American Recovery and Reinvestment Act (ARRA), P.L. 111-5 . According to HHS, nearly $1.1 billion in Early Head Start funds from ARRA remained unobligated at the end of FY2009. The program is administered by the Office of Head Start within the Administration for Children and Families (ACF) at HHS.\nEven Start\nEven Start programs are authorized by ESEA Title I, Part B, Subpart 3, and are intended to integrate early childhood education, adult basic education, and parenting skills education into a unified family literacy program. Funds are distributed to all states and must be subgranted to local education agencies working in collaboration with community based organizations. Even Start programs generally serve children aged zero to seven and their parents. Services must include home-based instruction, adult literacy instruction, early childhood education, instruction to help parents support their child's education, participant recruitment, screening of parents, and staff training. An assumption underlying Even Start is that children whose parents have low literacy or basic education levels are more likely to be educationally successful if, in addition to receiving early childhood instruction themselves, their parents receive educational services plus instruction in how to help their children learn. The program is administered by the Office of Elementary and Secondary Education, within the Department of Education. It was funded at the level of $66 million for FY2010 ( P.L. 111-117 ).\nHealthy Start\nThe Healthy Start program provides funding through competitive grants or cooperative agreements to provide health and related services to high-risk pregnant women, infants, and mothers in communities with exceptionally high rates of infant mortality. Among other purposes, the program seeks to reduce racial and ethnic disparities in the proportion of pregnancy-related maternal deaths, preterm births, and infant mortality. Healthy Start projects also work to ensure that the basic needs of mothers and infants (including \"housing, psychosocial, nutritional and education support, and job skill building\") are met. The program operates in 40 states (including the District of Columbia and Puerto Rico) and reaches roughly 100 communities.\nHome visits are frequently a part of services offered under this program. A 2003 survey of Healthy Start grantees (n=95) found that 99% provided home visits to at least some of their clients, with most offering home visits to a majority of their pregnant or parenting clients: 76% of grantees provided home visits to at least three-fourths of their pregnant clients and 64% of grantees provided home visits to their inter-conceptional clients. A little more than one-third of the grantees (35%) used a specific schedule to provide these home visits, but most (64%) reported scheduling visits in accordance with client need. Home visiting services provided to Healthy Start clients frequently included depression screening and treatment (84%), well baby care (75%), and smoking cessation and reduction services (73%). The large majority of grantees (87%) also conducted home visits to assess the home environment for infants and toddlers. The program is authorized under the Public Health Service Act (Section 330H, as amended by P.L. 106-310 ) and is administered by the Maternal and Child Health Bureau within the Health Resources and Services Administration (HRSA) of HHS. For FY2010, it received funding of approximately $105 million ( P.L. 111-117 ).\nInfants and Toddlers Program, Part C, IDEA\nThe Infants and Toddlers Program (\"Part C\") component of the Individuals with Disabilities Education Act (IDEA) provides grants to states to assist them in implementing statewide systems of \"coordinated, comprehensive, multidisciplinary, interagency programs\" that identify children (ages birth through three) that have or are at risk of physical, mental, or social skills developmental delays. The Part C program may be targeted toward children experiencing a developmental delay in one or more physical, mental, or social skill areas; The IDEA requires that these Part C services be delivered to the \"maximum extent possible\" in a child's \"natural environment,\" and the very large majority of Part C services are delivered in the home. In fact, one report indicates that more than 80% of Part C Services are delivered in the home. However, specific services are not based on any statutorily developed curriculum. Instead, they are provided pursuant to an Individual Family Services Plan (IFSP) that must be created to address the identified developmental delays. The Part C program is administered by the Office of Special Education within the Department of Education. The program received an appropriation of $439 million in FY2010 ( P.L. 111-117 ).\nMaternal and Child Health Block Grant\nThe Maternal and Child Health Block grant (Title V of the Social Security Act) is a public health program that seeks to (1) ensure access to and improve the quality of health care for mothers and children, especially those with low income or limited availability of care; (2) reduce infant mortality; (3) provide and ensure access to comprehensive prenatal and postnatal care to women (especially low-income and at-risk pregnant women); (4) increase the number of children receiving health assessments and follow-up diagnostic and treatment services; (5) provide and ensure access to preventive and child care services as well as rehabilitative services for certain children; (6) implement family-centered, community-based systems of coordinated care for children with special health care needs; and (7) provide toll-free hotlines and assistance in applying for services to pregnant women with infants and children who are eligible for Medicaid. States use Title V block grant funds for a variety of purposes, including direct services; efforts to build community capacity to deliver \"enabling services\" (e.g., home visiting, care coordination, transportation, and nutrition counseling); personal and preventive health services; and infrastructure-building services. Separately, Title V funds Community Integrated Service Systems (CISS). These projects use six specified strategies to increase capacity and integration of local service systems, including through provision of maternal and infant home health visiting, health education, and related support services for pregnant women and infants up to one year old.\nThe Title V program received FY2010 funding of $662 million ( P.L. 111-117 ), the large majority of which is distributed to all states under the block grant. However, some of these funds are provided for CISS grants and others are devoted to research via the Special Projects of Regional and National Significance (SPRANS) grants. The Title V block grant is administered by the Maternal and Child Health Bureau within the Health Resources and Services Administration (HRSA) at HHS.\nNew Parent Support Program\nThe military's New Parent Support Program (NPSP) was developed in recognition of the unique parenting challenges faced by military families (e.g., frequent deployments, long duty hours, moves to unfamiliar locations, and separation from extended families and friends). NPSP services are available to military families who are expecting a child, or who have a child or children up to three years of age (or five years of age for the Marine Corps). Services offered may vary across military branches and installations, but all NPSP programs include a home visiting component. In addition, programs may include supervised playgroups, prenatal and parenting classes, hospital visits, and referrals to other resources. Home visitors provide parents with guidance on child growth and development and address topics such as breastfeeding, sleeping, nutrition, and behavior management. The Department of Defense notes that home visits per family may be limited unless the family has been identified as being at high risk for child abuse. Every professional NPSP program staff member is required to be licensed as a Licensed Clinical Social Worker (LCSW), Marriage and Family Therapist, or Registered Nurse (RN). In addition, all staff must complete a criminal background check. The NPSP program is a part of the military's Family Advocacy Program (FAP).\nParent Information Resource Centers\nParent Information and Resource Centers (PIRCs) help implement parental involvement policies, programs, and activities designed to improve student academic achievement and strengthen partnerships among parents, teachers, principals, administrators, and other school personnel in meeting the education needs of children. The Elementary and Secondary Education Act (ESEA) (Section 5563) requires the recipients of PIRC grants to serve both rural and urban areas; use at least half their funds to serve areas with high concentrations of low-income children; and use at least 30% of the funds they receive to establish, expand, or operate Parents as Teachers (PAT) programs, HIPPY programs, or other early childhood parent education programs. Projects generally include a focus on serving parents of low-income, minority, and limited English proficient (LEP) children enrolled in elementary and secondary schools. According to the most recent data available, nearly 60% of parents served in the 2006-2007 school year were from low-income families, and nearly 25% had limited English proficiency. PIRC funding is distributed through competitive grants to nonprofit organizations or a consortium of a nonprofit organization and a local education agency (LEA). For FY2010, PIRC grants were funded at the level of $39 million ( P.L. 111-117 ), of which about 30% (roughly $11.7 million) may go toward PAT, HIPPY, or other early childhood parent education programs selected by the grantee. PIRC grants are administered by the Office of Innovation and Improvement (OII) at the Department of Education.\nPromoting Safe and Stable Families\nThe Promoting Safe and Stable Families program (PSSF, Title IV-B, Subpart 2 of the Social Security Act) primarily authorizes funds to state child welfare agencies for provision of four categories of services. The statute requires that states spend a \"significant\" amount of program funding on each of the categories: family support, family preservation, time-limited reunification (for families whose children have been removed to foster care within the past 15 months), and adoption promotion and support. For FY2010, the PSSF program received funding of $408 million, of which an estimated $64 million, at a minimum, should be made available for family support services. Home visitation is typically considered a family support service and the statutory definition of \"family support services\" for purposes of the PSSF program is \"community-based services to promote the safety and well-being of children and families designed to increase the strength and stability of families (including adoptive, foster, and extended families), to increase parents' confidence and competence in their parenting abilities, to afford children a safe, stable and supportive family environment, to strengthen parental relationships and promote healthy marriages and otherwise to enhance child development.\" Current data on the number of states using PSSF dollars to support home visitation are not available. The PSSF program is administered by the Children's Bureau within the Administration for Children and Families at HHS.\nAppendix B. Federal Initiatives Related to Coordination of Early Childhood Programs and Services\nResearchers have noted the importance of providing home visitation services in the context of other community supports intended to support and improve the well-being of young children and their families. In recent years, a number of federal initiatives have been established that seek to improve coordination among early childhood health, education, and social services programs and which might be relevant to home visitation programs. Several are discussed below.\nState Advisory Councils on Early Childhood Education and Care\nThe 2007 reauthorization of Head Start ( P.L. 110-134 ) 2007 included a new requirement for governors to establish State Advisory Councils on Early Childhood Education and Care ( \"State Advisory Councils\") for children from birth to school entry. These councils are intended to improve coordination across critical early childhood programs within each state and are expected to have representation from a broad spectrum of stakeholders, ranging from the state child care and education agencies to agencies responsible for health and mental health care. State Advisory Councils must:\nconduct a statewide needs assessment; identify opportunities for collaboration and coordination among entities carrying out federally funded and state-funded child development, child care, and early childhood education programs; develop recommendations for increasing the participation of children in existing federal, state, and local early childhood education and child care programs; develop recommendations for establishing a unified data collection system for publicly funded programs offering early childhood education, development, and services; develop recommendations for a statewide professional development and career plan for early childhood education and care; assess the capacity and effectiveness of two- and four-year public and private institutions of higher education toward supporting the development of early childhood educators; and make recommendations for improvements in state early learning standards, as appropriate.\nThe Head Start Act requires that governors officially \"designate\" a council to serve as the State Advisory Council and an individual to coordinate the activities of the council (which might be a pre-existing advisory council). The Head Start Act allows HHS to award one-time start-up grants of $500,000 or more to states for the development or enhancement of high-quality systems of early childhood education and care designed to improve school preparedness. Funding ($100 million) was made available for these grants for the first time in FY2009. States have until the end of FY2010 to apply for these funds. Grantees are required to provide a 70% match. All Head Start activities, including State Advisory Councils, are administered by the Office of Head Start within the Administration for Children and Families at HHS.\nEarly Childhood Comprehensive Systems\nState Early Childhood Comprehensive Systems (ECCS) are funded via competitive grants to states, and are to ensure school readiness through creation of a seamless system of early childhood services for all children. There are five core areas in which these systems, by fostering integrated efforts across health, human service, and education agencies, are meant to ensure delivery of services for young children. The five areas are (1) access to health care and medical homes; (2) assessment of and services to address socio-emotional development and mental health needs; (3) early care and learning programs; (4) parenting education; and (5) family support services. The initiative, which is supported with a part of the Title V (of the Social Security Act) Maternal and Child Health Block Grant funding reserved for Special Projects of Regional or National Significance (SPRANS), was first funded in FY2003. Nearly all states have now received these grants and were developing or implementing these systems. States have tended to focus ECCS activities on state early care and learning policies and programs, and one analysis concluded that \"most states need to give more importance to strategies that promote health, mental health, and family support.\" Home visiting is one family support strategy that is generally consistent with the overall school readiness aim of the initiative and which has received specific attention by some ECCS grantees. In its announcement of FY2009 funding (just over $7 million was made available), the Maternal and Child Health Bureau (HRSA, HHS), stated that this phase of the initiative was expected to support continued implementation of the state early childhood strategic plans and \"the integration of the ECCS program with the Substance Abuse and Mental Health Services Administration's Project LAUNCH [described below in this Appendix], the Administration for Children and Families Home Visiting Program [see \" Current ACF Home Visiting Initiative \"], and the State Early Learning Councils mandated by the Head Start reauthorization legislation [described above in this Appendix].\"\nProject LAUNCH\nThe Project LAUNCH (Linking Actions for Unmet Needs in Children's Health) initiative provides competitive grants for states and tribes to promote the wellness (defined as positive physical, emotional, social, and behavioral health) of children from birth to age eight. Grantees are charged with supporting evidence-based initiatives to achieve the overall goal of wellness. In their applications for funds grantees have sometimes identified one or more specific home visitation models they intend to support. These have included Parents as Teachers, Healthy Steps Home Visitation Component, Baby University Nurse Home Visiting Program, First Born Home Visiting Program, Safe Care, and \"Visitation to at-risk infants and parents by Touchpoints trained visitors.\" In addition, grantees identified numerous additional parent training and family strengthening programs, along with programs focused on developmental assessments, mental health, and physical health. Among other requirements, grantees are required to create a State (or Territorial or Tribal) Council on Young Child Wellness and to include public agencies that administer health, education, and human services for young children (including child welfare agencies). In addition, grantees are specifically required to link their efforts to those of any HRSA-funded ECCS grantee in the state as well as any ACF Home Visitation grantee. Initial funding of just under $7.5 million was provided for FY2008 ( P.L. 110-161 ) under authority of Section 520A of the Public Health Service Act; for FY2009 Congress provided $20 million for the initiative ( P.L. 111-8 ) and $25 million for FY2010 ( P.L. 111-117 ). The initiative now supports some 25 grantees, many of which are state health departments. The program is administered by the Center for Mental Health Services within the HHS, Substance Abuse and Mental Health Services Administration (SAMHSA).\nInteragency Coordinating Councils\nThe Individuals with Disabilities Education Act (IDEA) requires that each state establish a state Interagency Coordinating Council, appointed by the governor of the state, for the purpose of advising and assisting the state's lead agency in the implementation of the Part C program. States receiving funds under Part C are expected to establish such a council. The statute gives governors authority to appoint members to the council and goes on to specify a broad spectrum of early childhood stakeholders that should be included. At least 20% of council members must be parents of children with disabilities, a requirement that emphasizes the role of family involvement in policy and program development. The IDEA state councils are required to meet on a quarterly basis and council meetings may be open to the public. State councils are responsible for advising and assisting the lead state agency in the identification of fiscal and other resources for early intervention programs. Moreover, the councils may advise and assist the lead agency and the state educational agency on the provision of appropriate services for children from birth through age five, including the transition to preschool. The councils may also advise appropriate agencies in the state with respect to the integration of services for infants and toddlers with disabilities and at-risk infants and toddlers and their families, regardless of whether at-risk infants and toddlers are eligible for early intervention services. The councils are also required to prepare an annual report on the status of the state's early intervention programs for infants and toddlers with disabilities and their families."
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"question": [
"How is legislation supporting families who would benefit from home visiting services?",
"How does this legislation differ from prior legislation regarding home visiting programs?",
"How was this legislation funded?",
"Has the legislation been continuously funded?",
"What is the practice of home visiting?",
"How does this report analyze home visiting as a service strategy?",
"What are major home visitation models based on?",
"How is the type of visitor determined in each model?",
"What are the typical durations of home visiting models?",
"How widespread are home visitation programs in the US?",
"How well-funded are these programs?",
"What is the coverage of these services (ie. how many families do they cover)?",
"To what extent do home visitation programs operate in tandem with other programs?",
"Why has the practice of home visitation grown in popularity?",
"How have home visitations been assessed for effectiveness?",
"To what extent have home visitation programs been successful?",
"To what extent can home visitation play a role in enhancing early childhood?"
],
"summary": [
"Health care reform legislation passed by the House in November 2009 (H.R. 3962) and in the Senate in December 2009 (H.R. 3590) would authorize and provide funds for grants to states to provide home visiting services, on a voluntary basis, to families with young children.",
"There is no current law program that provides grants to states exclusively for home visiting programs.",
"The Obama Administration requested authorization and funding for such a program as part of its FY2010 budget request.",
"This proposal was not included in the President's FY2011 budget request, although the Administration has indicated its expectation that the pending health care reform legislation will be enacted.",
"Home visiting is a strategy for delivering support and services to families or individuals in their homes.",
"This report deals exclusively with home visiting as a service strategy for families with young children or those expecting children.",
"There are a variety of early childhood home visitation models. These models typically seek to positively impact one or more outcomes across three main domains: maternal and child health; early childhood social, emotional, and cognitive development; and family/parent functioning.",
"Depending on the particular model of early home visitation being used, the visitors may be specially trained nurses, other professionals, or paraprofessionals.",
"Visits, which often occur weekly, may begin during a woman's pregnancy or some time after the birth of a child and may continue until the child reaches his/her second birthday (in some cases) or enters kindergarten.",
"Early childhood home visitation programs are in operation in all 50 states and the District of Columbia.",
"The current combined public and private annual investment in these services has been estimated at between $750 million and $1 billion.",
"This funding supports services for an estimated 400,000-500,000 families, or about 3% of all families (17.4 million) with children under six years of age.",
"In addition to private and state and local public funds provided for early childhood home visitation, a number of federal programs have been tapped to support home visitation programs. Among others, these include Medicaid, the Temporary Assistance for Needy Families block grant, the Social Services Block Grant, the Promoting Safe and Stable Families program, Community-Based Grants to Prevent Child Abuse and Neglect, Even Start, Part C early intervention services for infants under the Individuals with Disabilities Education Act, the Maternal and Child Health Block Grant, Healthy Start, and Early Head Start.",
"The current popularity of early childhood home visitation draws, in some measure, from newer research on how the human brain develops and, specifically, the significance of prenatal and early childhood environments to later life outcomes.",
"Further, since at least the 1960s, a variety of home visiting programs have undergone evaluations to test their effectiveness.",
"While the results have been mixed, some research has shown results that promise both immediate and longer term benefits to children and their families, including improvements in birth outcomes, enhanced child cognitive development and academic success, and strengthened child-parent interactions.",
"Overall, researchers caution that home visiting is not a panacea, but many have encouraged its use as part of a range of strategies intended to enhance and improve early childhood."
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|
GAO_GAO-13-200
|
{
"title": [
"Background",
"Sex Offender Registration Requirement",
"Federal Requirements for Registered Sex Offenders Traveling Internationally",
"Federal Agencies That Play a Role in Identifying Registered Sex Offenders Traveling Internationally",
"Federal Agencies Collect Information on Traveling Registered Sex Offenders, but the Information Could be More Comprehensive",
"Limitations in the Information Federal Agencies Receive on Registered Sex Offenders Leaving the Country from State and Local Jurisdictions and CBP Passenger Data",
"Limitations in Information on Registered Sex Offenders Returning to the Country Provided by Foreign Officials and from Reviews of Criminal History Records",
"ICE Has Not Made Plans to Receive Information from the Automated Notification, a Fact That May Preclude It from Obtaining Information on Some Traveling Sex Offenders",
"ICE and USNCB Notify Foreign Officials about Some Registered Sex Offenders Traveling Abroad, but Improved Information Sharing Could Increase the Number and Content of These Notifications",
"USNCB and ICE Notify Their Respective Foreign Counterparts of Registered Sex Offenders Traveling Internationally for Similar as well as Unique Purposes",
"Federal Agencies Do Not Share All Available Information They Have on Traveling Registered Sex Offenders with One Another, thus Limiting the Number and Content of Notifications Sent to Foreign Officials",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Registered Sex Offenders Traveling Internationally Who Were Refused Entry by Foreign Countries",
"Appendix III: Comments from the Department of Homeland Security",
"Appendix IV: Comments from the Department of Justice",
"Appendix V: Contact and Staff Acknowledgments",
"GAO Contact",
"Acknowledgments"
],
"paragraphs": [
"",
"The purpose of SORNA is to protect the public from sex offenders and offenders against children by providing a comprehensive set of sex offender registration and notification standards. These standards require convicted sex offenders, prior to their release from imprisonment or within 3 days of their sentencing if the sentence does not involve imprisonment, to register and keep the registration current in the jurisdictions in which they live, work, and attend school, and for initial registration purposes only, the jurisdiction in which they were convicted. Registration generally entails the offender appearing in person at a local law enforcement agency and the agency collecting information such as name, address, Social Security number, and physical description of the offender, among other items. The registration agency also is to document, among other items, the text of the provision of law defining the criminal offense for which the offender is registered; the criminal history of the offender, including dates of all arrests and convictions; and any other information the Attorney General requires. In addition, implementing jurisdictions are to maintain a jurisdiction-wide sex offender registry and adopt registration requirements that are at least as strict as those SORNA established. The length of time that convicted sex offenders must continue to update their registration is life, 25 years, or 15 years, depending on the seriousness of the crimes for which they were convicted and with possible reductions for maintaining a clean record. The frequency with which sex offenders must update or verify their information—either quarterly, semiannually, or annually—also depends on the seriousness of the crime. Once sex offenders register or update their registration in their jurisdictions, under the act, implementing jurisdictions are to provide the new information to FBI’s National Sex Offender Registry (NSOR). NSOR is a national database within the FBI’s National Crime Information Center (NCIC) that federal, state, local, territorial, and tribal law enforcement officials can access to obtain information on registered sex offenders throughout the United States. Jurisdictions’ receipt of certain federal grant funds is conditioned upon whether they have “substantially implemented” SORNA, and, as we have previously reported, jurisdictions are in various stages of implementing the act.",
"Pursuant to the Attorney General’s authority to interpret and implement SORNA, the SMART Office developed SORNA guidelines specifically related to registered sex offenders traveling internationally. For example, under DOJ’s National Guidelines, each jurisdiction in which a sex offender is registered as a resident is instructed to require the sex offender to inform the jurisdiction if the sex offender intends to commence residence, employment, or school attendance outside of the United States. The jurisdiction needs to then (1) notify all other jurisdictions in which the offender is required to register through immediate electronic forwarding of the sex offender’s registration information, and (2) notify the U.S. Marshals—the primary federal agency responsible for investigating sex offender registration violations under SORNA—and update the sex offender’s registration information in the national databases pursuant to the procedures under SORNA § 121(b)(1). Also, under DOJ’s Supplemental Guidelines, jurisdictions are directed to have sex offenders report international travel 21 days in advance of such travel and submit information concerning such travel to the appropriate federal agencies and databases. Furthermore, per the SMART Office’s SORNA Implementation Document, in order to provide the most helpful information to U.S. Marshals and other law enforcement agencies, DOJ’s guidelines require jurisdictions to collect passport information in addition to other travel information, such as itinerary details, purpose of travel, criminal records, and contact information within the destination country, regarding a registered sex offender’s intended international travel. Currently, according to officials from the SMART Office, DOJ will not reduce grant funds for jurisdictions that have not yet implemented the supplemental guidelines on registered sex offenders traveling internationally, because DOJ is allowing jurisdictions additional time to implement the supplemental guidelines as part of its assessment of whether jurisdictions have “substantially implemented” SORNA.",
"Under SORNA, the responsibility for establishing a system for informing jurisdictions about persons entering the United States who are required to register is divided among three federal departments— DHS, DOJ, and State—with DOJ being the lead agency. Additionally, in 2008, the SMART Office created the IWG, which consists of multiple agencies within DOJ, DHS, and State, to discuss issues related to identifying registered sex offenders traveling internationally.SORNA, ICE’s Homeland Security Investigations (HSI) division, consistent with its objective to target transnational sexual exploitation of children, developed the Angel Watch program. The purpose of this program is to provide advance notice to foreign officials when a registered sex offender who committed a crime against a child is traveling from the United States to a foreign country. Table 1 describes the functions of the federal agencies that play a role in identifying registered sex offenders traveling internationally.",
"Three federal agencies—U.S. Marshals, USNCB, and ICE—use information from state, local, territorial, and tribal jurisdictions, as well as passenger data from CBP, to determine whether registered sex offenders are traveling outside of the United States. Similarly, five federal agencies—USNCB, ICE, U.S. Marshals, Consular Affairs, and CBP—may be notified of registered sex offenders traveling to the United States through several means, including tips from foreign officials or when CBP queries the registered sex offender’s biographic information at a port of entry and finds that the offender has a criminal history. However, none of these sources provides complete or comprehensive information on registered sex offenders leaving or returning to the United States. For example, because CBP’s passenger data are based on information from private or commercial air, commercial vessels, and voluntary reporting from rail and commercial bus lines; and CBP does not routinely query individuals who leave the United States by commercial bus, private vessel, private vehicle, or by foot, it is unable to provide information on all individuals leaving the country. In addition, foreign officials do not always monitor when a registered sex offender is returning to the United States. The FBI is establishing an automated notification process that is expected to address some of these limitations. However, because ICE has not requested to receive the automated notifications, ICE will not be notified of registered sex offenders who leave the country via a land port of entry.",
"Officials from the U.S. Marshals and USNCB said that they use information from state, local, territorial, and tribal jurisdictions, and officials from the U.S. Marshals and ICE said that they use air and sea passenger data from CBP, to determine whether registered sex offenders are traveling internationally, but both mechanisms have limitations.\nThe information that the U.S. Marshals and USNCB receive from jurisdictions about registered sex offenders traveling internationally is limited, in part because (1) some jurisdictions do not require sex offenders to inform them of international travel and (2) those jurisdictions that do require notice must rely on sex offenders to self-report this information. Consistent with the Attorney General’s authority under SORNA to require sex offenders to provide additional information for inclusion in the jurisdiction’s registry than what the act requires, DOJ’s Supplemental Guidelines added that registered sex offenders must provide jurisdictions 21 days advance notice of any international travel, and jurisdictions are to notify the U.S. Marshals of any registered sex offenders traveling internationally. According to the U.S. Marshals, to support these jurisdictions’ efforts to provide more complete and consistent information, in February and March 2012, the SMART Office asked jurisdiction registry officials, and the U.S. Marshals and USNCB asked relevant jurisdictional law enforcement agencies, to submit a Notification of International Travel form to the U.S. Marshals. This form includes the traveler’s name, passport number, travel information, criminal record, and contact information in the destination country.\nHowever, not all jurisdictions have elected to implement the DOJ guideline requiring registered sex offenders to provide advance notice of international travel. Specifically, of the 50 jurisdictions that responded to our survey question about advance notice of international travel requirements, 28 reported that they require sex offenders to provide such advance notice, whereas the other 22 do not, primarily because their jurisdiction’s laws do not permit them to do so. For example, 1 jurisdiction said that because its statute requires registered sex offenders to notify the registry within 72 hours after international travel, officials are not authorized to collect this information in advance. Moreover, some jurisdictions have difficulty obtaining information on traveling registered sex offenders on a consistent basis because jurisdictions must rely on sex offenders to self-report, and jurisdictions have limited mechanisms in place to enforce the self-reporting requirement. For example, sex offender registry officials in 1 jurisdiction we visited said that they would not know that a registered sex offender failed to self-report international travel unless they conducted an address verification operation, which would enable them to determine that the sex offender is traveling. Senior officials from the SMART Office stated that they are pleased that 28 jurisdictions have already implemented the advance notice provision, considering that the guidance for the provision was not released until January 2011. These officials also stated that they continue to provide technical assistance to jurisdictions seeking to implement this provision.\nInformation on registered sex offenders traveling internationally that the U.S. Marshals and ICE obtain from CBP’s review of passenger data also has limitations. CBP, as part of DHS, has the mission to secure the United States’ borders while facilitating legitimate trade and travel. To help fulfill that mission, CBP established NTC, which, among other things, receives and reviews air and sea passenger data to determine whether persons entering or leaving the country via a commercial airline or cruiseline are on the terrorist watchlist, are wanted, or have a warrant out for their arrest. NTC officials stated that in 2009, they met with the U.S. Marshals to determine how they could support efforts under way at the newly formed NSOTC. NTC agreed to review passenger data to determine whether any persons leaving the country are registered sex offenders. Since then, according to NTC officials, they have provided the U.S. Marshals information, such as name, date of birth, destination, and offense, on all registered sex offenders NTC identifies from passenger data so that the U.S. Marshals can verify that the sex offender did not violate any registration requirements. NTC officials stated that they also use this information to identify registered sex offenders who remain in a foreign country for an extended period of time and return to the United States for short periods of time, because this may be an indication that the individual is circumventing SORNA requirements by falsely reporting their place of residency. NTC provides this information to ICE and U.S. Marshals for possible investigation or other law enforcement action. Figure 1 shows the primary methods by which the U.S. Marshals, ICE, and USNCB receive information on registered sex offenders traveling internationally.\nWhile the information NTC provides may be helpful, it has limitations. First, CBP collects and analyzes information on individuals leaving the United States via private or commercial airline, commercial vessel, and voluntary reporting from rail, but does not routinely query individuals who leave the United States by commercial bus line, private vessel, private vehicle, or by foot . Since travelers departing by commercial rail, commercial bus line, private vessel, private vehicle or by foot are not required to report travel information in advance of their travel, CBP may be unable to provide advance targeting and analysis of these individuals. However, a CBP officer may access information on these individuals by querying their biographical information during special outbound operations at port of entry. It is CBP’s policy that CBP officers query individuals leaving the country only if there is a special operation underway, such as an operation to verify the amount of currency taken out of the United States. According to NTC officials, CBP officers at the land port of entry are not required to provide NTC with the results of their queries because they are only required to pass information related to individuals on the terrorist watchlist. Therefore, NTC is generally not able to inform the U.S. Marshals and ICE about registered sex offenders leaving the country through means such as land ports or on a privately chartered boat.\nSecond, to determine whether a registered sex offender is on a particular flight, NTC determines whether any of the passenger data, such as name and date of birth, match any of the data in the FBI’s NCIC. However, NCIC may not always have complete information to enable NTC to determine if there is a match, in part because jurisdictions may enter information incorrectly or not at all because certain fields are not mandatory. In this case, NTC checks electronic public sex offender registries—which are not always up to date—to collect missing information, or calls relevant registry officials—which could take additional time.",
"Five federal agencies—USNCB, ICE, the U.S. Marshals, Consular Affairs, and CBP— have several mechanisms in place to identify registered sex offenders returning to the United States. For example, USNCB officials stated that their foreign counterparts, to the extent that they are aware, may notify U.S. officials of registered sex offenders returning to the United States. In addition, U.S. Marshals officials stated that they sometimes receive information from NTC on registered sex offenders returning to the United States. According to NTC officials, they are able to provide this information to the U.S. Marshals analyst stationed at NTC to the extent that the sex offender’s entire itinerary and flight information are available. However, these mechanisms do not identify all of the registered sex offenders returning to the United States all of the time. For example, even though USNCB may receive information on some returning registered sex offenders through its foreign counterparts, the information these officials provide is based on anonymous tips or offenders’ self-reported information. According to USNCB officials, even though hundreds of registered sex offenders traveled outside of the United States from August through September 2012, as we discuss later in this report, USNCB rarely received notifications of these registered sex offenders returning to the United States. Table 2 describes the mechanisms by which federal agencies become aware of registered sex offenders traveling back to the United States and the limitations of those mechanisms.\nTo help ensure that relevant federal agencies are more consistently notified of registered sex offenders leaving or returning to the United States, in 2008, the SMART Office established the IWG. The IWG is charged with developing an international tracking system to identify registered sex offenders leaving and returning to the country and immediately relay this information to appropriate domestic law enforcement agencies for any additional action as needed, such as to initiate an investigation. Specifically, FBI officials stated that, in collaboration with other IWG member agencies, they are developing a process that will send an automated notification to the U.S. Marshals’ NSOTC and registry and law enforcement officials in the jurisdictions where the sex offender is registered: (1) when a registered sex offender has purchased an airline or cruise ticket for international travel, (2) 1 week before the registered sex offender is scheduled to travel by commercial air or sea transport, and (3) when a CBP officer queries that person’s biographic information at a U.S. port of entry, such as any U.S. airport.\nThe automated notification, if implemented as intended, will provide the U.S. Marshals and relevant jurisdictions with information on registered sex offenders returning to the United States whose biographic information is queried by CBP officers at air, sea, and land ports of entry, assuming these offenders enter the country legally and their identifying information in NCIC, such as date of birth, is accurate and complete. In addition, FBI officials stated that the automated notification is expected to provide relevant jurisdictions with information on sex offenders registered in their jurisdiction who did not self-report international travel. This will help law enforcement officers to avoid using resources to search for sex offenders who they thought had absconded, when the offender had actually left the country on personal travel.\nAccording to FBI officials, the FBI vetted the automated notification proposal through its Advisory Policy Board; the FBI Director approved the proposal in June 2012; and FBI officials estimate that they will be able to implement the automated notification as early as March 2013. FBI officials responsible for implementing the automated notification said that they are currently working with CBP to include additional information from CBP’s systems in the automated notifications, such as the specific ports of entry and the mode of transportation offenders are using. The FBI will not delay implementation of the automated notification to incorporate the additional information from CBP; instead, the FBI will incorporate this information into the automated notifications at a later date, if necessary.\nWhile the automated notification will address some of the limitations discussed previously, it will not address all of them. For example, according to FBI officials, the automated notification will provide notice to the U.S. Marshals and jurisdictions of all registered sex offenders leaving or returning to the United States for whom CBP officers query their biographic information at a port of entry. Consequently, the automated notification will not provide notice of a registered sex offender who plans to leave the country via a land port of entry because CBP generally does not query information for these travelers. CBP officials explained that CBP officers may query biographic information for individuals leaving the United States through a land port of entry—such as in the case of a special operation to verify the amount of currency taken out of the country—but generally do not do so because of regulatory, policy, and infrastructure limitations in monitoring individuals leaving the United States. notification is intended to address the federal government’s current limitations in identifying registered sex offenders traveling internationally.\nAccording to FBI officials responsible for implementing the automated notification, they have had preliminary discussions with Canadian Police Information Center officials as to whether every person that enters Canada through the U.S.-Canada land border will be queried in NCIC.\nOf the 17 jurisdictions that reported receiving information on registered sex offenders entering the United States from a federal agency, 10 reported receiving information from the U.S. Marshals and USNCB, respectively; 8 reported receiving it from ICE; and 2 reported receiving it from CBP and State, respectively. Some of the responses reflect jurisdictions receiving information from more than one federal agency.\nJurisdictions could possibly use information on registered sex offenders traveling to their jurisdictions from abroad to help them identify the current location of these offenders. For example, officials from one local law enforcement agency we visited stated that receiving such notifications would help officers verify whether the offenders have returned from foreign travel when officers conduct address verifications. In addition, this information would help jurisdictions fulfill their requirements under SORNA to protect the public from sex offenders. Once the automated notification system is operational, jurisdictions that have registered the sex offender and entered a record into NCIC will be notified that an offender has returned to the United States. Having this information will allow these jurisdictions to implement public safety measures more consistently.",
"To help ensure that they obtain as complete information as possible regarding registered sex offenders traveling internationally, the U.S. Marshals and ICE will continue to request information from jurisdictions or NTC even after the automated notification is operational. Currently, the U.S. Marshals and ICE do not consistently receive information on registered sex offenders entering or leaving the country via a land port of entry because NTC does not have this information and jurisdictions receive this information only to the extent that sex offenders self-report it. The automated notification will fill this information gap, in part, by sending notices about registered sex offenders entering and leaving the country via a land port of entry, to the extent that CBP queries the biographical information of the offender, in addition to providing notices about registered sex offenders traveling internationally via commercial air and sea transport. Although the automated notification will provide information on a greater number of traveling registered sex offenders than the number that jurisdictions and NTC provide, as shown in table 4, NTC provides more details on a specific traveler than the automated notification. Further, jurisdictions that collect offenders’ self reported data may also be able to provide more details. Therefore, according to U.S. Marshals officials, they find it beneficial to continue to receive information from each of these two sources.\nAccording to an ICE section chief responsible for the Angel Watch program, ICE has not requested to receive the automated notifications because it prefers to rely on information NTC provides, which meets ICE’s specific needs. In particular, an NTC analyst, after identifying a registered sex offender with plans to travel internationally via commercial air or sea transport, conducts further analysis to determine whether the offender committed a crime against a child. This ICE chief stated that ICE does not want information on all types of registered sex offenders, which is what the automated notification would provide, but only on those who have committed crimes against children, in accordance with ICE’s mission to investigate the sexual exploitation of children. However, by not requesting to receive the automated notification, ICE will not have information on registered sex offenders who committed offenses against children, left the country via a land port of entry, and had their biographical information queried at the port. According to the FBI, in order to receive the automated notification, ICE would have to submit a request to FBI’s Advisory Policy Board; and given that the board meets twice a year, it could take approximately 1 year or more for the board to approve an agency’s request to receive alerts from the system. The FBI also explained that the automated notification will not be able to distinguish between traveling registered sex offenders who committed offenses against children and those who committed offenses against adults because the notifications are derived from NCIC data, and the age of the victim is not a required field in this system. Therefore, if ICE were to receive the automated notification, ICE would have to determine on its own whether the offenders leaving the country through a land port of entry committed an offense against a child. However, according to NTC officials, about 90 percent of the registered sex offenders they identified in fiscal year 2012 who planned to travel internationally via commercial air or sea transport had committed offenses against children. We have previously reported that collaborating agencies can look for opportunities to address resource needs by leveraging each others’ resources, which could include receiving the automated notification, and obtaining additional benefits that would not be available if they were working separately. By electing not to receive the automated notifications, ICE will not receive information on registered sex offenders traveling to Canada or Mexico via a land port of entry whose biographical information is queried. This is of particular concern considering that, according to ICE, Mexico is one of the countries to which registered sex offenders travel most frequently. If ICE were to receive alerts from the automated notification, we recognize that some effort would be required to determine whether sex offenders leaving the country through a land port of entry committed an offense against a child. However, the level of effort required, and whether or not the benefits of the effort would outweigh the cost, cannot be determined at this time.",
"USNCB and ICE inform foreign officials when registered sex offenders are traveling to their countries to enable these officials to take actions that they deem appropriate to ensure public safety. USNCB and ICE notify their own unique counterparts in foreign countries about traveling sex offenders for similar purposes, such as enabling them to make decisions as to whether they will admit sex offenders into their country. In addition USNCB and ICE notify these counterparts for different purposes. For example, ICE counterparts may monitor the whereabouts of sex offenders while they are in the foreign country. USNCB and ICE base such notifications on different information sources; USNCB uses information it receives from the U.S. Marshals and jurisdictions, and ICE uses information it receives from NTC’s passenger data reviews as part of ICE’s Angel Watch program. However, the U.S. Marshals do not consistently share information with USNCB on traveling sex offenders, and USNCB and ICE do not share the information they receive on traveling sex offenders with each other. As a result, USNCB and ICE were not able to notify their foreign counterparts about a large number of registered sex offenders traveling internationally from August to September 2012, and some of the notifications were not as comprehensive as possible.",
"USNCB notifies its INTERPOL counterparts in other countries about registered sex offenders traveling internationally. Similarly, ICE, through its Angel Watch program, notifies its foreign law enforcement counterparts about sex offenders traveling internationally who had committed an offense against a child. According to USNCB and ICE officials, USNCB and ICE send these notices to different agencies within the foreign countries, but for similar purposes—to enable foreign officials to decide whether they want to admit the registered sex offender into their country or take other public safety measures they deem appropriate. For example, with regard to the United Kingdom, USNCB notifies its INTERPOL counterpart—the United Kingdom National Central Bureau— which is hosted by the Serious Organised Crime Agency (SOCA), a law enforcement body that fights organized crime. SOCA officials then make decisions about how to use this information. They could share it with agencies such as the United Kingdom (U.K.) Border Agency, which is responsible for refusing entry to persons who do not qualify, or the U.K. Metropolitan Police Service (MPS), which interviews registered sex offenders to establish exactly what their plans are while in the United Kingdom and where they will be staying upon entry or if admitted. On the other hand, according to ICE officials, ICE notifies the sex offender unit within the U.K. Metropolitan Police Service as well as the U.K. Border Agency directly through its attachés posted abroad about registered sex offenders traveling to the United Kingdom who committed an offense against a child. Of the six countries included in our review, three generally do not admit registered sex offenders, and in one country, even though it generally admits registered sex offenders, foreign law enforcement officials monitor the activity of the sex offender while in country. For example, ICE Angel Watch program officials reported that in 2012, an ICE attaché notified foreign officials in advance that a registered sex offender was traveling from the United States to their country; and as a result, the foreign officials denied entry to the registered sex offender. Appendix II provides information on registered sex offenders traveling internationally who were refused entry by foreign countries.\nUSNCB and ICE identified reasons why it is advantageous that they both notify foreign officials of sex offenders traveling internationally. USNCB officials explained that they have been trying to encourage their INTERPOL counterparts to inform them about individuals convicted of sex offenses in their countries who are traveling to the United States. Therefore, it is important for USNCB to provide such notifications if it expects its counterparts to reciprocate. ICE officials explained that it is important for their ICE attachés to inform their foreign law enforcement counterparts about traveling registered sex offenders to assist the counterparts with tracking offenders visiting that country, such as by developing a shared spreadsheet designed to help the country establish its own sex offender registry, and to monitor sex offenders’ activities while in that country.",
"USNCB provides more comprehensive information on sex offenders’ travel plans to its INTERPOL counterparts than ICE provides to its foreign law enforcement counterparts, and the additional information that USNCB has could help support ICE’s mission. USNCB bases its notifications on information that it receives from jurisdictions that require registered sex offenders to provide advance notice of international travel, whereas ICE bases its notifications on information it receives from NTC’s analysis of commercial air and sea passenger data. As previously discussed, jurisdictions that require advance notice may collect more information on each sex offender’s travel plans—such as hotel information—than NTC does.\nIn addition, neither USNCB nor ICE has provided its foreign counterpart with as many notices of traveling registered sex offenders as it potentially could. Specifically, as shown in figure 2, from August 1 through September 30, 2012, USNCB notified its counterparts of 105 offenders that ICE did not provide to its counterparts. Further, 82 of these 105 notifications (78 percent) were for registered sex offenders who had committed offenses against children. Similarly, ICE notified its counterparts of 100 offenders that USNCB did not provide to its counterparts.\nThere are several reasons why USNCB and ICE generally do not have information to share on the same sex offenders traveling internationally. First, USNCB generally does not receive information on traveling sex offenders from NTC, whereas ICE does. This is in part because the U.S. Marshals has not passed on all of the information it has obtained from NTC on registered sex offenders to USNCB. We have previously reported that collaborating agencies should consider if participants have full knowledge of the relevant resources in their agency.this guidance, in March 2012, the U.S. Marshals assigned one of its investigators to be co-located with USNCB officials in order to provide USNCB with information on sex offenders for whom USNCB would send Consistent with green notices to its foreign INTERPOL counterparts. U.S. Marshals officials then realized that they had additional information on traveling registered sex offenders that could be of interest to USNCB, and starting in August 2012, the U.S. Marshals investigator was to begin providing USNCB information on traveling registered sex offenders that the U.S. Marshals receives from NTC. However, we found that from August through September 2012, the U.S. Marshals only provided USNCB with information on 39 of the 169 traveling sex offenders of whom the U.S. Marshals was aware based on information from NTC.\nAccording to U.S. Marshals officials, the U.S. Marshals analyst posted at NTC may not be informing USNCB about all registered sex offenders traveling internationally that NTC has identified because the analyst’s primary purpose is to identify and pursue potential SORNA violations— instances in which a registered sex offender is in violation of registration requirements by traveling internationally without providing advance notice. As a result, by the time the analyst finishes looking into potential SORNA violations, some of the registered sex offenders that NTC identified may have already completed their international travel; the U.S. Marshals investigator posted at USNCB would not notify USNCB about these offenders because the opportunity would have passed for USNCB to provide advance notice to its foreign counterparts about these offenders.\nOfficials further explained that it takes time to complete the Notification of International Travel form for each traveling sex offender that NTC identifies, which may also prevent the investigator from notifying USNCB prior to the sex offender initiating travel. U.S. Marshals officials also stated that they would generally not provide USNCB with information on registered sex offenders whose international travel is less than 3 days. However, USNCB officials stated that they send notifications to their counterparts on all traveling registered sex offenders, regardless of travel duration or ability to provide advance notice.\nU.S. Marshals officials explained that they did not receive any additional resources to help bridge the gap between the information that NTC and USNCB obtain on registered sex offenders traveling internationally, but volunteered to help remedy this issue with limited existing resources. While the U.S. Marshals’ intentions are commendable, USNCB still does not have access to information on most of the registered sex offenders traveling internationally that NTC identifies, thus precluding USNCB from notifying its foreign counterparts about these individuals and enabling them to make informed public safety decisions.\nA second reason why USNCB and ICE do not have information on the same traveling sex offenders could be that USNCB receives information on registered sex offenders traveling internationally from jurisdictions, whereas ICE does not. Third, according to a senior ICE official, ICE may have received information on additional traveling sex offenders, but did not send notifications via Angel Watch because of constrained manpower or insufficient information on the child exploitation conviction, among other things.\nAccording to USNCB officials, they copy several other federal agencies on their notifications to foreign officials, including FBI’s Innocent Images National Initiative and the State Department’s Bureau of Diplomatic Security (DS) which may choose to take further action.officials stated that they share information on registered sex offenders traveling internationally with their regional security officers, who may inform other U.S. government and foreign law enforcement officials in- country, as they deem appropriate. However, USNCB officials reported that they do not coordinate their notifications with ICE, in part because their understanding was that ICE was interested in registered sex offenders traveling internationally only if the offender was the subject of For example, DS an ICE investigation; USNCB officials stated that they were not aware that ICE’s primary interest in obtaining information on these offenders was to notify their foreign law enforcement counterparts.\nWe have previously reported that collaborating agencies can look for opportunities to address resource needs by leveraging each others’ resources and obtaining additional benefits that would not be available if they were working separately. According to senior ICE officials responsible for the Angel Watch program, the additional information USNCB collects and provides to its counterparts could also help support ICE’s efforts. In particular, these officials stated that the relevant ICE attaché could share the additional information with that person’s foreign counterpart to support efforts to deny entry or monitor activity of registered sex offenders. USNCB officials stated that it would be feasible to include Angel Watch program officials on the notifications USNCB sends to foreign counterparts.\nTaking steps to ensure that USNCB and ICE have information on the same registered sex offenders traveling internationally—which could entail, for example, the two agencies copying one another on notifications to their foreign counterparts, or USNCB receiving information directly from NTC—could help ensure that USNCB and ICE are providing more comprehensive information on traveling registered sex offenders to their foreign counterparts to help inform public safety decisions.",
"Cases in which individuals who had previously been convicted of a sex offense in the United States subsequently traveled overseas to commit an offense against a child underscore the importance of sex offender registration and notification standards to help ensure public safety in the United States and abroad. Some of the limitations federal agencies have faced with regard to identifying registered sex offenders leaving and returning to the United States are expected to be addressed by the automated notification the FBI is currently developing. However, ICE has not requested to receive the automated notification, which may preclude it from identifying entire categories of sex offenders, such as those entering and returning to the United States via a land port of entry whose biographical information is queried. USNCB, U.S. Marshals, and ICE have taken steps to coordinate their efforts to identify registered sex offenders traveling internationally, such as participating in the IWG and collocating staff. However, despite these efforts, these agencies still do not have access to all of the information on traveling registered sex offenders that they could potentially receive. Sharing additional information could help ensure that these agencies are providing more comprehensive information on traveling registered sex offenders to their foreign counterparts to help inform public safety decisions.",
"Given ICE’s objective to target the transnational sexual exploitation of children, after the automated notification becomes operational, the Director of ICE should direct ICE Homeland Security Investigations officials to coordinate with FBI Criminal Justice Information Services officials to collect and analyze information that will enable ICE to determine if the benefits of receiving the automated notifications outweigh the costs. The type of information ICE may consider collecting as part of this analysis could include the number of notifications generated for sex offenders leaving the country via a land port of entry.\nTo ensure that USNCB and ICE are providing more comprehensive information to their respective foreign counterparts regarding registered sex offenders traveling internationally, we recommend that the Attorney General and the Secretary of Homeland Security take steps to help ensure that USNCB and ICE have information on the same number of registered sex offenders as well as the same level of detail on registered sex offenders traveling internationally. Such steps could include USNCB and ICE copying each other on their notifications to their foreign counterparts or USNCB receiving information directly from NTC.",
"We provided a draft of this report for review and comment to DHS, DOJ, and State. We received written comments from DHS and USNCB, within DOJ, which are reproduced in full in appendices III and IV, respectively. DHS generally agreed with our recommendations in its comments, and USNCB agreed with our recommendations with additional observations. State did not provide written comments on the draft report. We also received technical comments from DHS and DOJ, which were incorporated throughout our report as appropriate.\nIn its written comments, USNCB agreed with our recommendation that the Attorney General and the Secretary of Homeland Security take steps to help ensure that USNCB and ICE have the same information on registered sex offenders traveling internationally. USNCB noted that it has already begun the process of establishing points of contact with the appropriate ICE personnel so that USNCB can include ICE in its dissemination of sex offender notifications. USNCB also identified additional actions which were beyond the scope of our review, such as the need for technical improvements to streamline data sharing and foreign notification processes. In addition, USNCB stated that there needs to be an impetus for all states to substantially implement the guidelines set forth by the SMART Office on traveling registered sex offenders. During the course of our review, officials from the SMART Office stated that they have taken some actions, such as conducting workshops and providing technical assistance, to encourage jurisdictions to implement the requirement for registered sex offenders to report international travel 21 days in advance of such travel.\nDHS agreed with our recommendations that ICE should assess whether receiving the automated notifications would benefit their mission to target transnational sexual exploitation and that DOJ and DHS should take steps to ensure that USNCB and ICE have the same information on traveling registered sex offenders. However, in its letter, DHS questioned whether the automated notifications would be of use to the Angel Watch program because the timing of some of the notifications would not enable ICE to notify foreign officials in advance that a sex offender is traveling to their country, in which case the foreign officials could choose not to admit the offender. Nevertheless, in addition to admissibility decisions, foreign law enforcement officials with whom we spoke stated that they use the information they receive from ICE for multiple purposes, including determining how frequently the sex offender travels to that country, where the offender stays while in country, and where to direct their resources to monitor sex offenders.\nDHS also raised concerns that given the hundreds of thousands of individuals leaving the United States via the southwest border on a daily basis, handling notifications on sex offenders leaving the country through this border may be untenable. However, it is uncertain how many of these individuals are sex offenders and how many of them will be queried by CBP when exiting the country. Therefore, it will be important for ICE to implement our recommendation so that once the automated notification process is underway, ICE can obtain the necessary information to determine if the number of notifications of sex offenders exiting the country through a land port of entry is manageable.\nWe are sending copies of this report to the appropriate congressional committees, the Attorney General, the Secretary of Homeland Security, the Secretary of State, and other interested parties. This report is also available at no charge on GAO’s web site at http://www.gao.gov.\nIf you or your staff have any questions, please contact me at (202) 512- 6510 or larencee@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Staff acknowledgments are provided in appendix V.",
"Since 2006, Congress has passed legislation and the Department of Justice (DOJ) has promulgated regulations to help ensure that federal, state, local, territorial, and tribal officials are aware of when registered sex offenders travel internationally. To determine the extent to which these officials have procedures in place to implement these requirements, we addressed the following questions: (1) How and to what extent does the federal government determine whether registered sex offenders are leaving or returning to the United States? (2) How and to what extent have federal agencies notified foreign officials about registered sex offenders traveling internationally?\nTo address both objectives, we identified legislation, regulations, and other guidance that directs federal agencies’ efforts to identify registered sex offenders leaving or returning to the United States. Section 128 of the Sex Offender Registration and Notification Act of 2006 (SORNA), directs the Attorney General, in consultation with the Secretary of State and the Secretary of Homeland Security, to establish a system for informing domestic jurisdictions about persons entering the United States who are required to register under SORNA (referred to as registered sex offenders). Further, SORNA makes it a federal crime for a sex offender required to register under SORNA to travel to foreign countries and knowingly fail to register or update a registration in the United States. Additionally, under DOJ guidance, jurisdictions are required to have registered sex offenders report international travel 21 days in advance and to submit information concerning such travel—such as expected itinerary, departure and return dates, and means and purpose of travel— to the appropriate federal agencies.\nIn order to assess how federal agencies obtain information on registered sex offenders leaving and returning to the United States, we obtained documentation from and interviewed members of the International Tracking of Sex Offenders Working Group (IWG), which is composed of representatives from various components within DOJ, the Department of Homeland Security (DHS), the Department of State (State), and the Department of Defense (DOD). The IWG was tasked with developing mechanisms to comply with statutory and regulatory requirements for identifying registered sex offenders leaving and returning to the United States. We reviewed the IWG’s proposals for such mechanisms, which were documented in a white paper prepared by the IWG in December 2010. We then interviewed officials from three of the federal departments represented on the IWG to obtain information on the mechanisms by which they identify registered sex offenders leaving and returning to the country, any limitations of these mechanisms, and what steps could be taken to address these limitations. Those agencies are the following:\nOffice of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking (SMART Office)\nFederal Bureau of Investigation (FBI)\nUnited States Marshals Service (U.S. Marshals)\nInternational Criminal Police Organization (INTERPOL) Washington – U.S. National Central Bureau (USNCB)\nDepartment of Homeland Security\nU.S. Customs and Border Protection (CBP)\nU.S. Immigration and Customs Enforcement (ICE)\nBureau of Consular Affairs (CA)\nBureau of Diplomatic Security (DS)\nWe excluded DOD from our review because under SORNA, the departments responsible for dealing with registered sex offenders traveling abroad were identified as DOJ, DHS, and State.\nWe also interviewed and surveyed relevant state, local, and territorial officials to determine what role, if any, they play in informing the federal government of registered sex offenders leaving the country, and how, if at all they become aware of registered sex offenders returning to the country, and how they use that information to help ensure public safety. We first conducted a screening survey of officials from all 56 jurisdictions—the 50 states, the District of Columbia, and the 5 territories, excluding tribal territories, that are eligible to implement SORNA. We contacted jurisdiction officials identified by the SMART Office as being responsible for implementing SORNA in the jurisdictions to determine whether they require registered sex offenders to provide advance notice of international travel and whether they share information with relevant federal agencies on registered sex offenders leaving or returning to the country. These officials included representatives of state police departments or attorney general offices. We pretested the survey with 2 jurisdictions, distributed the survey by e-mail, and received responses from all 56 jurisdictions. Subsequently, of those jurisdictions that responded that they require sex offenders to provide advance notice of international travel, we selected 4 jurisdictions—Maryland, Florida, Michigan, and Arizona—to conduct site visits and 1 jurisdiction (New Mexico) to conduct interviews. During the site visits we obtained additional information on how they implemented and enforced the requirement and shared information with relevant federal agencies. We chose these jurisdictions based on (1) variation in the extent of international travel from the jurisdiction; (2) percentage of the population that is composed of sex offenders; and (3) whether the state has land and sea ports of entry, in addition to airports, to cover the various modes by which sex offenders could enter and leave the country. During the site visits, we met with officials from the following federal, state, and local law enforcement agencies: U.S. Marshals, ICE, and CBP (at air, land, and sea ports of entry), state agencies responsible for maintaining the state sex offender registry, and local law enforcement agencies responsible for registering and monitoring sex offenders. During the site visits, we determined what actions were taken by state jurisdictions after the federal government informed them of sex offenders returning to their jurisdiction, particularly if the jurisdiction was not aware that the individual had left the country. Furthermore, we gathered information from jurisdictions on any actions that can be taken to improve their efforts to identify registered sex offenders leaving or returning to the United States. While the perspectives from the officials we interviewed during site visits cannot be generalized to all jurisdictions, they provided valuable insights about registered sex offenders traveling internationally.\nWe also developed and administered a second survey of the same officials from the 56 jurisdictions to obtain more detailed information on the extent to which jurisdictions implement the 21-day advance notice requirement and inform federal agencies of registered sex offenders leaving the country. The survey also included questions related to jurisdictions’ perspectives on any challenges or improvements needed regarding receiving or providing information about sex offenders leaving or returning to the United States, in addition to other issues related to the implementation of SORNA. To develop this survey, we designed draft questionnaires in close collaboration with a GAO social science survey specialist and conducted pretests with 4 jurisdictions to help further refine our questions, develop new questions, clarify any ambiguous portions of the survey, and identify any potentially biased questions. Log-in information for the web-based survey was e-mailed to all participants, and we sent two follow-up e-mail messages to all nonrespondents and contacted the remaining nonrespondents by telephone. We received responses from 52 out of 56 jurisdictions.\nAdditionally, during our interviews with the IWG agencies, we asked whether any of these agencies use the information they obtain on registered sex offenders leaving and returning to the country to help ensure public safety. For the three agencies identified as having responsibility for taking action based this information—U.S. Marshals, ICE, and USNCB, we obtained and analyzed data on the number of registered sex offenders they received from August 1 through September 30, 2012 of registered sex offenders traveling internationally. We chose this time period because we wanted to assess the effectiveness of a process the U.S. Marshals instituted in August 2012 for sharing information with USNCB on registered sex offenders traveling outside of the United States. We then asked USNCB and ICE to provide us with the notifications they sent to foreign officials about the registered sex offenders who traveled outside of the United States for the same time period. We also analyzed the data to determine the extent to which there was any fragmentation (i.e. circumstances in which more than one federal agency is involved in the same broad area of national interest) or duplication (i.e. two or more agencies or programs are engaged in the same activities or provide the same services to the same beneficiaries) with regard to the notices. Specifically, we analyzed and compared the data provided by U.S. Marshals, ICE and USNCB to determine the extent to which the information these agencies had on sex offenders who planned to travel outside of the country was similar or different. We also assessed the similarities and differences in the notifications sent by USNCB and ICE to their foreign counterparts. We assessed the reliability of the data the agencies provided by questioning knowledgeable agency officials and reviewing the data for obvious errors and anomalies. We determined that the data were sufficiently reliable for our purposes.\nFurthermore, we contacted federal and foreign officials in select countries to obtain information on how they learn of registered sex offenders traveling from the United States to the countries in which they are located; how, if at all, they use this information to help ensure public safety; and any limitations or benefits of receiving this information. The countries we selected are Australia, Canada, Mexico, the Philippines, Thailand, and the United Kingdom. We selected Mexico, the Philippines, and Thailand because, on the basis of data we obtained from ICE, these are among the countries most frequented by child sex tourists—that is, individuals who travel to another country for the purpose of engaging in inappropriate sexual activity with a child. We selected Australia, Canada, and the United Kingdom because they are known to have national sex offender registries, similar to those of the United States, and have expressed an interest in receiving information from the U.S. government on sex offenders traveling to their countries. For each of these countries, we reached out to the ICE attachés stationed in country as well as a representative from the country’s national law enforcement agency. The perspectives of these officials are not representative, but provide valuable insights.\nWe conducted this performance audit from January 2012 to February 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our analysis based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our analysis based on our audit objectives.",
"CBP’s National Targeting Center (NTC) reviews air and sea passenger data to identify registered sex offenders who plan to travel internationally. NTC shares this information with the U.S. Marshals and ICE. The U.S. Marshals then refers these travelers to USNCB, and USNCB sends notifications to its counterparts via INTERPOL to foreign countries so that these countries can take action they deem appropriate to help ensure public safety, such as refusing entry. Figure 3 shows, according to NTC, how many registered sex offenders NTC identified and referred to USNCB (through the U.S. Marshals) who were ultimately refused entry by the foreign country during fiscal year 2012.",
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"In addition to the contact named above, Kristy Brown, Assistant Director; Su Jin Yon, Analyst-in-Charge; and Alicia Loucks made significant contributions to the report. Other key contributors were Susan Baker, Gary Bianchi, Frances Cook, Anthony DeFrank, Heather Dunahoo, Michele Fejfar, Eric Hauswirth, Richard Eiserman, Lara Miklozek, Linda Miller, Anthony Moran, Sheena Smith, Julie Spetz, and John Vocino."
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{
"question": [
"How are registered sex offenders tracked abroad?",
"How are these people tracked when they enter the US?",
"To what extent is data collected on these border crossings?",
"How might CBP fail to notice sex offenders crossing borders?",
"How might this shortcoming in tracking be addressed?",
"How is this proposed program limited?",
"How can ICE and USNCB better track sex offenders overseas?",
"How do ICE's and USNCB's processes for notifying foreign authorities differ?",
"Why is ICE's data less detailed?",
"How do the agencies differ in the notifications which they send?",
"Why is there a lack of overlap between the agencies?",
"How might the notification process be improved?",
"Why is tracking sex offenders overseas important?",
"What is the focus of this report with regard to sex offenders?",
"How does this report attempt to investigate this?",
"How did GAO source their data?",
"How did GAO augment the raw data with other sources?"
],
"summary": [
"Three federal agencies--U.S. Marshals, International Criminal Police Organization (INTERPOL) Washington - U.S. National Central Bureau (USNCB), and U.S. Immigration and Customs Enforcement (ICE)--use information from state, local, territorial, and tribal jurisdictions, as well as passenger data from the U.S. Customs and Border Protection (CBP), to identify registered sex offenders traveling outside of the United States.",
"Similarly, these agencies may be notified of registered sex offenders traveling to the United States through several means, including tips from foreign officials or when CBP queries the registered sex offender's biographic information at a port of entry and finds that the offender has a criminal history.",
"However, none of these sources provides complete or comprehensive information on registered sex offenders leaving or returning to the United States.",
"For example, CBP does not routinely query individuals who leave the United States by commercial bus, private vessel, private vehicle, or by foot, in which case CBP may not be able to determine if any of these individuals are registered sex offenders. In addition, foreign officials do not always monitor when a registered sex offender is returning to the United States.",
"The Federal Bureau of Investigation (FBI), working with other agencies, is developing a process that will address some of these limitations. Specifically, the FBI will send an automated notice to the U.S. Marshals and law enforcement officials in the jurisdictions where the sex offender is registered that the offender is traveling, to the extent that the offender's biographical information is queried at the port of entry.",
"However, because ICE has not requested to receive the automated notifications, ICE will not be notified of registered sex offenders who leave the country via a land port of entry whose biographical information is queried.",
"USNCB and ICE have notified foreign officials of some registered sex offenders leaving and returning to the country, but could increase the number and content of these notifications.",
"USNCB notifies its foreign INTERPOL counterparts about registered sex offenders traveling internationally, and ICE notifies its foreign law enforcement counterparts about traveling sex offenders who had committed an offense against a child. USNCB provides more detailed information than ICE because USNCB uses offenders' self-reported travel information that some jurisdictions collect, which may include details such as hotel information.",
"Since ICE uses passenger data, it does not have these details.",
"Also, data from August 1 to September 30, 2012, showed that the two agencies had significant differences in the number of offenders they identified in notifications. USNCB sent notifications on 105 traveling sex offenders that ICE did not, and, conversely, ICE sent notifications on 100 traveling sex offenders that USNCB did not.",
"In part this is because the two agencies rely on different information sources and do not share information with one another.",
"Taking steps to ensure that these agencies have all available information on the same registered sex offenders traveling internationally could help ensure that the agencies are providing more comprehensive information to their foreign counterparts to help inform public safety decisions.",
"In recent years, certain individuals who had been convicted of a sex offense in the United States have traveled overseas and committed offenses against children.",
"GAO was asked to review what relevant federal agencies—including DOJ, DHS, and the Department of State—are doing with regard to registered sex offenders traveling or living abroad.",
"This report addresses the following questions: (1) How and to what extent does the federal government determine whether registered sex offenders are leaving or returning to the United States? (2) How and to what extent have federal agencies notified foreign officials about registered sex offenders traveling internationally?",
"GAO analyzed August and September 2012 data from the U.S. Marshals, USNCB, and ICE on registered sex offenders who traveled internationally.",
"GAO also interviewed relevant agency officials and surveyed officials from all 50 states, 5 territories, and the District of Columbia to determine the extent to which they identify and use information on traveling sex offenders."
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CRS_RL32978
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{
"title": [
"",
"Current Tax Treatment",
"Development of the Current Rules",
"Is Relief From the Capital Gains Tax on Residences Justified?",
"Labor Mobility",
"Other Distortions",
"Equity Issues",
"Record Keeping",
"Contribution of Provision to Tax Sheltering and Avoidance",
"Converting Rental Property to Owner-Occupied Property",
"\"Like Kind\" Property Exchanges",
"Sharing Capital Gains",
"Including Investment Property with the Home",
"The Professional \"Fixer-Upper\"",
"Cottage and Home",
"House Swapping",
"Options for Change",
"Eliminating the Ceilings",
"Indexing the Dollar Cap",
"The Single vs. Joint Exclusion",
"Changing the Structure of the Exclusion",
"Tax Sheltering of Investment Gains",
"Conclusion"
],
"paragraphs": [
"For more than 50 years, capital gains on sales of taxpayers' homes have been preferentially treated. A revision in 1997 replaced two longstanding provisions—a provision allowing capital gains tax deferral when a new residence is purchased and a one time exclusion of $125,000 of capital gains for sellers over age 55—with a capped exclusion for each sale. While the 1997 cap was higher than the previous cap for the over-age-55 sellers, it was less generous than the uncapped rollover provision it replaced. In addition, the dollar cap was not indexed for price changes, and, unlike the previous over-age-55 cap, was half as large for unmarried taxpayers—$500,000 for married couples and $250,000 for single taxpayers. The exclusion is allowed once every two years, subject to taxpayers meeting ownership and use tests.\nThe ceiling was presumably meant to eliminate any capital gains tax on home sales for the vast majority of taxpayers, but the rapid rise in housing prices and the passage of time have reduced the value of the exclusion. With no revision and a continued upward march of housing prices, an increasing share of gains will be subject to tax.\nTwo bills in the 109 th Congress addressed this provision. H.R. 2127 , introduced by Representative Filner, would have allowed taxpayers over the age of 50 to exclude an amount that is double the current cap, but it is available only once in their lifetime. H.R. 2757 , introduced by Representative Andrews, would have indexed the exclusion. Other legislation ( H.R. 3803 by Representative McCarthy and S. 4075 by Senator Schumer) was introduced to change the amount of the exclusion for surviving spouses to that of a married couple.\nIn the 110 th Congress, S. 138 was introduced to allow a surviving spouse to exclude up to $500,000 of gain from the sale or exchange of a principal residence owned jointly with a deceased spouse if the sale or exchange occurs within two years of the death of the spouse. That provision was also included in H.R. 3648 , the Mortgage Forgiveness Debt Relief Act of 2007, which became public law ( P.L. 110-142 ) on December 20, 2007.\nThis report examines the capital gains exclusion and the ceiling. The first section describes the current tax rules, and the second section presents the historical development of the capital gains provisions. The third section discusses potential justifications for capital gains relief, as well as tax avoidance problems that may arise. The final section discusses various options for change, primarily focusing on the dollar ceiling. The modification to current law enacted by the Mortgage Forgiveness Debt Relief Act of 2007 is also addressed in the final section.",
"When an individual sells a personal residence, the excess of the sales price over the original cost plus improvements is a capital gain and is subject to tax. The individual is able to deduct any costs of the sale (such as commissions and advertising), and may also be required to include gain that was deferred from previous home sales.\nGain up to $250,000 for single taxpayers and $500,000 for married couples filing joint returns is excluded if the taxpayer meets a use test (has lived in the house for at least two years out of the last five years) and an ownership test (has owned the house, also for two years out of the last five). The use and ownership years may be the same or different. The exclusion can be used every two years.\nIn order to minimize the tax, assuming the individual is subject to it, he or she must keep records of any improvements during the entire time the home is owned and also, to comply with the law, appropriately distinguish between expenditures that are repairs, which do not reduce gain, and those that are improvements, which do reduce gain.\nFor homes that were acquired before the 1997 change in tax law, there may also be deferred gain from previously owned residences. Under pre-1997 tax law, a taxpayer could defer the gain on a home sale if another residence was purchased. If the new residence cost as much or more than the old residence sold for, the tax on the entire gain was deferred. If the new residence cost less than the sale price of the old residence, gains tax was due on the difference between the value of the old and new residence (if less than the gain) and tax on the remainder was deferred. The additional gain from previously owned residences makes it more likely that total gains will exceed the cap; had the 1997 law been in place for many years, much or all of the prior gain would have been excluded.\nCapital gains on assets that are held at least a year are taxed at special, lower rates: 5% for taxpayers in the 10% and 15% marginal income tax brackets and 15% for taxpayers in marginal income tax brackets above 15%. These provisions are temporary. Although the 5% rate will be reduced to 0% in 2008, the lower rates will expire at the end of 2010, absent legislative change, and the rates will revert to their previous levels, generally 10% and 20%.\nA special relief provision for military families and the Foreign Service allows them to expand the five-year period for the ownership and use tests to up to 10 years while on qualified official duty.\nAnother provision that may influence a taxpayer's decision about selling a residence is a long-standing provision that allows the gain to be forgiven entirely if the taxpayer does not sell the home and leaves it as part of his or her estate. If an individual keeps his house until death and leaves it to heirs, no tax on gain accumulated would be due, since the heir would be able to deduct the fair market value at time of death from sales price, when the house is sold (resulting in a zero capital gain with instantaneous sale). This rule is called a step-up in basis.",
"The gain realized upon the sale of a personal residence was taxed as capital gain until the passage of the Revenue Act of 1951 (P.L. 82-183). At that time, Congress enacted a rollover provision that allowed for the deferral of capital gains tax if the proceeds of the sale were used to buy another residence of equal or greater value within a year before or after the sale of the old residence. Congress stated that the rollover provision was in response to transactions that were:\nnecessitated by such facts as an increase in the size of the family or a change in the place of the taxpayer's employment. In these situations the transaction partakes of the nature of an involuntary conversion. Cases of this type are particularly numerous in periods of rapid change such as mobilization or reconversion.\nAt that time, the economy had grown as a result of industrialization and residential moves were more frequent due to business transfers and other employment related changes. Congress also recognized that capital gains from home sales were, in part, a result of general inflation. During the congressional debate, the rollover provision was justified on the grounds that homeowners were changing homes, not to make a profit as investors, but rather in response to employment and/or family size changes.\nThe first exclusion from taxation for capital gains on the sale of a primary residence was enacted by the Revenue Act of 1964 (P.L. 88-272). The provision was available only for the elderly (age 65 and over) and applied to residences sold after 1963. It was available on a one-time basis only, and was at the same level for both single and married individuals. To qualify, the house had to be occupied for five of the previous eight years. The exclusion of gain was limited to the amount attributable to the first $20,000 of sales price. Above that level, a ratio was used to determine the gain subject to taxation, such that the amount of the exclusion depended on the relationship of sales price to basis, as well as the relationship between $20,000 and sales price. For example, if the sales price were $40,000, one-half of the gain ($20,000/$40,000) could be excluded. But the actual amount excluded would be less than $20,000, unless the house originally cost $20,000. For example, if the basis in the house was $10,000, the gain on the $40,000 sale would be $30,000. Of that $30,000, one half, or $15,000, would be excluded because $20,000 was half the sales price.\nThe reason given for the exclusion was to reduce the burden on elderly taxpayers who would have to tie up all of their investment in a new home to avoid paying capital gains tax. The dollar restriction was due to a focus on the average and smaller home, thus suggesting a distributional motive.\nThe amount of capital gains excludable from taxation for older taxpayers was increased three times in response to higher housing prices. The three increases were enacted by The Tax Reform Act of 1976 ( P.L. 94-455 ), the Revenue Act of 1978 ( P.L. 95-600 ), the Economic Recovery Tax Act of 1981 ( P.L. 97-34 ) and finally, the Taxpayer Relief Act of 1997 ( P.L. 105-34 ). The limit for elderly homeowners rose to $35,000 in 1976, $100,000 in 1978, and $125,000 in 1981. The 1978 provision also liberalized the benefit by simply allowing an exclusion rather than a proportional share that depended on basis and lowered the age limit to 55. (There was consideration of eliminating the age requirement altogether.) The 1978 change also reduced the holding period requirement to three out of the previous eight years.\nIn each case of capital gains relief, Congress cited the rising sale prices of homes as the source of large amounts of taxable capital gains on residences and the reason for adjusting the amount of capital gains that could be excluded from taxation.\nWhen the rollover provisions and one time exclusion for the elderly were replaced by the current exclusion (in the Taxpayer Relief Act of 1997, P.L. 105-34 ), a major reason given was to reduce the record keeping burden and to eliminate the need for referring to records and making judgements about what expenditures are improvements.\nOther reasons cited for changing the tax law were to limit the distortions in behavior arising from the rollover treatment and from those elderly who had exceeded the exclusion limit or had already used it. Because the full deferral of tax required the purchase of a new residence of equal or greater value, the law may have encouraged taxpayers to purchase more expensive homes than they otherwise would have. The pre-1997 rules also discouraged some elderly taxpayers from selling their homes to avoid possible tax consequences. As a result, elderly taxpayers who had already used their one-time exclusion and those who might have realized a gain in excess of $125,000, may have retained their homes even though it was desirable for them to move.\nIt was also clear from statistical data that between rollovers, exclusions, step-up in basis (which allowed capital gains to be avoided if the home were held until death and left to heirs), and under-reporting, very little capital gains on owner-occupied housing were taxed. Thus, little revenue was gained from a set of provisions that, nevertheless, caused distortions in behavior and complicated compliance. These observations supported a simple elimination of the capital gains tax on principal residences.\nIn 1997 Congress imposed what was characterized as a \"relatively high\" ceiling on the amount of excluded gain, $500,000 for married couples. In a departure from the historic treatment of lifetime exclusions, however, the exclusion was only half as large for single taxpayers as for married couples—$250,000. The previous treatment had cut the exclusion in half for married couples filing separately but not for single taxpayers, an important difference given that most married individuals who do not divorce are eventually widowed. Unlike the lifetime exclusion, however, the exclusion could be taken in each period. In contrast to many other dollar limits in the tax code, the amount of the exclusion was not indexed, so that it, like the previous exclusion, might need to be periodically revisited.",
"Economists have often been critical of preferential treatment of certain types of activities, because that preferential treatment distorts behavior and causes a misallocation of capital. Tax preferences also narrow the tax base and require higher marginal tax rates for a given revenue target; these higher tax rates in turn magnify other distortions. Tax preferences also can be inequitable, favoring those who engage in tax preferred activities. (Tax preferences are also sometimes criticized because they favor higher income individuals; the appropriateness of such criticisms depends on one's view of how taxes should be distributed and whether such preferences are offset by a more graduated rate structure).\nIt is also true that the favorable treatment for owner-occupied housing may divert investment from business investment. Absent a market failure, this misallocation reduces the efficiency of the economy. Favorable capital gains treatment for housing is not the only tax benefit it receives, or even the most important in economic terms. The implicit income from housing is not subject to tax, yet costs such as mortgage interest and property taxes are allowed as deductions, at least for those who itemize. In general, the effective tax rate on the return to owner-occupied housing is around zero. And although housing is often claimed to provide external benefits, such benefits have not generally been measured; nor is there reason to believe that they justify such significant subsidies.\nIt is not clear whether the prospect of future capital gains relief plays an important role in inducing additional investment in housing. Unlike mortgage interest deductions, future capital gains relief provides no immediate cash flow benefit, and may be heavily discounted due to the delay and uncertainty of the benefit.\nIn addition, there are some good reasons to provide some relief for capital gains on owner-occupied houses and to restrict other owner-occupied housing tax benefits if a reduction in the preferential treatment of owner-occupied housing is desired. Perhaps the most important of these justifications for relief is to reduce the barriers to labor mobility, contributing to economic efficiency. Other reasons include reduction in other inefficiencies that distort housing costs; more equitable treatment among homeowners in different circumstances; and reduction of compliance burdens. There is some empirical evidence that significant distortions are induced by the gains tax once an individual has a home and wishes to move.\nOn the other hand, the exclusion can contribute to compliance problems, by allowing a potential for tax sheltering. These tax sheltering problems are discussed below.\nThe possible forms of capital gains revisions are closely tied to these rationales and issues. Therefore, following the general discussion of the rationales, we also consider the implications of the particular forms of these potential changes.",
"One of the important reasons for having some type of relief is to minimize the barriers to labor mobility. In order to have an efficient market economy that can respond to changes in tastes and technology, it is important to have as few barriers to labor mobility as possible. This consideration was reflected in the rationale for the rollover provision enacted in 1951. Americans' taste and preference for owning their own homes inevitably creates barriers to a willingness to relocate, barriers that cannot be avoided. But imposing capital gains tax at sale adds to that barrier.\nThe rollover provision, as it existed in prior law, provided some relief but still left some barriers to mobility in place. One problem arose because there were regional differences in housing prices, which still exist. If the individual was moving to an area that generally has lower prices (for example, from California to Arizona), it might be sensible to buy a house that was similar in quality but cost less because of lower overall prices in the area (which might also have included a lower salary). This shift would result in a capital gain, and the individual then might have been discouraged from making the move, or induced to purchase a larger house than otherwise desirable. There may also have been circumstances where it might have been more desirable to rent rather than to purchase a new home when relocating (for example, when the family is moving because of economic hardship or the new location is expected to be the place of employment for only a few years). The rollover provision would not have reduced the capital gains barrier in that case. Thus, the rollover provision was imperfect in its elimination of labor mobility barriers.\nThe capped exclusion eliminates all barriers, as long as the cap is not exceeded, and reduces the cost of labor mobility. Unless the cap is increased explicitly or indexed to housing prices, however, an increasing share of individuals will be affected by the ceiling over time and barriers to labor mobility will grow.",
"Aside from the labor mobility problem, capital gains taxes on owner-occupied housing can cause other distortions. Capital gains taxes on assets in general cause a lock-in effect (i.e., discourage changes in portfolio allocations by replacing old assets with new assets). One can argue, however, that the lock-in effect for homes in particular imposes greater costs. Financial assets are more likely to be close substitutes, so the lock-in effect is probably not very costly. [However, it is also possible to swap real estate investments without paying a capital gains tax.] Some might argue that people should be encouraged to hold on to investments in the stock market for a long period of time, in order to average out the ups and downs of the market, and the lock-in effect may actually be beneficial in some cases.\nDifferent types of housing, however, may be less substitutable for each other; the difference between the house to which an owner is \"locked-in\" and the home he desires may be more important than for various alternative financial assets. And with no relief provisions, capital gains taxes discourage moving for any purpose, whether to a larger house (for example, to accommodate a larger family) or a smaller one (when children have grown and left the home or to simplify maintenance during retirement). As noted above, a rollover treatment can cause people to buy too much housing, or continue to own when renting might be optimal. The once-in-a-lifetime exclusion which aided the elderly was aimed at older individuals who might wish to sell their houses to move into smaller and more easily maintained houses, to move to a rental status, or to \"cash out\" the value of the house for other purposes. If the exclusion cap does not come into play, these distortions do not exist, but, as noted above, if the cap does not rise with housing prices it will become increasingly binding.\nThe current provision permitting a capped exclusion every two years actually creates, for those affected, the opposite distortion. It encourages higher income individuals to move more frequently. For instance, an individual who has a capital gain at the limit can move, take advantage of the gains exclusion, and then, within, two years take advantage of it again, while the individual who sells only once, but has an equal gain would have to pay tax. Suppose, for example, that one taxpayer (a single individual) realizes a capital gain of $200,000 on the sale of a home, purchases another home, and then sells that second home two years later, earning an additional $200,000 in capital gains. The taxpayer would be able to exclude $400,000. If a similar taxpayer experiences a single gain of $400,000 in the same time period, he or she may exclude only $250,000.",
"The caps on both the prior one-time exclusion and the current exclusion were enacted to impose gains taxes on higher income individuals with large capital gains, and therefore the caps are presumed to have a vertical equity objective because they limit the benefit for high income taxpayers.\nThe cap, however, produces some horizontal inequities. First, the limited exclusion combined with the step-up in basis at death causes elderly taxpayers who had to move from their homes due to ill health to pay taxes not assessed on their healthier counterparts who remain in their homes until their death and leave the houses to their heirs with no capital gains tax.\nThe cap itself also produces some inequities among individuals who sell their homes and who are affected by the cap. These inequities are of three types: between those who move frequently and those who do not; between people living in different regions of the country; and between married couples where both spouses survive until the point they wish to sell and those where only one spouse survives.\nIn the first case, people who buy and sell frequently (and are thus less likely to accrue a large gain in a particular sale) are less likely to be affected by the tax. For example, a married couple who sells every five years and gets a $150,000 gain on each sale would not pay a gains tax. If a similar couple buys a house and sells after 20 years with the same accumulated gain (four times $150,000 or $600,000), they will pay a tax.\nTaxpayers living in states and locations where the cost of living, including housing prices, tends to be high, are more likely to be affected by the cap even in cases where their real incomes and standard of living are the same as those who are not affected. Thus, taxpayers in California and Massachusetts are more likely to be affected than taxpayers in Mississippi and Oklahoma.\nFinally, the tax is more likely to fall on elderly taxpayers who have lost a spouse than married couples who remain alive at the time they wish to sell their house. Although the tax laws allow the gain for the spouse who is deceased to be excluded (half the gain at that time), further capital gain exclusions are limited by the lower ceiling that applies to singles. For example, suppose the gain on a house is $400,000. In the case of a married couple who sells, the entire gain will be excluded. In the case of a surviving spouse, the exclusion will be $250,000 plus half of any gain that accrued during the deceased spouse's life; if that gain is less than $150,000 some tax will be due. Since most women marry husbands who are older than themselves, and since women live longer than men, a significant number of widows are likely to live in the house after the spouse has died.",
"Record keeping required to deal with the capital gains tax on residences is complex. To comply with tax regulations, taxpayers have had to keep detailed records of the financial expenditures associated with their home ownership. The taxpayer needs to record the original cost of the residence, any costs added at the time of purchase, and any capital improvements. In the latter case, taxpayers also have had to differentiate between those expenditures that affected the basis of the property and those that were merely for maintenance or repairs. In many instances these records have to be kept for decades. Congress has addressed this issue, stating in the reasons for the 1997 increase in the exclusion that\ncalculating capital gain from the sale of a principal residence was among the most complex tasks faced by a typical taxpayer.... [A]s a result of the rollover provisions and the $125,000 one-time exclusion under prior law, detailed records of transactions and expenditures on home improvements had to be kept, in most cases, for many decades.\nThe 1997 tax law simplified income tax administration and record keeping by providing a \"relatively high threshold, few taxpayers will have to refer to records in determining income tax consequences of transactions related to their house.\"\nThe capital gains exclusion, however, was not indexed for inflation, or for housing price changes. Since 1997, the value of homes has increased as much as 70%, depending on the price index used (see the discussion of indexing the cap below). If this appreciation were used to adjust the 1997 figure, the exclusion would rise from $500,000 to as much as $850,000 for couples (and from $250,000 to $425,000 for single taxpayers). In addition, gain on houses increased proportionally more. For example, if the basis (the original cost) of the house in 1997 were half the market value purchase price, a 70% increase in value would mean a 140% increase in the gain. This appreciation means that many more taxpayers would be subject to the ceiling. Without an indexing procedure, some of the potential record keeping benefits from the 1997 revision have been lost. It would be unwise to abandon record keeping given that the exclusion is covering fewer and fewer sales over time and there is no commitment from the government to index the provision, so that the simplification from less record-keeping is likely to be diminished.",
"The presence of a special exclusion contributes to the possibility of using the tax benefit to avoid capital gains taxes in unintended ways. This section discusses several ways this might occur.",
"Capital gains avoidance can occur by converting rental property to owner-occupied property. After this conversion, the property can be sold and the capital gains excluded up to the allowable amount, as long as the property has been owned and used as a principal residence for at least two years during the five-year period ending on the date of the sale of the residence. As an example, consider a married couple who have a primary residence and a rental property and both properties have substantially appreciated in value. The couple can sell the primary residence and claim a capital gain exclusion of up to $500,000 on that residence. The couple can then move into the rental property and use that as the primary residence. After two years the taxpayers could then sell the property and realize a gain of which up to $500,000 can be excluded under the law. It makes no difference that most of the appreciation on the second property was realized when it was a rental unit. Current tax law, however, does require that any depreciation on the rental property be recaptured and taxed.\nAn example of the depreciation recapture can be seen in the following example. A married couple sells their primary residence which had an adjusted basis (purchase price plus capital improvements) of $100,000 for $200,000. In prior years, the property had been a rental property and the couple had claimed $50,000 in depreciation deductions on the home. The taxable gain for the sale would be $100,000, which is the sales price minus the adjusted basis. Of that gain, $50,000 is tax-free and the $50,000 taken as depreciation deductions in the past would be subject to a 15% capital gains tax.",
"Taxpayers can avoid paying tax on the gain from the sale of their real estate property by participating in a \"like kind\" property exchange. Under section 1031 of the Internal Revenue Code, like-property exchanges offer business owners or investors a way to trade their property for something of similar value and type without reporting a profit and, thereby, defer paying taxes on the gain. In the case of residential property, this exchange can be combined with the exclusion of capital gains to allow taxpayers to avoid capital gains tax on some of the deferred gain. Some gain on the original investment property would be taxed as recaptured depreciation, and some may be taxed if the total remaining gain exceeds the cap. For example, a taxpayer who owns a rental property can participate in a \"like kind\" exchange for another residential property which then becomes the taxpayer's primary residence. The taxpayer must meet the ownership and use tests for a minimum of five years before the taxpayer can then sell the property and exclude capital gains up to the allowable amount. Essentially, the taxpayer will have sold real estate and avoided capital gains taxation on some, and perhaps most, of the capital gains earned on both properties.\nPrior to October 2004 when the American Jobs Creation Act of 2004 ( P.L. 108-357 ) was enacted, there was no minimum holding period for properties acquired through \"like kind\" exchanges. The exclusion of gain on the sale of a principal residence applied after two years, when the ownership and use tests for the provision would have been met. The 2004 law requires the taxpayer to hold the exchanged property for a full five years, as opposed to two, before the residence can qualify as a principal residence. This change reduced, but did not eliminate, the attractiveness of combining \"like-kind\" exchanges with the principal residence exclusion.",
"If taxpayers expect huge gains from owning, then selling a house—more than can be excluded from tax under the new rule—they could divide ownership of the house in order to maximize the amount of capital gain that could be excluded. If, for example, a married couple owns their residence together with an adult son and he meets the ownership and use tests for one-third of the property, the son may sell his share for a $250,000 gain without incurring a tax. His parents could simultaneously sell their share for $500,000 without tax, sheltering as much as $750,000 in capital gains. Note that this avoidance technique arises not from the exclusion, but from the presence of a cap. This approach to tax avoidance involves some constraints and risks: the child must live in the residence, and the property could be subject to attachment for the child's debts.",
"This avoidance technique might be termed the \"land with a small house\" strategy. A taxpayer can purchase a house with a significant amount of land as an investment, and then use the exclusion for the residence to also exclude gain on the land. You can also sell vacant land adjacent to your home separately from the home itself, as long as the home is also sold either two years before or two years after the sale of the vacant land. There are some restrictions on this exclusion for land, one being that the land must not only be adjacent to the home but used as part of the home (which would rule out farm land, timber land, and other uses but not simple speculation).",
"An individual can buy a house that needs substantial renovation as a principal residence, fix it up, live in it for two years, and then sell the home. This gain reflects untaxed labor income of the individual, which is now excluded from tax. In fact, this approach can be used by professional builders who would normally be paid for their services.",
"An individual who has both a regular home and a vacation home can take measures to shift the vacation home to principal residence status. Such an individual may effectively continue to live in the original home in part, but after the required holding period can sell the vacation home, avoid capital gains, and move back to the regular home as a permanent residence. Which home is determined to be the principal residence is based on a facts and circumstances assessment, including the length of time the taxpayer lives in each home, the location of employment and the principal residences of family members, mailing addresses (on bills and correspondence, tax returns, drivers' licences, and car and voter registrations), the locations of banks used, and the location of recreational associations and churches where the taxpayer has a membership. Thus, it is not easy to establish the vacation home as the principal residence, though it may be feasible in some cases and, of course, the IRS cannot audit every case of this type.",
"In this avoidance technique, wealthy individuals sell their homes back and forth periodically to qualify frequently for the capital gains tax exclusion. If they mutually agree to this arrangement, the transactions costs could be minimal (a lawyer to search the title and record the transaction). They may not even live in the exchanged homes. Such an arrangement is illegal (a sham transaction) but may be difficult to detect. This avoidance technique arises from the existence of the cap.",
"While there are any number of potential ways to deal with capital gains taxes on owner-occupied housing, including retaining the current rules, allowing no exclusions, or returning to the pre-1997 rules, the two areas where changes might be considered are the ceilings on the exclusion and in rules relating to investment property and tax sheltering.\nOptions for addressing the ceilings could include eliminating the ceilings altogether, indexing the ceilings either with respect to general inflation or housing prices, changing the relative ceilings between single and joint returns, or changing the basic structure of the ceilings.",
"One policy option could be to remove the ceilings altogether. For some taxpayers, the exclusion with ceilings enacted in 1997 increases their tax liability, because they might otherwise have used the rollover provision and then held the asset until death.\nOne advantage of eliminating the ceilings would be the elimination of any remaining distortions (such as incentives not to sell a house even if it would be desirable) and record-keeping requirements. This efficiency gain would reflect not only benefits to high income individuals who actually pay the tax, but also the much larger group who, because of uncertainty, need to keep records. As the section below on indexing indicates, by one index, houses have, on average, increased in value by 70% in the seven years since the existing ceilings were imposed. Suppose in 1997 a married couple had a home worth $300,000 with a $200,000 gain. A 70% increase would have caused the new home value to rise to $510,000, for a $410,000 gain. The gain would have doubled in only seven years, and could exceed the limit of $500,000 in a few years.\nOther circumstances could cause such a taxpayer to be over the limit. The percentage gain figure cited above is averaged across the country. In several cities across the country, including some in California, the average value of houses doubled in only five years. If the couple had a house in those cities that appreciated at the local average rate, they would have exceeded the $500,000 ceiling. Another circumstance in which the ceiling would be exceeded is if a spouse dies before most of the additional appreciation occurs. In that case, the surviving spouse could be over the exclusion limit because the exclusion would be limited to about $350,000 ($100,000 for half the appreciation that had already occurred and the $250,000 limit for single individuals). Finally, while some individuals sell houses more frequently, others live in them for a very long time. Appreciation that occurs more than 20 or 30 years, or even more, will be much greater than that over a seven-year period. While appreciation has been higher than normal in recent years, a normal rate of appreciation (that would probably be similar to the nominal growth in per capita income over the long run) would lead to huge gains. At a 5% rate, the gain would be almost $700,000 after 20 years. If inflation rises, or the holding period is longer, the gain will be larger.\nThese examples illustrate that individuals who are living in houses that may currently have accrued gains or have values well below the limit on the capital gains exclusion would need to keep records given the uncertainty about how long the house will be owned, what the appreciation rate will be, whether and when Congress might act to change the ceiling, and whether a spouse might die.\nEliminating the ceilings would also eliminate the inequities that arise among homeowners. These inequities tend to arise because of differences in housing prices across states and localities, differences that lead to more or less frequent sales of houses, and differences among elderly homeowners that arise from different health outcomes that require the sale of a house.\nEliminating the ceilings has some disadvantages. It would involve a revenue loss. In addition, some people might see its expected favoritism of high income individuals to be a disadvantage. Any reduction in tax progressivity, however, would be minor. The revenue loss from eliminating the ceilings is relatively minor in comparison to the revenue loss for the exclusion in general and the taxes collected on other assets of high income individuals. For example, in 1999, reported taxable capital gains on the sales of residences were in the range of $3.7 billion to $4.9 billion. Assuming a 20% tax rate, the tax on this amount was less than $1 billion and much of this amount may be due not to the cap but to failing to qualify in other ways. For that same year, the reported revenue loss from untaxed capital gains was estimated at $5.8 billion. Thus, the presence of the cap limited the amount of revenue loss from the exclusion of capital gains by less than—perhaps much less than—17%.\nTotal gains on all capital assets were $719.7 billion in 1999. Thus, taxable gains on residences accounted for around ½ of 1% of all gains. These capital gains are highly concentrated in high income classes, so the cap on the capital gains exclusion for residences most likely played a minor role in affecting the tax liability of higher income individuals, compared to the capital gains taxes in general.\nThe capital gains tax rates were cut substantially in 1997, and by almost 50% for the highest income class, the same year the capped exclusion for gains on residences was enacted. The effect of that cut dwarfed the revenue effect from imposing the cap. Capital gains on residences were also a small part of the total income of high income individuals. For example, the adjusted gross income of individuals with more than $1,000,000 in that same year was $653 billion; the income of those with more than $500,000 was $888 billion, and the income of those with more than $200,000 was $1,421 billion. Thus, with any of these classes, taxable capital gains on residences accounts for less than 1% of income and not all of the gain is due to the cap.\nMoreover, the data collected on tax returns filed in 1995 and 1996 (before the 1997 change) indicate that the benefits did not solely or even largely accrue to high income individuals if income is measured without including the gain itself. These data show large shifts in the distribution between 1995 and 1996, but in both years from 20% to 25% of the tax that would have been collected under the new law accrued to individuals with incomes below $20,000. In 1996, very little of the tax (less than 20%) would have been paid by those with incomes over $100,000. It is possible that the distribution of the tax that one might normally think would accrue to high income individuals may reflect sales due to divorce, job loss, and ill health. Indeed, wealthy individuals may be more likely to have the resources to keep their houses through these types of changes.\nAs these data suggest, compared to other capital gains provisions, the cap on residential capital gains has relatively small revenue effects and plays a relatively small role in the distribution of the tax burden. So while revenue and distributional issues may be of concern, other changes could easily be made that would accomplish those same goals. For example, the reduction in the tax rate on dividends enacted in 2003 cost 20 to 25 times as much ($20 billion) as the revenue gained from maintaining the dollar cap on the exclusion.\nNote that the appreciation in housing values should make revenue from the cap somewhat larger than reported in 1999 relative to income and other capital gains (although not necessarily relative to the benefit of the exclusion in general).\nAnother possible problem to consider, however, when weighing eliminating the cap, is the possibility of increased tax avoidance through like-kind exchanges, through converting investment property to residences and other techniques as described above. These activities are, however, likely to be undertaken by a minority, perhaps a small minority, of taxpayers. One of the challenges in designing tax rules is determining how to restrict general provisions of the tax law in order to target abuses by a small number of individuals. In addition, in most cases, there are alternative measures that can be undertaken to address such problems, as discussed below.",
"Rather than eliminating the cap, another approach would be to adjust the ceiling to reflect recent price changes and index it for future price changes. A commitment to indexing, rather than intermittently changing the cap as has occurred with prior exclusions, would provide individuals more assurances that they might not need to keep records.\nThere are several indexes that might be considered. The Office of Federal Housing Enterprise Oversight (OFHEO) data cited above show that house prices appreciated by 70% from the last quarter of 1997 through the first quarter of 2005. Applying this index to the $500,000 ($250,000) ceilings would imply a ceiling of $850,000 ($425,000) for the first quarter of 2005, and this amount would presumably be higher for the full year. This price index is based on repeat sales or repeat financing, and thus reflects price changes for the same property over time.\nThe National Association of Realtors (NAR) also provides an index for existing single family houses, which is simply the price of the average or median existing house sold. Their measures indicate that the median house has appreciated by 60% and the average value over all houses (the mean) has increased by 65%. Those measures would indicate an increase in the ceiling from $500,000 to $800,000 in the case of the median and $827,000 in case of the mean (with the single exclusion half as large).\nThe Census provides indexes of new single family homes, using three measures: change in median price, change in average price, and change in a constant quality house. These measures indicate somewhat smaller increases of 52%, 61%, and 42% respectively. The last price index is more related to the general price indices for the economy which, in turn, measure changes in prices of produced goods controlling for quality. These indexes would imply ceiling increases from $500,000 to $758,000, $804,000, and $708,000 respectively.\nHouses could also be indexed to general price inflation, which over the seven-year period suggests a 13% increase, and which would bring the $500,000 cap to $567,000.\nUsing the 70% measure, it appears that without indexing, a substantial increase in the share of taxpayers subject to the tax, or at least required to measure and report gain, is likely. According to 2000 Census data, 14.1% of houses were valued at amounts over $250,000 and 2.9% were valued at over $500,000. If we use the OFHEO price index to correct the distribution back to 1997 and forward to the current time, the estimates suggest that in 1997, 9.4% of houses were valued at over $250,000 and 1.6% were valued at over $500,000. By the first quarter of 2005, 27.4% were estimated to be valued at over $250,000 and 6.3% were estimated to be valued at over $500,000. These measures are consistent with Treasury estimates that in 1995, less than 3% of taxpayers were potentially subject to the tax.\nWe can also use data on gains reported on tax returns in 1998 and 1999 to estimate the increase in the share and absolute number of homeowners paying the capital gains tax. Using this approach, the number of homeowners paying the tax was less than 90,000 in 1997 (had the new rules been in effect for the entire year). While some portion of these taxpayers (perhaps a significant portion) paid tax because they did not qualify because of other rules, for those who paid the tax because they exceeded the exclusion, their numbers could have increased by more than five fold by 2005.\nEventually, the growth in the number of individuals subject to the tax may slow, in part because housing prices are not likely to continue to grow at such a rapid pace and in part because gain will no longer include accumulated gain on previous residences. This latter effect will cause fewer people with houses valued above the ceiling to have gains in excess of the exclusion, but will not reduce the numbers required to file a return and, thus, the need to keep records.\nWhich index would be appropriate depends on the objective of the cap. The recent change in housing prices has far outstripped the change in the overall price level by any measure and a good part of that difference could reflect a housing bubble. Over a period of time, however, indexing with respect to price levels would lag the value of housing price increases, which would tend to grow with income. During a seven-year period after the 1997 enactment, the value of GDP grew about 41% and, were the ceiling indexed to output growth, it would have risen to $706,000. If the objective of the cap is to maintain a fixed inclusion to exclusion ratio, a house price index would be appropriate, or perhaps an index to income (the latter would maintain the relationship over a long period of time). If the objective is to fix the cap in real terms, an index to a general price rise would be appropriate. If a general price increase is chosen, however, more and more gains will fall above the cap and in the very long run, virtually all gain will be above the cap and thus be subject to tax.",
"Another issue is whether the single exclusion should remain at a level that is half the joint exclusion. In making the cap half as large for singles (or twice as large for married couples), the provision departed from historical practices for the over-age-55 exclusion. The 1997 change doubled the existing $125,000 exclusion for singles, although that exclusion had not kept pace with house price changes because it had not been changed since 1981. If the 1981 value had been adjusted based on the Census bureau's average new house index, it would be $413,000 currently. Thus, single individuals who might have been eligible for the old age exclusion have lost ground compared to some historical periods, while married couples, at least currently, have gained. For an equivalent revenue cost, this approach favors married individuals relative to single individuals, including widows and widowers. (Both types of taxpayers could have been made worse off because there was no cap on rollovers).\nAllowing the exclusion to be half as large for single taxpayers may have reflected, to some extent, the tax planning problems faced by divorcing couples. If each taxpayer has the same ceiling, then it is more advantageous to sell a house with a large gain after the divorce, when each individual could have a full exclusion. This problem may have been less important for older individuals in the past when divorce was less likely, but with the exclusion substituting for rollover treatment, many more divorcing couples would be facing this problem. Higher income individuals who divorced and optimized their timing may be worse off under the post-1997 changes because they were not eligible for an uncapped rollover or larger exclusion. However, the new rules are beneficial for moderate income divorcing couples who wish to trade down. The change in relative exclusions could have addressed the problem of unmarried couples who own houses together, an issue that arose as part of the discussion of the \"marriage penalty\" in the income tax rate structure. This latter phenomenon is probably not very numerically important since, according to Census data unmarried couples were only 4.2% of households. Moreover, because they tend to be younger, they are less likely to be homeowners.\nMany of the single individuals selling homes, outside of divorcing couples, are likely to be widows or widowers and the remainder are largely people who have never been married or who have been divorced for some time. By reducing the exclusion ceiling for them, not only is the benefit reduced relative to historical values, but complexity is introduced because more individuals will be subject to filing requirements and paying taxes. As noted above, more than a quarter of houses are estimated to have values over $250,000.\nAlthough it eliminated the complexity for divorcing couples, the halving of the exclusion especially magnified compliance problems for surviving spouses. Although surviving spouses can receive the benefit of the step-up in basis for the half of the house allocated to the decedent, the lower ceiling not only increases the frequency with which basis must be calculated (any time the sales price is $250,000 or more) but also requires the measurement of the basis step-up. (Note: Surviving spouses can get the full step up of the entire gain in community property states, such as California). These individuals may be more likely to have houses that fall into the taxable range because they were married, perhaps for a long time. And the lower limit in general adds to the risk that even a couple with a modest house will have to keep complex records because of the possibility that one of them will die before the house is sold.\nOne potential change would be to allow surviving spouses to opt for the $500,000 exclusion as a substitute for the step-up in basis if they are selling a house they lived in with their spouse, a move that would simplify compliance for those whose housing values fall between $250,000 and $500,000. H.R. 3803 , introduced by Representative McCarthy in the 109 th Congress, proposed this allowance for certain surviving spouses.\nIn the 110 th Congress a similar proposal was introduced by Senator Schumer ( S. 138 ) and included in H.R. 3648 , the Mortgage Forgiveness Debt Relief Act of 2007, which became public law ( P.L. 110-142 ) on December 20, 2007. Specifically, the new law allows a surviving spouse to exclude from gross income up to $500,000 of the gain from the sale or exchange of a principal residence owned jointly with a deceased spouse if the sale or exchange occurs within two years of the death of the spouse and other ownership and use requirements have been met.",
"Another option is to change the structure of the exclusion in general. For example, there could be a much larger lifetime exclusion, with each sale of a home using up part of the exclusion. A lifetime exclusion would eliminate the incentive to turn over houses frequently and would eliminate the penalty for holding on to one's home for a long period of time. It would shift benefits (even for the same revenue cost) from very wealthy people who sell houses frequently to people who are less wealthy but have lived in their houses for a long time. It would, however, add to administrative costs and to complexity for some people who would need to keep track of the amount of the exclusion consumed.\nA different approach would be that embodied in H.R. 2127 of the 109 th Congress, which would have allowed a one-time doubling of the exclusion for those over the age of 50.",
"A final issue is whether additional measures should be taken to prevent the use of the exclusion from sheltering gains earned from investment property. There is little or no evidence of how serious this issue is. According to revenue estimates, the restriction on like-kind exchanges enacted in 2005 (requiring a five-year test) will have a negligible revenue effect ($200 million over 10 years). The revenue loss from the converting of investment property into a residence is likely larger.\nNote that these tax sheltering problems are not unique to current law; they existed under prior law as well.\nTo deal with the investment and \"like kind\" exchanges, the provision requiring longer residence periods for \"like kind\" exchanges could be expanded to property used as an investment. Another, more direct approach, which might be used to raise revenue to finance cap expansions, would be requiring the gain attributable to investment property to be separated out and taxed, as recaptured depreciation is now taxed.\nThe conversion of investment property is probably the most important tax avoidance scheme. Techniques such as buying a house with extensive land, establishing a vacation home as a residence, or explicit house swapping can probably only be addressed through tax auditing. These shelters would probably be made less attractive with longer holding periods, but longer holding periods have other consequences (such as interfering with mobility). The effect of longer holding periods would not be as onerous, however, because houses held for a short period of time are likely to have little appreciation, especially after deducting real estate commissions and other selling costs. And partial exclusion could be allowed for cases where sales were due to employment changes, and other factors. In addition, record keeping for a few years is not the burden that would be the case if the house was owned for decades. House swapping would be reduced or eliminated if the ceilings were increased or eliminated. It is very difficult to deal with the professional \"fixer-upper\" problem, although, as in the case of other tax avoidance schemes, longer holding period requirements would discourage such methods.",
"Capital gains on sales of taxpayers' homes have been preferentially treated in the tax code for decades. Current law allows an exclusion from income taxation of up $500,000 in capital gains for couples ($250,000 for singles). This preferential treatment is justified for several reasons. Capital gains taxes on homes create barriers to labor mobility in the economy. Imposing capital gains taxes on homes also creates significant compliance costs, requiring individuals to keep records for decades and to make fine distinctions between improvements and repairs. Capital gains taxes also tend to distort housing choices, discouraging individuals from selling their homes because of changing family and health circumstances. The taxation of gains in excess of a cap creates inequities between homeowners with different job circumstances, between those living in different parts of the country, and between those with different health outcomes. Exclusions of gains on homes do, however, contribute to tax avoidance schemes, especially ones that allow gains on investment properties to escape tax.\nThe exclusion from capital gains tax for owner-occupied housing currently exempts most homeowners from the tax. Although the capital gains exclusion adds to the magnitude of homeowner preferences that may distort investment, there are reasons to exempt capital gains on home sales from tax. The rise in housing prices juxtaposed with the fixed dollar cap for the exclusion is, however, estimated to increase more than fivefold the share of homeowners subject to gains tax. The possibility of capital gains tax in the future, arising from a cap that does not keep pace with housing prices, substantially reduces the number of taxpayers who could be freed from detailed record keeping. The problems associated with the gains tax could be eliminated or mitigated with the elimination of the cap or by indexing it to housing prices. The ceiling on the excluded gain, presumably adopted for revenue and distributional reasons, is, however, of small consequence compared to other provisions (such as the general taxes and tax preferences on capital gains and dividends). A complication of increasing or eliminating the ceiling, however, is the increased opportunity for tax sheltering activities, which may suggest additional restrictions aimed at these activities."
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"question": [
"What suggests that capital gains exclusion might change?",
"What bills did the 109th Congress introduce to address these issues?",
"What was the intention of other introduced legislation?",
"How does S.138 help a newly widowed person?",
"How was this provision included outside of S. 138?"
],
"summary": [
"Two factors in recent years, the rapid rise in housing prices and interest in tax reform, suggest the capital gains exclusion, including the dollar cap, might be reconsidered.",
"In the 109th Congress, two bills were introduced to address this issue. H.R. 2127 would have allowed taxpayers over the age of 50 to double the current exclusion, once in their lifetime. H.R. 2757 would have indexed the exclusion to price changes.",
"Other legislation (H.R. 3803 and S. 4075) was introduced to change the amount of the exclusion for surviving spouses to that of a married couple.",
"In the 110th Congress, S. 138 was introduced to allow a surviving spouse to exclude up to $500,000 of gain from the sale or exchange of a principal residence owned jointly with a deceased spouse if the sale or exchange occurs within two years of the death of the spouse.",
"That provision was also included in H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007, which became public law (P.L. 110-142) on December 20, 2007."
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GAO_GAO-18-33
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{
"title": [
"Background",
"DOD Definitions of Unwanted Sexual Behaviors",
"DOD Entities with Key Roles and Responsibilities in Addressing Unwanted Sexual Behaviors",
"DOD’s Sexual Assault Prevention and Response Program",
"DOD’s Military Equal Opportunity Program",
"DOD’s Family Advocacy Program",
"CDC and Its Sexual Violence Prevention Efforts",
"Continuum of Harm",
"DOD’s Policies on Sexual Harassment Include Some but Not All of CDC’s Principles and Most Relevant Legislative Elements",
"DOD’s Sexual Harassment Policies Include Some of CDC’s Principles for Preventing Sexual Violence but Not Others",
"DOD’s Sexual Harassment Policies Include Most Elements Mandated in the NDAA for FY 2013, but Some Do Not Include Mechanisms for Anonymous Reporting",
"Development of New OSD Harassment Policy May Provide Opportunities for Enhanced Oversight and More Consistent Approaches",
"DOD Has Processes for Maintaining and Reporting Consistent Data on Incidents of Sexual Assault and Domestic Abuse That Involves Sexual Assault, but Does Not Have Reasonable Assurance of Consistent Data on Sexual Harassment",
"DOD Has Developed and Plans to Further Improve Centralized Databases That Enable It to Maintain and Report Consistent Data on Sexual Assault Incidents and Domestic Violence Incidents That Involve Sexual Assault",
"DOD Reports Annually on Sexual Harassment, but Does Not Have Reasonable Assurance That the Military Services Maintain Consistent Data on Sexual Harassment Incidents",
"DOD Has Several Overarching Efforts to Address Unwanted Sexual Behaviors across the Continuum of Harm",
"DOD Is Developing an Overarching Prevention Strategy to Address the Continuum of Harm, but It Is Unclear Whether DOD Will Include Key Elements of a Long-Term, Results- Oriented Strategy",
"DOD Has Ongoing Collaborative Efforts to Address Behaviors along the Continuum of Harm",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Scope and Methodology",
"Appendix II: Comments from the Department of Defense",
"Appendix III: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments",
"Related GAO Products"
],
"paragraphs": [
"",
"DOD has defined various types of unwanted sexual behaviors, including sexual assault, sexual harassment, and domestic violence.\nSexual assault: DOD defines sexual assault as intentional sexual contact, characterized by use of force, threats, intimidation, abuse of authority, or when the victim does not or cannot consent. The term includes a broad category of sexual offenses consisting of the following specific Uniform Code of Military Justice offenses: rape, sexual assault, aggravated sexual contact, abusive sexual contact, forcible sodomy (forced oral or anal sex), or attempts to commit these acts.\nSexual harassment: DOD defines sexual harassment as a form of sex discrimination that involves unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature when (1) submission to such conduct is made either explicitly or implicitly a term or condition of a person’s job, pay, or career; (2) submission to or rejection of such conduct by a person is used as a basis for career or employment decisions affecting that person; or (3) such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creates an intimidating, hostile, or offensive working environment. However, as noted earlier, a provision of the NDAA for FY 2017 changed the definition of sexual harassment for the military for purposes of investigations by commanding officers so that it is no longer defined solely as a form of sex discrimination, but is recognized as an adverse behavior on the spectrum of behavior that can contribute to an increase in the incidence of sexual assault. We discuss this changed definition of sexual harassment later in this report.\nDomestic violence: DOD defines domestic violence as an offense under the United States Code, the Uniform Code of Military Justice, or state law involving the use, attempted use, or threatened use of force or violence against a person, or a violation of a lawful order issued for the protection of a person who is a current or former spouse, a person with whom the abuser shares a child in common or a current or former intimate partner with whom the abuser shares or has shared a common domicile. Sexual assault of spouses and intimate partners is a subset of domestic violence.",
"Various offices and organizations within DOD play a role in addressing unwanted sexual behaviors in the military. The Under Secretary of Defense for Personnel and Readiness is responsible for developing the overall policy and guidance for the department’s efforts to prevent and respond to instances of sexual assault, except for criminal investigative policy matters assigned to the DOD Inspector General and legal processes in the Uniform Code of Military Justice.",
"The Under Secretary of Defense for Personnel and Readiness oversees the Sexual Assault Prevention and Response Office (SAPRO), which serves as the department’s single point of authority, accountability, and oversight for its sexual assault prevention and response program. The responsibilities of the Under Secretary of Defense for Personnel and Readiness and SAPRO with regard to sexual assault prevention and response include providing the military services with guidance and technical support and facilitating the identification and resolution of issues; developing programs, policies, and training standards for the prevention of, reporting of, and response to sexual assault; developing strategic program guidance and joint planning objectives; overseeing the department’s collection and maintenance of data on reported alleged sexual assaults involving servicemembers; establishing mechanisms to measure the effectiveness of the department’s sexual assault prevention and response program; and preparing the department’s mandated annual reports to Congress on sexual assaults involving servicemembers.\nThe Secretaries of the military departments are responsible for establishing policies for preventing and responding to sexual assault within their respective military service, and for ensuring compliance with DOD’s policy. Further, they are responsible for establishing policies that ensure commander accountability for program implementation and execution. Each military service has established an office that is responsible for overseeing and managing the military service’s sexual assault prevention and response program. Each military service also maintains a primary policy document on its sexual assault prevention and response program. Much like DOD’s directive and instruction on sexual assault prevention and response, the military service policies outline responsibilities of relevant stakeholders, including commanders, sexual assault response coordinators, and victim advocates and training requirements for all personnel.",
"The Under Secretary of Defense for Personnel and Readiness has responsibility for developing the overall policy for DOD’s military equal opportunity program and monitoring compliance with the department’s policy. According to the policy, all servicemembers are afforded equal opportunity in an environment free from harassment, including sexual harassment, and unlawful discrimination on the basis of race, color, national origin, religion, sex (including gender), and sexual orientation. The chain of command is used as the primary and preferred channel to (1) identify and correct unlawful discrimination practices, (2) process and resolve complaints of unlawful discrimination or harassment, to include sexual, and (3) ensure that military equal opportunity matters are taken seriously and acted on as necessary. The Office of Diversity Management and Equal Opportunity (ODMEO) oversees the department’s efforts to promote equal opportunity, diversity, and inclusion management, and to help prevent unlawful discrimination and harassment throughout DOD. The Defense Equal Opportunity Management Institute develops training and studies on equal opportunity. Behaviors under the purview of the military equal opportunity program include unlawful discrimination on the basis of color, national origin, race, religion, or sex.\nThe Secretaries of the military departments are responsible for developing policies to prevent unlawful discrimination and harassment, (including sexual harassment), ensuring compliance with DOD’s policy, and establishing both formal and informal means of resolving complaints. The chain of command is the primary and preferred channel for identifying and correcting discriminatory practices and resolving servicemembers’ complaints of sexual harassment. The military services encourage servicemembers to resolve any complaints of sexual harassment they may have at the lowest possible level first.\nFor servicemembers who wish to report a complaint of sexual harassment, DOD provides two complaint options—formal and informal.\nA formal complaint is an allegation of sexual harassment that a complainant submits in writing to the authority designated for the receipt of such complaints in military service implementing guidance. Formal complaints require specific actions to be taken, are subject to timelines, and require documentation of the actions taken, in accordance with federal law. In contrast, an informal complaint is an allegation of sexual harassment, made either orally or in writing, which is not submitted as a formal complaint. Informal complaints may be resolved directly by the complainant, such as by confronting the individual or by involving another individual or the chain of command. Servicemembers who elect to resolve their complaints informally may submit a formal complaint if they are dissatisfied with the outcome of the informal process. In 2014, DOD directed the military services to develop implementing instructions and mechanisms for reporting instances of sexual harassment anonymously.",
"The Deputy Assistant Secretary of Defense for Military Community and Family Policy under the Under Secretary of Defense for Personnel and Readiness is responsible for the development and oversight of policy for the military departments to implement a coordinated community response approach to addressing domestic abuse. The DOD Family Advocacy Program (FAP) office provides guidance and technical assistance to the military departments and DOD components to support their efforts to address, among other things, domestic abuse.\nThe Secretaries of the military departments are responsible for developing military service-wide policies, supplementary standards, and instructions to provide for the requirements within their respective installations FAPs. Each military service has established a FAP that is responsible for overseeing and managing, among other things, the installation-level FAPs and the military service’s domestic violence and domestic abuse prevention and response programs. When domestic abuse does occur, the military service installation FAP conducts a risk assessment and works to ensure the safety of the victims and help military families overcome the effects as well as change destructive patterns.",
"CDC is one of the major operating components of the Department of Health and Human Services, which serves as the federal government’s principal agency for protecting the health of U.S. citizens. As part of its health-related mission, CDC serves as the national focal point for developing and applying disease prevention and control, environmental health, and health promotion and education activities. CDC, among other things, conducts research to enhance prevention, develops and advocates public health policies, implements prevention strategies, promotes healthy behaviors, fosters safe and healthful environments, and provides associated training.\nIn 1992, CDC established the National Center for Injury Prevention and Control as the lead federal organization for violence prevention. The center’s Division of Violence Prevention focuses on stopping violence, including sexual violence, before it begins and works to achieve this by conducting research on the factors that put people at risk for violence, examining the effective adoption and dissemination of prevention strategies, and evaluating the effectiveness of violence prevention programs. In 2004, CDC published a framework for effective sexual violence prevention strategies. This framework includes prevention concepts and strategies, such as identifying risk and protective factors (i.e., factors that may put a person at risk for committing sexual assault or that, alternatively, may prevent harm). CDC’s framework defines sexual violence as including non-contact unwanted sexual behaviors, sexual harassment, and physical sexual assault.",
"DOD has acknowledged that connections exist across the continuum of unwanted sexual behaviors including sexual harassment and sexual assault and that this continuum of harm is reflected in key documents that guide prevention and response activities. For example, SAPRO has also reported that certain behavior and activities, such as hazing, can lead to sexual assault. Additionally, DOD’s Prevention Roundtable and 2014- 2016 Sexual Assault Prevention Strategy have both adopted CDC’s definition of “prevention” as it applies to sexual violence. CDC defines sexual violence to include sexual harassment and sexual assault.\nIn 2014 and 2017, DOD contracted with RAND to conduct independent assessments of behaviors across the continuum of harm, including sexual assault and sexual harassment. In its 2014 report, RAND found that (1) 34 percent of male servicemembers who were surveyed reported that the sexual assault was part of a hazing incident, (2) servicemembers who experienced sexual harassment or gender discrimination in the past year also experienced higher rates of sexual assault, and (3) approximately one-third of servicemembers who are sexually assaulted stated the offender sexually harassed them before the assault. In its 2017 report, RAND found that (1) people are more likely to engage in problematic behaviors, such as sexual harassment, if that person perceives that peers and leaders condone those actions and (2) some organizations responsible for addressing unlawful discrimination and sexual harassment lack adequate policies, plans, information systems, and resources needed to establish a departmental approach to certain behavioral issues, inform senior leadership about these problems, and ensure that leadership’s decisions about problematic behaviors are uniformly enforced.\nCDC research revealed that behaviors such as bullying and homophobic teasing in early adolescence are significant predictors of sexual harassment over time. According to the CDC, these youth are at an increased potential to perpetrate sexual violence and engage in sexually harassing behavior. In response, CDC recommends that communities work to prevent all types of violence from occurring and coordinate and integrate responses to violence in a way that recognizes these connections. CDC’s research has also established that survivors of one form of violence are more likely to be victims of other forms of violence, that survivors of violence are at higher risk for behaving violently, and that people who behave violently are more likely to commit other forms of violence. Further, CDC states that violence prevention and intervention efforts that focus on only one form of violence can be broadened to address multiple, connected forms of violence to increase the public health impact.",
"DOD’s policies on sexual harassment include some but not all of CDC’s principles and most relevant legislative elements. OSD and military service-specific sexual harassment policies generally include prevention strategies that CDC has identified in its principles for sexual violence prevention but leave out risk and protective factors, as well as risk domains. Additionally, DOD’s sexual harassment policies include most elements identified in section 579 of the NDAA for FY 2013, but do not consistently include mechanisms for anonymous reporting. ODMEO officials stated that they plan to issue a new policy that is intended to focus on sexual harassment and other forms of harassment, but it is too early to know whether that policy will include all the CDC principles or mechanisms for anonymous reporting. We also noted during our review that most existing policies have not yet been updated to reflect a provision in the fiscal year 2017 NDAA that redefined sexual harassment for certain purposes so it is no longer defined solely as a form of sex discrimination but is recognized also as an adverse behavior on the spectrum of behaviors that can contribute to an increase in the incidence of sexual assault.",
"DOD’s sexual harassment policies include some of the principles that have been developed by CDC as part of a framework for preventing sexual violence, but other principles are not included. OSD includes sexual harassment as part of its broader military equal opportunity policy. It addresses, among other things, processes for preventing and responding to cases of discrimination, including sexual harassment; education and training in equal opportunity; and complaints processing. The military services’ policies on sexual harassment cover similar topics, such as chain of command responsibilities, complaint processing, and definitions for sexual harassment; however, they have some differences. For example, while all policies include provisions on sexual harassment prevention training, the Army’s and the Navy’s policies include specific characteristics of effective training. Both policies also specify what should be included in trainings for different levels of the chain of command. The Marine Corps and Air Force policies simply state that commanders must conduct sexual harassment prevention training.\nCDC’s framework defines sexual violence as including non-contact unwanted sexual behaviors, sexual harassment, and physical sexual assault. We applied six principles for sexual violence prevention from CDC’s framework to DOD’s sexual harassment policies. These principles are:\nRisk factors: Factors that may put people at risk for sexual violence perpetration or victimization, such as an organizational climate that either explicitly or implicitly condones sexual harassment.\nProtective factors: Factors that may protect high-risk people from harm, such as an organizational climate that promotes respect amongst personnel at all levels.\nPrimary strategies for prevention: Strategies that occur before sexual violence takes place to prevent initial perpetration, such as sexual harassment prevention training.\nSecondary strategies for prevention: Immediate responses after sexual violence has occurred to address the early identification of victims and the short-term consequences of violence, such as mechanisms for reporting instances of sexual harassment and immediate interventions.\nTertiary strategies for prevention: Long-term responses after sexual violence has occurred to address the lasting consequences of violence and sex-offender treatment interventions, such as long-term treatment of the victim and perpetrator.\nRisk domains: Levels at which risk and protective factors should be categorized, including: individual, relationship, community, and societal. In its sexual assault prevention strategy, DOD adapted risk domains to the military population, using the levels of: individual, relationship, leaders at all levels, military community, and society.\nOur comparison of DOD sexual harassment policies with CDC’s framework for preventing sexual violence showed that the policies include some of the principles in the framework but not others (see table 1.)\nOur analysis showed that the OSD and the Air Force policies each include two of the six principles in CDC’s framework, and the Army, the Navy, and the Marine Corps policies include three principles. Specifically, the policies generally identify sexual harassment prevention training for the armed forces, a primary strategy for prevention. In addition, the policies generally outline mechanisms for reporting and responding to sexual harassment, considered a secondary strategy for prevention. The Army, the Navy, and the Marine Corps policies outline counseling support and referral services, as well as specifying the options available for administrative or judicial punishment, including discharge from service for perpetrators, which can be considered to be tertiary strategies for prevention.\nCommon elements missing from DOD’s sexual harassment policies are risk factors and protective factors, which identify conditions or behaviors that might heighten or lower the risk of sexual harassment victimization or perpetration, respectively. Examples of risk factors for sexual violence identified by the CDC include, but are not limited to, alcohol and drug use, hypermasculinity, emotionally unsupportive family environments, general tolerance of sexual violence within the community, and societal norms that support male superiority and sexual entitlement. Examples of protective factors from the CDC include emotional health and connectedness, and empathy and concern for how one’s actions affect others. Additionally, RAND identified an organizational climate that is oppositional to sexual violence as a protective factor. The policies also did not include risk domains, which would categorize risk and protective factors at the individual, relationship, community, and society levels. ODMEO officials told us that they are familiar with the CDC framework and are considering using it as a source of best practices for a new sexual harassment prevention strategy. DOD has previously used CDC’s sexual violence prevention framework to guide its sexual assault prevention strategy.\nIn the absence of more comprehensive policies on sexual harassment that fully include principles in the CDC framework for sexual violence prevention, DOD may be missing opportunities to address and potentially reduce incidents of sexual harassment in the military population based on risk and protective factors and effective, tested strategies. Specifically, DOD may be missing the opportunity to identify risk factors, which would help to recognize situations where individuals and populations may be at a higher risk of sexual harassment perpetration or victimization; identify protective factors to lower the risk of sexual harassment; develop mechanisms to address sexual harassment across risk domains—at the individual, relationship, community, and society levels; and develop tertiary strategies, or long-term responses after sexual violence has occurred to address the lasting consequences of violence and sex- offender treatment interventions.",
"DOD’s sexual harassment policies include three elements required by section 579 of the NDAA for FY 2013 but some do not include one element involving the anonymous reporting of incidents. Section 579 mandated that DOD, among other things, develop a comprehensive sexual harassment policy that includes the following elements: (1) prevention training for members of the armed forces; (2) mechanisms for reporting sexual harassment, including mechanisms for anonymous reporting; and (3) mechanisms for resolving sexual harassment that include the prosecution of perpetrators. In 2014, the Office of the Undersecretary of Defense for Personnel and Readiness issued a policy memorandum addressing the provisions of Section 579 and directed the military services to develop implementing instructions that include mechanisms for anonymous reporting.\nWe compared DOD’s policies with the required elements in section 579 and found that OSD and military service policies generally include required elements except for the element focused on DOD including anonymous reporting in its policies for sexual harassment. The OSD, Army, and Marine Corps policies do not include anonymous reporting, while the Air Force policy and a new Navy policy do. Officials from ODMEO said that providing an option for anonymous reporting is important because it increases the odds that incidents will be reported. ODMEO officials also told us that the services have hotlines that servicemembers can use to anonymously report complaints of sexual harassment, and the Air Force and Navy policies note that their respective military servicemembers have options for anonymous reporting. While the military services may have mechanisms in place for anonymous reporting of sexual harassment, these mechanisms are not included in OSD’s policy—as required by section 579—or the policies of two of the Services, those of the Army and the Marine Corps. Without including anonymous reporting of sexual harassment complaints in DOD’s sexual harassment policies, the statutory requirement for anonymous reporting may be interpreted and applied inconsistently throughout the military services, or left unmet.",
"OSD is developing a new policy—planned to be issued in fiscal year 2018—that will specifically focus on various forms of harassment, including sexual harassment, hazing, and bullying. ODMEO officials who are developing the new policy stated that it is intended, among other things, to enhance oversight of sexual harassment prevention and response within the department. However, because the policy is under development, it is too early to determine how the policy will address the CDC principles and anonymous reporting, as discussed earlier. Further, it is unclear how OSD plans to improve oversight and whether it intends to include performance goals, objectives, milestones, and metrics as we previously recommended in 2011.\nAlthough OSD in 2014 directed the military services to improve their oversight of sexual harassment, none of the military services were able to demonstrate that they had implemented all the required elements.\nSpecifically, DOD’s 2014 policy memorandum addressing the provisions of section 579 also directs the military services to develop a sexual harassment oversight framework to be reviewed quarterly by a senior leadership forum that includes long-term goals, objectives, and milestones; criteria for measuring progress; results-oriented performance measures to assess effectiveness of service sexual harassment policies and programs; standards for holding leaders accountable for promoting, supporting, and enforcing policies, plans and programs; and strategies to implement the oversight framework.\nWhile some of the military services have included elements of the oversight framework directive from the 2014 policy memorandum, none of them were able to provide information that demonstrated that they had fulfilled all requirements set forth by that policy memorandum. For instance, when asked, none of the military services were able to provide details that they have senior leader forums that review their oversight efforts on a quarterly basis. Officials from the Air Force told us that they were waiting for ODMEO to release a new sexual harassment policy before establishing the oversight framework. Officials from the Navy referred us to their July 2017 sexual harassment policy, which instructs the Navy Sexual Harassment Prevention and Equal Opportunity Office to develop and implement standards for holding leaders accountable for promoting, supporting, and enforcing sexual harassment prevention and response policies, plans, and programs, and to develop results-oriented performance measures to assess the effectiveness of sexual harassment prevention and response policies and programs. Officials from the Army referred us to their SHARP Campaign Plan, which outlines methods to hold leaders accountable for taking appropriate action to address sexual harassment; goals and objectives for the program; and ways to measure program effectiveness. The Marine Corps did not respond to our request for information regarding an oversight framework for sexual harassment.\nA new department-wide policy on sexual harassment could be helpful to the military services as they review and update their respective policies. As noted earlier, military service policies have some differences in how they address aspects of sexual harassment. The Marine Corps told us that they have been waiting for additional guidance from OSD before updating their sexual harassment policies. However, following publicized incidents of Marines posting inappropriate photos on line of female servicemembers without their consent, the Marine Corps updated its guidance in May 2017 adding “the distribution or broadcasting of an intimate image, without consent” to its list of sexual harassment incidents that mandate separation processing. Additionally, in May 2017, a Marine Corps official said the service was revising its sexual harassment policy. The Navy updated its sexual harassment policy in July 2017 without additional guidance from OSD.\nWe also noted during our review that most existing policies have not yet been updated to reflect a provision in the fiscal year 2017 NDAA that redefined sexual harassment for certain purposes so it is no longer defined solely as a form of sex discrimination but is recognized also as an adverse behavior on the spectrum of behavior that can contribute to an increase in the incidence of sexual assault. We asked DOD officials from several offices about the implications of this change. They identified some actions they will take, but the full implications, if any, of the change are unclear. Officials from the Assistant Secretary of Defense for Readiness said that there are no significant implications of the sexual harassment definition change beyond making conforming revisions to policy documents and guidance. ODMEO officials said that adjusting to the new definition of sexual harassment would not significantly affect their work at the OSD level, since they are already updating their sexual harassment policy to reflect this change and since sexual harassment is expected to remain within the responsibilities of ODMEO. They added that the military services will likely have to adjust to the new definition of sexual harassment, but did not offer details in how they would have to adjust.\nThe Navy’s new policy dated July 2017 reflects the new definition, but the other military services have yet to incorporate the change. Officials from SAPRO said that they are working with ODMEO to revise surveys on unwanted sexual behaviors to reflect the new definition. SAPRO officials further stated that sexual harassment should remain under ODMEO’s purview since ODMEO personnel are trained specifically in sexual harassment response. Officials from the Army’s SHARP program said that the new definition means that sexual harassment will more often be considered misconduct, and taken more seriously.\nSince OSD is in the process of updating its policy, we are not making any recommendations. However, it will be important for OSD and the military services to address our prior recommendation regarding improving the oversight framework as well as incorporating the new definition of sexual harassment required by the fiscal year 2017 NDAA while updating their policies.",
"DOD has processes for maintaining and reporting consistent data on sexual assault incidents and domestic violence incidents that involve sexual assault, but the department does not have similar assurance of consistent data on incidents of sexual harassment. SAPRO and FAP each use centralized databases that enable them to maintain and report consistent data on those incidents that fall under their purview. In contrast, DOD relies on military service-specific databases on sexual harassment incidents and does not have assurance of consistent data from these databases because it has not established standard data elements and definitions to guide the military services in maintaining and reporting these data.",
"DOD uses centralized databases to maintain and report data on sexual assault incidents in the military and domestic violence incidents involving sexual assault. Specifically, SAPRO and the military services use the Defense Sexual Assault Incident Database (DSAID), and FAP uses the DOD Central Registry. These databases maintain data on incidents that are included in statutorily required annual reports to Congress on sexual assaults in the military. In 2011, Congress mandated that DOD provide annual reports that include: the number of sexual assaults committed against and by members of the armed forces that were reported to military officials, including unsubstantiated and substantiated reports with a synopsis of each substantiated case organized by offense and the action taken, including disciplinary actions; the policies, processes, and procedures implemented by the Secretary concerned during the year covered by the report in response to incidents of sexual assaults; the number of substantiated sexual assault cases in which the victim is deployed where the assailant is a foreign national; and a description of the implementation of the accessibility plan, including a description of the steps taken to ensure that trained personnel, appropriate supplies, and transportation resources are available to deployed units.\nThe most recent DOD annual report on sexual assault was issued in May 2017 and covered fiscal year 2016. The report includes data on the number of both restricted and unrestricted reports of sexual assault involving servicemembers. The report also contains separate enclosures for the Army, the Navy (including the Marine Corps), the Air Force, and the National Guard, as well as annexes on the Workplace and Gender Relations Survey of Active Duty Members (WGRA) and the Military Investigation and Justice Experience Survey (MIJES). The WGRA annex discusses topics including the continuum of harm and the MIJES annex contains information on closed cases of sexual assault.\nSAPRO and FAP both contributed sexual assault incident data to the fiscal year 2016 report, and our review of the underlying databases found that data elements and definitions were defined and management was able to process the data into consistent information. Specifically, the two databases used are the:\nDSAID Data on Sexual Assault Incidents: DSAID captures DOD-wide data on certain incidents of sexual assault that involve a servicemember or in some cases, when a sexual assault involves a servicemember’s spouse or adult family member or a DOD civilian or contractor. However, FAP-related sexual assault incidents are not captured in DSAID. Using information generated by DSAID, SAPRO includes both substantiated and unsubstantiated reports of sexual assault in its annual report.\nIn 2017, we reviewed DSAID and found that DOD had taken steps to ensure the quality and consistency of data in DSAID as well as to monitor the data entered into the system. In addition, OSD had provided the military services with definitions for required data elements in the database, which include details on the incident, victim, and alleged offender. In addition, we identified several technical challenges with the system, including issues with the system’s speed and ease of use; interfaces with other external DOD databases; and users’ ability to query data and generate reports. At the time of the report’s release, DOD had plans to modify DSAID. As of July 2017, DOD officials told us that they are still in the process of making modifications to DSAID to resolve or alleviate the technical challenges for users.\nDOD Central Registry Data on Domestic Abuse Incidents Involving Sexual Assault: The DOD Central Registry captures DOD-wide data on reports of domestic abuse on populations within FAP’s purview, including on family members of servicemembers as well as on their intimate partners. The DOD Central Registry includes details of each case such as the status of cases, the demographics of the perpetrator and victim, the specific type of abuse, and other details surrounding the incident. FAP officials explained that they do not use the “substantiated” and “unsubstantiated” terminology like SAPRO does. Rather, FAP, which is not responsible for determining criminal or legal disposition, uses the terms “met criteria” and “not met criteria” for maltreatment. This difference in terminology has to do with FAP’s process for determining if an incident meets the clinical criteria to be classified as abuse for the purpose of developing an intervention/treatment plan for both the victim and the offenders involved in the allegations of domestic violence.\nIncidents that are determined as having met criteria are entered into the DOD Central Registry. We reviewed the DOD Central Registry and found that it includes well defined data elements and descriptions for collecting data on cases of domestic violence including those that involve sexual assault. The data in the DOD Central Registry includes 46 discrete data elements, including the relationship between the victim and perpetrator, the timeline of the case, and actions taken and treatments administered in response to the incident. The elements are defined and described in an OSD policy.\nIn its annual reporting to Congress, FAP provides the number of domestic violence incidents involving sexual assault that met criteria and the total number of instances of domestic violence that did not meet criteria. However, FAP does not maintain or report data on the total number of reported domestic violence incidents that specifically involve sexual assault. That is because only the details of cases that meet criteria are recorded in the DOD Central Registry. A FAP official said that the military services likely have more detailed information about cases that did not meet the criteria, but it does not collect these data in the DOD Central Registry. A provision in the NDAA for FY 2017 requires DOD to submit an annual report on child abuse and domestic abuse incident data, including the number of incidents reported during the year involving the physical or sexual abuse of a spouse, intimate partner, or child. This report is to be submitted simultaneously with submission of DOD’s annual sexual assault report to Congress. FAP officials told us that they are currently working with SAPRO to ensure that all reported incidents of domestic violence involving sexual assault, including those that did not meet the criteria, are included in the annual sexual assault report.",
"Though not required to do so, DOD has included sexual harassment incident data in an appendix of its annual report on sexual assault in the military. The appendix provides information on the total number of sexual harassment reports over the fiscal year and the total number of substantiated sexual harassment reports. It also breaks down complaints by sex, service, and pay grade. ODMEO generates the reported data through annual data calls to each military service; however, it does not have assurance that the services maintain consistent data on sexual harassment incidents consistent with federal standards of internal control.\nThe military services maintain sexual harassment incident data in military service-specific databases, and there is no centralized database similar to DSAID or the Central Registry. The military service databases are intended to collect data on formal complaints. According to the military services, the Army, the Air Force, and the Marine Corps use web-based systems, and the Navy tracks data using an Excel spreadsheet. Each service has a discrete process for entering and performing quality checks on sexual harassment incident data in its respective database, as shown in table 2.\nAlthough the military services perform some data quality checks as shown in table 2, ODMEO does not have assurance the military services are maintaining consistent data because it has not defined standard data elements and definitions for the information in their databases. Rather, the individual military services have established their own data elements and definitions. We compared data elements and definitions from each of the military services and found that there are several data elements that remain consistent throughout the services. For example, each military service records whether the complainant and offender are in the same unit, what their relationship is to each other, and the disposition of cases.\nHowever, we also found inconsistencies in data fields and their definitions across the military services, and some of the military services have data fields and definitions that do not exist in other databases. For example, the Marine Corps records whether or not the incident involves alcohol or drug use, which the rest of the military services do not record, and the military services record dates differently between their respective databases. For example, the Air Force records an initial date, the date the complaint form was signed, the date the general court martial was sent, the date the legal review was completed, and the final review date. The Marine Corps records the date the incident was reported, the date the incident occurred and whether the incident occurred over multiple dates; the dates associated with notifications and status updates to general courts martial proceedings; the dates associated with steps in the investigation, including any extensions; the dates associated with dispositions; and the dates associated with appeals. Additionally, the military services have different ways of categorizing sexual harassment incidents, as shown in table 3.\nAs shown in table 3, while some data descriptions are similar—for instance, each of the military services include crude/offensive behavior, unwanted sexual attention, and sexual coercion—there are differences as well. The Air Force also categorizes sexual harassment into verbal, nonverbal, physical, and other, for example, whereas the other military services’ top-level categories are different. The Navy has a “not applicable” category that it describes as sexual harassment complaints that do not fall under sexual harassment, and only the Air Force has an “other” category. Because the military services have different descriptors for similar data fields, DOD cannot ensure that the services are categorizing similar types of sexual harassment in the same way.\nIn addition, we found that the Army is more detailed in characterizing different types of sexual harassment. Specifically, as shown in table 4, the Army has an additional data field that provides more detailed descriptions of three types of sexual harassment; the other military services’ respective databases do not have this level of detail.\nBecause the Army has this additional data field, it can capture information on multiple types of harassment that may occur in a single incident. The other military services, in contrast, do not have this capability in their respective databases. To illustrate, if one case of sexual harassment involved both verbal and nonverbal forms of sexual harassment, the Army could choose a more specific characterization to describe the incident, while the other military services would characterize the incident in more general terms.\nODMEO officials are considering adapting an existing system to track instances of sexual harassment department-wide. That system, called Force Risk Reduction (FR2), is currently used to track safety issues like military injuries, civilian workers’ compensation claims, and casualty notifications at DOD. ODMEO recently completed a pilot of the system with the Marine Corps, the Navy, and the Army to test whether it would be useable for adaptation for sexual harassment data, and is planning a second pilot to include the Air Force and the National Guard Bureau.\nAccording to ODMEO officials, their adaptation of FR2 is intended to collect aggregate-level sexual harassment data from the military services, and the military services will continue to operate and rely on their individual databases to maintain more detailed case-level information on incidents. For example, ODMEO’s adaptation of FR2 would not have details such as descriptions of specific incidents, or information on dates associated with investigations or appeals. These types of data will continue to be maintained in the service systems. ODMEO officials told us that their new data system, if implemented, is not designed to collect case-level details in order to avoid personally identifiable information.\nFederal internal control standards state that management should define the identified information requirements at the relevant level and requisite specificity for appropriate personnel. Management should also process the obtained data into quality information. Consistency of information meets the identified information requirements when relevant data from reliable sources are used. While DOD is exploring implementing a system to track instances of sexual harassment department-wide, as currently planned this system will not collect case-level details and individual military service systems will continue to be relied upon for this type of information.\nInconsistencies in data elements and definitions among the military services generally mean that one military service may be maintaining sexual harassment data that are more or less detailed than sexual harassment data maintained by other military services, or that is simply different from the data maintained by other military services. Additionally, inconsistent data elements and definitions may create difficulties in reporting sexual harassment data from the military services to OSD for a department-wide report, since ODMEO has to adapt data from the services to fit reporting requirements. Without standard data elements and definitions for sexual harassment data, DOD will continue to lack assurance about the consistency of these data across the military services.",
"DOD has several overarching efforts to address unwanted sexual behaviors across the continuum of harm. Specifically, the department established an office to oversee the integration and coordination of unwanted sexual behaviors in 2015 and is in the process of developing an overarching prevention strategy. However, because the strategy is under development, it is unclear whether it will contain key elements for long-term and results-oriented strategic planning. DOD also has ongoing collaborative efforts to address unwanted sexual behaviors along the continuum of harm. Specifically, we identified 15 collaborative efforts, including regular meetings, Integrated Product Teams, and working groups that involve multiple entities that address unwanted sexual behaviors.",
"DOD has taken steps to integrate activities related to the continuum of harm and is in the process of developing an overarching prevention strategy. Based on its research, DOD has sought to understand and define the continuum of harm, including the shared characteristics that contribute to increased unwanted sexual behaviors along the continuum and implications for prevention and response efforts. Also, in November 2015, DOD established a new entity—the Office of the Executive Director for Force Resiliency, within the Office of the Assistant Secretary of Defense for Readiness—to oversee policies and initiatives related to the continuum of harm. Specifically, the Executive Director for Force Resiliency was expected to provide senior leader policy guidance and oversight on high visibility departments that include SAPRO and ODMEO. In November 2016, the Office of the Executive Director for Force Resiliency was absorbed under the Assistant Secretary of Defense for Readiness. According to the Assistant Secretary of Defense for Readiness, the functions of the Office of the Executive Director for Force Resiliency remain and coordination of the efforts of several offices that address the continuum of harm continues.\nOfficials from the Assistant Secretary of Defense for Readiness and SAPRO told us that they are drafting an overarching prevention strategy to encompass behaviors along the continuum of harm. However, because the strategy is still under development, its contents and timelines are unclear. We have previously identified six elements of strategic management planning that are key for establishing a long-term, results- oriented strategic planning framework: (1) a mission statement, (2) long- term goals, (3) strategies to achieve goals, (4) external factors that could affect goals, (5) the use of metrics to gauge progress, and (6) evaluations of the plan to monitor goals and objectives.\nBy incorporating the elements of a comprehensive and results-oriented strategy into its overarching prevention strategy, the department will be better positioned to effectively coordinate and integrate prevention activities and reduce unwanted sexual behaviors. A mission statement, along with long-term goals and strategies to achieve those goals, should help to focus efforts in integrating prevention activities, and metrics and evaluations will allow the department to gauge progress and make changes as necessary, while also accounting for external factors that may impact progress towards goals.",
"Our review identified 15 collaborative efforts that DOD has used to address behaviors along the continuum of harm, including sexual harassment, sexual assault, and domestic violence involving sexual assault. Three of these efforts are cross-cutting between all three of the key OSD stakeholders—ODMEO, FAP, and SAPRO—and five involve cross-cutting efforts by at least two of the key stakeholders. Figure 1 lists DOD’s 15 collaborative efforts.\nRegarding the three cross-cutting efforts involving all three of the key stakeholders,\nThe Sexual Assault Prevention and Response Integrated Product Team provides a forum for OSD, the military departments, and the National Guard Bureau to address sexual assault prevention efforts. The team meets bimonthly and serves as the implementation and oversight arm for DOD’s Sexual Assault Prevention and Response (SAPR) program. The team also coordinates new policies; reviews existing SAPR policies and programs to ensure they are consistent with applicable instructions; and monitors the progress of program elements including DOD’s SAPR strategic plan tasks, DOD’s sexual assault prevention strategy tasks, and implementation of NDAA- related sexual assault issues. SAPRO leads this effort.\nThe Prevention Collaboration Forum and working group develops coordinated prevention approaches that address factors impacting personnel readiness such as sexual harassment, sexual assault, and domestic violence involving sexual assault. According to its proposed charter, the focus of the forum is on enhancing the health of military unit and family climates as well as strengthening and promoting the resiliency and readiness of the total force through a coordinated effort around integrated policies, collaborative direction of research, alignment of resources, analysis of gaps, and synchronization of activities. The Assistant Secretary of Defense for Readiness leads this effort with SAPRO providing administrative and facilitation support.\nThe Victim Assistance Leadership Council advises the Under Secretary of Defense for Personnel and Readiness on policies and practices related to victim assistance across DOD. According to its charter, the council provides a forum for senior leaders to exchange information and collaborate on issues affecting victims of all forms of crime and harassment within DOD, including but not limited to victims of sexual harassment, sexual assault, and domestic violence involving sexual abuse. Leadership rotates between SAPRO, FAP, and ODMEO and other offices.\nRegarding the cross-cutting efforts involving two of the three key stakeholders, the Sexual Harassment Prevention and Response Working Group is led by ODMEO and includes SAPRO. The group was established to evaluate how to best position sexual harassment prevention and response policy and oversight and to leverage technology to automate annual reporting requirements. The four other cross-cutting efforts are (1) the hazing and bullying working group, (2) retaliation working groups created under the SAPR Integrated Process Team, (3) domestic abuse rapid improvement events, and (4) ODMEO and SHARP meetings.\nThe remaining collaborative efforts we identified are specific to FAP, SAPRO, and ODMEO. For example, the Sexual Assault Prevention Roundtable is a forum for representatives from OSD, the military departments, and the National Guard Bureau to share information on sexual assault prevention efforts and requirements. According to its charter, the roundtable’s activities include, among other things, sharing promising practices and prevention updates; discussing challenges in prevention program implementation, including servicemember training, and identifying approaches to address them; identifying metrics to assess the impact and effectiveness of prevention efforts, and opportunities to collaborate on research projects; and tracking the implementation of prevention tasks identified in the DOD SAPR strategy. SAPRO leads this effort. The Defense Diversity Working Group is an ODMEO-specific group that collaborates with various OSD and military service offices on military and civilian diversity and inclusion issues and implements mandated diversity plans and programs.",
"Studies by DOD and others have shown that unwanted sexual behaviors do not exist in isolation but are part of a range of interconnected, inappropriate behaviors that are connected to the occurrence of a sexual assault. While DOD has policies and procedures to prevent and respond to these types of unwanted behaviors, some of the policies do not include key elements like anonymous reporting of sexual harassment and principles in the CDC framework for sexual violence prevention. Fully including these elements in the department’s policies can help ensure that the military services are interpreting and applying prevention and response efforts consistently and may also decrease the risk of perpetration or victimization related to instances on unwanted sexual behaviors. Further, DOD has developed reliable data systems for collecting and reporting data on some of the unwanted sexual behaviors including sexual assault and instances of domestic violence with sexual assault. However, inconsistencies in sexual harassment data elements and definitions may be creating difficulties in developing department-wide reports on unwanted sexual behaviors. Improving and standardizing data collection efforts will not only improve the quality of data that DOD and the military services collect but may also increase the ability for DOD to further develop its understanding of the connection between unwanted sexual behaviors. Finally, DOD officials have stated that they are in the early stages of developing an overarching strategy to address the interconnected nature of the range of unwanted sexual behaviors. To ensure that the department is appropriately concentrating its efforts to prevent and respond to the full range of unwanted behaviors, it is important that DOD include elements of a long-term, results-oriented strategy into its overarching prevention strategy. In doing so, DOD will be in a better position to effectively coordinate and integrate prevention activities and ultimately reduce instances of unwanted sexual behaviors.",
"We are making the following four recommendations to DOD: The Under Secretary of Defense for Personnel and Readiness should fully include in the new policy for sexual harassment the principles in the Centers for Disease Control’s framework for sexual violence prevention, including risk and protective factors, risk domains, and tertiary strategies. (Recommendation 1)\nThe Under Secretary of Defense for Personnel and Readiness should include in the new policy for sexual harassment mechanisms for anonymous reporting of incidents consistent with section 579 of the National Defense Authorization Act for FY 2013. (Recommendation 2)\nThe Under Secretary of Defense for Personnel and Readiness should (1) direct the Office of Diversity Management and Equal Opportunity to develop standard data elements and definitions for maintaining and reporting information on sexual harassment incidents at the military service level, and (2) direct the military services to incorporate these data elements and definitions into their military service-specific databases. (Recommendation 3)\nThe Under Secretary of Defense for Personnel and Readiness should direct the Assistant Secretary of Defense for Readiness to incorporate in its continuum of harm prevention strategy all the elements that are key for establishing a long-term, results-oriented strategic planning framework. The elements are (1) a mission statement, (2) long-term goals, (3) strategies to achieve goals, (4) external factors that could affect goals, (5) use of metrics to gauge progress, and (6) evaluations of the plan to monitor goals and objectives. (Recommendation 4)",
"We provided a draft of this report to DOD and CDC for review and comment. In its written comments, DOD concurred with three recommendations and partially concurred with one, noting planned actions to address this recommendation. DOD’s comments are reprinted in their entirety in appendix II. DOD and CDC also provided technical comments, which we incorporated into the report as appropriate.\nDOD concurred with our three recommendations that DOD fully include in the new policy for sexual harassment the principles in the CDC's framework for sexual violence prevention, that DOD also include in the new sexual harassment policy mechanisms for anonymous reporting, and that DOD incorporate in its continuum of harm strategy all the elements that are key for establishing a long-term, results-oriented strategic planning framework.\nWith regard to our recommendation that DOD develop standard data elements and definitions for maintaining and reporting information on sexual harassment incidents and direct the military services to incorporate these into their databases, DOD partially concurred and stated that while a 2013 policy memorandum provides standard data elements and definitions, the services collect other data elements based on their unique needs. DOD stated that ODMEO will conduct a review to determine compliance with DOD reporting requirements and identify emerging policy modifications or changes/additions to standard definitions.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Under Secretary of Defense for Personnel and Readiness, and the Director, Centers for Disease Control and Prevention. In addition, the report is available at no charge on the GAO website http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.",
"To determine the extent to which the Department of Defense (DOD) has policies on sexual harassment that include Centers for Disease Control and Prevention (CDC) principles and relevant legislative elements, we obtained and reviewed Office of the Secretary of Defense (OSD) and service-level sexual harassment policies. We compared the policies with a framework developed by the CDC for preventing sexual violence, which CDC defines as including non-contact unwanted sexual behaviors, sexual harassment, and physical sexual assault. CDC’s model is based on the concept of addressing the health of a given population based on common risk and protective factors and effective, tested strategies. We reviewed CDC’s framework for preventing sexual violence as well as our report on DOD’s sexual assault prevention strategy to identify six principles that an organization can include in a sexual violence prevention strategy or policy:\nRisk factors: Factors that may put people at risk for sexual violence perpetration or victimization, such as an organizational climate that either explicitly or implicitly condones sexual harassment;\nProtective factors: Factors that may protect high-risk people from harm, such as an organizational climate that promotes respect among personnel at all levels;\nPrimary strategies for prevention: Strategies that occur before sexual violence takes place to prevent initial perpetration, such as sexual harassment prevention training;\nSecondary strategies for prevention: Immediate responses after sexual violence has occurred to address the early identification of victims and the short-term consequences of violence, such as reporting mechanisms and immediate interventions;\nTertiary strategies for prevention: Long-term responses after sexual violence has occurred to address the lasting consequences of violence and sex-offender treatment interventions, such as the long- term treatment of the victim and perpetrator; and\nRisk domains: Levels at which risk and protective factors should be categorized, including: individual, relationship, community, and society. DOD has previously adapted risk domains to the military population, using the levels of: individual, relationship, leaders at all levels, military community, and society.\nDOD previously used CDC’s framework for preventing sexual violence in the department’s 2014-2016 Sexual Assault Prevention Strategy. In addition, we reviewed the OSD and service-level sexual harassment policies to determine the extent to which they included three elements identified in the National Defense Authorization Act (NDAA) for FY 2013, which directed DOD to develop a comprehensive policy that includes sexual harassment prevention training for the armed forces; mechanisms for reporting incidents, including mechanisms for anonymous reporting; and mechanisms for responding to and resolving instances of sexual harassment, including for the prosecution of perpetrators. Two GAO analysts independently reviewed the policies and determined whether or not each element was included. Any discrepancies were resolved through discussion and consultation with a third analyst. We interviewed officials in the Under Secretary of Defense for Personnel and Readiness’ Office of Diversity Management and Equal Opportunity, who oversee department- wide policy on sexual harassment, to obtain an understanding of their roles and processes regarding sexual harassment as well as the status of policy development in that area. We also interviewed officials from military equal opportunity offices in the Air Force, the Navy, and the Marine Corps, as well as officials from the Army’s Sexual Harassment/Assault Response and Prevention Office to obtain an understanding of the service sexual harassment offices and roles, as well as the status of updates to their respective policies.\nTo determine the extent to which DOD has processes for maintaining and reporting consistent data on incidents of unwanted sexual behaviors, we reviewed DOD reports to Congress that provide incident data regarding unwanted sexual behaviors, including DOD’s most recent annual report on sexual assault in the military. We identified the databases that generate the reported data and evaluated the processes for assuring the quality and consistency of data in those databases—including the Defense Sexual Assault Incident Database, which maintains sexual assault data; the Central Registry database, which maintains data on domestic violence involving sexual assault; and various military service- level databases that maintain sexual harassment data. To evaluate DOD’s reported data we reviewed pertinent statutory provisions, DOD guidance, and the Standards for Internal Control in the Federal Government that address agencies’ use of quality data and our prior reports evaluating sexual assault data. In evaluating the reported data, we obtained and reviewed statutory provisions with reporting requirements, as well as DOD guidance on data collection for sexual harassment, sexual assault, and domestic violence involving sexual abuse. With regard to DOD efforts to collect and maintain sexual assault data, we met with OSD, Navy, Air Force, and Marine Corps officials in their respective Sexual Assault Prevention and Response offices as well as officials in the Army’s Sexual Harassment/Assault Response and Prevention office. We also reviewed our prior report on DOD’s Defense Sexual Assault Incident Database and our prior report that evaluated sexual assault data across agencies. To determine whether DOD has processes for collecting and maintaining consistent data for domestic violence with sexual assault, we obtained and compared data elements and processes from DOD’s Central Registry database, which contains data for domestic violence throughout the department. We also obtained and reviewed policies that outline processes for collecting and reporting domestic violence involving sexual abuse data, and interviewed officials from Family Advocacy Program offices in OSD and the Army, Navy, Marine Corps, and Air Force to determine data reliability and comprehensiveness. To determine the extent to which reports of sexual assault, including reports of sexual assault among servicemembers and reports of domestic abuse involving sexual assault, meet statutory requirements for reporting, we reviewed DOD reports to Congress that provide sexual assault incident data, including DOD’s most recent annual report on sexual assault in the military and compared those reports with requirements in the NDAA for FY 2011, which directs DOD to report the total number of substantiated and unsubstantiated sexual assault incidents, among other things. With regard to sexual harassment data, we interviewed officials in the Under Secretary of Defense for Personnel and Readiness’ Office of Diversity Management and Equal Opportunity, as well as officials from the Military Equal Opportunity offices in the Air Force, Marine Corps, and Navy, and officials from the Army Sexual Harassment/Assault Response and Prevention office. We collected and compared data fields and data definitions from the Army, Navy, Marine Corps, and Air Force offices that address sexual harassment. We compared the data elements to determine whether the data elements and definitions across the services are consistent.\nTo identify the extent to which DOD has overarching efforts, including a prevention strategy, to address unwanted sexual behaviors across the continuum of harm, we met with officials in the Office of the Assistant Secretary of Defense for Readiness and DOD’s Sexual Assault Prevention and Response office. We reviewed our prior work and provisions from the Government Performance and Results Act to identify key elements that should be included in strategic plans as well as standards for coordinating within agencies. Key elements include (1) mission statement, (2) long-term goals, (3) strategies to achieve goals, (4) external factors that could affect goals, (5) use of metrics to gauge progress, and (6) evaluations of the plan to monitor goals and objectives. We identified and reviewed coordinating mechanisms used by OSD and the service offices that guide and oversee efforts to address unwanted sexual behaviors. We reviewed DOD, RAND Corporation, and CDC reports that addressed the continuum of harm and the relationship between the various forms of unwanted sexual behaviors. We interviewed officials from OSD and service-level Sexual Assault Prevention and Response, Family Advocacy, and Military Equal Opportunity offices and the Army’s Sexual Harassment/Assault Response and Prevention to identify the various efforts in which they participate. We also collected and reviewed charters and meeting notes for integrated product teams and working groups to identify their intended purposes, their activities, their membership, and whether they involved multiple offices addressing unwanted sexual behaviors. In identifying DOD’s collaborative efforts, we also reviewed our prior work on collaboration among federal agencies but we did not assess the effectiveness of department’s collaborative efforts.\nWe conducted this performance audit from August 2016 to December 2017 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
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"",
"In addition to the staff named above, key contributors to this report include Thomas Gosling (Assistant Director); Isabel Band; Matthew Bond; Vincent Buquicchio; Caroline DeCelles; Mae Jones; Kirsten Lauber; and Brian Pegram.",
"Sexual Assault: Better Resource Management Needed to Improve Prevention and Response in the Army National Guard and Army Reserve. GAO-17-217. Washington, D.C.: February 27, 2017.\nMilitary Personnel: DOD Has Processes for Operating and Managing Its Sexual Assault Incident Database. GAO-17-99. Washington, D.C.: January 10, 2017.\nSexual Violence Data: Actions Needed to Improve Clarity and Address Differences Across Federal Data Collection Efforts. GAO-16-546. Washington, D.C.: July 19, 2016.\nDOD and Coast Guard: Actions Needed to Increase Oversight and Management Information on Hazing Incidents Involving Servicemembers. GAO-16-226. Washington, D.C.: February 9, 2016.\nSexual Assault: Actions Needed to Improve DOD’s Prevention Strategy and to Help Ensure It Is Effectively Implemented. GAO-16-61. Washington, D.C.: November 4, 2015.\nMilitary Personnel: Actions Needed to Address Sexual Assaults of Male Servicemembers. GAO-15-284. Washington, D.C.: March 19, 2015.\nMilitary Personnel: DOD Needs to Take Further Actions to Prevent Sexual Assault during Initial Military Training. GAO-14-806. Washington, D.C.: September 9, 2014.\nMilitary Personnel: DOD Has Taken Steps to Meet the Health Needs of Deployed Servicewomen, but Actions Are Needed to Enhance Care for Sexual Assault Victims. GAO-13-182. Washington, D.C.: January 29, 2013.\nPreventing Sexual Harassment: DOD Needs Greater Leadership Commitment and an Oversight Framework. GAO-11-809. Washington, D.C.: September 21, 2011.\nMilitary Justice: Oversight and Better Collaboration Needed for Sexual Assault Investigations and Adjudications. GAO-11-579. Washington, D.C.: June 22, 2011.\nMilitary Personnel: DOD’s and the Coast Guard’s Sexual Assault Prevention and Response Programs Need to Be Further Strengthened. GAO-10-405T. Washington, D.C.: February 24, 2010.\nMilitary Personnel: Additional Actions Are Needed to Strengthen DOD’s and the Coast Guard’s Sexual Assault Prevention and Response Programs. GAO-10-215. Washington, D.C.: February 3, 2010.\nMilitary Personnel: DOD’s and the Coast Guard’s Sexual Assault Prevention and Response Programs Face Implementation and Oversight Challenges. GAO-08-924. Washington, D.C.: August 29, 2008.\nMilitary Personnel: The DOD and Coast Guard Academies Have Taken Steps to Address Incidents of Sexual Harassment and Assault, but Greater Federal Oversight Is Needed. GAO-08-296. Washington, D.C.: January 17, 2008."
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{
"question": [
"Why is it alarming that OSD and military service policies do not address risk and protective factors?",
"What did a provision in 2013 require the DOD to do?",
"What do OSD and service policies lack of the required policy elements?",
"Why might DOD gain from including CDC's principles for anonymous reporting?",
"How was sexual harassment redefined in 2017?",
"What were officials unclear on in relation to this redefinition?",
"How dod DOD’s policies on sexual harassment differ from the CDC’s?",
"What did GAO identify in CDC’s framework for preventing sexual violence?",
"What processes does DOD lack in regards to sexual harassment?",
"Why does DOD have an inconsistency in data on sexual harassment?",
"What does it mean for services to have inconsistencies in data?",
"Why does it matter that DOD does not maintain consistent data across services?",
"What has DOD done to address unwanted sexual behaviors?",
"What concerns are there about the DOD's efforts for the long-term?",
"How might the DOD's prevention strategy prove ineffective?",
"Why does GAO need to review DOD's efforts?",
"What did GAO assess about DOD's policies?"
],
"summary": [
"GAO found that Office of the Secretary of Defense (OSD) and military service policies generally include CDC's principles regarding prevention strategies, but none address risk and protective factors, which identify conditions or behaviors that might heighten or lower the risk of sexual harassment victimization or perpetration, respectively.",
"Additionally, a statutory provision in fiscal year 2013 mandated that DOD, among other things, develop a comprehensive sexual harassment policy that includes prevention training, mechanisms for anonymous reporting, and mechanisms for resolving incidents of sexual harassment.",
"OSD and service policies are generally consistent with those required elements except for the inclusion of anonymous reporting.",
"Without policies that include CDC's principles and mechanisms for anonymous reporting, DOD may miss opportunities to address and potentially reduce incidents of unwanted sexual behaviors.",
"Finally, a statutory change in fiscal year 2017 redefined sexual harassment for certain purposes so it is no longer defined solely as a form of sex discrimination but is recognized also as an adverse behavior on the spectrum of behavior that can contribute to an increase in the incidence of sexual assault.",
"While officials indicated a need to update policies, they were unclear on the full implications, if any, of this change.",
"The Department of Defense's (DOD) policies on sexual harassment include some but not all of the Centers for Disease Control's (CDC) principles for preventing sexual violence and include most relevant legislative elements.",
"GAO identified six principles from CDC's framework for preventing sexual violence, which CDC defines as including sexual harassment.",
"DOD has processes for maintaining and reporting consistent data on incidents of unwanted sexual behaviors including sexual assault and incidents of domestic violence that involve sexual assault, but does not have similar processes for maintaining and reporting data on incidents of sexual harassment.",
"Specifically, DOD uses centralized databases to maintain and report data on incidents of sexual assault and domestic violence that involve sexual assault, but relies on military service-specific databases for information on incidents of sexual harassment.",
"DOD has not established standard data elements and definitions to guide the services in maintaining and reporting data on sexual harassment. Inconsistencies in data elements and definitions generally mean that one service may be maintaining data that is more or less detailed than, or that differs from, the data maintained by other services.",
"Such inconsistencies may create difficulties in reporting department-wide sexual harassment data, since the individual service data must be adapted to fit reporting requirements.",
"DOD has several overarching efforts to address unwanted sexual behaviors across the continuum of harm, including developing an overarching prevention strategy.",
"However, it is unclear whether the strategy under development will contain key elements for long-term and results-oriented strategic planning such as long-term goals, strategies to achieve goals, and metrics to gauge progress.",
"Without incorporating these elements into its overarching prevention strategy, DOD may not be in a position to effectively coordinate and integrate prevention activities and reduce instances of unwanted sexual behaviors.",
"Senate Report 114-255 included a provision for GAO to review efforts by DOD to prevent unwanted sexual behaviors in the military.",
"GAO assessed the extent to which DOD has (1) policies on sexual harassment that include CDC principles and relevant legislative elements; (2) processes for maintaining and reporting consistent data on incidents of unwanted sexual behaviors; and (3) overarching efforts, including a prevention strategy, to address unwanted sexual behaviors across the continuum of harm. GAO reviewed DOD policies and pertinent databases, and interviewed agency officials."
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GAO_GAO-13-746
|
{
"title": [
"Background",
"Health Care Fraud and Abuse Control Program",
"HCFAC Appropriations",
"Activities Conducted Under the HCFAC Program",
"Agencies Obligated $583.6 Million for HCFAC Activities in Fiscal Year 2012; Most Obligations Were for Personnel",
"HHS, HHS-OIG, and DOJ Obligated $583.6 Million in Fiscal Year 2012; 12 Percent of Obligated Funds Came From Other Appropriations",
"Most HCFAC Obligations Were for Personnel in Fiscal Year 2012",
"Over $47 Million in Obligations in Fiscal Year 2012 Supported Strike Force Teams in Nine Cities",
"Agencies Use Several Indicators to Assess HCFAC Activities, and Some Key Outputs Changed Over Time",
"HHS, HHS-OIG, and DOJ Use Several Indicators to Assess HCFAC Activities and Inform Decisions about Resource Allocation and Prioritization of Activities",
"Some Key Outputs that Reflect Work of Multiple Agencies Have Changed in Recent Years",
"Several Factors Contribute to Lack of Information about the Effectiveness of HCFAC Activities",
"Indicators Agencies Use to Assess HCFAC Activities Provide Information on Accomplishments, but Not Effectiveness",
"Several Factors Make Assessing the Effectiveness of the HCFAC Program Challenging",
"Concluding Observations",
"Agency Comments",
"Appendix I: Health Care Fraud and Abuse Control (HCFAC) Program Activities Conducted by Agencies in Fiscal Year 2012",
"Appendix II: Health Care Fraud and Abuse Control (HCFAC) Program Obligations for Fiscal Years 2008 through 2012",
"Appendix III: Indicators Used by Agencies to Assess Health Care Fraud and Abuse Control (HCFAC) Program Activities",
"HHS-OIG Component Collective indicators in which more than one HHS- OIG component contributes",
"HHS-OIG Component",
"Office of Audit Services (OAS)",
"Office of Counsel to the Inspector General (OCIG)",
"HHS-OIG Component",
"Office of Evaluation and Inspections (OEI)",
"Office of Investigations (OI)",
"DOJ Component Civil Division",
"Civil Rights Division",
"DOJ Component",
"Criminal Division",
"DOJ Component Federal Bureau of Investigation (FBI)",
"United States Attorneys’ Offices (USAOs)",
"DOJ Component",
"Appendix IV: Key Outcomes and Outputs of Health Care Fraud and Abuse Control (HCFAC) Program Activities",
"HCFAC Key Program Outcomes/Outputs in Selected Years Program outcome/output Obligations of other appropriations $67,274,025",
"Appendix V: Comments from the Department of Health and Human Services",
"Appendix VI: GAO Contacts and Staff Acknowledgements",
"GAO Contacts",
"Staff Acknowledgements"
],
"paragraphs": [
"",
"The HCFAC program was established under HIPAA to (1) coordinate federal, state, and local law enforcement efforts to control fraud and abuse associated with health plans; (2) conduct investigations, audits, evaluations, and inspections of delivery and payment for health care in the United States; (3) facilitate the enforcement of federal health care fraud and abuse laws; (4) provide guidance to the health care industry in the form of advisory opinions, safe harbor notices, and special fraud alerts; and (5) establish a national database of adverse actions against health care providers.\nHIPAA requires that HHS and DOJ issue a joint annual report to Congress that outlines the amounts returned to the Medicare Trust Funds for the previous fiscal year under various categories, such as amounts of criminal fines and civil monetary penalties—penalties for certain activities, such as knowingly presenting a Medicare claim that is not medically necessary. Additionally, HHS and DOJ are required to report the amounts deposited into and expended from the Medicare Trust Funds to conduct HCFAC activities during the previous fiscal year and the justification for those expenditures. In addition to the mandatory appropriations provided under HIPAA, which Congress increased in 2010, DOJ and HHS-OIG have received discretionary funding through annual appropriations for the HCFAC program since fiscal year 2009.\nThe annual HCFAC report includes a summary of the key HCFAC activities that the agencies and their components carried out and provides information on the outputs or outcomes of those activities. For example, the report includes information on the amount of money returned to the Medicare Trust Funds as a result of HCFAC activities. Additionally, the report includes sections that describe the activities each agency and component that received HCFAC funding conducted. These sections provide information on the outputs of each component’s activities. For example, DOJ’s USAO section highlights the number of new criminal investigations initiated and the number of civil matters pending.",
"HHS and DOJ receive funding from several appropriations to conduct their HCFAC program activities. Figure 1 describes HCFAC appropriations to HHS, HHS-OIG, and DOJ. Mandatory funds are appropriated by HIPAA from the Medicare Trust Funds, and are available until expended, meaning that the funds can be spent in other years. A large portion of these funds are appropriated to HHS-OIG; the law appropriates the remainder to both HHS and DOJ, which must determine together how to allocate the funds—referred to as the wedge—between the agencies.\nIn each fiscal year, beginning with fiscal year 2009, Congress appropriated discretionary funding to DOJ and HHS-OIG to finance activities conducted under the HCFAC program. In addition, Congress also appropriated discretionary funds to CMS for program integrity activities it conducts in Medicare and Medicaid, which was outside the scope of our review. Although the FBI is a component of DOJ and was allocated a portion of DOJ’s discretionary HCFAC funding (about $3.4 million), the FBI also received mandatory funding under HIPAA to conduct health care fraud and abuse activities. This mandatory funding was appropriated from the general fund of the U.S. Treasury.\nIn addition to the HCFAC mandatory and discretionary funding that HHS, DOJ, and its components receive, the agencies use funding from other appropriations to support HCFAC activities. For example, HHS’s Office of General Counsel (OGC) uses appropriations from HHS's General Departmental Management appropriation to support its HCFAC activities.",
"HHS and DOJ components conduct a variety of activities under the HCFAC program using mandatory and discretionary HCFAC funding. Among other activities, HHS components identify and investigate fraud through programs, including the Administration for Community Living’s (ACL) Senior Medicare Patrol programs, which are designed to educate and train Medicare beneficiaries to identify fraud. HHS’s OGC supports a variety of program integrity work, including assisting DOJ on False Claims Act cases.Pharmaceutical Fraud Program, which is designed to detect pharmaceutical, biologics, and medical device fraud. CMS uses a portion of HHS’s HCFAC funding to improve its financial oversight of the Medicaid program and CHIP, and for a pilot project related to fraud in HHS’s Food and Drug Administration (FDA) conducts the community mental health centers. CMS also uses its portion of HCFAC funding to support its efforts related to the Medicare Fraud Strike Force (Strike Force) teams, which consist of investigators and prosecutors who use advanced data analysis techniques to identify, investigate, and prosecute potentially fraudulent billing patterns in geographic areas with high rates of health care fraud.\nHHS-OIG conducts a variety of activities to identify and reduce fraud, waste, and abuse. For example, HHS-OIG assesses civil monetary penalties and imposes other administrative penalties—such as excluding individuals and entities from participating in federal health care programs—against individuals and entities for certain types of conduct. Each of HHS-OIG’s components receives HCFAC funding for the work it conducts. Among other activities:\nThe Office of Investigations (OI) coordinates and conducts investigations of allegations of fraud, waste, and abuse in Medicare and Medicaid.\nThe Office of Evaluation and Inspections (OEI) conducts national evaluations on issues related to preventing fraud, waste, and abuse, and promoting economy, efficiency, and effectiveness of HHS programs.\nThe Office of Audit Services (OAS) conducts independent audits of HHS programs, grantees, and contractors.\nThe Office of Counsel to the Inspector General (OCIG) exercises the authority to impose civil and administrative penalties related to health care fraud, as well as issue advisory opinions.\nThe Office of Management and Policy (OMP) provides management, guidance, and resources in support of the other HHS-OIG components.\nDOJ’s components have the primary role in enforcing U.S. laws related to health care fraud and abuse, including both criminal and civil matters. For example:\nThe Criminal Division prosecutes criminal health care fraud and leads the Strike Force teams.\nThe Civil Division represents the U.S. in civil fraud matters, such as False Claims Act cases and has the authority to bring criminal charges under the Federal Food, Drug, and Cosmetic Act.\nThe USAOs litigate or prosecute civil and criminal health care fraud cases in their 94 districts throughout the country and are part of the Strike Force teams.\nThe Civil Rights Division enforces several laws related to cases of abuse, substandard care, or needless institutionalization of certain individuals.\nThe Justice Management Division (JMD) provides financial oversight of the DOJ components.\nThe FBI serves as an investigative agency with jurisdiction in both federal and private health insurance programs, and participates in task forces and undercover operations to investigate health care fraud.\nAlthough the agencies and components conduct certain activities without assistance from other agencies and components, HHS, CMS, HHS-OIG, and DOJ—including the FBI—frequently collaborate to investigate and prosecute fraud in federal health care programs. For example, HHS-OIG, FBI, and DOJ investigators and prosecutors comprise Strike Force teams. Table 2 in appendix I provides further detail on these activities.",
"In fiscal year 2012, HHS, HHS-OIG, and DOJ obligated approximately $583.6 million to fund HCFAC activities. About 78 percent of obligated funds were from mandatory HCFAC appropriations, 11 percent of obligated funds were from discretionary HCFAC appropriations, and 12 percent of obligated funds were from other appropriations.the obligations for HCFAC activities were for personnel costs; some agencies reported obligating funds for services under contract and supplies. Additionally, HHS-OIG and DOJ obligated over 8 percent of their HCFAC funds to support Strike Force teams located in 9 cities nationwide.",
"In fiscal year 2012, HHS, HHS-OIG, and DOJ reported $583.6 million in obligations for HCFAC activities. This total includes obligations of mandatory (about 78 percent) and discretionary (about 11 percent) HCFAC appropriations and other appropriations not specific to the HCFAC program (about 12 percent). HCFAC mandatory funds are available until expended, while discretionary HCFAC funds are available for 2 fiscal years. Other appropriations that agencies use for HCFAC activities vary in how long they are available. Because agencies reported in fiscal year 2012 obligating funds that were carried over from prior fiscal years, and because agencies obligated funds from other appropriations not specific to the HCFAC program, the obligations the agencies reported for HCFAC activities in fiscal year 2012—$583.6 million—exceed the HCFAC funds appropriated to the agencies for that year. For example, HHS, HHS-OIG, and DOJ were appropriated $486.1 million in HCFAC mandatory and discretionary funding for fiscal year 2012. However, for fiscal year 2012, these agencies reported HCFAC obligations of $583.6 million, including over $67 million in obligations of other appropriations, as well as obligations of funds appropriated in prior fiscal years.\nIn fiscal year 2012, DOJ incurred about 48 percent of the agencies’ total HCFAC obligations (about $280.3 million), while HHS-OIG incurred about 44 percent ($258.8 million), and HHS incurred the remaining 8 percent ($44.4 million). See figure 2 for the distribution of HCFAC obligations by appropriations type—HCFAC mandatory, HCFAC discretionary, and other appropriations—by HHS, HHS-OIG, and DOJ’s components for fiscal year 2012. See table 3 in appendix II for the distribution of HCFAC obligations by appropriations type—HCFAC mandatory, HCFAC discretionary, and other appropriations—for HHS, HHS-OIG, and DOJ’s components for fiscal years 2008 through 2012.\nA portion of the mandatory HCFAC appropriation that supports HHS and DOJ’s HCFAC activities—or wedge funds—is allocated to each agency. According to a HHS official, in fiscal year 2010, the departments reached a standing agreement for the following allocations: approximately 38 percent for HHS and 62 percent for DOJ. Prior to fiscal year 2010, HHS and DOJ negotiated each year how to divide the wedge funds between the two agencies, which a HHS official described as time- consuming.\nHHS distributes its wedge funds to HHS components based on their annual funding requests that the Secretary approves. In fiscal year 2012, HHS distributed mandatory funding to ACL for the Senior Medicare Patrol programs, OGC to support program integrity work of its clients, FDA to support the Pharmaceutical Fraud Program, and CMS to support Medicaid and CHIP financial specialists and a pilot project related to fraud in community mental health center providers in Texas, Florida, and Louisiana.HCFAC funds—its portion of wedge funds—to its components to carry out their HCFAC activities, and the distribution of such funds has not varied much since the inception of the program. Separately, HHS-OIG receives a mandatory appropriation for its HCFAC activities. This appropriation is HHS-OIG’s primary source of funding for Medicare and Medicaid fraud investigations, as well as for audits, evaluations, and inspections it conducts related to the Medicare and Medicaid programs.\nAccording to a DOJ official, DOJ distributes mandatory In fiscal year 2012, DOJ and HHS-OIG obligated discretionary HCFAC appropriations. According to the information each agency reported to us, each DOJ component received a share of DOJ’s discretionary HCFAC appropriation for their HCFAC activities. A DOJ official told us that DOJ components generally received the same amount of funding from the agency’s discretionary HCFAC appropriation for their HCFAC activities in fiscal year 2012 as they had in prior fiscal years. Additionally, the official indicated that a large portion of DOJ’s HCFAC discretionary appropriation supports the Strike Force teams because DOJ believes that these teams reduce fraud. One component in HHS-OIG—OMP—received discretionary HCFAC appropriations.obligations of these funds are for overhead expenses for the HHS-OIG components that are handled by OMP (such as rent and utilities).\nHHS, HHS-OIG, and DOJ components obligated over $67 million in funds from other appropriations in addition to the mandatory and discretionary HCFAC appropriations they obligated for HCFAC activities in fiscal year 2012. Within HHS, one component—OGC—used other appropriations to To carry out its HCFAC activities, OGC supplement its HCFAC funding. obligated funds from the annual HHS General Department Management appropriation, which accounted for almost half of its overall obligations for HCFAC activities in fiscal year 2012. ACL, CMS, and FDA did not use other appropriations to support their HCFAC activities.\nHHS-OGC’s reported estimated obligations of other appropriations, which also included reimbursements for attorney services provided to OGC clients within HHS that supported HCFAC activities.\nEach of HHS-OIG’s components obligated funds from other appropriations to support HCFAC activities in fiscal year 2012. From other appropriations, HHS-OIG obligated about $18.9 million of these appropriations for HCFAC activities in fiscal year 2012, which represented about 7 percent of its overall HCFAC obligations. HHS-OIG reported that the other appropriations used to support HCFAC activities included funds appropriated specifically to support HHS-OIG’s Medicare and Medicaid program integrity work. For example, in fiscal year 2012, each HHS-OIG component reported obligating funds appropriated in section 6034 of the Deficit Reduction Act (which, among other things, established the Medicaid Integrity Program and provided HHS-OIG with increased funding for Medicaid fraud and abuse control activities) to conduct HCFAC activities.\nAlthough some DOJ components reported obligating funds from other appropriations for HCFAC activities, they also reported carrying over some of their HCFAC funding into other fiscal years. A DOJ official told us that funds are often carried over to a new fiscal year, such as in the situation of a continuing resolution, which may shorten the number of months in which they are able to obligate the appropriated funds. work, such as to investigate qui tam cases alleging false claims and to prepare cases for trial. The Civil Rights Division reported using DOJ's Salaries and Expenses, General Legal Activities appropriation to fund the rent for office space used by personnel, and the FBI reported using its annual appropriation to cover personnel expenses for investigators working health care fraud cases beyond those covered by HCFAC funds.",
"HHS, HHS-OIG, and DOJ reported that most of their HCFAC obligations were for personnel costs in fiscal year 2012, with some exceptions based on the type of HCFAC activities each component performs (see table 3 of appendix II for HCFAC obligations for fiscal years 2008 through 2012 for HHS, HHS-OIG, and DOJ’s components). A large portion of most HHS components’ HCFAC obligations were for personnel costs. The same was true for HHS-OIG and DOJ. Each agency relied on personnel to conduct HCFAC activities—HHS-OIG employed investigators to examine potential fraud cases and DOJ employed investigators, attorneys, and other support personnel to investigate and prosecute fraud cases. Additionally, HHS-OIG employed auditors and evaluators to study issues related to the Medicare and Medicaid programs, including issues related to fraud in these programs, as well as a variety of other issues.\nHHS, HHS-OIG, and DOJ components also reported that their next largest amount of HCFAC obligations was for contractual services and supplies. Components reported using these contractual services and supplies for transportation, rent, supplies, or other contractual services— such as for litigation consultants (for example, medical experts) and litigation support (for example, paralegals to review case documentation), among other things. Obligations for personnel and contracted services and supplies generally accounted for almost all of a component’s HCFAC obligations.\nSpecifically, for HHS’s components, obligations for personnel costs represented the largest portion of FDA’s, CMS’s, and OGC’s obligations for HCFAC activities for fiscal year 2012. In contrast, most of ACL’s obligations in fiscal year 2012 were for expanding grants to the Senior Medicare Patrol programs.\nEach of HHS-OIG’s components, with the exception of OMP, reported obligations for personnel costs as their largest HCFAC obligations for fiscal year 2012, devoting 87 percent or more of their obligations to personnel in fiscal year 2012. For OMP, over 70 percent of its obligations were devoted to rent, communication, utilities, equipment, printing, and other contractual services. OMP officials told us that certain overhead expenses incurred by the HHS-OIG components—for example, rent payments—are handled by OMP.\nAbout half or more of DOJ components’ obligations for HCFAC activities were for personnel costs. In fiscal year 2012, the USAOs, Civil Division, Criminal Division, Civil Rights Division, and FBI reported that obligations for personnel costs ranged from 47 percent (Civil Division) to 84 percent (USAOs) of their obligations. For example, for the Civil Division, obligations for contractual services and supplies represented 53 percent of its HCFAC obligations; and officials told us that they use contracted services for litigation consultants (such as medical experts to review medical records or to prepare exhibits to be used at trial) and for litigation support (such as paralegals to review case documentation).",
"In fiscal year 2012, HHS-OIG and DOJ obligated over $47 million in HCFAC funds to support Strike Force teams. This represented about 8.1 percent of the $583.6 million in obligations for HCFAC activities. DOJ officials told us that Strike Force teams are an important and valuable tool for identifying potential health care fraud schemes. (See table 1 for the HCFAC obligations by Strike Force location for fiscal year 2012, and see appendix II, table 4 for information on HCFAC obligations devoted to Strike Force teams for fiscal years 2008-2012.)\nIn fiscal year 2012, DOJ and HHS-OIG obligated over $12.9 million for the Strike Force team in Miami, which represented over 27 percent of funding for all Strike Force teams. The first Strike Force team was officially launched in Miami in fiscal year 2007, based in part on an HHS- OIG evaluation that found aberrant claims patterns for infusion therapy for Medicare beneficiaries with HIV/AIDs that differentiated South Florida Medicare providers and beneficiaries from the rest of the country. Additionally, obligations for Miami’s Strike Force team were more than twice as much as in Detroit, the team with the second highest obligations for fiscal year 2012 ($5.1 million).\nBased on the obligations reported for fiscal year 2012, HHS-OIG’s Office of Investigations accounted for 45 percent of the total obligations used for Strike Force teams. The FBI incurred 25 percent, DOJ’s Criminal Division incurred 17 percent, and the USAOs incurred 13 percent of obligations for the Strike Force teams. HHS-OIG’s Office of Investigations and the FBI’s agents conduct investigations and gather evidence, such as through surveillance for Strike Force cases, while DOJ’s Criminal Division and the USAOs’ attorneys are the primary prosecutors of Strike Force cases. Additionally, although not reflected in the table above, CMS obligated approximately $350,656 in discretionary HCFAC appropriations to support Strike Force Teams. CMS’s HCFAC obligations were not associated with any one individual Strike Force city.\nSince fiscal year 2010, the USAOs have used some of their HCFAC discretionary appropriation for three Special Focus teams—in San Francisco, Boston, and Philadelphia. These Special Focus teams are similar to the Strike Force teams, but handle pharmaceutical civil cases rather than criminal cases. Approximately $2.8 million of the USAOs’ HCFAC obligations in fiscal year 2012 were for these Special Focus teams. This amount was in addition to the HCFAC obligations they used for the Strike Force teams.",
"HHS, HHS-OIG, and DOJ use several indicators to assess HCFAC activities as well as to inform decision-makers about how to allocate resources. These indicators include those listed in the annual HCFAC report as well as others outlined in agency reports. For example, FDA assesses the work of its Pharmaceutical Fraud Program by tracking the number of criminal investigations opened and the outcomes of criminal convictions obtained, among other indicators. Additionally, many of the indicators that HHS, HHS-OIG, and DOJ use reflect the collective work of multiple agencies since they work many health care fraud cases jointly. Outputs from some of these key indicators have changed in recent fiscal years. For example, the return-on-investment has increased from $4.90 returned for every $1.00 invested for fiscal years 2006-2008 to $7.90 returned for every $1.00 invested for fiscal years 2010-2012.",
"HHS, HHS-OIG, and DOJ officials reported using several indicators to assess HCFAC activities and that those indicators serve multiple purposes. Several indicators are included in the annual HCFAC report, while other indicators are reported in agency documents or used internally. Additionally, some indicators are collective—in that they reflect the work of multiple agencies—and other indicators outline the activities conducted by a particular agency or component. Appendix III, tables 5 through 8, provides detailed information on indicators used to assess the activities conducted using HCFAC funding, including those outlined in the HCFAC report, as well as other indicators the agencies use, by agency and component.\nEach HHS component conducts unique activities related to health care fraud and abuse. As a result of these different types of activities, the indicators that each HHS component uses to highlight the accomplishments of its HCFAC activities vary.\nFDA uses indicators associated with its Pharmaceutical Fraud program— which focuses on detecting, prosecuting, and preventing pharmaceutical, biologic, and medical device fraud—including the number of criminal investigations opened during a fiscal year and the outcomes of criminal convictions obtained (such as amount of jail time, probation, or amount of restitution). FDA officials told us that the indicators they use are outlined in the annual HCFAC report. For example, FDA reported in the fiscal year 2012 HCFAC report that it had opened 42 criminal investigations since the inception of the Pharmaceutical Fraud Program, and 17 investigations during fiscal year 2012.\nACL primarily uses indicators that track information related to the Senior Medicare Patrol (SMP) programs—which train senior volunteers to inform fellow beneficiaries on how to detect and prevent fraud, waste, and abuse in the Medicare program—such as indicators related to beneficiary education and training, outreach activities, and events the SMP programs conduct, and cases that were referred for investigation. For instance, ACL tracks the number of group education sessions the SMPs conduct and the estimated number of beneficiaries who attended the sessions. Many of the indicators ACL uses are outlined in an annual HHS-OIG report on According to the SMP programs, as well as the annual HCFAC report.ACL officials, ACL has hired a contractor to assess the adequacy of the current indicators used by ACL and to determine if the indicators are appropriate for evaluating the performance of the SMPs.\nHHS’s OGC uses several indicators to assess the HCFAC activities it conducts. These indicators include amounts of recoveries for matters on which OGC has assisted—such as False Claims Act matters and civil monetary penalties—and the number of physician self-referral disclosures in which OGC advised. indicators are outlined in the annual HCFAC report.\nAccording to the fiscal year 2012 HCFAC report, OGC advised CMS on the new voluntary Self Referral Disclosure Protocol established by the Patient Protection and Affordable Care Act. Pub. L. No. 111-148, § 6409(a), 124 Stat. at 772. Under this protocol, providers of services and supplies may self-disclose actual or potential violations of the physician self-referral law, commonly known as the Stark law. The Stark law prohibits physicians from making certain referrals for “designated health services” paid for by Medicare to entities with which the physician (or immediate family members) has a financial relationship, unless the arrangement complies with a specified exception, such as in-office ancillary services. 42 U.S.C. § 1395nn(a)(1), (b)(2). officials told us that one indicator they use is the drop in number of claims for particular services, which they believe coincides with the efforts of the Strike Force teams to investigate and prosecute fraud. For example, according to information that CMS provided to us, payments for home health services dropped by nearly one-half from 2008 to 2011 in Miami- Dade County, which officials believe was, in part, due to the Strike Force team’s efforts focused on reducing fraud in home health care.\nHHS-OIG uses a variety of indicators to assess the work it conducts using HCFAC funds. Some of these indicators reflect the collective work of HHS-OIG’s components and some are unique to the activities conducted by a particular component. For example, HHS-OIG tracks the health care savings attributable to HHS-OIG investigations, audits, and evaluations. This indicator includes work from nearly all HHS-OIG components, including the Office of Investigations, the Office of Audit Services, and the Office of Evaluation and Inspections. Among many other indicators, HHS- OIG’s Office of Counsel to the Inspector General tracks the number of corporate integrity agreements monitored for compliance, which is specific to the work of that office. HHS-OIG officials told us that the indicators they use to assess HCFAC activities are reported in the annual HCFAC report and in other HHS-OIG reports (such as its semi-annual reports to Congress).\nDOJ uses several indicators to assess the work it conducts with HCFAC funding. The indicators it uses relate to the activities that each DOJ component conducts to enforce health care fraud and abuse laws. For example, the USAOs use indicators related to criminal prosecutions, including the number of defendants charged and the number of convictions. In addition to those measures, the USAOs also track information related to civil matters, such as the number of pending civil investigations.\nIn addition to the indicators listed in the annual HCFAC report, officials from DOJ’s components told us that they use other indicators to assess the work they conduct related to health care fraud and abuse. Officials told us that these indicators are tracked at the departmental level and aggregate the work of multiple DOJ components. For example, DOJ tracks the percentage of criminal and civil cases resolved favorably. These indicators include health care fraud cases, as well as other cases that DOJ components handle.\nOfficials from HHS, HHS-OIG, and DOJ told us that they use indicators to inform decision-makers about how to allocate resources. For example, officials from DOJ’s Civil Rights Division told us that they use indicators to help determine what resources they need to handle their current caseload. The Civil Rights Division considers the number of cases the division is currently working along with the number of remedial agreements with facilities that the division needs to monitor in the upcoming year when developing requests for funding. Additionally, officials from FDA told us that they review the preceding year’s number of investigations and the costs associated with those investigations, when requesting annual funding.\nAdditionally, HHS, HHS-OIG, and DOJ officials indicated that they use data to inform their decisions about which activities to prioritize, including what cases or studies to undertake, as well as where to locate specific resources. For example, officials from HHS-OIG told us that they use Medicare claims data to identify which service areas to target for investigations, audits, or evaluations, as well as which geographic regions to focus their efforts. Officials said that they continually review whether HHS-OIG staff are located in the most appropriate geographic areas and have relocated staff to areas to enhance the efficiency of HHS-OIG resources. HHS-OIG officials also told us that the agency uses several indicators for internal management purposes. Additionally, officials from DOJ’s Criminal Division told us that one factor they consider when deciding how to prioritize cases is to review data analyses to focus on cases with large amounts of alleged fraudulent billing.",
"Since HHS-OIG and DOJ’s components work many health care fraud cases jointly, many of the indicators included in the annual HCFAC report highlight the work of both HHS-OIG and DOJ, as well as various components within each agency. For example, the report includes information on the results of HCFAC activities, such as the dollar amount recovered as a result of fraud cases, which HHS-OIG and DOJ officials say reflects the investigative work done by HHS-OIG and FBI, as well as the work of DOJ’s components in prosecuting the cases. Additionally, the report presents several indicators related to the work of the Strike Force teams, such as the number of indictments and complaints involving charges that were filed, the outcomes of the cases, and the total amount of alleged billing to Medicare as a result of these Strike Force cases.\nThe return-on-investment is another indicator that reflects the work of multiple agencies and has changed in recent years. We have recognized that agencies can use a return-on-investment as a valuable tool for assessing a program’s activities and for determining how best to target resources. The return-on-investment is included in the annual HCFAC report and compares the amount of funds that were returned to the Medicare Trust Funds, such as restitution and compensatory damages awarded, with the amount of appropriations for HCFAC activities. Specifically:\nThe total returns—the numerator—includes deposits to the Medicare Trust Funds. The calculation includes amounts that were deposited into the Medicare Trust Funds rather than amounts that were ordered or negotiated in health care fraud and abuse cases, but not yet transferred to the Medicare Trust Funds. Officials reported that although there may be large amounts of restitution ordered or agreed upon in health care fraud cases, the amounts actually returned to the Medicare Trust Funds may be lower. By including only those funds that have been returned to the Medicare Trust Funds, the return-on-investment is not artificially inflated.\nFor example, officials told us that although a defendant convicted of health care fraud may be ordered to pay restitution and penalties in a specific amount, the defendant may pay less than what is ordered as the ability to pay often affects how much is actually received.\nMany cases discussed in the annual HCFAC report include settlements reached with pharmaceutical and device manufacturers for criminal and civil liabilities. For example, the fiscal year 2012 HCFAC report describes many settlements reached with pharmaceutical and device manufacturers and the settlements ranged from about $200,000 to $3 billion.\nThe total investment—the denominator—includes mandatory and discretionary HCFAC funds that were appropriated to HHS, HHS-OIG, and DOJ (including the FBI’s mandatory funds devoted to health care fraud and abuse reduction activities) and does not include funding from other appropriations. DOJ officials told us that the HCFAC funding that CMS receives through HHS’s wedge fund is included in the return-on-investment calculation, and a small portion of HCFAC discretionary funds that CMS uses to support the Strike Force teams.\nReturn-on-investment is calculated using a 3-year moving average. To account for differences in the amounts returned to the Medicare Trust Funds between years, the return-on-investment is calculated using a 3-year average. For example, a case may have been investigated in fiscal year 2010 but not settled until fiscal year 2012, and thus the funds received from that case would not be deposited until 2012. Similarly, although agencies may carry over HCFAC appropriations into future fiscal years, the amount of appropriations included in the calculation is also based on a 3-year average with carry over amounts included in the year in which they were appropriated.\nAccording to the annual HCFAC report, the return-on-investment for fiscal years 2010-2012 was $7.90 returned to the Medicare Trust Funds for every $1.00 of HCFAC funds appropriated for HCFAC activities. The return-on-investment increased steadily from fiscal year 2008 to 2012. In fiscal years 2006-2008, the return-on-investment was $4.90 to $1.00, and in fiscal years 2010-2012, the return-on-investment was the highest at $7.90 to $1.00. See figure 3 for additional information on the return-on- investment for fiscal years 2008-2012.\nA review of other key outputs listed in the annual HCFAC reports from 2008 through 2012 that reflect accomplishments or outputs of activities conducted by multiple agencies using HCFAC funding shows some key outputs have generally increased and some have remained stable. During the same time period, HCFAC obligations and funding from other appropriations used to support HCFAC activities increased about 38 percent. See figure 4 for data on selected key outputs for fiscal years 2008 to 2012, and see appendix IV, table 9 for additional detailed information on the key outputs for fiscal years 2008 to 2012.\nOne key output that has increased since fiscal year 2008 is the number of defendants convicted of health care fraud. For example, the number of defendants convicted of health care fraud generally increased from around 588 in fiscal year 2008 to 826 in fiscal year 2012 (a 40 percent increase).\nSome key outputs did not change between fiscal years 2008 and 2012. While funding has increased since 2008, there has not been a consistent pattern of increasing outputs. For example, the number of new criminal health care fraud investigations opened increased from fiscal year 2008 (957 investigations) to fiscal year 2012 (1,131 investigations). Additionally, the number of new civil health care fraud investigations opened did not vary much between 2008 (843 cases) and 2012 (885 cases).\nHHS-OIG and DOJ officials indicated that there are a number of factors that might contribute to these trends. DOJ officials told us that the complexity of fraud cases has increased in recent years and requires more substantial resources to investigate and prosecute than other, less- complex cases. Officials stated that this limits the amount of resources they are able to commit to other cases. HHS-OIG and DOJ officials also cited other factors, including external factors (such as an increase in the number of defendants opting to go to trial) and significant changes to federal health care programs (such as the implementation of the Medicare Part D prescription drug program), which might influence these trends.\nNonetheless, HHS-OIG and DOJ officials indicated that they consider the increase since 2008 in some of the key outputs to be significant. For example, HHS-OIG officials noted that there was an increase of 42 civil fraud investigations from 2008 to 2012, and they consider the increase to be of significance given the complexity of fraud schemes and the resources needed to handle these civil cases. Additionally, DOJ officials told us that they consider increases to the number of new criminal fraud investigations opened (an increase of 18 percent) to be significant. DOJ officials also indicated that several key outputs related to the Strike Force teams have increased since 2008. See appendix IV for detailed information on key outputs related to HCFAC activities, including the Strike Force teams.",
"The indicators used by agencies to track the outputs of HCFAC activities provide information on the accomplishments of HCFAC activities, not on the effectiveness of the activities in reducing health care fraud and abuse. HHS, HHS-OIG, and DOJ officials reported that they consider the indicators to be the outputs or accomplishments of the HCFAC activities they conduct and in that sense they provide a composite picture of the achievements of the HCFAC program. However, difficulty in establishing a causal link between HCFAC activities and output indicators, difficulty in determining the deterrent effect HCFAC activities may have on potential health care fraud and abuse, limited research on the effectiveness of health care fraud interventions, and the lack of a health care fraud baseline hinder a broader understanding of the effectiveness of the HCFAC program in reducing health care fraud and abuse.",
"The indicators that HHS, HHS-OIG, and DOJ use to track HCFAC activities offer insights on the accomplishments and outputs of HCFAC activities, but they do not measure the effectiveness of the HCFAC program in reducing health care fraud and abuse. HHS, HHS-OIG, and DOJ officials reported that they consider the indicators they use to be the accomplishments or outputs of the HCFAC activities they conduct. For example, the key program outputs discussed earlier in this report reflect accomplishments of activities agencies conduct using HCFAC funding. Officials from HHS, HHS-OIG, and DOJ told us that these indicators can be used to provide insights on program activities or the number of actions a component has been able to accomplish in a specific time frame (e.g., the number of defendants convicted in a fiscal year). However, several HHS and DOJ agency officials told us that they do not consider these indicators to be measures of the performance or the effectiveness of the HCFAC program in reducing health care fraud. The return-on- investment is an example of an indicator that describes program results but does not measure program effectiveness. We found that the return- on-investment provides information on the accomplishments of HCFAC activities in relationship to the amount of funds appropriated for these activities, but does not provide information on the extent to which the HCFAC program reduces health care fraud.\nAdditionally, most of the indicators used to track HCFAC activities do not have targets or goals associated with them. Although standard practices for internal controls indicate that ongoing performance monitoring should include comparison of performance indicator data against planned targets, our previous work has recognized that establishing measures and setting specific targets in the law enforcement area can be challenging. Officials from HHS, HHS-OIG, and DOJ told us that they intentionally do not set performance targets for indicators such as the number of health care fraud investigations or prosecutions undertaken because such targets could cause the public to perceive law enforcement as engaging in “bounty hunting” or pursuing arbitrary targets merely to meet particular goals.law enforcement actions that are based on merit and avoid the appearance that they strive to achieve certain numerical quotas.",
"HHS, HHS-OIG, and DOJ officials, as well as literature we reviewed, indicate that there are several factors that make assessing the effectiveness of the HCFAC program in reducing health care fraud and abuse challenging.\nIt is difficult to establish if the HCFAC program has a direct relationship to changes in the amount of health care fraud and abuse. HHS, HHS-OIG, and DOJ officials told us that HCFAC activities—as well as other efforts by federal agencies and others, including non-government entities—may have helped reduce health care fraud; however, the effect that any of these actions may have had on health care fraud and abuse is difficult to isolate. For example, HHS-OIG officials stated that compliance training and guidance provided by the HHS-OIG to health care organization directors—an activity conducted with HCFAC funding—may have had an effect on health care fraud but that it is difficult to isolate how much of an effect the activity has had. However, according to HHS-OIG officials, a rise in the number of provider compliance programs established by hospital organizations in response to shareholder interest in improving compliance with federal and state health care program requirements may also contribute to reductions in health care fraud. Moreover, many efforts within CMS aim to reduce health care fraud and abuse, in addition to those identified as HCFAC activities, and it is difficult to know which CMS program or activity has had an effect on the incidence of fraud. For example, CMS has implemented a number of initiatives to prevent health care fraud and abuse that are not funded with HCFAC funds. One such effort is a change to the provider enrollment process, which is designed to better ensure that only legitimate providers and suppliers are allowed to bill Medicare. However, it is difficult to isolate the effect that either HCFAC activities or broader CMS efforts may have had in reducing health care fraud and abuse.\nAnother factor that limits understanding of the effectiveness of the HCFAC program in reducing health care fraud and abuse is the difficulty in quantifying the HCFAC program’s effect in deterring health care fraud and abuse. DOJ officials provided anecdotal evidence that HCFAC activities help to deter would-be offenders. For example, a Justice Management Division official asserted that DOJ prosecutions that result in doctors being sentenced to prison for health care fraud and abuse deter other doctors who are contemplating committing fraud. Other DOJ officials reported that cooperating witnesses in health care fraud investigations have told officials of instances where a provider committing potentially fraudulent acts had ceased operations because of the pressure brought on by Strike Force prosecutions. DOJ officials stated that they could recall about a dozen examples of specific individuals who have said they were deterred from committing fraud or ceased a fraudulent operation because they saw another individual get caught. However, these examples are anecdotal and DOJ and HHS-OIG officials stated that it is difficult to know how much health care fraud is deterred as a result of HCFAC activities.\nResearch on the effectiveness of health care fraud and abuse interventions, and on ways to measure the effectiveness of health care fraud and abuse interventions has been limited. We found that none of the 49 articles we selected to review for this study evaluated the effectiveness of the HCFAC program specifically, and few studies examined the effectiveness of health care fraud and abuse interventions in general. A recent review of literature conducted by experts in the field found similar results.\nAnother challenge that limits the ability to determine whether HCFAC activities are effective in reducing health care fraud and abuse is the lack of a baseline for the amount of health care fraud that exists at any point in time. Having such a baseline could provide information on the amount of health care fraud and how much it has changed in a given year or over time. We have previously reported that there currently is no reliable baseline estimate of the amount of health care fraud in the United States. Several experts told us or have written about the importance of establishing a baseline in assessing the effectiveness of law enforcement programs. A baseline estimate could provide an understanding of the extent of fraud and, with additional information on program activities, could help to inform decision-making related to allocation of resources to combat health care fraud.\nHHS and CMS have taken steps to try to establish a health care fraud baseline because, according to the fiscal year 2012 HCFAC report, they appreciate that a baseline would allow the agencies to evaluate the success of fraud prevention activities. HHS officials stated that the Assistant Secretary for Planning and Evaluation initiated work to establish a baseline measurement, and that work was subsequently transferred to CMS’s Center for Program Integrity. According to the fiscal year 2012 HCFAC report, the project is designed to measure probable fraud in home health care agencies and will pilot test a measurement approach and calculate an estimate of probable fraud for specific home health care services. CMS and its contractor will collect information from home health care agencies, the referring physicians, and Medicare beneficiaries selected in a national random sample of home health care claims. The pilot will rely on the information collected along with a summary of the service history of the home health care agency, the referring provider, and the beneficiary to estimate the percentage of total payments that are associated with probable fraud, and the percentage of all claims that are associated with probable fraud for Medicare fee-for-service home health care. CMS reports that after completion of the pilot, it will determine whether the measurement approach should be expanded to other areas of health care. Officials from the Center for Program Integrity stated that as of May 2013, they were beginning the data collection phase of the fraud baseline measurement pilot, which they expect will last two years.\nSome HCFAC-funded agencies have attempted to determine the effect of HCFAC activities on specific types of fraud in certain locations. DOJ officials provided examples of reductions in billings for certain services in specific locations and told us that they believe these reductions are associated with the work of the Strike Force teams. For example, DOJ officials reported assessing the amount of home health care billings in certain Strike Force cities before the Strike Force began operations and then again after the Strike Force had begun operations. Since the amount of home health care billing was measured before and after the Strike Force was implemented, HHS, HHS-OIG, and DOJ officials are able to estimate some effect that the Strike Force team had on the amount of billing in that area. For example, in a May 14, 2013 press conference, the Attorney General noted that after the Detroit Strike Force began investigating cases of potential group-psychotherapy fraud, claims for this type of treatment in Detroit dropped by more than 70 percent since January 2011.",
"Making progress in preventing and reducing health care fraud and abuse is an essential yet challenging task. HHS and DOJ use a number of indicators to assess the activities they conduct to reduce health care fraud and abuse. However, the indicators do not provide information about the effectiveness of the program, and little is known about whether and how well the HCFAC program reduces health care fraud. While positive results on the program’s return-on-investment can be seen as an indication of program success, the return-on-investment does not indicate the extent to which the program is reducing fraud. For example, the increasing returns from the fraud that is being investigated and prosecuted may indicate that HCFAC programming is effective in detecting or deterring potentially fraudulent schemes or indicate that there is simply an increase in potentially fraudulent activity. CMS’s recent efforts to establish a home health care fraud baseline is a good first step to understanding the extent of the problem and, if implemented as planned, could provide policymakers with information on how much fraud exists and in coming years, how potentially fraudulent activity has increased or decreased over time. However, CMS has not yet determined whether the methodology used to establish a baseline of probable fraud in home health care could be used to assess the amount of fraud in other health care services. Additionally, even with a baseline estimate of the total amount of probable fraud, there will likely be continuing challenges in understanding the effectiveness of the HCFAC program, such as isolating the program’s ability to reduce or prevent fraud and abuse. Despite these inherent challenges, if a health care fraud baseline is established more broadly, it may become feasible to study how individual HCFAC activities, and possibly the program as a whole, affects changes in health care fraud. Results from these studies could provide HHS and DOJ with additional information regarding which activities are the most effective in reducing health care fraud and abuse, and could potentially inform agency decisions about how best to allocate limited resources.",
"GAO provided a draft of the report to HHS and DOJ. In its written comments reproduced in appendix V, HHS discussed its program integrity efforts to reduce fraud, waste, and abuse. HHS also provided examples of CMS’s efforts to reduce fraud, waste, and abuse in Medicare. The examples provided were not included in our review because they were not included in the funding used to calculate the return-on-investment for the HCFAC program. While not commenting specifically on our report, DOJ sent us examples of reductions in Medicare billings for specific services (such as durable medical equipment, home health services, and community mental health center services) in certain Strike Force cities. In their comments, DOJ officials stated that based on their examples, the Strike Force efforts have had a lasting effect on savings to Medicare payments. In addition, HHS and DOJ provided technical comments, which we have incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of HHS, the Attorney General, the Inspector General of HHS, and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Kathleen M. King at (202) 512-7114 or kingk@gao.gov or Eileen R. Larence at (202) 512-8777 or larencee@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix VI.",
"The activities listed in table 2 below represent only activities that are supported with HCFAC funds (as reported in agency documents or interviews with agency officials). The table does not include other activities conducted by the agencies that are not related to health care fraud and abuse control.",
"Table 3 summarizes the HCFAC obligations for the Department of Health and Human Services (HHS), including the HHS Office of Inspector General, and Department of Justice components for fiscal years 2008 through 2012 by type of appropriations. An obligation is a definite commitment that creates a legal liability of the government for payment of goods and services ordered or received. The table includes obligations of mandatory HCFAC appropriations, discretionary HCFAC appropriations, and other appropriations used to support HCFAC activities. Mandatory HCFAC appropriations refer to the HCFAC budgetary resources controlled by a law, principally the Health Insurance Portability and Accountability Act of 1996, rather than appropriations acts. Discretionary HCFAC appropriations refer to budgetary resources provided in annual appropriation acts, other than those that fund mandatory programs. Congress appropriated mandatory funding for HCFAC activities beginning in fiscal year 1997, and appropriated discretionary funding for HCFAC activities beginning in fiscal year 2009. Other appropriations include funding from other appropriations not specific to the HCFAC program that the agencies used, in addition to the HCFAC funds, to carry out activities related to health care fraud and abuse. In addition, the table shows the percentage of HCFAC obligations for personnel services and contracted services and supplies.\nTable 4 summarizes HCFAC obligations for Strike Force teams for fiscal years 2008 through 2012 by the geographic location of the Strike Force teams. Strike Force teams consist of investigators and prosecutors who use data analysis techniques to identify, investigate, and prosecute potentially fraudulent activities in geographic areas with high rates of fraud.",
"Appendix III: Indicators Used by Agencies to Assess Health Care Fraud and Abuse Control (HCFAC) Program Activities indicates that measure is included in Fiscal Year 2012 annual HCFAC report indicates that measure is included in Department of Health and Human Services’ Office of Inspector General (HHS-OIG) July 2013 report on Senior Medicare Patrol programs.\nUnless otherwise noted, the information on outcomes/output for each measure is for fiscal year 2012. For the outcomes and outputs for indicators associated with ACL’s Senior Medicare Patrol program, we used the most currently available data, which was calendar year 2012 data obtained from the July 2013 HHS-OIG report on the Senior Medicare Patrol program. The outcomes and output for these indicators is also included in the fiscal year 2012 HCFAC report; however, the outcomes and output is calendar year 2011 data.\nIn HHS-OIG’s July 2013 report on Senior Medicare Patrol program, this indicator for Medicare and Medicaid funds recovered attributable to the programs was expanded to account for both expected and actual funds recovered. However, in the fiscal year 2012 report, the indicator included only actual funds recovered.",
"Amount of expected recoveries, including audit receivables and investigative receivables and non-HHS investigative receivables resulting from work in areas such as states’ shares of Medicaid restitution $6.9 billion consisting of $923.8 million in audit receivables and $6 billion in investigative receivables (which includes $1.7 billion in non-HHS investigative receivables resulting from work in areas such as the states’ shares of Medicaid restitution)\nRatio of expected return on investment measuring the efficiency of HHS-OIG’s health care oversight efforts (Target: $12.0)",
"",
"Questioned cost recommendations (dollar value)\nFunds put to better use recommendations Timeliness of draft reports (or final reports if issued without a draft) (Target: 63 percent)\nAudit receivables (disallowed questioned cost recommendations)",
"",
"",
"Number of evaluations started (Target: 57 evaluations)\nPercentage of final reports completed within a year (Target: 55 percent)",
"Complaints received (Target: 6,290 complaints) indicates that the indicator is included in Fiscal Year 2012 annual HCFAC report. indicates that the indicator is included in at least one of the two HHS-OIG’s Semiannual Report to Congress for fiscal year 2012. indicates that the indicator is included in HHS-OIG’s Fiscal Year 2014 Justification of Estimates for Appropriations Committees, which includes outcomes/output of indicators for fiscal year 2012.",
"Number of new civil health care fraud investigations opened Number of civil health care fraud matters pending at the end of the fiscal year Number of investigations completed per Department of Justice attorney working on financial fraud and health care fraud cases (Target: 11.92 investigations per attorney)\nPercentage of civil cases favorably resolved for litigating divisions (Target: 80 percent of civil cases favorably resolved)",
"",
"Number of cases favorably resolved for litigating components (Target: 80 percent of civil cases favorably resolved)",
"Average number of months of prison sentences in health care fraud cases Amount secured through court-ordered restitution, forfeiture, and fines Number of investigations completed per Department of Justice attorney working on financial fraud and health care fraud cases (Target: 11.92 investigations per attorney)\nPercentage of criminal cases favorably resolved for litigating divisions (Target: 90 percent of criminal cases favorably resolved)",
"Number of new health care fraud investigations initiated by the FBI (Targets vary by field office)\nNumber of pending health care fraud investigations (Targets vary by field office)\nNumber of FBI health care fraud investigators and analysts that received training (Targets vary by field office)\nNumber of dismantled criminal enterprises engaging in white-collar crime (Target: 360 criminal enterprises)\nIn fiscal year 2011: $1.2 billion in restitutions; $1 billion in fines; $96 million in seizures; $320 million in civil restitution; and over $1 billion in civil settlements.",
"Number of Federal health care fraud related convictions Number of new civil health care fraud investigations opened Number of civil health care fraud investigations pending Number of investigations completed per Department of Justice attorney working on financial fraud and health care fraud cases (Target: 11.92 investigations per attorney)",
"Indicators used by agencies to assess activities (Associated target, if applicable) Percentage of criminal cases favorably resolved for litigating divisions (Target: 90 percent of criminal cases favorably resolved; 80 percent of civil cases favorably resolved)\nPercent of white collar crimes cases concerning mortgage fraud, health care fraud, and official corruption favorably resolved (Target: 90 percent of white collar cases favorably resolved)\n92.2 percent of white collar crime cases favorably resolved in fiscal year 2010 indicates that measure is included in Fiscal Year 2012 annual HCFAC report indicates that measure is in DOJ’s Performance and Accountability report ¡ indicates that the measure is in DOJ’s Performance Plan for Fiscal Year 2012 ⁄ indicates that the measure is in FBI’s Financial Crimes Report to the Public for Fiscal Years 2010 – 2011.\nUnless otherwise noted, the information on outcomes/output for each measure is for fiscal year 2012. The outputs for these indicators are included in the summary of the HCFAC report and in the section regarding USAO activities. We report the outputs in the Civil Division section and USAO section of this table because the outputs include civil matters handled by the USAOs and/or Civil Division. These measures are reported at the departmental level for DOJ, in which several DOJ components contribute, and include health care fraud cases in addition to other cases.",
"",
"Some of the outcomes/outputs associated with the Strike Force teams are subsets of outcomes/outputs reported for the HCFAC program as a whole. For example, the number of defendants charged in Strike Force cases is a subset of the total number of defendants in health care fraud-related cases where criminal charges were filed. As a result, the outcomes/outputs reported in this table may be duplicative.",
"",
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"In addition to the contacts named above, Martin T. Gahart, Assistant Director; Tom Jessor, Assistant Director; Christie Enders; Sandra George; Drew Long; Lisa Rogers; and Meghan Squires made significant contributions to the work."
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"question": [
"What program activities received approximately $583.6 million?",
"From what sources did these funds originate?",
"What is the purpose of the Medicare Fraud Strike Force?",
"What are indicators used to inform decision-makers about?",
"What sorts of indicators does the United States Attorneys' Offices use?",
"Why do some indicators used reflect collective work?",
"What do these indicators suggest has happened in recent years?",
"How has the return-on-investment as a result of HCFAC activities compare from the period of 2006-2008 to 2010-2012?",
"What did GAO do to describe how HHS and DOJ obligated funds?",
"What did GAO review to examine how HHS and DOJ assess HCFAC activities?",
"How did GAO determine effectiveness of the HCFAC activities?"
],
"summary": [
"In fiscal year 2012, the Department of Health and Human Services (HHS), HHS Office of Inspector General (HHS-OIG), and the Department of Justice (DOJ) obligated approximately $583.6 million to fund Health Care Fraud and Abuse Control (HCFAC) program activities.",
"About 78 percent of obligated funds were from mandatory HCFAC appropriations (budgetary resources provided in laws other than appropriation acts), 11 percent of obligated funds were from discretionary HCFAC appropriations (budgetary resources provided in appropriation acts), and 12 percent were obligated funds from other appropriations that HHS, HHS-OIG, and DOJ used to support HCFAC activities.",
"HCFAC funds were obligated to support a variety of activities, including interagency Medicare Fraud Strike Force Teams--which provide additional investigative and prosecutorial resources in geographic areas with high rates of health care fraud--located in 9 cities nationwide.",
"HHS, HHS-OIG, and DOJ use several indicators to assess HCFAC activities, as well as to inform decision-makers about how to allocate resources and prioritize those activities.",
"For example, in addition to other indicators, the United States Attorneys' Offices use indicators related to criminal prosecutions, including the number of defendants charged and the number of convictions.",
"Additionally, many of the indicators that HHS, HHS-OIG, and DOJ use--such as the dollar amount recovered as a result of fraud cases--reflect the collective work of multiple agencies since these agencies work many health care fraud cases jointly.",
"Outputs from some key indicators have changed in recent years.",
"For example, according to the fiscal year 2012 HCFAC report, the return-on-investment--the amount of money returned to the government as a result of HCFAC activities compared with the funding appropriated to conduct those activities--has increased from $4.90 returned for every $1.00 invested for fiscal years 2006-2008 to $7.90 returned for every $1.00 invested for fiscal years 2010-2012.",
"To describe how HHS and DOJ obligated funds, GAO obtained financial information from HHS and DOJ for fiscal year 2012.",
"To examine how HHS and DOJ assess HCFAC activities and whether key outputs have changed over time, GAO reviewed agency reports and documents, and interviewed agency officials.",
"To examine what is known about the effectiveness of the HCFAC program, GAO conducted a literature review and interviewed experts."
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GAO_GAO-12-564
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{
"title": [
"Background",
"GS Pay Adjustments Can Be Determined through FEPCA Process or Set Directly by Congress",
"Across-the-Board Adjustments Are Usually Based on Private Sector Salary Growth",
"Locality Adjustments Are Usually Set by Congress",
"Pay Increases and Awards for GS Employees Vary in their Links to Individual Performance",
"Findings of Selected Pay and Total Compensation Comparison Studies Varied Due to Different Approaches, Methods, and Data",
"Selected Studies Differed in Their Conclusions and Basic Approaches to Analyzing Pay",
"Selected Studies Used Different Methods to Include Benefits in Estimates of Total Compensation",
"Concluding Observations",
"Agency and Third- Party Comments",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Implementation of Locality Pay",
"Locality Payments from 1994 to 2011",
"Appendix III: Information on the Selected Studies’ Data Sources and Methodologies for Analyzing Pay and Total Compensation",
"Pay Analysis",
"Total Compensation Analysis",
"Appendix IV: Comments from the Project On Government Oversight",
"Appendix V: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"The GS pay system covered 69 percent of federal civilian workers in 2011, with compensation costing about $147 billion (about 67 percent of total federal civilian compensation of about $220 billion). The GS workforce is divided into 15 pay grades, with 10 rates of pay (referred to as steps) within each grade. Agencies use a uniform set of classification standards to determine grade levels for their positions organized within five occupational categories—Professional, Administrative, Technical, Clerical, and Other White-Collar (PATCO). The GS system of classification was established by the Classification Act of 1949 in response to calls for a modernized system to ensure equity in pay setting. Until the late 1960s, general pay adjustments for federal employees were made through acts of Congress. The Federal Pay Comparability Act of 1970 permanently authorized the President to adjust GS pay rates annually, and established a system for recommending adjustments with the goal of increasing federal pay to be comparable with the private sector; however, we previously found that the gap between average federal and private sector salaries for similar jobs continued after implementation of the act because the recommended adjustments were not always made.\nThe Federal Employees Pay Comparability Act of 1990 (FEPCA) created annual locality-based pay adjustments for GS employees to reduce reported gaps between federal and nonfederal pay in metropolitan areas. In addition, FEPCA maintained an annual across-the-board pay adjustment that is the same for each employee to keep the GS base pay schedule in line with salary growth in the general labor market, similar to what had already existed under the 1970 act.\nBefore FEPCA, federal employees doing the same job at the same level anywhere in the country were paid the same amount. However, there was a growing concern that it was difficult to recruit and retain skilled federal employees in areas with higher nonfederal wages. We concluded that locality-based pay adjustments were necessary. FEPCA established locality pay, and the President’s Pay Agent designated pay localities based on Office of Management and Budget (OMB) Metropolitan Statistical Areas. FEPCA’s goal was to reduce the gap between federal and nonfederal pay in each locality, as measured by BLS data and reported by the President’s Pay Agent, to 5 percent over the course of 9 years. This goal was not met, but locality pay increases have been provided every year since locality pay was implemented in 1994, except during the pay freeze in 2011 and 2012. According to OPM, locality pay is now a broadly accepted practice in federal pay administration. See app. II for more information on the implementation of locality pay.\nFigure 1 illustrates the extent to which locality pay has been implemented for a representative employee. The annual pay (base plus locality) in 2012 for an employee at GS-11 (approximately the midpoint grade level), step 1 is shown for selected pay localities. Examples of positions that a GS-11 employee might hold are Administrative Officer, Scientist, Paralegal Specialist, Accountant, Engineer, Medical Records Administrator, Nurse Specialist, and Information Technology Specialist. There were 34 pay localities in the United States in 2012, composed of the states of Alaska and Hawaii, 31 metropolitan areas, and a residual locality called “Rest of U.S.” that includes all other areas in the United States and its territories and possessions. Rest of U.S. was the lowest- paying locality in 2012, with a GS-11, step 1 earning $57,408, and San Francisco was the highest, with a GS-11, step 1 earning $67,963. We selected additional localities with various pay rates and population sizes and from various regions to create figure 1.",
"",
"Across-the-board adjustments are designed to keep the GS base pay schedule in line with salary growth in the general labor market. FEPCA specifies that unless the President provides for alternative pay adjustments, across-the-board pay adjustments are to be determined using a simple formula: Pay rates are to be increased by the 12-month percentage increase in the wage and salary component of the Employment Cost Index (ECI) for private sector workers, minus one-half of one percentage point. For example, the ECI reference period for the January 2013 increase is the 12-month period ending September 2011. The ECI shows that during that period, pay for private sector workers rose Therefore, the across-the-board increase for 2013 would by 1.7 percent.be 1.2 percent. The ECI, an index compiled by the BLS and published quarterly, measures percentage changes in wages and salaries for private sector employees.\nAs specified in FEPCA, the President may decide to either provide across-the-board pay adjustments based on this calculation, or provide alternative pay adjustments based on national emergency or serious economic conditions affecting the general welfare. Congress may legislate an increase that is different from the formula result or the President’s alternative plan; this is not part of the process specified by FEPCA. The FEPCA formula increase has gone into effect in An 12 of the 19 years since 1994; the largest increase was 3.8 percent.\nIn evaluating economic conditions, the President is to consider a range of economic measures, including (but not limited to) Gross National Product, the unemployment rate, the budget deficit, and the Consumer Price Index. amount lower than the formula amount went into effect in the other 7 years due to President’s alternative pay plans and laws passed by Congress. The smallest increase was 0 percent, during the freeze on annual pay adjustments in 2011 and 2012.",
"Locality adjustments are designed to reduce the gap between federal and nonfederal pay in each locality to no more than 5 percent based on surveys to be conducted by BLS. FEPCA specifies that locality pay adjustments are to be recommended by a Pay Agent designated by the President, which is to consider the views of employee organizations:\nThe President’s Pay Agent recommends annual comparability payment amounts, establishes and modifies pay localities as it considers appropriate, and submits an annual report to the President on these items. The Secretary of Labor and the Directors of OMB and OPM serve as the Pay Agent. In making its recommendations, the President’s Pay Agent considers the views and recommendations of a Federal Salary Council and other employee organizations.\nThe Federal Salary Council makes annual recommendations to the President’s Pay Agent on locality pay adjustments, including the establishment or modification of pay localities, the coverage of salary surveys used to set locality pay, the process for making pay comparisons, and the level of comparability payments that should be made. The Council is to be comprised of three experts in labor relations and pay policy and six representatives of employee organizations representing large numbers of GS employees.\nTo recommend locality pay adjustments, the President’s Pay Agent compares the annual GS base pay rates of federal workers in each area to the annual pay rates of nonfederal workers in the same area for the same levels and types of work. The sidebar provides details on this process. The target locality pay is the amount that reduces these differences to 5 percent.\nThe surveys and models used for making these pay comparisons have changed somewhat between the passage of FEPCA in 1990 and the 2011 President’s Pay Agent Report (which recommends pay adjustments for 2013 and is the most current report available). Some changes were initiated by BLS, and some changes were made in response to concerns expressed by the Federal Salary Council or President’s Pay Agent. For example, BLS changed the survey used to measure nonfederal pay in 1996; the Federal Salary Council and President’s Pay Agent expressed concerns, and BLS worked together with OPM and OMB to improve the suitability of the new survey for recommending locality payments. Improvements were phased in from 2002 to 2011. Changes are summarized in app. II.\nAs specified in FEPCA and similar to the process for across-the-board adjustments, the President may decide to either provide locality pay adjustments based on the Pay Agent’s recommendation, or provide for alternative pay adjustments based on national emergency or serious economic conditions affecting the general welfare. Additionally, Congress may legislate an average percent increase that is different from the Pay Agent’s recommendation or the President’s alternative plan; this is not part of the process specified by FEPCA.\nFor 1994, the first year that locality payments were made, FEPCA specified that the locality increase should be not less than one fifth of the amount needed to reduce the pay disparity to 5 percent. This amount, providing a 3.95 percent average locality pay rate for the average GS employee as recommended by the Pay Agent, went into effect. In subsequent years through 2012, the effective increase has usually been far less than the one recommended by the Pay Agent, either due to a President’s alternative pay adjustment or to a law passed by Congress.\nNonetheless, some locality pay increase has been provided every year since locality pay was implemented in 1994 (except during the pay freeze in 2011 and 2012), and reported disparities between federal and nonfederal pay by locality have been reduced. The President’s Pay Agent reported that pay disparities were lower in 2011 than in 1994 in 16 of the 21 pay localities that existed in both of those years. Federal Salary Council members and OPM officials we spoke with said that FEPCA was successful in its goal of improving federal pay setting for large metropolitan areas by more closely aligning pay to local labor markets.\nFigure 2 summarizes pay adjustments during the past 6 years, illustrating the differences between the President’s Pay Agent recommendations and the final effective amounts. These differences were driven primarily by locality pay, since the across-the-board adjustments required under the FEPCA formula were smaller and were provided in some years, while the recommended locality adjustments were larger and were not provided. For example, for 2007, the President’s Pay Agent recommended a 1.7 percent across-the-board increase to comply with the formula in FEPCA, and a 7 percent average locality increase based on BLS salary survey data. The President provided for the 1.7 percent across-the-board increase but limited the average locality increase to the alternative amount of 0.5 percent.\nAs another example, for 2012, the FEPCA process specified a 1.1 percent across-the-board increase and an average 18.5 percent locality increase, but annual pay adjustments were frozen instead.Agent had reported that in 2010 (the reference year for setting 2012 pay), taking both across-the-board and locality pay into account, the average federal-nonfederal pay gap was 24 percent. The approximately 20 percent overall average increase recommended by the Pay Agent for The Pay 2012 would have lowered the pay disparity to FEPCA’s target of 5 percent.",
"The pay increases and awards available to GS employees are designed to recognize individual performance to varying degrees. Across-the-board and locality pay increases, which are given to all covered employees nearly every year, are not linked to performance at all. Awards such as suggestion/invention awards and superior accomplishment awards are designed to recognize performance without being linked specifically to performance ratings.\nThree pay increases and monetary awards available to GS employees are linked to performance ratings as determined by agencies’ performance appraisal systems:\nWithin-grade increases are periodic increases in a permanent employee’s rate of basic pay from one step of a grade to the next higher step within the grade. Ratings-based cash awards are lump sum cash payments that are designed to recognize performance.\nQuality step increases are faster-than-normal step increases that are designed to recognize excellence in performance.\nAgencies are permitted to provide quality step increases to eligible employees under 5 U.S.C. § 5336.\nFactors that are to affect GS employee eligibility for these pay increases and awards are specified in legislation and regulations and clarified in OPM guidance. two summary rating levels to a system with five summary rating levels.All the systems used by the agencies include level 3, “fully successful,” which is the pass level for a pass/fail system.\nIn practice, based on our analysis of CPDF data from fiscal year 2011, the degree to which individual performance drove receipt of these pay increases and awards for employees in the GS pay plan varied. Of the three pay increases and awards we analyzed, within-grade increases were the least strongly linked to performance. Ratings-based cash awards were more strongly linked to performance depending on the rating system the agency used, and quality step increases were also more strongly linked to performance.\nWithin-grade increases were the least strongly linked to performance of the three pay increases and awards we analyzed, in accordance with their design. As noted in table 1, agencies are required to provide within- grade increases to employees whose performance is at least “fully successful” and who have finished their waiting period. Over 99 percent of employees in the GS pay plan received performance ratings at or above “fully successful” in fiscal year 2011. Thirty-nine percent received within-grade increases, comprising nearly all the employees who completed their waiting period.\nRatings-based cash awards were more strongly linked than within- grade increases to performance. All GS pay plan employees may receive ratings-based cash awards every year (unlike within-grade increases), so frequency limits are not a primary determinant of who receives them. In fiscal year 2011, the degree of linkage of awards with performance ratings varied by the type of appraisal system used by the agency.\nIn fiscal year 2011, 81 percent of employees in the GS pay plan were covered by 5-level rating systems and other systems that allowed for distinctions between “fully successful” and higher levels of performance.Ratings-based cash awards for these employees were given at higher rates to employees with better performance. For example, for the 5-level system, which covered 63 percent of GS employees, awards were given to 65 percent of employees with “outstanding” ratings, 58 percent of employees with ratings “between outstanding and fully successful,” and 24 percent of employees with “fully successful” ratings. Along with the performance rating received, agency criteria were used to determine who received awards. As noted in table 1, an agency should identify any other criteria to be considered when making award recommendations and decisions, including any other awards or personnel actions that should be taken into consideration such as time off, a quality step increase, or a recent promotion.\nIn accordance with OPM regulations, employees with higher ratings are to receive larger ratings-based awards, and award patterns reflected this distinction in 2011, as shown in figure 3. Employees who received “outstanding” ratings within the 5-level system received the largest awards.\nIn fiscal year 2011, about 19 percent of employees in the GS pay plan were covered by a pass/fail rating system or another system that did not allow for distinctions in performance above the “fully successful” level. Over 99 percent of employees in these systems received a “fully successful” rating in fiscal year 2011, while only 31 percent received a ratings-based award, meaning that most decisions not to provide awards were made based on other criteria than ratings. Performance ratings and agency criteria, including performance-related criteria, were used to determine who received awards.\nQuality step increases were also more strongly linked to performance than within-grade increases. As shown in table 1, GS employees must perform at their agency’s highest possible level to be eligible to receive a quality step increase. About 49 percent of employees received the highest possible rating their agency’s system allowed in fiscal year 2011. Of those employees, about 7 percent received a quality step increase. Unlike within-grade increases, the waiting period for quality step increases is 1 year for all employees, eliminating the waiting period as a primary determinant for receiving quality step increases; rather, decisions were made based on performance rating and agency criteria, including performance-related criteria.\nFigure 4 illustrates the percentage of employees receiving each type of increase and award, the average amounts of the increases and awards in dollars and as a percent of the recipient’s pay, and the cost to the government of ratings-based pay increases and awards for GS employees for fiscal year 2011.\nOPM’s role with respect to awards and increases includes providing policy direction to agencies, including regulations, reporting on agencies’ use of awards and increases, and evaluating agencies’ linkage of awards and increases with results.\nAgencies, in turn, must ensure they have met statutory and regulatory requirements and may develop agency-specific criteria for providing quality step increases and cash awards. According to OPM officials, awards regulations are highly decentralized because the statutes provide agency heads, not OPM, with the authority to grant awards.agency heads may grant quality step increases within the limits of available appropriations and regulatory requirements.\nPolicy direction. To help agencies understand how to administer pay increases and awards, OPM issues regulations and supporting memoranda and posts fact sheets, frequently asked questions, and other resource documents on its website. Topics have included approaches to calculating ratings-based cash awards, tax issues for awards, how the timing of quality step increases affects within-grade increases, and recent limitations on awards given budgetary constraints. According to OPM officials, OPM responds to agency questions about guidance as needed.\nReporting. OPM provides agencies with an annual Federal Award Statistics report on cash awards, time-off awards, quality step increases, and other awards received by GS and other employees.OPM officials, OPM uses the report to show trends and compare usage of awards between agencies and across the government. OPM also uses the report data to help inform its decisions about awards policy and monitor agency compliance with the policy, such as limitations on awards usage.\nEvaluation. OPM evaluates selected agencies’ human capital management systems as part of its broader strategy for maintaining human capital accountability. As part of these evaluations, OPM determines whether an agency’s human capital system provides and clearly communicates linkages between employee performance expectations, performance recognition through increases and awards, and the agency’s mission. OPM also reviews a sample of case files to check that the awards granted meet the requirements of the law and and assists agencies in leading their own evaluations. regulations,OPM officials said that they have identified the following issues in regard to pay increases and awards:\nSome agencies tried to circumvent limitations on award amounts by issuing several incremental awards within a short time period.\nSome agencies granted quality step increases to compensate for low award budgets.\nSome agencies’ human capital management systems did not link individual performance expectations and recognition through pay increases and awards to the accomplishment of specific mission- related goals or milestones.\nWhen OPM determines that an agency violated the law or regulations, such as circumventing award limitations by issuing several incremental awards within short periods of time, it requires the agency to take corrective action and respond to OPM with evidence of how it addressed or plans to address the violation within 60 days. For example, according to an OPM official, corrective action may result in the agency recovering the award from the recipient and correcting the documentation for the award.\nWhen OPM observes an issue with an agency’s award implementation that does not violate regulations, OPM may recommend to the agency improvements that could be made. For example, when OPM determines that an agency has granted quality step increases to compensate for a low award budget, it recommends that the agency review its policies for granting pay increases and awards to ensure the policies comply with the intent of the laws and regulations. According to an OPM official, OPM requires an agency to respond to the recommendations made, but the agency is not required to take action on addressing the issue.",
"",
"The different study designs used by the authors of six studies resulted in varying conclusions on how federal pay differed from private sector or nonfederal pay. As shown in table 2, conclusions varied on which sector had the higher pay (which does not include benefits) and the size of pay disparities. All but one of the studies estimated the difference in pay after controlling for some personal and job-related attributes that can affect pay levels such as education and locality. This remaining difference is sometimes called the unexplained difference because it persists after controlling for attributes that can affect pay.\nHowever, the overall pay disparity number does not tell the whole story; each of the studies that examined whether differences in pay varied among categories of workers, found such variations (see table 2). For example, CBO found that federal workers with graduate and professional degrees were paid less in comparison to the private sector, while workers without college degrees were paid more.\nImportantly, all of the study authors acknowledged that the data they used in their analyses had limitations which could affect their findings. Any comparison of the studies needs to take these data limitations into account. For example, studies that used the Census Bureau’s Current Population Survey (CPS) were unable to directly control for years of work experience given this measure is not available in the CPS; some of the authors said that work experience is an attribute that affects how much a person is paid. Also, it was acknowledged that many federal jobs may not have equivalents in the private sector.\nThe studies used three basic approaches to analyze differences in pay, as shown in table 3. Each author chose the approach they thought would best describe differences in pay. The Pay Agent is mandated by law to compare the rates of pay under the GS system with the rates of pay generally paid to nonfederal workers for the same levels of work within each pay locality, as determined on the basis of appropriate BLS surveys.\nThe studies’ differing conclusions on the overall pay disparity between federal and private or nonfederal workers were affected by their basic approaches—human capital, job-to-job, and trend analysis. Across these approaches, data sources and types of attributes controlled for differed. Within each approach, conclusions differed due to studies’ specific methodologies—specific attributes controlled for and statistical methods used.\nBasic approaches: Across the three basic approaches, the differences in the data sources and types of attributes controlled for (personal or job-related) contributed to the differing conclusions.\nData sources: The type of approach the study authors chose influenced the data sources they used. Studies using the human capital approach used data from the CPS to determine the pay for federal and private sector workers. Studies using the job-to-job approach used data from BLS’s National Compensation Survey (NCS) to determine pay for nonfederal (Pay Agent) and private sector (POGO) workers and data from OPM to determine pay for federal workers. For the trend analysis approach, Edwards used data from BEA’s national income and product accounts (NIPA)tables to determine pay for federal and private sector workers. Types of attributes difference in pay, accounting for the fact that employees earn different amounts based on education, locality, and other personal and job-related attributes. However, studies using different basic approaches controlled for different types of attributes. Studies using the human capital approach controlled for attributes related to both the individual worker and the job the person occupied. Studies using the job-to-job approach controlled for only job- related attributes. The trend analysis approach did not control for attributes. : Most of the studies estimated the unexplained\nSpecific methodologies: Within the human capital and job-to-job approaches, the studies controlled for different specific attributes and used different statistical methods, as shown in table 4. These differences led to differing conclusions.\nThe study authors and people with expertise in compensation issues that we interviewed differed in their views on which type of approach is most informative in comparing pay of workers across sectors. According to study authors who used the human capital approach, this approach is the standard method in the field of economics to compare workers’ pay across sectors. The overall unexplained difference between federal and private sector pay is a way to measure the extent to which the federal government may be paying more or less for the services it receives from its workers relative to what those workers could earn in the private sector.\nThese findings could help inform policy decisions regarding the pay of federal workers. However, study authors (including those who used the human capital model) and people with expertise in compensation issues did not suggest that the human capital approach be used for setting an individual’s rate of pay. They explained that some of the personal attributes that are associated with analyzing differences in pay using a human capital approach are demographic in nature (e.g., race, gender) and not work-related. OPM officials added that they are not aware of any employers that use the human capital approach to set pay for their employees.\nThe President’s Pay Agent and POGO used the job to job approach in their analyses of pay differences, not the human capital approach. According to OPM officials who serve as staff to the President’s Pay Agent, employees with the same human capital characteristics can choose to work in markedly different jobs with large variations in pay. POGO and some people with expertise in compensation issues said that the fundamental concept of setting pay based on the job, without taking account of the personal characteristics of individuals in similar jobs, is the most appropriate approach. They said it is not appropriate to pay individuals differently according to personal attributes, such as education or job experience, if they hold the same job. However, others said that matching individuals by occupation and level of work involved some subjective judgment and lacks transparency, which makes it difficult for other interested parties to understand the analysis.\nThe President’s Pay Agent has stated that it has serious concerns about a process that requires a single percentage adjustment in the pay of all white-collar civilian federal employees in each locality pay area without regard to the differing labor markets for major occupational groups, and it believes that reforms of the GS system should be considered. Specifically, the Pay Agent stated that the underlying model and methodology for estimating pay gaps should be reexamined to ensure that private sector and federal sector pay comparisons are as accurate as possible.",
"Five studies found a wide range of disparities in benefits as part of total compensation (pay and benefits) between the federal and private sector workforces, as shown in table 5. (The President’s Pay Agent Report did not include an analysis of benefits as part of total compensation.) Most studies presented the disparity in terms of total compensation, not just the benefits portion, because the levels of some benefits—for example, most retirement benefits—are a function of pay rates, years of service, and type of plan. The five studies included benefit comparisons in an effort to capture the cost of benefits to the federal government.\nAs with their analyses of pay, the study authors acknowledged that limitations in data affected their analyses of total compensation and could affect their findings, as discussed below table 5. These limitations need to be taken into account when comparing the studies. Additionally, the studies do not all analyze the same group of federal workers; for example, POGO analyzed workers in 35 selected occupations.\nThe wide range of estimates between the studies is due to the different data sources, types of benefits analyzed, and specific methodologies used.\nData sources. Study authors agreed that available data were less adequate for comparing federal to private sector benefits than pay. Benefits data at the individual level are not available from a single source so the studies used multiple sources. This makes it challenging to compare across the sectors. For example, some data sources, such as the CPS, ask workers questions about their pay, but do not ask about the cost of their benefits because workers generally do not know the monetary value of their benefits. As a result, study authors used data sources such as the NCS that ask employers questions about the cost of their workers’ benefits. Additionally, different studies drew from different data sources, contributing to the range of different results.\nBiggs/Richwine used BLS’s NCS data, specifically the Employer Costs for Employee Compensation portion for private sector worker data. For federal workers, they used the OPM/OMB civilian position full fringe benefit cost factor—a percent factor describing the cost of benefits relative to salaries. To capture benefits the OPM/OMB source did not cover, Biggs/Richwine used OPM’s Federal Civilian Work Force Statistics: Work Years and Personnel Costs Report to determine paid leave, and the Annual Social and Economic Supplement of the CPS to estimate job security.\nPOGO used NCS data on private sector workers. For federal workers, it used the OPM/OMB civilian position full fringe benefit cost factor as Biggs/Richwine did.\nCBO used more detailed data from the NCS and OPM for private sector and federal workers, respectively. These data were not publically available.\nEdwards and Sherk both used BEA’s NIPA data. According to BEA, this data source includes annual intra-governmental payments to amortize the accumulated unfunded liability of the Civil Service Retirement and Disability trust fund. This reduces the data’s accuracy for measuring compensation for current workers, according to the study authors that used the data. Sherk used OPM data to correct for this issue of federal retiree benefits.\nBenefits analyzed. The studies included different types of benefits in their analyses, contributing to the range of different results. In addition, the study authors made assumptions in determining the value of benefits.\nAll of the studies included health insurance, retirement benefits, and the employer portion of mandatory government benefits such as Social Security.\nBiggs/Richwine, CBO, and POGO (for private sector workers only) included paid leave, while Sherk did not.\nBiggs/Richwine included job security, asserting that federal workers are less likely to experience periods of unemployment than private sector workers and so can expect a higher income for a given salary over the course of a year.\nAll of the studies relied on estimates of future benefits, which requires assumptions to be made about the present value of the benefit, which may introduce uncertainty in the estimates. According to BEA, estimates of the present value of future benefits are inherently dependent on assumptions about the discount rate, participant separation rates, retirement ages, mortality, and even future pay increases and future inflation. As a result, the amount of money that has to be set aside today to pay for tomorrow’s benefits could be different.\nSpecific methodologies. It was not possible to estimate the cost of benefits directly while controlling for differences between the federal and private workforces, so most authors used various indirect methodologies.\nThe indirectness increased uncertainty, and the wide range of methodologies led to different results.\nCBO developed a model to estimate the relationship between federal workers’ pay and the cost of the benefits they received, and an analogous model for private sector workers. CBO imputed employee benefits using those models, then compared benefits for federal and private sector workers controlling for personal and job-related attributes, just as they did for pay, to estimate the portion of the difference in total compensation unexplained by attributes. CBO was the only study to use a model that allowed for varying benefits-to-pay ratios for different pay levels.\nSherk calculated the difference in average total compensation for federal and private sector workers. He used his estimates of the unexplained difference in pay from the human capital model and applied this to the difference in average total compensation. He assumed the unexplained difference in total compensation was the same as the unexplained difference in pay.\nBiggs/Richwine used different benefits-to-pay ratios for federal workers and private sector workers. They applied these ratios to the unexplained differences in pay from their human capital model to obtain the unexplained difference in total compensation. Biggs/Richwine assumed the unexplained difference in total compensation was the same as the unexplained difference in pay.\nPOGO used different benefits-to-pay ratios for federal workers and private sector workers. It applied these ratios to differences in pay for the selected occupations in each sector to obtain the percent difference in total compensation for these occupations.\nEdwards calculated the difference in average total compensation for federal and private sector workers. He did not control for attributes between the workers.",
"The findings of the selected studies comparing federal and private sector pay and total compensation varied because they used different approaches, methods, and data. When looking within and across the studies, it is important to understand these differences because they impact how the studies can be interpreted. On the one hand, the human capital approach compares pay for individuals taking into account personal attributes such as education and job experience. Study authors who used this approach said that analyzing federal and private sector workers’ pay was a way to measure the extent to which the federal government may be overpaying or underpaying its employees compared to what they could earn in the private sector. On the other hand, the job- to-job approach compares pay for similar jobs on such job-related attributes as occupation and level of work rather than personal attributes. The President’s Pay Agent, which used this approach, examined how pay for GS and nonfederal jobs compared for the same occupations and levels of work within the same locality pay areas with the goal of reducing existing pay disparities. Simply put, the differences among the selected studies are such that comparing their results to help inform pay decisions is potentially problematic. Given the different approaches of the selected studies, their findings should not be taken in isolation as the answer to how federal pay and total compensation compares with other sectors.\nAs stated earlier, we have reported on the importance of considering the skills, knowledge, and performance of federal employees as well as the local labor market in making pay decisions. The President’s Pay Agent has recommended that the underlying model and methodology for estimating the pay gaps be reexamined to ensure that private sector and federal sector pay comparisons are as accurate as possible. As a step in this direction, the administration recommended in its September 2011 deficit reduction proposal that Congress establish a Commission on Federal Public Service Reform composed of members of Congress, representatives from the President’s Labor-Management Council, members of the private sector, and academic experts to identify fundamental reforms for the federal government’s human capital systems including compensation reform. As of June 2012, such a commission has not been established.",
"We provided a draft of this report to the Secretary of Commerce (for Census), the Commissioner of BLS, and the Directors of BEA and OPM for their review and comment. The Census Bureau had a technical comment on the draft report, which we incorporated into the final report. BEA and BLS had no comments on the draft report. OPM provided technical comments on the draft report, which we incorporated as appropriate.\nWe provided applicable sections of the draft report to the authors of the selected compensation comparison studies for their review and comment. Biggs/Richwine and CBO provided technical comments, which we incorporated as appropriate. Edwards and Sherk did not have any comments on the draft section. POGO provided written comments (see app. IV). In its letter, POGO stated it concurred with our draft finding that many factors hinder public and private sector pay comparisons, such as a lack of detailed data. POGO also suggested that we analyze OPM federal-nonfederal salary comparisons as part of our final report. We believe this information is already addressed in other sections of the report, which POGO did not receive for comment. In these sections, we discuss in detail how annual pay adjustments are determined including the President’s Pay Agent process, which uses the comparisons referred to by POGO.\nAs we agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution of it until 30 days from the date of this letter. At that time, we will send copies of this report to the appropriate congressional committees; the Secretary of Commerce; the Commissioner of BLS; the Directors of BEA, Census, and OPM; and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-6806 or goldenkoffr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in app. V.",
"This report examines (1) how annual pay adjustments for the General Schedule (GS) system are determined; (2) the extent to which the pay increases and awards available to GS employees recognize individual performance, and how the Office of Personnel Management (OPM) provides oversight of pay increases and awards; and (3) how selected studies compare federal and private sector pay and total compensation and the factors that may account for the different findings.\nTo examine how the GS annual across-the-board and locality pay adjustments are determined, we reviewed legislation, OPM regulations, executive orders, Presidents’ alternative pay plans, President’s Pay Agent Reports, Federal Salary Council recommendations, OPM and Bureau of Labor Statistics (BLS) documents and reports, and reports by the Congressional Budget Office (CBO) and Congressional Research Service. We also examined how the methodology for determining locality pay has changed since the start of locality pay to the present. We interviewed selected members of the Federal Salary Council and its working group; the Council is to be made up of six representatives of federal employee groups and three experts in labor relations, and makes annual recommendations to the President’s Pay Agent. We interviewed BLS officials, OPM officials who are knowledgeable about federal pay policy and serve as staff to the President’s Pay Agent, and people with expertise in compensation issues including former federal officials experienced with pay and benefits issues. To provide background information illustrating a range of pay areas, we selected localities including the lowest paid locality, highest paid locality, and other localities to include a range of pay rates, population sizes, and geographic regions.\nTo determine the extent to which pay increases and awards recognize individual performance, we analyzed legislation and OPM regulations on pay increases and awards available to employees in the GS pay system and identified those pay increases and awards that are determined in part by an individual’s performance rating as measured by the agency’s performance appraisal system. These pay increases and awards are: within-grade increases, quality step increases, and ratings-based cash awards. We recognize that there are other types of pay increases and awards that reflect an individual’s contributions, such as suggestion/invention and superior accomplishment awards, and pay increases that do not reflect an individual’s performance at all including across-the-board and locality pay adjustments. We identified eligibility requirements outlined in the legislation and regulations and clarified in OPM guidance that can affect a GS employee’s eligibility for the increase or award, such as a waiting period given the individual’s position in the pay grade, frequency of receiving an increase or award, and agency- specific criteria.\nTo provide statistics on how the pay increases and awards were distributed among GS employees, we analyzed data from OPM’s Central The data we examined Personnel Data File (CPDF) for fiscal year 2011.included only federal employees in the GS pay plan. The GS classification and pay system includes several pay plan codes: GS (covered by pay system established under 5 U.S.C. chapter 53, subchapter III); GM (covers employees covered by the Performance Management and Recognition System termination provisions of Pub. L. No. 103-89); GL (covers law enforcement officers who receive special base rates at grades 3-10 under section 403 of FEPCA); GP (covers GS physicians and dentists paid market pay under 38 U.S.C. § 7431(c)); and GR (covers physicians and dentists covered by the Performance Management and Recognition System termination provisions who are paid market pay under 38 U.S.C. § 7431(c)). In addition to the GS pay plan, the GM and GL pay plans are used in federal-nonfederal pay comparisons to set locality pay. For the purposes of this analysis, we excluded the GM and GL pay plans because the GS pay plan covers the majority of the individuals in the GS, GM, and GL pay plans. We also excluded the GP and GR pay plans since individuals in these pay plans are no longer limited to GS rates of pay and they receive market pay under a different pay system.\nWe analyzed CPDF data for employees in the GS pay plan in the aggregate on the number, percentage and dollar amount of quality step increases, within-grade increases, and ratings-based cash awards; the amount of these increases and awards as a portion of the GS payroll (total adjusted basic pay for all employees in the GS pay plan); and the distribution of these increases and awards by rating pattern and rating levels. For the award/increase amounts as percentages of recipients’ pay, we excluded employees whose adjusted basic pay amount was missing. For the calculations based on ratings, we excluded employees who were coded in CPDF as “not rated”. The not rated code applies to an employee who has not yet received a rating of record under the agency performance appraisal system (e.g., someone newly hired). We also excluded employees whose ratings were missing due to data errors. For calculations based on rating levels or patterns (e.g., 5-level system), we excluded employees who were coded as not being covered by a performance appraisal system and generally do not have their performance appraised. We also excluded employees whose rating patterns were missing from the data due to data errors.\nTo help determine the reliability and accuracy of the CPDF data elements used, we checked the data for reasonableness and the presence of any obvious or potential errors in accuracy and completeness. For example, we excluded employees who were coded as receiving an increase or award in error (e.g., individuals who received a level 1 or 2 rating and a within-grade increase or ratings-based cash award) from our data. We also reviewed past GAO analyses of the reliability of CPDF data and interviewed OPM officials knowledgeable about the data to discuss the data’s accuracy and steps OPM takes to ensure they are reliable. For example, in its checks of the data, OPM excludes data where the dollar value is zero for ratings-based cash awards and within-grade and quality step increases. Also, for within-grade and quality step increases, OPM checks to make sure values for current and prior adjusted basic pay exist and the difference is greater than zero. On the basis of these procedures, we believe the data we used from the CPDF are sufficiently reliable for the purpose of this report.\nTo describe how OPM provides oversight of pay increases and awards, we collected and analyzed OPM guidance to agencies on administering relevant pay increases and awards including regulations, memoranda, reports, fact sheets, and frequently asked questions. We interviewed OPM officials responsible for federal pay policies to discuss the implementation of the guidance and monitoring of agencies’ use of increases and awards through reports and other means, and we interviewed OPM officials responsible for conducting human capital management evaluations at agencies on pay increases and awards to determine how they evaluate agencies’ linkage of pay increases and awards with organizational results and monitor the overall GS system, among other things.\nTo review selected studies that compare federal and private sector pay and total compensation and describe factors that help account for the different study findings, we reviewed the studies, summarized each study’s methodologies and key findings, and confirmed the accuracy of our summaries with the authors. We compared and contrasted the differences between the approaches, methodologies, and data sources of the selected studies. We interviewed the selected study authors to obtain their views on the various methodologies and data sources available, why they chose the ones they used, and their conclusions based on their work. From July through December 2011, we conducted a detailed literature review of academic journals, agency and organization publications, and grey literature to identify the selected studies.applied three criteria for study selection to the results—(1) studies that were published/issued since 2005; (2) studies that include original analysis; and (3) studies that have the explicit and primary purpose of We comparing federal and private sector pay and total compensation. Using these criteria, we identified at that time the following five studies as our proposed set to review (with the option to add other studies that may be issued during the course of our engagement and meet our criteria), see below:\nComparing Federal and Private Sector Compensation, Andrew Biggs and Jason Richwine, American Enterprise Institute for Public Policy Research, June 2011. (Co-author Richwine is from The Heritage Foundation.)\nFederal Pay Continues Rapid Ascent, Chris Edwards, The Cato Institute, August 2009.\nReport on Locality-Based Comparability Payments for the General Schedule, Annual Report of the President’s Pay Agent 2010, The President’s Pay Agent, March 2011.\nBad Business: Billions of Taxpayer Dollars Wasted on Hiring Contractors, The Project On Government Oversight, September 2011. Inflated Federal Pay: How Americans Are Overtaxed to Overpay the Civil Service, James Sherk, The Heritage Foundation, July 2010.\nAll of the selected studies except for the President’s Pay Agent compared federal to private sector pay and total compensation. The President’s Pay Agent compared federal to nonfederal pay (not benefits) and defined nonfederal as private sector, state government, and local government. We decided to include the President’s Pay Agent Report as one of our selected studies given that it plays a major role in the overall discussion of federal pay comparability. The President’s Pay Agent encompasses the Secretary of Labor and Directors of OPM and the Office of Management and Budget (OMB). To inform our understanding of the Pay Agent’s report and process, we interviewed OPM officials who are staff to the Pay Agent, members of the Federal Salary Council and its working group including officials from the National Treasury Employees Union and the American Federation of Government Employees, and officials at BLS, which provides the nonfederal data used for the Pay Agent’s analysis.\nThrough our literature review, we also identified articles and papers that compare compensation in other sectors (state and local government to private sector, or industry to industry). Additionally, we identified discussions of the selected studies’ findings and methodologies and of the issues of federal and private sector pay and total compensation comparison in general to further inform our review of the studies. We interviewed a number of individuals chosen for their expertise in compensation issues to obtain their views on the data sources for analyzing compensation and to provide a general context for the issues involved in comparing federal and private or nonfederal pay and total compensation. The findings regarding the selected studies are not based on input from these individuals. Representing a wide range of perspectives and experiences related to compensation issues, we identified these individuals through our literature review, background research on the topic, and recommendations from the study authors and other individuals knowledgeable about compensation issues. The selected individuals, some of whom were selected authors of the discussions noted above, included a university professor who has done research on compensation issues across sectors, a private sector compensation consultant, a staff member who researches compensation at an organization with a policy focus, and former senior federal officials who are experienced in federal pay and benefits issues. We interviewed officials from the Bureau of Economic Analysis (BEA), BLS, and Census Bureau to discuss how these agencies’ data are used to measure federal and private or nonfederal pay, compensation, or benefits, and limitations of their data or surveys. We also interviewed officials from OPM involved in federal pay policies. We asked everyone we interviewed about their views on the strengths and limitations of the data sources used in the studies.\nWe also asked everyone we interviewed, as applicable, to identify any additional studies that address our criteria for study selection. They did not identify any additional studies that met our criteria, but provided additional information, such as background articles. However, in January 2012, after our literature review was concluded, CBO issued a report:\nComparing the Compensation of Federal and Private-Sector Employees, Congressional Budget Office, January 2012.\nWe included this study in our review because it met our criteria. This brought the total number of studies up to six. We interviewed the authors of the CBO study to obtain their views on the various methodologies and data sources available, why they chose the ones they used, their conclusions based on their work, and our understanding of their work.\nWe did not examine the reliability or the appropriateness of the approaches, methods, and data used by the six selected studies in our scope, and we did not exclude any study on the basis of methodological quality.\nWe conducted this performance audit from July 2011 to June 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"",
"Even though the full locality payments recommended by the President’s Pay Agent have not been provided after locality pay was implemented in 1994, some locality increase has been provided each year since that time except during the pay freeze in 2011 and 2012. The President’s Pay Agent reported that pay disparities were lower in 2011 than in 1994 in 16 of the 21 pay localities that existed in both of those years.\nFigure 5 shows the relative pay rates for a GS-11 employee (approximately the midpoint grade level) in San Francisco and in the Rest of U.S. (the residual locality for areas not included in one of the other pay localities) and nonfederal equivalents based on the President’s Pay Agent Reports. In 1994, the pay disparity between federal and nonfederal workers in San Francisco at the GS-11 level was 30 percent, which decreased to 26 percent by 2011 (the most recent year for which disparity data is available). In 1994, the pay disparity between federal and nonfederal workers in the Rest of U.S. locality at the GS-11 level was 19 percent, which increased to 22 percent by 2011.\nThere have been several changes to the surveys and models used for locality pay setting between the passage of the Federal Employees Pay Comparability Act (FEPCA) in 1990 and the Pay Agent process and report for 2011, the most current report available. Changes are illustrated in figure 6 and additional information is below.\nFrom 1991 to 1996, BLS conducted the Occupational Compensation Survey Program (OCSP) to collect data on pay of nonfederal workers. OCSP used a fixed list of 3 to 8 positions in each of the five PATCO categories (Professional, Administrative, Technical, Clerical, and Other White-Collar) to represent the range of different white collar jobs. In 1996, there were 26 different positions - for example, Scientist (a professional position) and Key Entry Operator (a clerical position). Each position had one or more levels - for example, Scientist I to Scientist VIII; Key Entry Operator I and Key Entry Operator II. BLS referred to a particular position at a particular level (e.g., Scientist I) as a “job.” BLS asked surveyed establishments to identify positions they had that corresponded to one of the representative jobs. BLS and OPM worked together to write, test, and maintain survey job descriptions tied to a single GS grade level.\nIn 1996, BLS stopped conducting the OCSP and started conducting the National Compensation Survey (NCS), which uses probability sampling of jobs. BLS randomly selected positions at surveyed nonfederal establishments and determined which Standard Occupational Classification System job, PATCO category, and GS grade corresponded to the selected jobs. The Employment Cost Index (ECI) and a benefits survey were also merged into NCS. These changes were made to reduce costs and respondent burden and expand occupational coverage.\nThe President’s Pay Agent began reviewing the NCS in 1996, with input from the Federal Salary Council. During the time of their review, they used OCSP data, aged to a common reference date based on the ECI, to calculate pay disparities and recommend locality pay. In 1998, they determined that the NCS was not suitable for use without improvements, and a working group with representatives of OPM, BLS, and OMB was formed to recommend improvements. The working group made recommendations in 1999 that led to five improvements in the NCS data. The improvements were implemented starting in 2002, at which point the Pay Agent began to phase in use of NCS data. The recommendations are outlined in figure 6 above.\nIn 2008, the Federal Salary Council asked BLS to explore the use of additional sources of pay data so the Council could better evaluate the need for establishing additional locality pay areas, especially in areas where the NCS could not provide estimates of nonfederal pay. BLS developed a model to combine data from the Occupational Employment Statistics (OES) survey, another BLS survey, with NCS data in order to increase locality coverage. In 2010, due to budget cuts, BLS announced a reduction in the size of the NCS sample, and said that the model results from the combined surveys could still be used to calculate pay gaps. According to BLS officials, only the size of the NCS sample has changed, not the substance of what is collected, and the reduction should not affect the ability to determine levels of work.\nThe Federal Salary Council wrote in its 2011 memo to the President’s Pay Agent that it had concerns about the reduction. For 2011, the final year when the larger NCS data set was available, the Federal Salary Council reviewed modeled results both with and without the reduction, and found concerning discrepancies (about a 5 point average difference in computed pay gaps). In its memo, the Council recommended that the Pay Agent use only NCS data for setting pay until the new model is better understood, and that the full NCS survey be reinstated. The Council wrote that it plans to continue working with OPM and BLS to study the NCS/OES model.\nThe President’s Pay Agent wrote in its 2011 report dated March 2012 that it does not consider more funding for NCS to be feasible before exploring other options. The Pay Agent supported the Council’s plan to continue its review of the new model and to focus on the impact of dropping roughly half of the NCS sample on the volatility of the model. The Pay Agent also noted that the administration recommended Congress establish a Commission on Federal Public Service Reform composed of members of Congress, representatives from the President’s Labor-Management Council, members of the private sector, and academic experts to identify fundamental reforms for the federal government’s human capital systems including compensation reform. As of June 2012, such a commission has not been established.",
"",
"The six selected studies used different data sources and methodologies to analyze differences in pay between the federal and private sector or nonfederal workforces, as shown in table 6. They also varied slightly in how they defined the federal workforce and restricted their analysis of workers.\nStudies could control for many attributes—personal or job-related—to help explain the differences between federal and private sector pay, as shown in the previous table. The types of attributes the selected study authors controlled for depended on the type of approach used to analyze pay—human capital or job-to-job. For example, the human capital approach controls for personal attributes (e.g., education, job experience) and job-related attributes (e.g., occupation, firm size). The job-to-job approach involves controlling for job-related attributes (e.g., occupation, level of work) without considering the personal attributes of the workers. The trend analysis approach does not control for any attributes. Attributes such as occupation, level of work, firm size, locality, education, and job experience were considered relevant by several of the studies’ authors and people with expertise in compensation issues that we interviewed.\nControlling for occupation allows a study to account for different pay rates for different types of jobs. The distribution of occupations in the federal government is different from the private or nonfederal sector, which may be a factor that explains differences in pay. For example, according to the CBO study, 33 percent of the federal workforce compared with 18 percent of the private sector workforce was in a professional occupation. A job-to-job approach, as demonstrated by the study authors who used the approach, involves matching federal workers to equivalent positions in another sector. POGO limited its comparison to 35 selected occupations, while the Pay Agent used over 200 occupations. According to one of the people with expertise that we interviewed, one challenge with this approach is the difficulty of finding nonfederal equivalents for certain positions, such as the Federal Bureau of Investigation agents, that only exist in the government. Another person with expertise said matching occupations across sectors is a subjective process. In contrast, study authors using the human capital approach used fewer and much broader occupational groups. For example, Biggs/Richwine used 10 categories, while Sherk and CBO used 22 and 24, respectively. In addition to his analysis of the overall pay disparity, Sherk analyzed pay data with and without occupation controls, and reported that less was explained when occupation was not included in the analysis.\nLevel of Work: Controlling for level of work (or grade level) allows a study to account for different pay rates for different levels of job complexity and responsibility (e.g., entry-level, mid-level, senior level or finer distinctions by level). Level of work encompasses types of duties performed, the scope and effect of the work, the level of difficulty and responsibility, and the level of supervision received. It can be difficult to measure level of work since levels are defined differently in different workplace settings. Of the studies we examined, only the President’s Pay Agent Report controls for level of work. For federal employment in the GS pay system, there are 15 grade levels. To compare these with levels in nonfederal workplaces, BLS economists ranked nonfederal positions based on four factors: knowledge, job controls and complexity, contacts (nature and purpose), and physical environment.observed that the human capital approach does not recognize that there are many different levels within an occupation such as accountant or lawyer.\nFirm size: Controlling for firm size allows a study to account for the effect of the number of workers in a firm. Some of the study authors asserted that large firms tend to offer higher salaries and greater benefits than smaller firms, but they differed on the decision to control for this attribute. CBO and Biggs/Richwine felt that federal workers should be compared to private sector workers at similarly sized institutions (e.g., firms with at least 1,000 workers) and included a measure of firm size in their analyses. The reasons the authors cited included large firms requiring more occupational specialization or higher levels of skill than smaller firms. Sherk said he chose not to control for firm size because he views it as a proxy for individual ability in the private sector—the larger firms pay a premium to hire more capable individuals and the associated pay reflects that. He said this is not the case in the federal government; the federal government does not selectively hire employees from large corporations but competes for hiring with all sizes of firms in the private sector. Sherk felt that including firm size could bias results if more productive workers tend to work in larger firms in the private, but not the federal sector. A person with expertise we interviewed agreed that a larger firm would pay more and have better benefits and noted that large firms are in head-to-head hiring competition with the federal government. In 2008, the President’s Pay Agent decided to include data from all establishments in its locality pay recommendations to increase the amount of data available for jobs. Since locality pay began in 1994, the Pay Agent had used only data from large establishments in its calculations.expertise that we interviewed, the larger sample of data helps improve the quality of the job matching.\nSee app. II for more information on the implementation of locality pay since 1994. organization. An individual with a master’s degree and a PhD may be paid the same pay rate in the market if they are producing the same output.\nJob experience: Controlling for job experience allows a study to account for the length of time an individual has spent working. Experience both at a specific job and in general can affect pay, presumably because it can affect productivity, which can be accounted for in the human capital approach. Biggs/Richwine, CBO, and Sherk considered job experience a relevant attribute. However, the CPS does not include a direct measure of job experience. As a result, the studies use proxies to measure experience. For example, Biggs/Richwine and CBO used a common approach for measuring experience, “age minus years of education minus 6,” while Sherk included age in his model. According to a university professor we interviewed who has done research on compensation issues across sectors, there is no data set that measures how long a private sector worker has been out of the workforce or how long a worker has been working for a given employer. Age can be used as a proxy, but age does not reflect time out of the workforce for child-rearing or other reasons.",
"The selected studies varied in the data sources used, benefits included, and methodologies chosen in analyzing benefits as a part of total compensation, as shown in table 7. The President’s Pay Agent is mandated to analyze pay, not benefits, so its study is not included in the following table.\nThe study authors had a variety of data sources to choose from in analyzing pay and total compensation. They chose the data sources for their studies based on their overall approach and data needs. The study authors and people with expertise in compensation issues that we interviewed identified strengths and limitations of two common data sources the studies used in analyzing pay or total compensation—the CPS and NCS. Agency officials who oversee these data sources also weighed in on the use of the data in analyzing compensation.\nCurrent Population Survey. The CPS—and in particular, the monthly CPS—has a large sample size relative to other data sources enabling analyses that would not have been possible in data sets with a smaller sample size. According to Sherk, he used the monthly CPS because he needed at least 30 valid observations of occupations in both the public and private sectors for his analysis comparing detailed occupations. The Annual Social and Economic Supplement of the CPS has questions that are more indepth than the monthly CPS and it contains measures of job tenure, educational degree, and firm size. Individuals interviewed for the monthly or Annual Social and Economic Supplement of the CPS are self-reporting in their responses, which can result in reporting errors. As an example of an error that could occur, individuals who work for a contractor employed by the federal government could identify themselves as federal employees, which would be incorrect. Census officials said that there are CPS interviewer manuals to assist interviewers in helping respondents with their answers.\nNational Compensation Survey. BLS conducts the NCS by interviewing employers, which allows for cost data on pay and benefits to be directly collected from employers as opposed to individuals self-reporting the information. While the survey covers all sectors, it does not collect data on federal workers, which—according to the study authors who used the NCS—results in the need to piece together different sources of benefits information in order to get comparable data. The NCS also provides detailed pay information by occupational work level that is based on the duties and responsibilities of a job, which is a key source of information for the President’s Pay Agent when determining locality pay adjustment amounts. Recently, the sample size for the NCS was reduced, and BLS has developed a model to determine locality pay using a combination of the NCS and the Occupational Employment Statistics (OES) survey. The OES is a larger survey with broader coverage of locality areas than the NCS, but it does not contain information on levels of work. (See app. II for additional information on locality pay and the use of these surveys.)\nThe following table provides additional details on the data sources relevant for analyzing compensation across sectors including a description of the data source and supporting methodology.",
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"In addition to the contact named above, Trina Lewis (Assistant Director), Laurel Beedon, Benjamin Bolitzer, Sara Daleski, Karin Fangman, Robert Gebhart, Janice Latimer, Rebecca Shea, and Meredith Trauner made key contributions to this report."
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"question": [
"How are annual pay adjustments for the GS determined?",
"How has GS employees' increase been affected by FEPCA?",
"How do the intentions of the pay increase received by the GS match the intentions of the FEPCA?",
"What other increase do GS employees receive?",
"What happened to the FEPCA process during the freeze on pay adjustments in 2012?",
"Why did findings of selected pay and total compensation comparison studies vary?",
"How did the studies' conclusions vary?",
"What did the studies examine?",
"Why is it important to understand differences in studies' approach, methods, and data?",
"Why might there be issues with the differences in the selected studies?",
"Why should these studies' findings not be considered only individually?",
"Why is careful consideration of federal pay necessary?",
"What have recent studies comparing the compensation of federal workers to workers in other sectors produced?",
"What did GAO examine to improve understanding of federal pay setting?",
"What data did GAO review?",
"Why did GAO compare six studies?",
"What were these six studies about?",
"Why did GAO send its drafts to outside parties for review?",
"What is GAO not making in this report?"
],
"summary": [
"Annual pay adjustments for the General Schedule (GS), the pay system covering the majority of federal workers, are either determined through the process specified in the Federal Employees Pay Comparability Act of 1990 (FEPCA) or set based on percent increases authorized directly by Congress.",
"GS employees receive an across-the-board increase (ranging from 0 to 3.8 percent since FEPCA was implemented) that has usually been made in accordance with a FEPCA formula linking increases to national private sector salary growth.",
"While FEPCA specifies a process designed to reduce federal-nonfederal pay gaps in each locality, in practice locality increases have usually been far less than the recommended amount, which has been over 15 percent in recent years.",
"GS employees also receive a locality increase that varies based on their location; there were 34 pay localities in 2012.",
"For 2012, when there was a freeze on annual pay adjustments, the FEPCA process had recommended a 1.1 percent across-the-board increase and an average 18.5 percent locality increase.",
"Findings of selected pay and total compensation (pay and benefit) comparison studies varied due to different approaches, methods, and data.",
"Regarding their pay analysis, the studies’ conclusions varied on which sector had the higher pay and the size of pay disparities.",
"However, the overall pay disparity number does not tell the whole story; each of the studies that examined whether differences in pay varied among categories of workers, such as highly or less educated workers or workers in different occupations, found such variations.",
"When looking within and across the studies, it is important to understand the studies’ differences in approach, methods, and data because they impact how the studies can be interpreted.",
"The differences among the selected studies are such that comparing their results to help inform pay decisions is potentially problematic.",
"Given the different approaches of the selected studies, their findings should not be taken in isolation as the answer to how federal pay and total compensation compares with other sectors.",
"A careful consideration of federal pay is an essential part of fiscal stewardship and is necessary to support the recruitment and retention of a competent, successful workforce.",
"Recent studies comparing the compensation of federal workers to workers in other sectors have produced varying findings.",
"To improve understanding of federal pay setting, GAO was asked to examine (1) how annual pay adjustments for the GS system are determined; (2) the extent to which the pay increases and awards available to GS employees recognize individual performance, and how the Office of Personnel Management (OPM) provides oversight of pay increases and awards; and (3) how selected studies compare federal and private pay and total compensation and the factors that may account for the different findings.",
"GAO reviewed legislation, OPM regulations, executive orders, and federal agency documents; analyzed OPM data; and interviewed agency officials.",
"GAO compared and contrasted the differences between their approaches, methodologies, and data sources, and interviewed the studies’ authors, people with expertise in compensation issues, and agency officials responsible for the data.",
"GAO reviewed six studies that met three criteria: issuance since 2005, original analysis, and focus on federal and private sector compensation.",
"GAO provided drafts to agencies and study authors for review and comment and made technical changes as appropriate in response to comments received. One study author provided written comments concurring with the findings.",
"GAO is not making any recommendations in this report."
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CRS_RL34326
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{
"title": [
"",
"Balancing Storage and In-Stream Flow Tradeoffs",
"ACF Primer",
"Federal Dams Regulate for Multiple Uses",
"Reservoir Drawdown and Minimum Flows",
"Tri-State Water Conflict",
"Federal and State Roles in the ACF",
"ACF Reservoir Operations",
"Corps Operations Plans",
"Exceptional Drought Operations (November 2007-June 2008): Lower Minimum Flows and More Reservoir Refill",
"Proposed Modified Interim Operations Plan (June 2008 until Water Control Plan Is Revised)",
"Water Control Plan Revision",
"Water Supply Issues: Municipal and Industrial (M&I) and Agricultural",
"Consumptive Uses",
"Municipal and Industrial Water Supply",
"Atlanta Area Water Supply",
"Future Demand and Long-Term Conservation Measures",
"Agricultural Water Supply",
"Georgia's Emergency Conservation Measures37",
"Drought Management Plan",
"Flint River Drought Protection Program",
"Ecosystem and Species Issues",
"Bay Ecosystem and Industry",
"Protected Species",
"A Sturgeon and Three Mussels",
"EDO ESA Consultation",
"Biological Assessment of the EDO",
"Biological Opinion for the EDO",
"Incidental Take Statement and Reasonable and Prudent Measures",
"ACF and Southeast Water Supply Related Legislation",
"ESA Changes—H.R. 3847 and S. 2165",
"Apalachicola River Ecosystem Restoration—H.R. 2650",
"21st Century Water Commission—H.R. 135",
"Southeastern Watershed Management Study—H.R. 5587",
"ACF in the Federal Water Policy Context: Conclusions"
],
"paragraphs": [
"",
"Recent drought in the Southeast has intensified a tri-state water conflict involving Alabama, Florida, and Georgia over water allocation and management in the Apalachicola-Chattahoochee-Flint (ACF) river basin (see Figure 1 ). The water at stake is vital for the basin's municipalities and industries. These include the Atlanta metropolitan area's populace, industry, and recreational economy; hydropower dams and cooling of thermoelectric power plants throughout the basin; lower basin navigation interests; agriculture, including irrigators; and the regionally significant Apalachicola Bay oyster industry. The water also is vital to threatened and endangered species and basin ecosystems. Management of the current drought may shape long-term ACF management, set precedents for future federal drought responses, and affect the role of the Endangered Species Act (ESA) in water resources management. For more information on ACF species issues, see CRS Report RL34440, Apalachicola-Chattahoochee-Flint Drought: Species and Ecosystem Management , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].\nDrought has escalated competition for the water in federal ACF reservoirs. A central issue for the U.S. Army Corps of Engineers (Corps) is how to manage its reservoirs to meet municipal and industrial (M&I) water needs equitably in the upper and lower basin, while complying with federal law (e.g., ESA) and minimizing harm to river and bay ecosystems. The operation of federal reservoirs shapes both the quantity of stored water and the river flows. Predictions for a continued drought have Georgia's upper basin municipal and industrial users concerned about depletion of their principal (and, in some cases, their only) water supply—Lake Lanier—which is slow to refill because of the limited drainage area feeding into it. Lower basin interests (including those in southwest Georgia) are concerned about current and future river flows to meet their municipal, electricity, and ecosystem needs.\nThis report provides an introductory analysis of federal water management issues in the ACF, particularly during drought. The report underscores that decision-makers are faced with the tradeoff of the current harm that reduced flows may cause aquatic species against the benefits of maintaining water in storage for future multi-purpose use later. The first section briefly introduces the basin's water resources and related federal issues. The second section summarizes current federal reservoir operations. The third section discusses how the municipal, industrial, and agricultural uses of ACF waters affect federal reservoir management. The fourth section covers how species protections affect Corps operations and how Corps operations may affect protected species. The fifth section briefly discusses legislation in the 110 th Congress related to the ACF and water supply and management issues in the Southeast. The report concludes with comments about the ACF in the broader context of federal water policies and projects. Many aspects of the complex ACF management issues are not discussed in detail (e.g., ACF navigation and recreation issues, the influence of the Alabama-Coosa-Tallapoosa (ACT) basin).",
"",
"The ACF basin drains areas of northern and western Georgia, southeastern Alabama, and northwest Florida. (See Figure 1 ) The basin extends from the Blue Ridge Mountains to the Gulf of Mexico at Apalachicola Bay. Congress authorized construction of federal facilities for water resources development of the ACF in 1945 and 1946. The Corps now operates five dams—four on the Chattahoochee and one on the Apalachicola River at the confluence of Chattahoochee and Flint Rivers. Four of these dams store water: Buford Dam forming Lake Lanier (62% of the Corps' ACF storage capacity), West Point (18%), W. F. George (14%), and Woodruff forming Lake Seminole (6%). Woodruff's limited storage is primarily for flow regulation and does not function as a water storage reservoir for ACF operational purposes. These four facilities and other nonfederal dams in the ACF also house hydroelectric facilities. The fifth federal dam—Andrews Dam—is operated for navigation and has no storage capacity. No water storage facilities have been built on the Flint River.\nWater resource use in the ACF has changed since the planning and construction of the reservoirs, which originally were justified based on their navigation, hydropower, and flood control benefits. For example, the Atlanta metro area has developed into a significant economic and population center; basin agriculture has become more dependent on irrigation; and environmental quality and species concerns receive greater public attention and federal protections. These and other factors have increased competition for ACF waters and produced conflicting interests in maintaining water in storage and maintaining river flows for in-stream purposes.",
"It is often difficult to recognize when a drought is starting, and it is challenging to make decisions that entail tradeoffs between current and future costs and benefits based on expectations about when a drought may end. The current drought is already eclipsing conditions experienced by Georgia during the mid-1950s, which is considered the state's most severe drought on record.\nThe year 2007 was the second-driest on record for Atlanta, following 2006, which also was dry. As runoff in the basin fell below the flows necessary to meet both consumptive demand (i.e., M&I and agricultural uses) and in-stream flow requirements (e.g., for species and thermoelectric power plant cooling purposes), water stored in the reservoirs was released to meet these needs. The lower basin reservoirs were drawn down first. In late summer 2007, Lake Lanier was the only reservoir with significant remaining storage. When the Corps released water from Lake Lanier in the upper basin to provide minimum flows in the Apalachicola River in the lower basin, the lake experienced significant drawdown, surpassing the reservoir's previous record low and triggering urgent concern from lake Lanier water users and recreational interests.\nLake Lanier water storage is of critical concern because it provides 72% of the water supply for the Atlanta metro area and more than 62% of the storage space in federal ACF reservoirs, but refills slowly. The drainage area feeding the lake is only 5% of the ACF basin.\nLake Lanier's drawdown escalated the conflict among the three states. Without a water allocation agreement or decision to guide distribution of available supply among the states, lower basin stakeholders began questioning the sufficiency of Georgia's municipal, industrial, and agricultural long-term and emergency water conservation and demand management efforts. Upper basin stakeholders questioned the justification for the minimum flow requirements in the Apalachicola River and cited the Corps' operating procedures, which had been adopted in 2006 to protect threatened and endangered species, as significantly increasing the risk of depleting ACF reservoirs by allowing their drawdown and insufficient opportunity for refill.",
"In the 1970s and 1980s, Georgia officials became increasingly concerned with water supply for the Atlanta metro area's growing needs. The Corps in 1989 agreed to provide storage space for roughly twice as much M&I water in Lake Lanier by reallocating space from hydropower to water supply; this decision resulted in Alabama and Florida suing the Corps based on the impact that the reallocation would have on the lower basin and for a failure to comply with National Environmental Policy Act (NEPA) (42 U.S.C. §§ 4321 et seq.). (See Appendix A for an introduction to selected ACF suits in federal courts and the history of efforts to establish an ACF Compact. For a discussion of how NEPA relates to current ACF operations, see Appendix B ). The reallocation question has yet to be resolved. Since this first suit, ACF waters have been the foundation of multiple ongoing legal disputes and the subject of a tri-state water compact that failed when the states could not agree on how to allocate basin waters.\nWhen states are the parties disputing water allocation, the conflict may be resolved by agreement in an interstate compact, through apportionment by the courts, or through allocation by Congress. The water rights doctrines operating in the ACF states makes allocation particularly challenging. Alabama, Florida, and Georgia, like most eastern states, generally follow a riparian water rights doctrine, which permits those whose lands border waters to use them in a way that is reasonable relative to other users. When the water quantities are insufficient to meet all reasonable needs, all users are to reduce their usage proportionally. In contrast, most western states follow a prior appropriation doctrine, which provides a superior right to those who first put the water to use. When quantities are insufficient to meet all needs, those with the superior right receive their allocation first, and others receiving their share in order of priority. Because the ACF states follow the riparian rights doctrine, their relative rights to use the water are not determined by priority during drought. How to resolve water allocation during drought in a riparian context has few precedents, thus contributing to the challenge of the three states in successfully negotiating a water allocation compact. The three states most recently failed at such an effort in 2003 (see Appendix A ).",
"The federal government has authority under the Commerce Clause of the U.S. Constitution to manage the nation's water resources, but it recognizes the states' authority to allocate and use water within their jurisdictions. Federal laws often require federal agencies engaged in water resources management to defer to state laws or cooperate with state officials in implementing federal laws. Although a state generally has broad authority over waters within its border, exercise of its intrastate authority cannot entirely dismiss the interests of other states. In the case of the ACF, although the three states have authority over their waters, federal investments were built and are operated for multiple purposes, thus affecting the states' water use. That is, the basin's federal dams regulate the flows of the Chattahoochee and Apalachicola Rivers, thereby shaping the states' water use. Federal laws also shape dam operations. Most recently, protection of species protected under the federal ESA has become a significant factor in ACF dam operations. Additionally, certain federal actions must be reviewed under NEPA.",
"",
"As a consequence of the extensive ACF litigation and the absence of an agreement on allocating water among the three states, the Corps operates the ACF dams based on piece-meal guidance that has not received comprehensive analysis, review, or comment. That is, current operations are conducted under a 2007 exceptional drought modification to a 2006 interim plan for Woodruff Dam, that amended the 1989 draft plan for the entire ACF, as explained below.\nIn June 1990, the Corps began operating the ACF under its October 1989 Draft Apalachicola-Chattahoochee-Flint Basin Water Control Plan (WCP). The 1989 WCP has not been finalized due to litigation and expectations before 2003 for a negotiated agreement on tri-state water allocation. Under the WCP, the Corps largely operated the reservoirs to meet the multiple uses in the basin while maximizing the quantity of stored water. The WCP established operational zones for the federal reservoir; these operational zones signaled to the Corps how to manage reservoir releases based on changing storage volumes over the course of the year.\nWith the failure of the compact negotiations, the Corps had to address the ESA issues in the lower basin without a tri-state water allocation agreement. After years of informal communications and months of formal consultation with the U.S. Fish and Wildlife Service (FWS), the Corps adopted the Interim Operations Plan (IOP) for Woodruff Dam in October 2006. The plan is interim until an updated comprehensive ACF water control plan is adopted. The IOP added new in-stream Apalachicola River flow requirements for protection of threatened and endangered species to the Corps' ACF operational decision criteria. The IOP established minimum flows in the Apalachicola River based on different inflow rates into ACF reservoirs. The IOP, therefore, left in place the operational zones of the 1989 WCP but constrained the Corps' operations by requiring it to meet minimum flow requirements in both normal and dry conditions. Under the IOP, the Corps would make releases from reservoir storage to meet in-stream flow requirements if inflow into the reservoirs was insufficient to support the minimum flows. In sum, the IOP resulted in both the 1989 WCP operational zones and the IOP minimum flows guiding Corps' ACF operations during 2007.\nThe IOP is the subject of litigation (see Appendix A ) and of upper basin interests' criticisms of the Corps' reservoir management during 2007. They argue that the Lake Lanier drawdown in 2007 under the IOP created an unnecessary risk of system storage depletion in an effort to provide minimum flows that have not been scientifically justified. Others argue that system storage should be used to support species during dry conditions because the ACF ecosystems and species have been compromised by the cumulative long-term impacts of federal reservoir management and the basin's municipal, industrial, and agricultural water use.",
"On November 15, 2007, the Corps began operating under an Exceptional Drought Operations (EDO) modification to the IOP. The Corps proposed the EDO on November 1, 2007, and requested an expedited ESA consultation and Biological Opinion by the FWS to determine whether the EDO would jeopardize any of the four listed species. The Biological Opinion (hereafter referred to as the BiOp for the EDO) approved the EDO through June 1, 2008, with some stipulations. (See further discussion in CRS Report RL34440, Apalachicola-Chattahoochee-Flint Drought: Species and Ecosystem Management , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].)\nThe significance of the EDO was that by reducing the minimum flow requirement for the Apalachicola River more water was stored in basin reservoirs. The EDO also largely lifted operational guidelines of the IOP until reservoir storage significantly refilled. The EDO, therefore, reduced the rate of drawdown as dry conditions persisted and allowed reservoirs to refill more quickly as climate conditions improved. One justification provided for the lower minimum flows was to lessen the risk of much lower flows in later months or years, if the drought continues. In effect, the EDO risked some harm to the species now, to reduce the risk of greater harm later. The effects of the lower flows on electricity generation also were raised as a concern and are discussed in detail in Appendix C ; as discussed there, the EDO does not appear to have caused significant immediate harm to electricity generation or grid reliability.\nAs stipulated by the BiOp for the EDO, the Corps and FWS subsequently agreed upon triggers for how the Corps was to reduce flows from the previous low of 5,000 cfs (cubic feet per second) in the Apalachicola River, to 4,750 cfs, then 4,500 cfs. The Corps and FWS reportedly will consider triggers for reductions to 4,150 cfs in late spring 2008 when data are available and if the situation warrants. As of mid- to late spring 2008, flows in the Apalachicola River had yet to be reduced below 4,750 cfs due to winter rains. The winter rains have refilled the lower basin reservoirs and have improved Lake Lanier storage, but not dramatically, largely due to the lake's small drainage area.",
"On April 15, 2008, the Corps submitted to FWS a proposal to modify its IOP, thus eliminating the temporary EDO by incorporating elements of the EDO and other changes into a modified IOP (MIOP). A Biological Opinion on the proposal is anticipated by June 1, 2008. The modified IOP proposal includes provisions to store additional water during the winter and during drought periods and to release more during spawning periods. The intent is to avoid storage reaching levels that would trigger the lowering of the Apalachicola River minimum flows from 5,000 cfs to 4,500 cfs. The Corps proposal is to store 50% of basin inflow, instead of 30%; this would be accomplished by eliminating a minimum flow of 6,500 cfs during wetter periods, making fish spawn releases dependent on the storage level, and switching from a two-season to a three-season operation regime.",
"During the 2007-2008 winter, the Corps began revising its water control manual for the ACF reservoirs. The omnibus Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), in §134, Division C, Title I, prohibits the implementation of a new water control manual (but not its development) and requires the Corps to provide data on basin withdrawals, use, and stream flow by September 2008. The Corps plans to spend $1 million on the update in FY2008; the Corps estimates that it will take two to three years to draft a revised plan. When Administration efforts to broker a tri-state agreement by March 1, 2008, failed, the Corps' revision acquired additional significance as a mechanism for determining future operations in the absence of a tri-state agreement and in the midst of litigation.",
"Consumptive use of water reduces the amount of water available in the basin for other uses, including in-stream flows. Efforts to reduce water consumption through conservation and efficiency programs often fall into two categories: programs to reduce water use without reducing services by improving efficiency and reducing waste; and short-term emergency measures that cut services. Municipal, industrial, and agricultural water use are the primary consumptive uses in the ACF basin. This section provides a brief discussion of these consumptive uses and their management during the current drought, including short-term emergency conservation measures. Depletion or inability to access municipal drinking water sources can represent a significant public health threat, and reductions in M&I and agricultural water supply can have significant economic impacts.",
"Georgia dominates consumptive water use in the ACF basin. Georgia's municipal and industrial consumptive use annually averages roughly 290 million gallons per day (mgd, or 450 cfs). The Atlanta metro area is the largest M&I consumer, but Columbus and other basin communities also demand ACF surface water and groundwater. Georgia's agricultural sector has highly variable demand over the course of the year (with use concentrated from May through September) and depending on precipitation and soil conditions. Georgia agriculture's consumptive use of surface water and groundwater affecting ACF river flows can exceed 650 mgd (1,000 cfs) during a dry summer's growing season, can fall to close to nothing during winter months of a normal year, and averages 170 mgd (260 cfs) during a normal year. Alabama consumes considerably less ACF water than Georgia, consistently averaging less than 50 mgd annually from the Chattahoochee River, primarily for municipal and industrial use. Florida has few consumptive withdrawals (less than 10 mgd total) directly from the Apalachicola River. There are permits for less than 3 mgd of average daily withdrawal from the Chipola River, an Apalachicola River tributary, in Florida via the St. Joe Canal; the amount withdrawn from the St. Joe Canal in recent years has been less than 0.5 mgd. In 2006, the water management district in this region of Florida adopted a rule limiting consumptive water withdrawals by largely reserving the water in the Apalachicola and Chipola Rivers for fish and wildlife of the rivers, the associated floodplains, and the bay.",
"M&I water supplies are withdrawn from the ACF rivers and tributaries, the federal reservoirs on those rivers, locally-owned surface storage, and aquifers. The original authorized purposes of the federal investments in the ACF were navigation, hydropower generation, and flood control. Subsequent laws expanded what the Corps considers when making operating decisions. The Corps now operates ACF reservoirs for fish and wildlife protection, water quality protection, and recreation as well as for the original authorized purposes. Lake Lanier and its releases also supply water to the Atlanta metro area; to what degree the Corps operates the reservoirs for water supply is the subject of litigation (see Appendix A ).\nThe Corps principally cites the Water Supply Act of 1958 (43 U.S.C. §390b) as its authorization to make water supply storage space at Corps facilities available for M&I purposes. The act does not authorize the Corps to sell or allocate quantities of water. The contracts are for space in the reservoir and do not guarantee a fixed quantity of water. The Corps delivers the water if it is available in the storage space without significantly affecting the authorized purposes of the Corps project. The act also does not authorize the Corps to make significant modifications to its projects in order to provide for M&I water supply.\nThe majority of the M&I water being provided from Lake Lanier is being delivered under temporary \"holdover contracts\" because earlier contracts expired in 1990. The Corps has proposed replacing these with interim storage contracts that would make more M&I water storage space available as part of a Settlement Agreement (see Appendix A ). A February 2008 court decision held that the increased storage space provided in the agreement constitutes a change that requires congressional authorization before the Corps could proceed with the contracts.",
"The 28-county Atlanta metropolitan area is home to more than 5 million people and represents 75% of Georgia's economic activity. In 2000, the 16-county Metropolitan North Georgia (which is a subset of the 28-county metropolitan statistical area (MSA) Atlanta metro region, plus one additional county outside of the MSA) served 4 million people; under some projections, it may grow to 8 million by 2030.\nAtlanta's origins as a rail center, rather than a waterway commerce economy, contributed to its unusual status as a major metropolitan area in the headwaters of a river system. Metropolitan North Georgia gets more than 99% of its water from surface water supplies. Lake Lanier and the Chattahoochee River supply 72% of that water. The Atlanta metropolitan area's surface water dependency makes its water supply particularly vulnerable to regional drought and to changes in Buford Dam operations that may reduce water stored at Lake Lanier, such as those prescribed in the IOP. A significant amount of the water withdrawn for M&I use is not consumed; it returns to the ACF water bodies. The return flows represent a significant percentage of the upper Chattahoochee River's flow below the metro area in the upper basin.\nMetropolitan North Georgia's second-largest source is the Corps-operated Lake Allatoona reservoir on the Etowah River. It is a tributary of the Alabama-Coosa-Tallapoosa river basin immediately west of the ACF, which also is affected by the current drought. The ACT's Etowah basin provides 12% of Metropolitan North Georgia's water supply. Almost all of Metropolitan North Georgia's other supplies are surface water supplies from other basins.\nToday groundwater makes up less than 1% of Metropolitan North Georgia's water supply. However, groundwater was a major water supply source for the region prior to the 1940s; the region shifted to surface water supplies as the demands surpassed aquifers' yield. Aquifers in northwest Georgia are relatively small, so that no single well provides significant yields as a long-term water source. The possibility of diversifying existing surface water supplies by expanding groundwater use (e.g., supply augmentation during drought) has received some attention and exploration. Groundwater, however, is not anticipated to provide a significant long-term supply.",
"The Metropolitan North Georgia Water Planning District's Water Supply and Water Conservation Management Plan concluded, given estimates of population growth and water conservation that it chose, that the Atlanta metro area's average annual demand would exceed its available supplies between 2013 and 2020 unless water supplies in Lake Lanier and Lake Allatoona can be reallocated for M&I use. The Pacific Institute prepared for the Florida Department of Environmental Protection A Review of Water Conservation Planning for the Atlanta, Georgia Region . The review was critical of the plan's choice of population projections and of the level and breadth of conservation measures it considered. The review stated that the plan overestimated future demand and underestimated the potential for cost-effective demand management as a tool for meeting demand through 2030 with existing supplies (i.e., without reallocations).\nThe Water Supply and Water Conservation Management Plan argues for and relies heavily on the reallocation of water storage in the ACF's Lake Lanier and in the ACT's Lake Allatoona from either hydropower or flood control to water supply in order to have sufficient supplies to meet demand through 2030. Contracts for the reallocated supply are considered \"essential to guarantee water supply for the district for the next 30 years and beyond.\" The District also is proceeding with efforts to complete the permitting process of new nonfederal reservoirs and options for indirect potable reuse. The management plan also calls for water conservation measures; it estimated that these measures had the potential to reduce demand by 11%, thus extending existing supplies to 2020.\nA major concern for lower basin ACF stakeholders and environmental groups is that increased M&I water use will further and more consistently reduce in-stream flows, particularly in the Apalachicola River. Upper basin interests argue that the operations of federal reservoirs should recognize the economic benefits of M&I water supply and reservoir recreation. The analysis produced by these interests to support this argument estimated the economic benefit for reallocation of Lake Lanier storage at $19.3 billion; the analysis included the M&I and recreation benefits and losses to hydropower. Lower basin interests criticize the analysis for ignoring the ecosystem and species costs of reallocation, losses to lower basin uses, and the value of ecosystems services.",
"Agricultural water supply is not an authorized purpose of the federal ACF reservoirs; however, it is a significant consumptive use in the ACF's Flint River sub-basin, representing more than 90% of the sub-basin's annual withdrawal. The Flint River joins with the Chattahoochee River to form the Apalachicola River; therefore, agricultural consumptive water use in the Flint River sub-basin may shape ACF reservoir operations when operations are dictated by sustaining minimum Apalachicola River flows. This influence likely is greatest during the May to September months of a drought year when agricultural consumption peaks.\nA 1998-2002 drought brought attention to the effect of agricultural uses on reducing in-stream flows in the Flint River and various creeks in the lower basin. The current drought and adoption of the IOP have increased interest in better understanding how irrigation is affecting water availability in the Flint River and other smaller tributaries feeding into Lake Seminole (e.g., Spring Creek). Generally, in normal to wet years, irrigation's impact on stream flow and aquifer levels is insufficient to jeopardize availability of water in the sub-basin or stream ecology. That is not the case during dry conditions.\nIrrigation greatly increases crop yields, crop quality, crop diversity, gross and net return, land values, and the like. Cotton, peanuts, corn, and vegetables are the most extensively irrigated crops in the sub-basin. For some crops, such as vegetable, container nurseries, and ornamental horticulture, irrigation is a prerequisite. Agricultural irrigation in southwest Georgia, particularly in the lower Flint River sub-basin, has markedly increased since the late 1970s, with 40% of the harvested cropland in the sub-basin being irrigated. Although some irrigation water is from surface water, the majority is withdrawn from aquifers hydraulically connected to surface waters. Agricultural irrigation and its peak water use during dry conditions compound the effect of climatic drought on low stream flows in the Flint River sub-basin. Converting to more water-intensive crops could increase agricultural water demand.\nIrrigation water conservation measures are encouraged for all holders of Georgia agricultural surface water and groundwater withdrawal permits. Starting January 2006, conservation measures that can reduce the demand and improve the efficiency of water use are a required condition for all new or modified permits. Agricultural water conservation practices range from source water management, to use of reclaimed water, to more efficient irrigation. The USDA with state and private partners has been funding the adoption of water conservation efforts, particularly irrigation efficiency measures, in the Flint River basin through the voluntary Environmental Quality Incentives Program (EQIP), which provides participating farmers with cost-sharing assistance and technical assistance.",
"",
"The 1998-2002 drought raised awareness in Georgia regarding drought impacts and interest in drought planning and management. The first Georgia Drought Management Plan was adopted in 2003. The current drought is the first test of the plan. The plan includes innovative elements; most notably, the plan uses unique drought indicators for different geographic regions of the state. These indicators were developed using a participatory approach involving stakeholders in each region. This approach is being used as a model and is being adapted to other states' drought management plans.\nAccording to the National Drought Mitigation Center, a successful drought plan contains three basic elements—a monitoring and communication/information-sharing program, a risk/impact/vulnerability analysis, and response and mitigation measures. Few state plans fully utilize all these elements. Georgia's plan covers the first and the third, but it does not include a vulnerability analysis. For comparison, Alabama currently is operating under a draft drought management plan that focuses on monitoring and communication. Florida has no state drought management plan because it has long-standing regional water management districts that are responsible for comprehensive water resources management, including drought planning.\nGeorgia's plan incorporates a process to inform state decision-makers that have the ability to enact and enforce drought conservation measures. Most of the measures are short-term actions to reduce water demand during a drought, rather than long-term demand management. The plan does not encompass measures to control long-term water demand related to population growth, nor does it contain significant measures to manage the demand of the industrial and agricultural sectors. This is a limitation typical of state drought plans. Consequently, with continued population and agricultural growth in Georgia, the state's drought risk is increasing, even though the adoption and implementation of the drought plan is an improvement from 2000.\nSome ACF stakeholders have criticized Georgia for not taking more emergency conservation actions and for not fully complying with its Drought Management Plan. The plan generally calls for a meeting to be held once indicators for a region are shown to have moved into the next drought level (there are four tiers, 1 to 4, with 4 being the most severe) for two consecutive months. The meetings are for informing decision-makers that then choose to act. During the current drought, the following milestones occurred:\nLevel 1 drought declared for entire state on June 21, 2006, and placed hourly restrictions on residential outdoor watering; Level 2 drought declared for entire state on April 18, 2007, and limited residential outdoor water use to mornings only; Level 3 drought was not declared. It would have further restricted residential outdoor watering; Level 4 drought declared for 61 north and western counties (primarily along the Chattahoochee River, and a few but not most of the Flint River counties) on September 28, 2007, and prohibited most outdoor residential water use; and Governor Perdue went beyond the Drought Management Plan's Level 4 actions on October 23, 2007, by calling for a mandatory 10% cut in withdrawals by groundwater and surface water permit holders in 61 counties.\nData on the plan's drought indicators show that multiple indicators for increasing the level to 4 had been met for the counties along the Chattahoochee River in July 2007, months before the Level 4 was declared; on the other hand, the indicators had not been as clear regarding initiation of Level 3. Criticisms of Georgia's actions are countered by those arguing that the plan and its implementation are evolving and that they have performed well during this initial test. Upper basin stakeholders instead place the blame for the low storage levels and resulting adoption of the lower flows under the EDO on the IOP for allowing the reservoir drawdown. They also note that in addition to the Drought Management Plan, Georgia's Environmental Protection Division has drafted the first comprehensive statewide water management plan which is anticipated to be considered by the Georgia legislature in 2008.",
"In 2000, Georgia enacted the Flint River Drought Protection Act in response to drought conditions' effects on flows in the Flint River and other creeks in the sub-basin. The act created a program to preserve in-stream flows in the Flint River by requiring the Environmental Protection Division to conduct an auction to pay irrigators who voluntarily participate to temporarily cease irrigating during declared severe droughts, thus improving stream flows for aquatic species in the sub-basin. The program is implemented if by March 1 of any year, the Director of Georgia's Environmental Protection Division has issued a severe drought declaration for the Flint River basin. The program was implemented in 2001 and 2002; it is estimated to have reduced irrigation by up to 130 mgd (roughly 200 cfs) during the 2001 growing season. Both auctions had problems that raised concerns regarding the effectiveness of the program (e.g, the two auctions failed to remove the highest water use cropland from irrigation). The Director did not issue a severe drought declaration in 2006 or 2007; therefore, the program was not activated in those years. The forecasts, stream flows, and groundwater levels in the lower Flint River sub-basin reportedly did not support the designation.",
"",
"Apalachicola Bay oysters constitute an important part of northwestern Florida's economy. More than 1,000 people are employed by the oyster industry in Florida's Franklin County, which harvests approximately $10 million in oysters annually. Historically, this county harvests more than 90% of Florida's oysters and 10% of the entire nation's supply of this seafood. Within Franklin County, oysters account for almost one-third of the value of all commercial marine landings.\nApalachicola Bay is the site of the Apalachicola National Estuarine Research Reserve, one of 27 research sites designated by the National Oceanographic and Atmospheric Administration. The bay also is an exceptionally important nursery area for Gulf of Mexico commercial fish species. More than 95% of all species harvested commercially and 85% of all species harvested recreationally in the open Gulf spend a portion of their lives in estuarine waters (e.g., blue crabs may migrate as far as 300 miles to spawn in Apalachicola Bay).",
"",
"A focal point of recent debate on ACF water management during this drought has been protection of four species listed under the federal ESA: Gulf sturgeon ( Acipenser oxyrinchus desotoi ), fat threeridge mussel ( Amblema neislerii ), Chipola slabshell mussel ( Elliptio chipolaensis ), and purple bankclimber mussel ( Elliptoideus sloatianus ). Water flow, temperature, dissolved oxygen, and other aspects of water quality are important to all four. The threatened Gulf sturgeon are anadromous, migrating upriver from the Gulf of Mexico in the springtime to spawn near the headwater of rivers. The Woodruff Dam prevents sturgeon from reaching previous spawning habitat; sturgeon were once found in both the Chattahoochee and Flint Rivers. (See Figure 1 ) The endangered fat threeridge mussel, threatened purple bankclimber and Chipola slabshell live in the sand and gravel bottoms of streams and rivers. Major limiting factors include habitat modification by manmade structures (e.g., dams and channel alterations) that destroy free-flowing water habitats and restrict species from dispersing, resulting in small, isolated populations. These species also are threatened by point source pollution, such as discharge from factories and sewage treatment plants, and by nonpoint source pollution, such as runoff containing fertilizers, herbicides, and pesticides from various land-use practices. Of the four species (Gulf sturgeon and three mussels), concern related to the EDO has been greatest for the three mussels. According to FWS, not only is flow rate, per se, important to the mussels, but so are the effects of flow rates on other aspects of the species' biology.",
"On November 1, 2007, the Corps requested expedited consultation with FWS under §7 of the Endangered Species Act to consider its proposed EDO. In support, the Corps submitted a Biological Assessment of the EDO (BA of the EDO) to FWS. FWS conducted an expedited review and responded on November 15, 2007.",
"In the BA of the EDO, the Corps proposed to reduce flows from the Jim Woodruff Dam below the 5,000 cfs minimum established in the IOP. The IOP had a minimum of 5,000 cfs, and had considered 6,500 cfs as \"desirable.\" The EDO would maintain a 0.25 ft/day maximum fall rate, until 4,150 cfs was achieved.\nAccording to the BA of the EDO, \"adverse impacts to listed species (especially the listed mussel species) are reasonably certain to occur as flows on the Apalachicola River drop below 5,000 cfs.\" Among the issues mentioned in the rationale for adopting the EDO's lower minimum flows was reducing \"the demand for storage in order to ... have greater assurance of future ability to sustain flows for listed species during a severe multi-year drought, as currently being experienced in the ACF basin.\" In essence, the proposal was that the listed species would face a reduced water flow this year to reduce risks in later years, if the drought continues.",
"In its November 15, 2007, BiOp on the EDO, FWS concluded there would be no appreciable effect on the survival and recovery of the Gulf sturgeon and no appreciable effect on the ability of its designated critical habitat to provide its intended conservation role. In addition, FWS concluded that for the three mussels, the Corps' EDO would have a measurable—but not appreciable—impact on survival and recovery. The BiOp for the EDO required that the Corps supply FWS with triggers for making the incremental reductions. FWS limited its opinion to June 1, 2008, and to an initial reduction to 4,750 cfs, to be followed by a reduction to not less than 4,500 cfs, then to 4,150 cfs. Moreover, the BiOp for the EDO did not determine a minimum flow that would avoid jeopardy indefinitely.",
"FWS's Incidental Take Statement (ITS) contained in the BiOp included non-discretionary measures to determine the appropriate triggers for these incremental reductions. It directed that the Corps ensure that the measures become binding conditions of any contract or permit issued to carry out the EDO. Mandatory terms and conditions were attached to the ITS to ensure its implementation. These terms and conditions included reporting requirements, monitoring, and assuming responsibility for certain studies, among other things. These studies included measurements of take of the listed species resulting from lower flows, changes in mussel distribution, and life history studies to provide information to better inform future decisions. The ITS also warned that failure to carry out the terms and conditions could invalidate the ITS.\nIn addition to mandatory terms and conditions, the ITS also made discretionary recommendations to the Corps. For example, the ITS recommended that the Corps work with states and other stakeholders to reduce depletions to ACF stream flow, particularly in the Flint River; its examples included incentives to reduce agricultural demands. It also recommended that the Corps, with other stakeholders, \"evaluate ways to ensure that listed mussel mortality due to low flows does not become a chronic or annual source of mortality.\"",
"",
"In October 2007, identical bills, H.R. 3847 and S. 2165 , were introduced to address conflicts with the ESA arising from recent operations of the federal ACF dams. H.R. 3847 was referred to the House Natural Resources Subcommittee on Fisheries, Wildlife, and Oceans. S. 2165 was referred to the Senate Environment and Public Works Committee. These bills would suspend the entire ESA for both federal and state agencies managing any federal river basin if either the Corps or a basin governor determines that there is a drought in such a river basin and that the drought threatens the region's health, safety, or welfare. The bills would end the suspension if the Corps or the governor determines that the drought is no longer in effect in the basin.",
"In June 2007, H.R. 2650 , Restore the Apalachicola River Ecosystem Act, was introduced and referred to the House Transportation and Infrastructure Subcommittee on Water Resources and Environment. It would modify the ACF authorizations from 1945 and 1946 to deauthorize navigation in a portion of the Apalachicola River. Dredging is required to maintain the navigable channel; this dredging can disrupt and harm river species and ecosystems. The bill would also authorize the Corps to undertake a two-year study to restore the Apalachicola River's ecosystem.",
"The Twenty-First Century Water Commission Act of 2007, H.R. 135 , is similar to legislation introduced in recent Congresses to create a commission to make recommendations for a comprehensive water strategy for the nation based on a study federal, state, local, and private water management programs. H.R. 135 was referred to the House Natural Resources Committee, and additionally the House Transportation and Infrastructure Committee, for consideration of such provisions within the jurisdiction of each committee. The Natural Resources Committee reported the bill in December 2007. The Transportation and Infrastructure Committee has not acted.\nH.R. 135 is national in scope, but it is often discussed as part of the debate related to management of federal reservoirs for water supply purposes, including the ACF reservoirs. The commission would be charged with developing recommendations while respecting the primary role of states in water rights law and not increasing mandates on state and local governments. It also would be charged with identifying incentives for adequate and dependable domestic water supply for 50 years; ways to eliminate duplication and conflict among governmental agencies; means of capturing excess water for future droughts; technologies for increasing water supply efficiently, while safeguarding the environment; financing options for public works projects; and water conservation strategies. The commission would be directed to submit a final report no later than three years after its first meeting and would sunset within 30 days of the final report.",
"On March 11, 2008, H.R. 5887 was introduced. On the same day, the House Transportation and Infrastructure Subcommittee on Water Resources and the Environment held a hearing titled \"Comprehensive Watershed Management and Planning—Drought Related Issues in the Southeastern US.\" The bill was referred to the same subcommittee. The bill would require the Corps, in coordination with other federal agencies, to conduct a comprehensive study of long-term water management in the southeastern United States, including the ACF, ACT, and Savannah River basins. The purpose of the study would be to develop within three years recommendations to address current and future water needs in the region.",
"Although the drought has made reservoir management and endangered species protections the ACF basin's most active federal issues, the tri-state disagreement over water allocation and managing municipal, industrial, and agricultural demand will persist even when the drought subsides. The drought is drawing attention to how the Corps operates its ACF reservoirs under a draft water supply plan from 1989 that is being modified through interim plans for individual dams and exceptional drought waivers. This situation and the related lawsuits are increasing interest in having the three states devise a comprehensive long-term solution in order to avoid congressional or judicial resolutions on a piecemeal basis; however, the Administration's attempt to garner such a tri-state agreement failed in early 2008.\nHow the federal government responds to the current ACF drought may set precedents for the long-term management of the ACF basin and other basins whose stakeholders compete for water resources, as well as other basins where the demands on federal infrastructure have changed significantly since their original authorizations. Increasing pressures on the quality and quantity of available water supplies—due to growing population, environmental regulation, in-stream species and ecosystem needs, water source contamination, agricultural water demand, climate variability, and changing public interests—have resulted in heightened water use conflicts throughout the country. The federal government has a long history of involvement in water resource development and management to facilitate water-borne transportation, expand irrigated agriculture, reduce flood losses, and more recently restore aquatic ecosystems. Congress makes decisions that define the federal role in planning, constructing, maintaining, inspecting, and financing water resource projects. These decisions occur within the context of multiple and often conflicting objectives, competing legal decisions, and long-established institutional mechanisms (e.g., century-old water rights, contractual obligations, etc.).\nThe ACF is a prime example of the complexity of the river management issues in which the Corps and other federal water management and resource agencies are embroiled along with state and local governments and the general public. How the nation uses and values its rivers has changed over time. Rivers are now seen as not only providing economic benefits but also recreational opportunities and ecosystem services, such as species habitat, which also have economic dimensions. These changes have manifested themselves in law (e.g., ESA) and implementation of water resources statutes. This shift has caused a reexamination by the courts, agencies, and stakeholders of the distribution of economic and other benefits of river management alternatives. The debate over ACF management raises some fundamental questions about water resources management in the nation, such as whether some river uses should take priority over others (e.g., threatened and endangered species protection over inland waterway transportation), how to evaluate alternatives (e.g., balancing multiple uses, maximizing economic benefits, reducing short-term or long-term risk), and how to manage extreme conditions and changing water availability and use. Actions by federal agencies remain controversial on the Middle Rio Grande, San Joaquin, Colorado, Klamath, Columbia, Snake, Mississippi, and Missouri Rivers. Like the ACF, federal actions and facility operations on these rivers frequently are challenged in the courts and by state and local interests.\nAppendix A. ACF Compact and Lawsuits\nAfter almost 20 years of lawsuits about and attempts at allocating water among the basin states, the three basin states have been unsuccessful at resolving how to allocate water through a compact. There are several pending cases related to ACF waters, filed in various federal district courts. The first, Alabama v. U.S. Corps of Engineers (the Alabama case), was the original case that led to a 1997 ACF Compact; it was revived after the ACF Compact expired in 2003. The second, Southeastern Federal Power Customers, Inc. v. U.S. Army Corps of Engineers (the D.C. case), was filed in the district court for the District of Columbia in December 2000. The third case, Georgia v. U.S. Army Corps of Engineers (the Georgia I case), was filed in the federal district court for the Northern District of Georgia in February 2001. The fourth case, Georgia v. U.S. Army Corps of Engineers (the Georgia II case), was filed in the federal district court for the Northern District of Georgia in June 2006. The fifth case, Florida v. U.S. Fish and Wildlife Service (the Florida case), was filed in the federal district court for the Northern District of Florida in September 2006. The sixth case, City of Columbus v. U.S. Army Corps of Engineers (the City of Columbus case), was filed in the federal district court for the Middle District of Georgia in August 2007. The seventh case, City of Apalachicola v. U.S. Army Corps of Engineers (the City of Apalachicola case), was filed in the federal district court for the Northern District of Florida in January 2008.\nMany of these cases raise the same legal issues in differing contexts. In order to avoid repetitive litigation over very similar issues, many of the cases were consolidated in March 2007. One of the recurring issues in the litigation is determination of the authorized purposes of Lake Lanier. This issue was addressed in the most recent decision relating to the ACF (see discussion of the D.C. case below). In February 2008, the Court of Appeals for the D.C. Circuit held that congressional authorization would be necessary in order to provide local water supply for municipalities near the reservoir. That opinion directly affected only the D.C. case, the sole case omitted from the consolidation. This appendix includes a discussion of each of the cases and the consolidation. It also discusses considerations for the future of the litigation, including Supreme Court jurisdiction and possible effects of the D.C. case on the remainder of the litigation.\nACF Cases\nThe Alabama Case and the ACF Compact. In 1990, Alabama and Florida filed suit (the Alabama case) against the Corps to stop the larger withdrawals it had approved for Georgia, based in part on the impact they would have on downstream users and a failure to comply with the National Environmental Policy Act (NEPA; 42 U.S.C. §§ 4321-4347). The suit alleged that the Corps exceeded its authority under the Water Supply Act of 1958 by reallocating storage in the ACF reservoirs. Under the Water Supply Act, a modification to reservoir projects \"which would seriously affect the purposes for which the project was authorized ... or which would involve major structural or operational changes shall be made only upon the approval of Congress.\" The authorized purposes of Lake Lanier are disputed among the parties and have become a recurring issue in each of the lawsuits filed. Generally, each of the parties except Georgia recognizes three authorized uses: flood control, hydropower, and navigation. Georgia has maintained that municipal and industrial use was also authorized.\nThe parties suspended the proceeding in 1992 to negotiate a settlement. Settlement negotiations ultimately resulted in an interstate compact (the ACF Compact) which was approved by Congress in 1997 ( P.L. 105-104 ). Through the ACF Compact, the parties intended \"to develop an allocation formula for equitably apportioning the surface waters of the ACF Basin among the states while protecting the water quality, ecology and biodiversity of the ACF.\" In other words, the Compact provided an agreement to agree on allocations at some future date. Although the states negotiated for years, they never reached an agreement and, after many extensions of the 1998 date on which the ACF Compact was to terminate, the Compact expired on August 31, 2003. Since then, the litigation has resurfaced as the states attempt to secure their water rights (See discussion below and discussion on \" Consolidation of Cases .\")\nThe D.C. Case. The D.C. case involved a dispute brought by Southeastern Federal Power Customers (SeFPC), a non-profit corporate consortium of rural electric cooperatives and municipal electric systems. SeFPC alleged that the Corps contracts that provided for increased withdrawals from Lake Lanier exceeded the Corps' authority under the Water Supply Act of 1958. The increased withdrawals, they argued, consequently diminished the flow-through by which hydropower is generated. SeFPC claimed that its members were paying for Buford Dam hydropower at prices disproportionate to their residual share of water stored in Lake Lanier devoted to power generation.\nThe proceedings of the Alabama and D.C. cases are interrelated. In the Alabama case, Alabama and Florida sued to prevent withdrawals of water from Lake Lanier made to the detriment of downstream users. While the action was suspended pending negotiations, the D.C. case was filed. In January 2003, the parties in the D.C. case, including Georgia and the Corps, reached a settlement agreement and requested the court's approval. Because the parties to the D.C. case attempted to implement a settlement agreement that would affect the use of the water at issue in the Alabama case, Alabama and Florida revived the Alabama case to challenge the settlement agreement. Alabama and Florida also intervened in the D.C. case to oppose the approval of the agreement as a violation of the suspension of proceedings in the Alabama case. In October 2003, the federal district court in the Alabama case granted Alabama and Florida's motion for a preliminary injunction, enjoining the Corps and Georgia from implementing the agreement in the D.C. case. In 2004, the district court in the D.C. case approved the settlement agreement, but required that the injunction entered in the Alabama case be dissolved before the agreement could be implemented. In 2005, the 11 th Circuit Court of Appeals vacated the Alabama district court's injunction order, finding that Alabama and Florida did not establish an imminent threat of irreparable harm or a substantial likelihood of prevailing on the merits of the case.\nIn February 2008, the Court of Appeals for the D.C. Circuit reversed the district court's approval of the settlement agreement reached by the parties in the D.C. case. The settlement agreement, entered by Georgia and the Corps, provided for two 10-year contracts that allocated water to Georgia for municipal use. The court's opinion addressed only one of the statutory issues raised by the appeal—the Water Supply Act. The court held that \"the Agreement's reallocation of Lake Lanier's storage space constitutes a major operational change on its face\" and therefore, under the Water Supply Act, required prior congressional approval. Because Congress did not authorize the change, the court ruled that the agreement could not be enforced. Florida and Alabama also claimed that the agreement violated the Flood Control Act and NEPA, but the court did not reach those issues.\nThe Georgia I Case. In 2000, the Governor of Georgia made a written water supply request asking the Corps to commit to making increased releases of water from the Buford Dam until the year 2030 in order to assure a reliable municipal and industrial water supply to the Atlanta region. In 2001, after nine months without a reply to the request, Georgia sued the Corps to increase its water supply. While the Alabama and DC cases were being litigated, Florida and SeFPC filed motions to intervene in the Georgia I case, but the motions were denied by the district court. After this denial, the Corps denied Georgia's request, claiming that it lacked the \"legal authority to grant Georgia's request without additional legislative authority, because the request would involve substantial effects on project purposes and major operational changes.\"\nOn appeal, the Court of Appeals for the 11 th Circuit overturned the district court's decision. The court permitted Florida and SeFPC to intervene and returned the case to the district court for further adjudication. The district court, noting the similarity of the parties and the subject matter, found the case to be parallel to the Alabama case. The court suspended the proceedings in the Georgia I case pending resolution of the Alabama case. (See discussion below on \" Consolidation of Cases .\")\nThe Georgia II Case. In 2006, the Corps issued an interim operations plan (IOP) for Woodruff Dam for the purpose of protecting federally protected species in the Apalachicola River. (See discussion on p. 6.) Georgia sued the Corps to challenge the IOP, claiming that it constituted a change from the only approved water control plan (which was adopted in the late 1950s). Georgia argued that, by releasing more water from reservoir storage to meet the in-stream requirements for the Apalachicola River in the IOP, the Corps was jeopardizing the state's future water supply. The releases allegedly did not account for dry weather conditions and did not reserve enough water to supplement the dry summer conditions in northern Georgia. The suit also alleged that water supply was a contemplated purpose of the Corps' water project. (See discussion below on \" Consolidation of Cases .\")\nThe Florida Case. In 2006, FWS issued a biological opinion (BiOp) regarding the impact of the IOP for Woodruff Dam on protected species downstream (see discussion on p. 6). Florida filed a lawsuit to review the BiOp, which was issued pursuant to the ESA. The BiOp concluded that the Corps' operations under the IOP were not likely to jeopardize the species or their habitat. Florida sought review, claiming that operations had already caused significant damage. The BiOp, according to Florida, violated rational decision-making standards. Florida also alleged that the municipal and industrial uses for which Georgia sought water were not authorized purposes. (See discussion below on \" Consolidation of Cases \")\nThe City of Columbus Case. In 2007, the City of Columbus, Georgia, sued the Corps, challenging the validity of the IOP. Columbus asserted that the Corps failed to adopt a formally finalized water control plan for the ACF basin and that the Corps' current operation under the IOP violated its legal authority. The Corps was operating under a third revision of the IOP, each changing the flow levels in the rivers, at the time Columbus filed the lawsuit. Columbus claimed that the lack of reliable flow from the Chattahoochee River impaired its ability to discharge water that it used to provide services to the city in compliance with regulatory requirements. The city alleged that the IOP improperly revised the water control plan because it was published in final form without public comment and was put into effect for an indefinite period of time. According to Columbus, the IOP resulted in over-releases of water from the ACF reservoirs to the city's detriment.\nThe City of Apalachicola Case. In 2008, the City of Apalachicola, Florida, sued the Corps, challenging its management and operation of the ACF facilities. The lawsuit arose from the city's interest in maintaining the Apalachicola Bay ecosystem, which the city claims as a basis for its economy and livelihood. Apalachicola alleged that the Corps did not complete an adequate NEPA review when it issued the original IOP, the modified IOP, or the Exceptional Drought Operations modification (EDO) to the modified IOP. The city also claimed that the Corps did not comply with environmental assessments required under the Coastal Zone Management Act (CZMA). Apalachicola also alleged that various contracts entered by the Corps, which provide for withdrawals for purposes other than those authorized by law, and the Corps' application of the draft water control plan violate the Water Supply Act, Flood Control Act, and NEPA.\nConsolidation of Cases . In March 2007, the Alabama, Georgia I, Georgia II, and Florida cases were consolidated and transferred to the federal district court for the Middle District of Florida \"to serve the convenience of the parties and witnesses and promote the just and efficient conduct of the litigation.\" The City of Columbus case was also included in this litigation after it was filed. Other cases filed since the consolidation that relate to the ACF dispute, including the City of Apalachicola case, are likely to be included in the consolidated proceedings. The D.C. case was excluded from this consolidation of proceedings because it had already reached the appellate court, whereas the cases that were consolidated remained in various federal district courts.\nConsiderations for Future Litigation Efforts\nU.S. Supreme Court Review. The U.S. Supreme Court has not addressed the issues raised by the ACF litigation at this time. In June 2006, the Court declined to review an 11 th Circuit decision in the Alabama case. The underlying 11 th Circuit opinion held that the action did not involve a controversy between states, which would have to be heard by the U.S. Supreme Court, but did involve a dispute between states and a federal agency, which was properly heard by the lower federal courts. Therefore, the Court would only hear arguments regarding the ACF dispute if a new lawsuit is filed by one state against another state or if a party to one of the lawsuits appeals a circuit court's decision.\nAnticipated Effects of the D.C. Case Decision. As discussed above, the various lawsuits involve many recurring issues, including authorized purposes of Lake Lanier, the effect of the Water Supply Act of 1958 on authorized purposes, and whether the environmental reviews that have been conducted satisfy the requirements of NEPA. The D.C. Circuit's decision holding that reallocation of water supply storage for municipal use would require congressional authorization addresses one of these issues. That decision may affect the future path of litigation in the other cases.\nAlthough the court determined that the settlement agreement was unenforceable, the litigation of the D.C. case may continue at different levels. One or more of the parties may try to appeal the circuit court's decision to the U.S. Supreme Court. If the Supreme Court accepts the case for review, it may or may not uphold the D.C. Circuit's interpretation of the issue. The D.C. Circuit's decision addressed only one of the statutory challenges raised before the court. As a result, the case may also be remanded to the original court (the D.C. district court) for further review of other issues raised but not resolved in the higher courts.\nIf the case is remanded to the district court, it may be consolidated with the other cases. The D.C. case was omitted from the original consolidation because it was the only case not on the trial level. If it is remanded to the district court for further consideration, it would again be on the same level of review as the other cases and potentially be appropriate for consolidation.\nGenerally, the consolidated cases, being litigated in a different jurisdiction (a district court within the 11 th Circuit), are not controlled by decisions in the D.C. Circuit. That is, the 11 th Circuit, or district courts within its jurisdiction (including Alabama, Florida and Georgia), may choose to interpret the issue of required congressional authorization differently than the D.C. Circuit did. However, other courts may be bound by the D.C. Circuit's decision under a legal principle known as collateral estoppel. The principle of collateral estoppel, also known as issue preclusion, prevents parties from raising issues that have already been resolved in previous legal proceedings in later cases under certain circumstances. In order to raise the issue of collateral estoppel and prevent the consolidated cases from further litigating the issue decided by the D.C. Circuit, a party must show that:\n(1) the issue at stake is identical to the one involved in the prior proceeding; (2) the issue was actually litigated in the prior proceeding; (3) the determination of the issue in the prior litigation must have been \"a critical and necessary part\" of the judgment in the first action; and (4) the party against whom collateral estoppel is asserted must have had a full and fair opportunity to litigate the issue in the prior proceeding.\nIf a court determines that these four elements have been met, the ruling from the prior proceeding stands, meaning that the party raising the issue of collateral estoppel wins on that claim. If at least one element is not met, the court hearing the consolidated cases would be free to interpret the issue independent of the D.C. Circuit's decision.\nAppendix B. NEPA and Current ACF Operations\nNEPA and the Exceptional Drought Operations\nWhen a federal agency takes an action that could significantly affect the environment, it is required to conduct a review under the National Environmental Policy Act (NEPA) (42 U.S.C. §§ 4321 et seq.). The Corps submitted an environmental assessment (EA) of the Exceptional Drought Operations (EDO) modification to its operations of Woodruff Dam with a finding of no significant impact (FONSI). This EA-FONSI means the Corps determined that any adverse environmental effects were not so significant that an environmental impact statement (EIS) was required. Under NEPA, an agency is required to take a hard look at the environmental consequences of its action. The U.S. Supreme Court has said NEPA \"merely prohibits uninformed—rather than unwise—agency action.\" The original case (see Alabama Case in Appendix A ) raises a NEPA complaint.\nLegal challenges to EAs are based on the following: timing, contents, and conclusions. The timing factor is whether the document informed the agency decision, rather than providing an after-the-fact rationalization of the agency action. Challenges based on the contents of a document argue that the document does not show the agency took a hard look at the relevant environmental effects. The conclusion that no EIS was required can also be a basis for a legal challenge.\nTiming and Content\nNEPA requires federal agencies to comply \"to the fullest extent possible.\" However, NEPA does not require any particular results, such as choosing the least harmful project. The U.S. Supreme Court has said NEPA \"merely prohibits uninformed—rather than unwise—agency action.\" Accordingly, where courts have found that agencies took a hard look at the relevant areas of environmental impact and satisfied the other demands of Section 4332(2)(C), the courts have upheld the NEPA process.\nTo comply with NEPA the agency must show that the environmental review informed the decision-making process. NEPA regulations promulgated by the Council on Environmental Quality (CEQ) address the timing of an environmental review. The regulations all require the environmental review before the agency decision, indeed, as early as practical. A section discussing timing of environmental reviews says:\nAn agency shall commence preparation of an environmental impact statement as close as possible to the time the agency is developing or is presented with a proposal (Sec. 1508.23) so that preparation can be completed in time for the final statement to be included in any recommendation or report on the proposal. The statement shall be prepared early enough so that it can serve practically as an important contribution to the decisionmaking process and will not be used to rationalize or justify decisions already made.\nAlthough this section refers specifically to an environmental impact statement (EIS), the rationale of not using an environmental document to justify decisions already made applies to environmental assessments as well. After all, EAs are intended to be performed to see whether an EIS must be prepared. Therefore, since they precede an EIS (if an EIS is deemed necessary), they must also precede the agency decision on a course of action. A specific regulatory reference to EAs further supports that the document is intended to contribute to the discussion of choosing an action: \"Agencies may prepare an environmental assessment on any action at any time in order to assist agency planning and decisionmaking.\"\nAnother section discusses the benefits of starting the environmental review at the earliest possible time: \"Agencies shall integrate the NEPA process with other planning at the earliest possible time to insure that planning and decisions reflect environmental values, and to avoid delays later in the process, and to head off potential conflicts.\"\nEarly in NEPA practice, the courts established that a NEPA review should occur before an agency action was decided upon: \"That the filing of an EIS should precede rather than follow federal agency action has been consistently recognized by the courts.\" The Fifth Circuit described the harm in reversing the order:\nWhenever an agency decision to act precedes issuance of its impact statement, the danger arises that consideration of environmental factors will be pro forma and that the statement will represent a post hoc rationalization of that decision. NEPA was intended to incorporate environmental factors and variables into the decisional calculus at each stage of the process.\nThe courts agree that a NEPA review is intended to inform the decision-making process. The Ninth Circuit addressed the timing of the environmental review in relationship to the agency decision. It said the purpose of the review is to provide \"decisionmakers with an environmental disclosure sufficiently detailed to aid in the substantive decision whether to proceed with the project in light of the environmental consequences.\" A reviewing court is likely to find that an agency failed to take a hard look at the environmental consequences of its action when the decision on what action to take predates the consideration of the environmental effects.\nThe contents of a NEPA document may also influence a court as to whether an agency took a hard look at the environmental effects of the proposed action. The regulations provide a general description of the contents. EAs are intended to be concise, but are also required to consider the need for the project, the environmental impacts of the project and its alternatives, alternatives required by section 102(2)(E), and a list of the agencies and persons consulted. In the context of an action that could affect species listed under the ESA, the NEPA review and the biological assessment (BA) under the ESA can be synchronized. The statutory provision for a BA contemplates that it will be used in conjunction with the NEPA process, and in fact can be considered part of a NEPA review, although it does not mandate that the two go together.\nAnother issue related to the contents of an EA is whether the document indicates that an EIS is needed or that there is no significant impact. Reasonable people can disagree as to what conclusion the data in an EA justify. Deference is given to the agency's determination by courts, however. That judicial deference can be reduced under certain circumstances, including when a court finds the agency has pre-judged the environmental impacts. The environmental document must adequately support the conclusions within it in order for a court to uphold it. Also, the record must show how the agency reached its determination: \"mere perfunctory or conclusory language will not be deemed to constitute an adequate record and cannot serve to support the agency's decision not to prepare an EIS.\"\nIf an EA with a finding of no significant impact is found to be inadequate, most courts will remand the action to the agency, where another EA could be prepared by the agency. In certain rare cases, courts have directed agencies to prepare an EIS, without leaving the matter to the agency's discretion.\nThe Right to Sue Under NEPA\nNEPA suits are brought under the Administrative Procedure Act (APA). Therefore, courts review whether an agency's action was arbitrary or capricious or otherwise not in accordance with law. Parties have to show standing. That limits plaintiffs to those who could show they were adversely affected or aggrieved by the agency action and that NEPA intended to protect against that actual or threatened injury. For example, an economic injury by itself is not the type of harm NEPA protects against and could not be the basis for a lawsuit. However, the reduced use of the river by a recreational kayaker could be the basis for standing. Plaintiffs could include individuals and groups, provided they were able to show they suffered an injury in fact that was different from the injury suffered by the community at large.\nAppendix C. ACF Electric Power Generation Issues\nACF Power generation includes hydroelectric facilities operated by the Corps, Georgia Power, and private entities as well as coal-fired, gas-fired, and nuclear plants operated by Southern Company and its subsidiaries, Southern Nuclear and Gulf Power.\nHydroelectric Generation\nHistorically, hydropower at dams on the ACF provides power primarily during peak demand. An issue is the effect of decreased river flows on turbine operations, specifically whether lower reservoir levels would drop below the turbine's water intake. Currently, water levels are sufficient to generate peaking power for the region. According to the Corps, the two main units at Buford Dam can generate as long as water levels do not fall below 1035 feet. Even before the reduced flows under the EDO, the two main units at Buford were projected to be operational at least until summer 2008.\nThe Southeastern Power Administration (SEPA) markets the power generated at Corps-operated dams to its customers in the Southeast. SEPA enters into five-year contracts with its preference customers (cooperatives and municipal power systems) with power delivery obligations based on 1981 drought levels. SEPA is obligated to meet its contract requirements whether or not sufficient hydroelectric power is available to meet its obligations. In the event of a hydropower shortfall, SEPA purchases power on the open market, generally at a cost greater than hydroelectric generation. The additional cost is passed on to SEPA's customers. SEPA does not own transmission lines and must contract with other utilities for use of the transmission system.\nNuclear Generation\nPlant Farley, located in southeastern Alabama near the town of Dothan, is a 1,711 megawatt (MW) nuclear plant; water is used in the cooling system. (See Figure 1 ) According to the SERC Reliability Corporation, in addition to being a large source of electricity, generation from Farley is also important for maintaining the stability of the local power system.\nPlant Farley requires a minimum water flow of 2,000 cfs to operate at full load under its current water permit. At lower flow, water discharges from the plant may have thermal or other impacts on the Chattahoochee River that could trigger regulatory action. Under the lowest flows in the EDO, the flow at Farley may drop to roughly 2,300 cfs, still above the plant's full load requirement.\nBecause of the plant's design, it appears unlikely that all of the generation from Farley could be lost due to low water conditions, at least in the foreseeable future. Farley is a two-unit plant. On September 28, 2007, Unit 1 went off-line for refueling, and through October and early November, water flows often dipped far below 2,000 cfs (e.g., to a flow of 1,048 cfs on November 3, 2007). This indicates that the plant can operate with one unit at full load with much less water than required for two unit operation. However, according to Southern Company, during the period October to May, when other generation and transmission assets are taken off-line for maintenance, both Farley units are necessary for reliable operation of the local power system.\nAccording to the SERC Reliability Corp., alternative, albeit more expensive, natural gas-fired generation could be used to compensate for reduced generation from Farley during off-peak seasons. However, these alternatives may be otherwise committed during summer peaks and very cold winter periods, in which case reliability risks would be greater if Farley generation is unavailable or reduced.\nCoal-Fired and Natural Gas-Fired Generation\nCoal-fired power plants, older (steam electric) gas-fired plants, and modern combined cycle gas plants are dependent on water for steam processing, and primarily cooling. Older power plants, those whose construction began prior to 1972, use a once-through system where the water is discharged back into the water source. Newer power plants do not discharge water, but use cooling towers to evaporate the water. In low water years, once-through plants may encounter issues with thermal discharge. The discharge from the power plant is typically warmer than the water source, and increases in the surrounding water temperature could affect the ability of fish and other aquatic species to survive. This effect is more pronounced with low stream flows. For both older and newer plants, water intakes for the plant must be below water level.\nAlthough several large coal and gas-fired plants are located along the ACF rivers, only the coal-fired Plant Scholz in the Florida Panhandle has been mentioned as potentially being affected by low flow in the Apalachicola River. (See Figure 1 ) This plant is considered a base load plant which generates power throughout the day. Although Scholz is small (capacity of 92 MW), the plant is a low-cost source of generation and is used in some situations to maintain the reliability of the local power system. Specifically, Scholz is needed during high-demand periods to help prevent overloading power lines under some circumstances, and during low demand periods to maintain voltage levels.\nAccording to Southern Company affiliate Gulf Power, the plant's owner, the plant can operate with flows at 5,000 cfs. With the EDO flows, the plant should be able to continue operating without modifications for three months. The plant does not expect any issues with thermal discharge with the lower flows. Plant operators plan to make some modifications in its intake system to be able to continue operating into the summer of 2008.\nIf Scholz needs to shut down, there do not appear to be any transmission constraints in the area that would prevent power from being delivered from other generating plants. However, the cost of purchased power or generation from other Southern Company assets may be more expensive than generation from Scholz and Farley. Also, the reduction in reserve margins from taking Plant Scholz and other generating plants off line could create reliability concerns, especially during the peak summer season."
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"question": [
"How has the drought impacted states in the Southeast?",
"What has escalated the ongoing conflict in the Southeast?",
"Why are Atlanta metropolitan water users concerned?",
"Why are lower basin stakeholders concerned?",
"What issue does the U.S. Army Corps of Engineerings face regarding federal reservoirs?",
"Why does this pose an issue?",
"What new obstacles has the Corps' faced in managing federal reservoirs?",
"How has Congress addressed southeast water supply issues?",
"What questions have been raised regarding the ACF situation?",
"Why might the ACF drought management set a precedent for drought responses?",
"How has the EDO amendment benefited the Apalachicola River?",
"What depends on Apalachicola River flows?",
"What continues as a subject of debate?",
"How have plans for the ACF been further improved?",
"Why has revision to the plan gained significance for the future?",
"What has EDO not harmed, at least immediately?",
"What entity approved EDO through June 1, 2008?"
],
"summary": [
"Drought in the Southeast has brought congressional attention to an ongoing interstate conflict among Alabama, Florida, and Georgia over water allocation in the Apalachicola-Chattahoochee-Flint (ACF) river system.",
"Drawdown of Lake Lanier, the uppermost federal reservoir in the ACF basin, in fall 2007 to support minimum flows in the lower basin's Apalachicola River escalated the conflict.",
"The Atlanta metropolitan area's municipal and industrial water users are concerned about drawdown of their principal (in some cases, their only) water supply. They question the justification for the minimum flow requirements.",
"Lower basin stakeholders are concerned about sustaining river flows to meet their municipal, electricity, and ecosystem needs and are questioning the sufficiency of Georgia's municipal, industrial, and agricultural water conservation efforts.",
"The issue for the U.S. Army Corps of Engineers (Corps) is how to manage federal reservoirs to equitably meet upper and lower basin multipurpose water needs, especially during drought.",
"The challenge is complying with federal law (e.g., the Endangered Species Act (ESA)); minimizing harm to the river and Apalachicola Bay species, ecosystems, and oyster industry; and providing flows for hydropower and thermoelectric cooling, while also providing municipal and industrial water supply security.",
"The Corps' challenge has increased as basin water demands have increased (e.g., water supply to support the growing Atlanta metro area, agriculture's increased reliance on irrigation, and ecosystem and species needs), creating conflicts between water in storage and flows for in-stream purposes.",
"Legislation in the 110th Congress related to the ACF and southeast water supply issues includes H.R. 135, H.R. 2650, H.R. 3847, H.R. 5587, and S. 2165.",
"Is the ACF a harbinger of conflicts between ESA implementation and other water uses across the nation? Is the ACF a testing ground for both federal river management and resource allocation during drought in multi-state basins with riparian water laws?",
"ACF drought management may set a precedent for drought responses on other rivers regulated by federal dams. In November 2007, the Corps began managing the ACF under an Exceptional Drought Operations (EDO) amendment to its previous operations plan (which consisted of a 2006 Interim Operations Plan (IOP) amending a draft 1989 comprehensive plan).",
"The EDO lowered the minimum flow required in the Apalachicola River and allowed for greater reservoir refill before resuming normal operations, thus improving upper basin water supply security.",
"Four species protected by the ESA depend on Apalachicola River flows.",
"The EDO's immediate and long-term species impacts continue as subjects of study and debate.",
"On April 15, the Corps submitted to FWS a modification to the IOP; the Corps proposes that the modification be implemented starting June 1 until a new long-term ACF comprehensive plan is adopted.",
"With the failure of recent efforts by the Administration to broker a tri-state water allocation agreement by March 2008, the revision has gained additional significance for the future of ACF river management.",
"The EDO has not caused significant immediate harm to electricity generation or grid reliability.",
"The U.S. Fish and Wildlife Service (FWS) approved the EDO through June 1, 2008."
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CRS_R45162
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{
"title": [
"",
"The \"Too-Big-To-Fail\" Problem",
"TBTF Financial Institutions During the 2007-2009 Financial Crisis",
"Title I: Enhanced Prudential Standards for Systemically Important Financial Institutions",
"Designation of Non-Banks for Enhanced Prudential Regulation",
"Dodd-Frank Section 113 and FSOC Guidance",
"Non-Bank Designations to Date",
"AIG",
"GE Capital",
"Prudential",
"MetLife",
"Criticisms of Title I and Responses",
"Proposals to Alter Title I",
"Proposed Legislation",
"The Trump Administration's Views",
"Title II: Orderly Liquidation Authority",
"Pre-Dodd-Frank Resolution Mechanisms: Bankruptcy vs. FDIC Resolution",
"Dodd-Frank and the Orderly Liquidation Authority",
"Legislative History",
"Title II and the Orderly Liquidation Authority",
"The Decision to Invoke Title II",
"The FDIC's Powers as Receiver",
"Funding a Resolution Under Title II",
"Title II's Treatment of QFCs",
"Administrative Rules",
"Early FDIC Rules",
"Single Point of Entry (SPOE) Resolution (FDIC Notice for Public Comment)",
"Total Loss-Absorbing Capacity (TLAC) and \"Clean Holding Companies\"",
"QFCs",
"Criticisms of Title II and Responses",
"Proposals to Alter Title II",
"Proposed Legislation",
"The Trump Administration's Views",
"Appendix. Glossary"
],
"paragraphs": [
"T he prospect of a large financial institution's failure often presents policymakers with a stark choice. Regulators can \"bailout\" a distressed institution, risking taxpayer money and arguably creating incentives for management, shareholders, and creditors of similar institutions to take excessive risks. Alternatively, the government can allow the institution to fail, running the risk of financial destabilization. Before the 2007-2009 financial crisis, regulators relied on a variety of prudential regulations, federal deposit insurance, and the Federal Reserve's emergency lending power to limit the risk of commercial bank failures. Commercial banks are also subject to a special insolvency regime administered by the Federal Deposit Insurance Corporation (FDIC), in which the FDIC has robust authorities to rapidly resolve failed banks outside of the Bankruptcy Code.\nHowever, many non-bank financial institutions fall outside the ambit of these regulations despite facing risks similar to those confronting commercial banks. Many commentators viewed the distress and failure of a number of these institutions during the 2007-2009 crisis as highlighting the inadequacy of existing prudential regulations for such firms, and of the Bankruptcy Code for resolving their failure. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) adopted two general solutions to these perceived problems. First, Title I of the Act created the Financial Stability Oversight Council (FSOC) and granted it the authority to designate systemically important non-bank financial companies for enhanced prudential regulation by the Federal Reserve. Second, Title II of Dodd-Frank established the Orderly Liquidation Authority (OLA), a special resolution regime outside of the Bankruptcy Code that can be invoked for systemically important financial institutions.\nAs discussed in more detail below, federal regulatory agencies have pursued a number of measures to implement Titles I and II of Dodd-Frank. And 10 years after the crisis, legal commentators continue to debate whether these provisions have improved the resiliency of the financial system. This report provides an overview of how regulatory agencies have implemented Dodd-Frank's systemic risk provisions concerning non-bank financial institutions, and the legal debates surrounding proposals to repeal or change those provisions. In order to provide necessary background, the first two sections of the report discuss the nature of the \"too-big-to-fail\" problem and the 2007-2009 financial crisis. The report then provides an overview of Titles I and II, their implementation by the relevant federal agencies, criticisms of those provisions and responses, and legislative proposals to change them. An Appendix to this report contains a glossary that defines certain key terms in the report.",
"When large, interconnected financial institutions become distressed, policymakers often face a choice between (1) a taxpayer-funded bailout, and (2) the destabilization of the financial system—a dilemma that commentators have labeled the \"too-big-to-fail\" (TBTF) problem. Two features of the financial system help explain the origin of the TBTF problem. First, banks and certain other financial institutions are almost always highly leveraged, meaning that their shareholder equity is a small fraction of their total assets, and that they accordingly fund their assets with large amounts of borrowing. Second, banks and certain other financial institutions often fund themselves with large amounts of short-term debt, while investing in longer-term loans and other illiquid assets—a practice called \"maturity transformation.\" While commentators generally agree that maturity transformation is socially valuable, the process makes financial institutions vulnerable to liquidity \"runs.\" That is, when a financial institution's short-term creditors become concerned about its solvency or liquidity, they have incentives to demand immediate conversion of their claims into cash, or to reduce their exposure in other ways that force the institution to sell its illiquid assets at significantly discounted prices.\nA \"run\" on one financial institution can spread to other institutions that do business with it. Small banks typically hold deposit balances at larger banks, and large banks, securities firms, and insurance companies often face significant exposure to one another through their over-the-counter derivatives portfolios. Accordingly, troubles at one financial institution can spread to others, resulting in additional \"runs\" and a \"contagious panic throughout the financial system that causes otherwise solvent financial institutions to become insolvent.\" This type of financial \"contagion\" can cause asset price implosions as institutions liquidate assets in order to meet creditor demands, further impairing their ability to lend and the ability of businesses to raise capital. Faced with a choice between bailouts and economic collapse, policymakers have generally opted for bailouts, arguably creating incentives for financial institutions to take excessive risks and grow larger than is socially optimal.",
"The 2007-2009 financial crisis highlighted the significance of the TBTF problem. During that time, the United States experienced what many commentators believe was the worst financial crisis since the Great Depression, triggering a severe recession. According to many observers, a principal cause of the crisis was the collapse of a bubble in the housing market that had developed in the early and mid-2000s. As this bubble popped over the course of 2007 and 2008, many financial institutions experienced large losses related to the real estate market.\nIn March 2008, Bear Stearns—the fifth largest American investment bank at the time—informed the Federal Reserve that it was unable to refinance its short-term debt as a result of a \"run\" by its short-term creditors. Believing that the bankruptcy of Bear Stearns raised \"the potential for contagion to similarly situated firms,\" and the possibility of \"serious[] disrupt[ions]\" to the stability of financial markets, the Federal Reserve exercised its authority to lend to non-banks in \"unusual and exigent circumstances\" under Section 13(3) of the Federal Reserve Act. According to then-Chairman of the Federal Reserve Ben Bernanke, policymakers \"were reasonably sure that [Bear Stearns's] unexpected bankruptcy filing would ignite ... panic.\" A bankruptcy proceeding, Bernanke explained, could seriously damage the money market funds that lent to Bear Stearns and other corporations, and \"lock up the cash of many other creditors, potentially for years.\" Likewise, according to Bernanke, unwinding Bear Stearns's derivatives portfolio would have \"prove[n] chaotic\" because of its size and complexity. Moreover, a decision by JP Morgan, the \"clearing bank\" for Bear Stearns's repurchase agreements (repos), to liquidate collateral on behalf of Bear Stearns's creditors could drive securities prices down even further, \"leading to a new wave of losses and write-downs\" and possible \"runs\" on other investment banks.\nAccordingly, on March 14, the Federal Reserve Bank of New York (New York Fed) extended a bridge loan of $12.9 billion to Bear Stearns as it worked to orchestrate a deal to save the investment bank. On March 17, the Federal Reserve shepherded an acquisition of Bear Stearns by JP Morgan. In order to facilitate the acquisition, the Federal Reserve again exercised its Section 13(3) authority, creating an entity called Maiden Lane LLC and lending it roughly $29 billion to purchase certain mortgage assets from Bear Stearns.\nAlthough the Bear Stearns rescue temporarily calmed markets, similar troubles surfaced later in 2008 at Lehman Brothers (Lehman), the nation's fourth largest investment bank at the time. Over the weekend of September 12, the New York Fed attempted to coordinate a private-sector solution that would avert a Lehman bankruptcy. During these negotiations, regulators took the position that no government money would be committed to rescuing Lehman, unlike the case of Bear Stearns six months earlier.\nThe government's attempts to broker an acquisition of Lehman ultimately failed. Bank of America, one of the potential acquirers, purchased the also-troubled investment bank Merrill Lynch instead. British regulators of Barclays, another potential purchaser, refused to approve a proposed deal without a shareholder vote. Unable to secure government support or find a private buyer, Lehman declared bankruptcy on September 15, 2008.\nLehman's bankruptcy reverberated throughout financial markets. On September 15, the Dow Jones Industrial Average dropped more than 500 points, its worst single-day decline in seven years. Shares of Goldman Sachs and Morgan Stanley, two of the largest remaining investment banks, lost an eighth of their value. Lehman's bankruptcy also precipitated a \"run\" on money market funds. The Reserve Primary Fund, a large fund that had invested in Lehman's commercial paper, \"broke the buck,\" meaning that its asset value per share fell below $1. Because money market investors had come to expect that fund shares would always be worth $1, the troubles at the Reserve Primary Fund precipitated a $300 billion \"run\" on other funds, threatening a key source of short-term financing for large and medium-sized companies.\nAlso in September 2008, American International Group (AIG)—the nation's largest insurance company at the time—came under heavy financial pressure. During the real estate boom, one of AIG's affiliates had accumulated significant exposure to the housing market by selling \"credit default swaps\" (CDSs) on mortgage bonds, which provided their purchasers with credit protection in the event that the bonds defaulted. On September 15, the day Lehman declared bankruptcy, AIG suffered a credit rating downgrade that required it to post margin on its CDS obligations. Later that day, AIG informed the New York Fed that it was unable to access the commercial paper market in order to meet the margin call. As it had done with Bear Stearns, the Federal Reserve invoked its Section 13(3) authority to rescue AIG, reasoning that an AIG bankruptcy would have devastating effects on the financial system. On September 16, the Federal Reserve announced that it would provide AIG with an $85 billion credit line in exchange for a 79.9 percent stake in the firm.\nIn the fall of 2008, troubles at other large institutions rocked financial markets. Fannie Mae and Freddie Mac—government-sponsored enterprises that purchased and guaranteed mortgage loans and securities—were placed into conservatorships. The FDIC took over Washington Mutual, the nation's third largest mortgage lender, and sold it to JP Morgan. Goldman Sachs and Morgan Stanley, the two largest remaining investment banks, converted to bank holding companies to assure themselves continued access to the Federal Reserve's \"discount window,\" among other reasons. Numerous European financial institutions suffered \"runs.\" In October 2008, President George W. Bush signed the Emergency Economic Stabilization Act. The Act established the Troubled Asset Relief Program (TARP), pursuant to which the federal government would eventually disburse over $400 billion in the form of investments in financial institutions and the automotive industry, among other things.\nThe troubles in the financial system also spilled over to the real economy. U.S. households lost an estimated 26 percent of their wealth ($17 trillion) between mid-2007 and early 2009. And between 2008 and December 2009, the economy lost an estimated 8.3 million jobs.\nIn response to the crisis, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), legislation that some commentators characterized as \"the most ambitious overhaul of financial regulation in generations.\" Among other things, Dodd-Frank reformed certain aspects of securities and derivatives markets, imposed a variety of requirements related to mortgage standards, and created a new federal agency tasked with consumer financial protection (the Consumer Financial Protection Bureau). Other portions of Dodd-Frank are specifically directed at the systemic risk created by TBTF financial institutions. In order to minimize the risks that large financial institutions like Lehman and AIG fail, Title I of Dodd-Frank establishes an enhanced prudential regulatory regime for certain large bank holding companies and non-bank financial companies. And in order to resolve systemically important financial institutions in the event that they nevertheless experience financial distress, Title II establishes a new resolution regime available for such institutions outside of the Bankruptcy Code. The remaining sections of this report discuss the legal issues raised by Titles I and II, their implementation by federal regulatory agencies, and proposals to reform them.",
"Regulators have traditionally relied upon a variety of tools to minimize the risks of financial institution failures. In order to reduce the risk of insolvency, regulators have imposed capital requirements on commercial and investment banks. In order to reduce depositors' incentives to \"run,\" regulators require all commercial banks to obtain minimum levels of deposit insurance from the Federal Deposit Insurance Corporation (FDIC). In order to address liquidity problems, the Federal Reserve has the authority to serve as a \"lender of last resort\" by making \"discount window\" loans to commercial banks. Moreover, the Federal Reserve can lend to non-banks in \"unusual and exigent circumstances\" pursuant to its authority under Section 13(3) of the Federal Reserve Act. However, as the 2007-2009 financial crisis arguably demonstrated, sometimes these measures have proven insufficient to prevent financial institution failures.\nIn response to these concerns, Title I of Dodd-Frank establishes an enhanced prudential regulatory regime for certain large financial institutions. Specifically, the Title I regime applies to (1) all bank holding companies with total consolidated assets of $50 billion or more, and (2) any non-bank financial companies that the Financial Stability Oversight Council (FSOC) designates as systemically important. Section 165 of Dodd-Frank directs the Federal Reserve to impose prudential standards on these institutions that \"are more stringent than\" those applicable to other bank holding companies and non-bank financial companies, and that \"increase in stringency\" based on certain statutorily-prescribed considerations. These enhanced standards include\n1. risk-based capital requirements and leverage limits; 2. liquidity requirements; 3. overall risk management requirements; 4. a requirement that the relevant companies develop resolution plans (so-called \"living wills\") describing how they can be rapidly resolved in the event of material distress or failure; and 5. credit exposure reporting requirements.\nCongress is currently considering whether to change the first basis for imposition of enhanced prudential regulations on financial institutions—the automatic $50 billion threshold for bank holding companies. That policy question is addressed in another recent Congressional Research Service report. This section of the report accordingly provides a legal overview of (1) FSOC's process for designating non-banks as systemically important and FSOC's designations to date, (2) criticisms of FSOC's designation process and responses, and (3) proposals to reform FSOC's designation process.",
"",
"As discussed, during the 2007-2009 financial crisis, troubles at certain non-bank financial firms (such as Lehman and AIG) \"contributed to a broad seizing up of financial markets and stress at other financial firms.\" Accordingly, in the aftermath of the crisis, the Obama Administration proposed creating a council to identify non-bank financial companies whose failure could pose a threat to financial stability and subjecting them to consolidated supervision by the Federal Reserve irrespective of their legal structure. Section 113 of Dodd-Frank implemented this recommendation, creating FSOC and granting it the authority to designate certain non-bank financial companies for enhanced supervision by the Federal Reserve.\nSection 113 provides that FSOC may, by a vote of at least two-thirds of its voting members (which must include the Treasury Secretary in the majority), designate non-bank financial companies as systemically important under either of two standards :\n1. when \"material financial distress\" at a non-bank financial company \"could pose a threat to the financial stability of the United States,\" or 2. when the \"nature, scope, size, scale, concentration, interconnectedness, or mix of the [non-bank financial company's] activities\" could pose that same threat.\nIn making such a designation, FSOC must consider, among any other risk-related factors that FSOC deems appropriate, the following factors:\nthe company's leverage; the extent and nature of its off-balance-sheet exposures; the extent and nature of the transactions and relationships of the company with other significant nonbank financial companies and significant bank holding companies; the importance of the company as a source of credit for low-income, minority, or underserved communities, and the impact that the failure of such company would have on the availability of credit in such communities; the extent to which assets are managed rather than owned by the company, and the extent to which ownership of assets under management is diffuse; the nature, scope, size, scale, concentration, interconnectedness, and mix of the activities of the company; the degree to which the company is already regulated by 1 or more primary financial regulatory agencies; the amount and nature of the financial assets of the company; the amount and types of the liabilities of the company, including the degree of reliance on short-term funding.\nDodd-Frank requires that FSOC provide a non-bank financial company with written notice of a proposed systemic risk designation, including an explanation for the basis of the proposed determination. A non-bank that receives a notice of a proposed determination has 30 days to request an opportunity for a written or oral hearing before FSOC to contest the proposed determination, and FSOC has 60 days after such hearing to notify the non-bank financial company of its final determination. Once that determination is made, the designated non-bank is subject to the enhanced prudential regulatory regime.\nA designated company can then seek judicial review of FSOC's final determination within 30 days in either the U.S. district court for the judicial district in which its home office is located, or in the U.S. District Court for the District of Columbia. The court's review is limited to whether FSOC's determination was \"arbitrary and capricious,\" a standard pursuant to which a court evaluates whether an agency:\nhas relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it cannot be ascribed to a difference in view of the product of agency expertise.\nFSOC is required to annually re-evaluate systemic risk designations for non-bank financial companies and may rescind such designations upon a vote of two-thirds of its voting members that includes the Treasury Secretary.\nIn April 2012, FSOC issued guidance concerning the Title I designation process and standards for non-banks. In the guidance, FSOC organized the 10 statutory factors guiding systemic risk designations into six \"categories\" of considerations:\n1. interconnectedness; 2. substitutability (i.e., the extent to which other firms could timely provide similar financial services at a similar price and quantity if a non-bank financial company withdrew from a particular market); 3. size; 4. leverage; 5. liquidity risk and maturity mismatch; and 6. existing regulatory scrutiny.\nFSOC explained that the first three categories \"seek to assess the potential for spillovers from [a] firm's distress,\" while the remaining three categories \"seek to assess how vulnerable a company is to financial distress.\"\nThe guidance further provided that FSOC intends to assess how a non-bank's financial stress could be transmitted to other firms or markets through any of three \"transmission channels\":\n1. exposure (i.e . , the extent to which creditors, counterparties, investors, or other market participants are exposed to the company); 2. asset liquidation (i.e., whether the company holds assets that, if liquidated quickly, would cause a fall in asset prices); and 3. critical function or service (i.e., whether the company provides a critical function or service that is relied upon by market participants and for which there are no ready substitutes).\nThe FSOC guidance also outlined a three-stage process for systemic risk designations. FSOC explained that during Stage 1, it will apply \"a set of uniform quantitative metrics ... to a broad group\" of non-bank financial companies in order to identify companies \"for further evaluation.\" According to the guidance, during Stage 2, FSOC will apply \"a wide range of quantitative and qualitative information\" about the companies identified in Stage 1, and \"begin the consultation process\" with the company's \"primary financial regulatory agencies or home country supervisors.\" After Stage 2 is completed, companies selected for additional review are notified that they are being considered for designation as systemically important. Finally, during Stage 3, FSOC will evaluate information collected from the company under consideration, in addition to information considered during Stages 1 and 2, and will decide whether to make a proposed determination that the company be subject to enhanced supervision.",
"To date, FSOC has designated four non-bank financial companies for enhanced supervision: AIG, General Electric Capital Corporation (GE Capital), Prudential Financial (Prudential), and MetLife. However, FSOC later rescinded the designations of two of these entities—AIG and GE Capital—based on changed circumstances at those companies. Further, MetLife successfully challenged its designation by FSOC in federal district court, leaving Prudential as the only non-bank financial company subject to the enhanced prudential regulatory regime at the time of publication of this report. The following subsections of the report discuss the designations of each of these institutions as illustrations of how FSOC has implemented its designation authority.",
"FSOC designated AIG for enhanced supervision in July 2013. In designating AIG, FSOC explained that although a large number of the company's insurance products (such as life insurance and annuities) are intended to be long-term liabilities, many also contain \"features that could make them vulnerable to rapid and early withdrawals by policyholders.\" FSOC further explained that if AIG were to encounter sufficiently severe stress, \"funds from products allowing for early withdrawals might be withdrawn regardless of the size of associated surrender charges or tax penalties,\" forcing AIG to \"liquidate a substantial portion of its large portfolio of relatively illiquid corporate and foreign bonds, as well as asset-backed securities.\" Such an asset liquidation could, in FSOC's view, have disruptive effects on financial markets and \"cause financial contagion if the negative sentiment and uncertainty associated with material distress at AIG spread[] to other insurers.\" FSOC also concluded (1) that \"[a] large number of corporate and financial entities have significant exposures to AIG,\" (2) that because AIG was the leading commercial insurance underwriter in the U.S., its exit from the marketplace \"could reduce the availability and affordability of certain insurance products,\" and (3) that AIG's \"highly complex\" interstate and cross-border structure complicated its resolvability, further aggravating the effects that its financial distress could have on financial stability. AIG did not contest FSOC's designation.\nAfter an annual re-evaluation required by Dodd-Frank, FSOC voted to rescind its designation of AIG in September 2017. In rescinding its designation, FSOC explained that AIG had reduced the amounts of its total debt, short-term debt, derivatives portfolio, securities lending, repos, and total assets. FSOC further indicated that additional analyses conducted for the purposes of its re-evaluation, \"including additional consideration of the effects of incentives and disincentives for [AIG's] policyholders to surrender their life insurance policies and annuities,\" indicated \"that there is not a significant risk that a forced asset liquidation by AIG would disrupt market functioning.\" FSOC also noted that AIG had sold certain businesses, \"reduced its multi-jurisdictional operations, simplified its legal structure, and reduced its size and global footprint,\" making it \"notably different from the company as it existed leading up to the financial crisis.\"",
"On the same day it designated AIG for enhanced supervision, FSOC similarly designated GE Capital, a savings-and-loan holding company and wholly owned subsidiary of the General Electric Company. In designating GE Capital, FSOC explained that the company was one of the largest financial holding companies in the United States and \"a significant source of credit to the U.S. economy.\" FSOC further observed that large global banks and non-bank financial companies had significant exposure to GE Capital through their purchase of its commercial paper and long-term debt, and provision of backup lines of credit. Financial distress at GE Capital, FSOC reasoned, could trigger \"runs\" on money market funds that would in turn \"impair the ability of financial and other firms to fund their operations.\" FSOC also concluded that GE Capital's interstate and cross-border structure, coupled with its intercompany funding and shared service agreements, complicated its resolvability. GE Capital did not contest FSOC's designation.\nAfter an annual re-evaluation required by Dodd-Frank, FSOC rescinded its designation of GE Capital in June 2016, explaining that since its designation, GE Capital had \"fundamentally changed its business ... [t]hrough a series of divestitures, a transformation of its funding model, and a corporate reorganization.\" Moreover, FSOC noted that since its designation, GE Capital had decreased its total assets by more than 50 percent, shifted away from short-term debt, and reduced its interconnectedness with large financial institutions. Finally, FSOC observed that as a result of divestitures and changes to its business, GE Capital no longer owned any U.S. depository institutions, nor did it provide financing to consumers or small business customers.",
"Slightly less than two months after designating AIG and GE Capital, FSOC designated Prudential, a large financial services company and one of the largest U.S. insurers, for enhanced supervision. In designating Prudential, FSOC explained that \"[c]orporations, banks, and pension plans have exposures to Prudential through retirement and pension products, corporate- and bank-owned life insurance, and other group insurance products.\" Moreover, FSOC reasoned that Prudential's capital market activities—specifically, its derivatives activities, use of credit lines from large banks, securities lending, and reverse repo portfolio—further \"expand[ed] its connections to other financial firms and markets.\" As with AIG, FSOC reasoned that if Prudential faced pressure to rapidly liquidate its illiquid assets to meet withdrawals, securities markets could face significant disruptions, and other insurance companies could face \"runs\" of their own triggered by heightened uncertainty. FSOC also concluded that because of its multi-state and cross-border operations, and because there was \"no precedent for the resolution of an insurance company the size and scale of Prudential,\" the company would likely be difficult to resolve in an orderly fashion. Prudential requested a hearing to contest FSOC's proposed determination, and FSOC made its final determination after reviewing Prudential's written submissions and holding an oral hearing.\nAs a result of FSOC's rescission of its designations of AIG and GE Capital, and a decision by the U.S. District Court for the District of Columbia overturning MetLife's designation (discussed in \" MetLife \" infra ), Prudential remains the only non-bank financial company designated for enhanced supervision as of the publication of this report. However, in February 2018, Prudential announced that FSOC was in the process of conducting its annual review of its designation, and that the company intended to make its case that it does not meet the statutory standards for designation.",
"Over a year after its designation of Prudential, FSOC designated MetLife, another large insurance company, for enhanced supervision. MetLife's designation came after a lengthy engagement process that reportedly included 12 meetings between FSOC and the company's representatives, the submission of over 21,000 pages of materials to FSOC, and an oral hearing challenging FSOC's proposed determination. In designating MetLife, FSOC reasoned that MetLife's financial distress \"could lead to an impairment of financial intermediation or financial market functioning that could be sufficiently severe to inflict significant damage on the economy.\" Specifically, FSOC reasoned that large financial intermediaries had significant exposure to MetLife because of its institutional products and capital market activities, such as funding agreements, guaranteed investment contracts, pension closeouts, and securities lending agreements. Moreover, as with AIG and Prudential, FSOC concluded that a large-scale forced liquidation of MetLife's assets could disrupt securities markets. FSOC also reasoned that MetLife's interstate and cross-border operations complicated its resolvability, further exacerbating the effects its distress might have on financial stability.\nMetLife proceeded to challenge FSOC's decision before the U.S. District Court for the District of Columbia, which invalidated FSOC's determination in March 2016. In holding that FSOC's determination was \"arbitrary and capricious,\" the court explained that by assessing only the potential impact of MetLife's financial distress, and not MetLife's vulnerability to financial distress, FSOC had violated its April 2012 guidance, which indicated that FSOC would consider both issues and divided its \"categories\" of analysis accordingly.\nThe court also concluded that FSOC had failed to abide by its April 2012 guidance—which provided that a non-bank financial company could threaten financial stability only \"if there would be an impairment of financial intermediation or of financial market functioning that would be sufficiently severe to inflict significant damage on the broader economy\" —by failing to project \" what the losses would be, which financial institutions would have to actively manage their balance sheets, or how the market would destabilize as a result\" of MetLife's distress. Instead, the court observed, FSOC had only \"summed gross potential market exposures\" to MetLife in conducting its \"transmission channel\" analysis, without analyzing the extent to which MetLife's creditors were secured or other mitigating factors.\nIn arriving at this conclusion, the court acknowledged that counterparties' gross exposure to MetLife is relevant to the second statutory standard for designation—that a company's \"nature, scope, size, scale, concentration, interconnectedness, or mix of ... activities\" alone \"could pose a threat to\" financial stability. However, it interpreted FSOC's explanation for its designation as relying on only the first statutory standard, which allows for designation when \"material financial distress\" at a non-bank financial company \"could pose a threat to the financial stability of the United States.\" Because FSOC's guidance had provided that this standard requires a finding that a firm's financial distress would impair financial market functioning to a degree sufficient to inflict significant damage on the broader economy, and FSOC had not adequately supported that finding, the court held that its determination was arbitrary and capricious.\nFinally, the court held that FSOC's designation of MetLife was arbitrary and capricious because FSOC failed to consider the costs of its designation (which MetLife alleged ran in the \"billions of dollars\")—a consideration that it explained is \"essential to reasoned rulemaking.\"\nAlthough FSOC initially appealed the district court's decision to the U.S. Court of Appeals for the D.C. Circuit, it filed a motion to dismiss the appeal in January 2018, which the court granted, ending the case.",
"Title I and FSOC's process for designating non-banks as systemically important have attracted some criticism. Some commentators have criticized FSOC for failing to provide firms under consideration with meaningful, specific information about the criteria used in determining whether a firm is systemically important. Relatedly, some observers have questioned the rigor of FSOC's analysis of companies under consideration for designation. Others have raised concerns about the transparency of the designation process. Finally, some commentators have criticized FSOC for not considering the costs of designations in conducting its analyses—a criticism echoed in the district court's decision overturning FSOC's designation of MetLife.\nIn response, defenders of FSOC have argued that the \"malleable standard[s]\" FSOC applies in determining whether companies qualify as systemically important effectively deter companies from seeking out systemically risky activities. According to this line of argument, the adoption of precise mathematical formulas for distinguishing between safe and risky companies would encourage companies to seek out activities with risks that are not adequately reflected in such rigid standards. These commentators contend that vesting FSOC with \"broad discretion\" to designate firms as systemically important is appropriate given the inherent difficulty of identifying systemic risks and the perils of failing to identify such risks. Moreover, in responding to arguments that it should consider the costs of designations, FSOC has argued that because Dodd-Frank's statutory text does not require such analysis, it need not engage in that inquiry.",
"",
"A number of bills that would alter FSOC's authority to designate non-banks for enhanced regulation have been introduced in the 115 th Congress. The Financial CHOICE Act of 2017, as passed by the House of Representatives in June 2017, would repeal FSOC's authority to designate non-banks for enhanced regulation altogether. H.R. 4061 , the Financial Stability Oversight Council Improvement Act of 2017, which was reported out of the House Committee on Financial Services in March 2018, proposes more limited changes to FSOC's authority. Specifically, H.R. 4061 would require FSOC to consider \"the appropriateness of the imposition of prudential standards as opposed to other forms of regulation to mitigate the identified risks\" in determining whether to designate a non-bank as systemically important. The bill would further require that FSOC provide designated companies with the opportunity to submit written materials contesting their designation during FSOC's annual reevaluation process. If FSOC determines during a re-evaluation that a designation should not be rescinded, the bill would require it to provide notice to the designated company \"address[ing] with specificity\" how it assessed the relevant statutory factors in light of the company's written submissions.",
"In November 2017, the Trump Administration's Treasury Department released a report outlining four general recommendations for reforming FSOC's process for designating non-banks as systemically important. First, the report recommended that FSOC adopt an \"activities-based\" or \"industry-wide\" approach to assessing potential risks posed by non-banks. Under this approach, FSOC would prioritize identifying specific financial activities and products that could pose risks to financial stability, work with the primary financial regulatory agencies to address those specific risks, and consider individual firms for designation as systemically important only as a matter of last resort if more limited actions aimed at mitigating discrete risks are insufficient to safeguard financial stability.\nSecond, the Treasury Department recommended that FSOC \"increas[e] the analytical rigor\" of its designation analyses. Specifically, the Report recommended that FSOC: (1) consider any factors that might mitigate the exposure of a firm's creditors and counterparties to its financial distress; (2) focus on \"plausible\" (and not merely \"possible\") asset liquidation risks; (3) evaluate the likelihood that a firm will experience financial distress before evaluating how that distress could be transmitted to other firms; (4) consider the benefits and costs of designations; and (5) collapse its three-stage review process into two steps, notifying companies that they are under active review during Stage 1 and voting on proposed designations after the completion of Stage 2.\nThird, the Treasury Department recommended enhancing engagement between FSOC and companies under review, and improving the designation process's transparency. Specifically, the report recommended that FSOC: (1) engage earlier with companies under review and \"explain ... the key risks\" that FSOC has identified, (2) \"undertake greater engagement\" with companies' primary financial regulators, and (3) publicly release explanations of its designation decisions.\nFourth, the Treasury Department recommended that FSOC provide \"a clear off-ramp\" for non-banks designated as systemically important. The report recommended that FSOC: (1) highlight the key risks that led to a company's designation, (2) \"adopt a more robust and transparent process for its annual reevaluations\" that \"make[s] clear how companies can engage with FSOC ... and what information companies should submit during a reevaluation,\" (3) \"develop a process to enable a designated company to discuss potential changes it could make to address the risks it could pose to financial stability,\" and (4) \"make clear that the standard it applies in its annual reevaluations is the same as the standard for an initial designation of a nonbank financial company.\" FSOC has yet to act on these recommendations.",
"While Title I of Dodd-Frank is aimed at minimizing the likelihood that systemically important financial institutions experience financial distress, Title II is directed at resolving such institutions in a rapid and orderly fashion in the event that they nevertheless become distressed. To accomplish this goal, Title II establishes a new resolution regime available for systemically important financial institutions outside of the Bankruptcy Code. The following sections of the report discuss Title II and proposals for its reform. First, the report provides an overview of the resolution mechanisms available for financial institutions before Dodd-Frank. Second, the report discusses Title II's legislative history and the new resolution authority that it establishes. Third, the report canvasses a variety of administrative rules with important implications for Title II. Fourth, the report discusses certain criticisms of Title II, and responses to those criticisms. Finally, the report discusses proposals to repeal or change Title II.",
"Commercial banks, broker-dealers, and insurance companies are subject to different insolvency regimes. Commercial banks must utilize a special resolution regime administered by the FDIC. Before Dodd-Frank, broker-dealers and bank holding companies were limited to the Bankruptcy Code. Finally, before Dodd-Frank, insurance companies were limited to state law insolvency proceedings.\nThe purpose and mechanics of bankruptcy and the FDIC's resolution regime differ in important respects. A non-bank corporation may generally file a voluntary bankruptcy petition with the clerk of a federal bankruptcy court, or the company's creditors can file a petition for involuntary bankruptcy if certain conditions are met. By contrast, a bank's chartering agency, primary federal regulator, or the FDIC initiates the bank resolution process based upon one or more statutorily-established grounds, including a bank's undercapitalization. Accordingly, a bank need not have defaulted on any outstanding obligations or be deemed insolvent for an involuntary resolution to begin.\nCorporate bankruptcies are usually resolved in special federal bankruptcy courts. In a Chapter 7 bankruptcy, a court appoints an agent such as a trustee to coordinate the insolvency process. In a bankruptcy reorganization, the insolvent corporation's management is generally allowed to continue operating the company and has exclusive rights to develop a reorganization plan for a period of 120 days after the petition is filed, which may be extended under certain circumstances. Many of the trustee or management's decisions—for example, to release collateral to secured creditors, pay employees, and obtain debtor-in-possession financing (i.e., financing used to keep the company operating as a going concern)—are subject to court approval. Moreover, any reorganization plan is subject to the unanimous agreement of a company's creditors unless the court determines that certain conditions are met. These and other decisions by the bankruptcy court are reviewable by higher courts.\nBy contrast, bank resolutions are handled in administrative proceedings conducted by the FDIC. When the FDIC commences administrative resolution proceedings, it generally removes a bank's senior management without notice or a hearing and assumes control of the bank. The FDIC unilaterally makes decisions related to the liquidation (pursuant to a receivership) or continued operation (pursuant to a conservatorship) of the failed bank. For FDIC resolutions of a commercial bank, there is no separate oversight authority analogous to the relationship between the bankruptcy court and trustee or management, and there is no mechanism for creditors, management, or shareholders to participate in the resolution process beyond filing claims and providing requested information. While some of the FDIC's decisions during this process are subject to judicial review, others—including decisions to disallow creditor claims that are not proved to the FDIC's satisfaction—are not reviewable.\nBankruptcy and FDIC resolution also differ with respect to how creditors can be temporarily prevented from pursuing their claims against an insolvent debtor. In bankruptcy, creditors are temporarily barred from pursuing many of their claims by an \"automatic stay\" that is effective upon the filing of a bankruptcy petition, and bankruptcy courts have the authority to impose certain additional stays to ensure an orderly reorganization. However, a variety of financial contracts—including certain securities and commodities contracts, swaps, forwards, and repos—are exempt from the Bankruptcy Code's automatic stay. Often, such contracts provide that certain rights—for example, to terminate the contract, net obligations, or liquidate collateral—are triggered by a party's entry into bankruptcy (direct default rights) or by the entry into bankruptcy of a party's parent or affiliate (cross-default rights). Because of the Bankruptcy Code's \"safe harbor\" provisions, such rights can be exercised immediately upon the filing of a bankruptcy petition, notwithstanding the automatic stay.\nBy contrast, while the FDIC lacks general power to stay enforcement of a failed bank's contracts, it has broad power to disaffirm or repudiate certain contracts if it determines that performance would be \"burdensome,\" and that disaffirmance or repudiation would \"promote the orderly administration of the institution's affairs.\" Moreover, counterparties to \"qualified financial contracts\" (QFCs)—a term defined to include certain securities or commodities contracts, swaps, forwards, and repos —with a bank in an FDIC resolution are barred from exercising direct default rights against the bank based on its entry into resolution proceedings for one business day. If the FDIC transfers a QFC to another party (as it often does when it sells a bank's assets to a healthy acquirer), default rights under the QFC are permanently stayed. Accordingly, banks enjoy greater protection against \"runs\" by their derivatives counterparties in an FDIC resolution than do non-bank corporations in bankruptcy.\nFinally, bankruptcy and FDIC resolution differ with respect to the legal priority of creditors. The Bankruptcy Code provides a list of priorities specifying the order in which creditors are to be paid. During a Chapter 11 reorganization, the \"absolute priority rule\" bars the approval of a reorganization plan that awards property to a junior class of unsecured creditors while failing to compensate a dissenting class of senior creditors in full. A bankrupt firm can also obtain debtor-in-possession financing during a reorganization, which enjoys priority over certain pre-bankruptcy debts.\nBy contrast, if the FDIC is unable to find a healthy bank to purchase a failing bank in a \"purchase and assumption\" transaction (the most common method of resolving a failed bank), it generally liquidates the bank, paying off insured depositors and issuing receivership certificates to uninsured depositors and other general creditors. The FDIC pays uninsured depositors and general creditors according to a statutorily prescribed priority scheme. In paying these creditors, the FDIC is required to use the \"least costly\" resolution method—that is, the resolution method that minimizes expenditures from the deposit insurance fund. However, the FDIC can waive the least-cost resolution requirement if the Treasury Secretary (in consultation with the President and with the recommendation of the Federal Reserve) determines that adhering to that requirement \"would have serious adverse effects on economic conditions or financial stability\" and that alternative action \"would avoid or mitigate such adverse effects.\" Although there is no external debtor-in-possession financing during an FDIC resolution, the FDIC can offer \"open bank assistance\" (OBA) to a troubled bank in the form of a loan, an assumption of some or all of its liabilities, a purchase of troubled assets, or a direct infusion of capital. However, OBA is \"rarely used\" because of the least-cost resolution requirement, among other reasons.\nThese differences between the Bankruptcy Code and FDIC resolution reflect the different priorities of their respective insolvency schemes. According to many commentators, corporate bankruptcy is principally focused on maximizing creditor recovery by preserving the \"going-concern\" value of a firm, or equitably distributing its assets in the event of a liquidation. Accordingly, the Bankruptcy Code gives a firm's creditors a prominent role in the insolvency process, allowing them to vote on proposed reorganization plans if their interests are impaired, and subjecting a trustee or management's decisions to judicial scrutiny.\nBank resolution, by contrast, arguably places greater emphasis on financial stability than does the Bankruptcy Code, making the speed of the resolution process especially important. Accordingly, authority over bank resolution is highly concentrated in one actor: the FDIC. With its considerable resolution powers, the FDIC is often able to seize a failed bank at the close of business on a Friday, sell many of its assets, and re-open many of its offices under the auspices of a healthy acquirer by the following Monday, minimizing negative effects on the financial system.\nThis dual-track insolvency system, with the FDIC in charge of resolving commercial banks and bankruptcy courts tasked with non-bank insolvencies, arguably functioned effectively for much of the 20 th century. However, many commentators have contended that the bankruptcy system is ill-suited for the resolution of large, complex financial institutions. Specifically, observers have noted that the dependence of such institutions on short-term, highly liquid funding leaves them susceptible to \"runs\"—a problem exacerbated by the Bankruptcy Code's \"safe harbor\" provisions for certain derivatives contracts. Moreover, commentators have argued that the complicated legal structures of large financial institutions make their resolution in bankruptcy difficult, because such institutions often (1) have regulated subsidiaries such as banks and insurance companies that are not themselves eligible for bankruptcy, and (2) operate their businesses without regard for the legal separateness of these entities. Others have argued that reorganizing a large financial institution in bankruptcy (or continuing its subsidiaries' operations on a temporary basis until a buyer can be found) would be extraordinarily difficult, because such an institution would likely require billions of dollars of debtor-in-possession financing—a sum that \"[p]rivate lending markets are not capable of providing\" to a bankrupt firm, especially in a period of financial distress. According to these observers, the 2007-2009 financial crisis highlighted these problems with the Bankruptcy Code, and the need to develop alternative resolution mechanisms for financial institutions not subject to the FDIC's supervision.",
"",
"In March 2009, the Treasury Department released a legislative proposal for a new resolution authority \"to address systemically significant financial institutions that fall outside of the existing resolution regime under the FDIC.\" The Treasury Department argued that the financial crisis highlighted the inadequacy of the existing resolution options for large non-bank financial institutions. According to the Obama Administration's Treasury Department, policymakers during the crisis were forced to choose between two untenable options for such institutions: (1) securing outside capital or committing government funds to rescue a TBTF institution (as in the case of AIG), or (2) a destabilizing bankruptcy (as in the case of Lehman).\nThe Obama Administration accordingly proposed supplementing these options with a resolution regime \"modeled on the statutory framework that governs the FDIC's exercise of emergency resolution and other authority with respect to banks.\" Instead of \"subjecting a firm to bankruptcy\" or \"injecting taxpayers' funds with no real control,\" the Treasury Department's proposed legislation would enable the federal government to put a firm into a conservatorship or receivership managed by the FDIC, which could sell or transfer the firm's assets and liabilities, renegotiate or repudiate its contracts, and address its derivatives portfolio. The proposed legislation would also allow the FDIC to make loans to a financial institution placed into conservatorship or receivership, purchase the institution's obligations or assets, assume or guarantee the institution's liabilities, or purchase an equity interest in the institution.\nThe Obama Administration's proposal provided that the Board of Governors of the Federal Reserve and the Board of the FDIC, by two-thirds votes, were to provide the Treasury Secretary with a \"recommendation\" concerning actions that should be taken with respect to a troubled financial company, and that the Treasury Secretary make certain findings before commencing the conservatorship or receivership. The Administration's proposal allowed a seized firm to file suit requesting that the conservatorship or receivership be set aside within thirty days. The proposal did not restrict the issues that the reviewing court could consider or impose a time limit on the court's review.\nIn December 2009, the House of Representatives passed a version of the new resolution regime based on the Treasury Department's proposal. Like the Treasury Department's proposal, the House bill provided for the appointment of a receiver after (1) two-thirds votes by the Board of Governors of the Federal Reserve and the Board of the FDIC, and (2) the Treasury Secretary made certain determinations. The House bill also provided for a thirty-day period within which a seized firm could seek judicial review. However, unlike the Treasury Department's proposal, the House bill did not grant the FDIC the authority to provide equity financing to companies during the resolution process. Also in contrast to Treasury's proposal, the House bill required that any debt funding the government provided to a seized company be repaid from ex ante assessments on certain large financial institutions.\nA Senate bill introduced in April 2010 built on these proposals, but envisioned a slightly different process for appointing a receiver for non-bank financial institutions. The initial Senate bill required that a panel of three bankruptcy judges from the Bankruptcy Court for the District of Delaware approve the Treasury Secretary's decision to appoint a receiver for a troubled company. However, this panel of bankruptcy judges would consider only one of the Treasury Secretary's various findings: that the relevant firm is in default or in danger of default. The Senate bill also imposed a variety of secrecy requirements related to resolution proceedings. The bill provided that (1) the Treasury Secretary's petition to the bankruptcy panel would be filed under seal, (2) proceedings before the panel would be held \"[o]n a strictly confidential basis,\" and (3) criminal penalties would be imposed on persons who disclosed information about the proceedings. The panel would be required to rule within 24 hours of receiving the petition.\nAfter the initial Senate bill was introduced, Senator Christopher Dodd proposed a series of amendments. Among other things, the amendments provided that the Treasury Secretary would petition the U.S. District Court for the District of Columbia instead of a panel of bankruptcy judges for the appointment of a receiver. The amendments further provided that the district court would review two of the Treasury Secretary's determinations: (1) that the firm to be placed into receivership satisfied the statutory definition of a \"financial company,\" and (2) that the firm is in default or in danger of default. The Senate passed the revised bill on May 20, 2010.\nA Conference Committee resolved the differences between the House and Senate bills. Among other things, the Conference Committee report adopted an ex post assessment process on large financial institutions to repay any government funding providing during the resolution process, in place of the ex ante assessment in the House bill. The House and Senate passed the Conference Committee report in late June and mid-July 2010, respectively, and President Obama signed Dodd-Frank on July 21, 2010.",
"These various legislative proceedings culminated in Title II of Dodd-Frank, which creates an \"Orderly Liquidation Authority\" (OLA) pursuant to which the FDIC can serve as the receiver for \"failing financial companies that pose a significant risk to the financial stability of the United States.\" Title II can be invoked only for \"covered financial companies\" and \"covered brokers and dealers.\" Title II defines a \"covered financial company\" as a \"financial company\" that is not an insured depository institution, and for which a \"systemic risk determination\" has been made. Title II defines a \"covered broker or dealer\" as a broker or dealer that is registered with the Securities and Exchange Commission (SEC) and is a member of the Securities Investor Protection Corporation.",
"Under Title II, certain designated federal regulators may recommend to the Treasury Secretary the appointment of the FDIC as receiver of a financial company. The Federal Reserve and the SEC will make the recommendation if the company or its largest subsidiary is a broker or dealer. The Federal Reserve and the Director of the Federal Insurance Office will make the recommendation if the company is an insurance company. The Federal Reserve and the FDIC will make the recommendation in all other cases. Such a recommendation requires a vote of at least two-thirds of the members of the Board of Governors of the Federal Reserve, and (1) at least two-thirds of the SEC members then serving (in the case of a broker or dealer), (2) the Director of the Federal Insurance Office (in the case of an insurance company), or (3) two-thirds of the members of the FDIC's Board of Directors (in all other cases). Any such recommendation shall contain\n1. an evaluation of whether the financial company is in default or danger of default; 2. a description of the effect that the default of the financial company would have on financial stability in the United States; 3. a description of the effect that the default of the financial company would have on economic conditions or financial stability for low income, minority, or underserved communities; 4. a recommendation regarding the nature and the extent of actions to be taken regarding the financial company; 5. an evaluation of the likelihood of a private sector alternative to prevent the default of the financial company; 6. an evaluation of why a case under the Bankruptcy Code is not appropriate for the financial company; 7. an evaluation of the effects on creditors, counterparties, and shareholders of the financial company and other market participants; and 8. an evaluation of whether the company satisfies the definition of a \"financial company.\"\nUpon a written recommendation, the Treasury Secretary shall seek appointment of the FDIC as receiver of the financial company if (in consultation with the President) he makes a \"systemic risk determination\"—that is, if he makes the following seven determinations:\n1. the financial company is in default or in danger of default; 2. the failure of the financial company and its resolution under otherwise applicable federal or state law would have serious adverse effects on financial stability in the United States; 3. no viable private sector alternative is available to prevent the default of the financial company; 4. any effect on the claims or interests of creditors, counterparties, and shareholders of the financial company and other market participants as a result of actions to be taken under the relevant subchapter is appropriate, given the impact that any such action would have on financial stability in the United States; 5. the relevant action would avoid or mitigate such adverse effects, taking into consideration the effectiveness of the action in mitigating potential adverse effects on the financial system, the cost to the general fund of the Treasury Department, and the potential to increase excessive risk taking on the part of creditors, counterparties, and shareholders in the financial company; 6. a federal regulatory agency has ordered the financial company to convert all of its convertible debt instruments that are subject to the regulatory order; and 7. the company satisfies the definition of a \"financial company.\"\nUpon making a \"systemic risk determination,\" the Treasury Secretary must notify the financial company and the FDIC. If the company's board of directors consents to the appointment of the FDIC as receiver, the Treasury Secretary must appoint the FDIC as receiver. If the company's board of directors does not consent to the appointment, the Treasury Secretary can petition the U.S. District Court for the District of Columbia for an order authorizing the appointment. The court must then hold a \"strictly confidential\" hearing at which it reviews (under the \"arbitrary and capricious\" standard) two of the Treasury Secretary's determinations: (1) the company is in default or in danger of default, and (2) the company is a \"financial company.\"\nIf the court determines that these determinations are not arbitrary and capricious, it must issue an order immediately authorizing the Treasury Secretary to appoint the FDIC as receiver of the financial company. If the court does not make a determination within 24 hours after receiving the petition, the petition is deemed granted by operation of law. The court's determination is \"final,\" and \"not ... subject to any stay or injunction pending appeal.\" Moreover, any appeal of the district court's decision must be considered \"on an expedited basis.\" Title II also imposes criminal penalties on persons who \"recklessly disclose[]\" a systemic risk determination by the Treasury Secretary or the pendency of court proceedings related to such a determination.",
"Upon its appointment as receiver, the FDIC succeeds to all rights, titles, powers, and privileges of the company and its assets, and of any stockholder, member, officer or director. The FDIC may continue the company's business and \"liquidate\" and \"wind-up\" its affairs \"in such manner as [it] deems appropriate.\" Pursuant to this authority, the FDIC may sell the company's assets, merge the company with another company, transfer its assets or liabilities to another company, or transfer the company's assets or liabilities to a newly created \"bridge financial company.\"\nThe creation of a bridge company allows the FDIC to continue the troubled company's critical businesses on a temporary basis until it can find a buyer or liquidate the company. This new entity would \"not be saddled with the shareholders, debt, senior executives or bad assets and operations that led to the failure of the covered financial company.\" QFCs transferred to a bridge company cannot be terminated simply because they are assumed by the bridge company. According to the FDIC, this provision \"is an important tool to avoid market destabilization because, unlike the Bankruptcy Code, it can prevent the immediate and disorderly liquidation of collateral during a period of market distress.\"\nTitle II also specifies the priorities governing payment of unsecured claims, mandating that the costs of the receivership be paid first. Claims owed to the United States are paid second, followed by a rank-ordering of other categories of unsecured claims. However, Title II allows the FDIC to depart from this statutory priority list and make \"additional payments\" to \"any claimant or category claimants\" if it \"determines that such payments ... are necessary or appropriate to minimize losses to the [FDIC].\" Title II also requires that the FDIC treat all similarly situated creditors similarly, except when the FDIC determines that not doing so is necessary to (1) maximize the assets of the covered financial company, (2) continue operations that are \"essential to implementation of the receivership,\" (3) maximize the present value return from the sale or other disposition of covered financial company's assets, or (4) minimize the amount of any loss realized upon the sale or other disposition of the covered financial company's assets. Despite granting these powers to the FDIC, Title II provides that \"in no event\" shall a creditor receive less than it would have received if the FDIC had not been appointed receiver and the company had instead been liquidated under Chapter 7 of the Bankruptcy Code.\nAs in bank resolutions, the FDIC has the authority to disallow any claims not proved to its satisfaction. A claimant may contest such determinations by filing suit in the federal district where the relevant financial company's principal place of business is located. Title II also provides that the FDIC may disaffirm or repudiate any contract or lease of a company in receivership if it determines that performance would be \"burdensome\" and that doing so \"will promote the orderly administration of the affairs of the covered financial company.\" The FDIC may transfer its rights under a contract or lease to an acquirer of a financial company's assets, despite any contractual provisions excusing a counterparty from performance in the event of the financial company's insolvency, the appointment of a receiver, or similar circumstances. The FDIC also has the authority to sue to avoid fraudulent transfers, preferences, and improper setoffs, like a trustee in bankruptcy. Finally, Title II gives the FDIC the authority to \"recover from any current or former senior executive or director substantially responsible for the failed condition of [a] covered financial company any compensation received during the 2-year period preceding\" the FDIC's appointment as receiver.\nAlthough Title II gives the FDIC broad powers to resolve troubled companies, it also imposes a number of mandatory conditions on its conduct as a receiver. Specifically, Title II provides that the FDIC shall\n1. determine that any actions it takes as receiver are \"necessary for purposes of the financial stability of the United States, and not for the purpose of preserving the covered financial company\"; 2. \"ensure that the shareholders of a covered financial company do not receive payment until after all other claims and the [Orderly Liquidation] Fund are fully paid\"; 3. ensure that unsecured creditors bear losses in accordance with statutorily prescribed priorities; 4. \"ensure that management responsible for the failed condition of the covered financial company is removed\"; 5. \"ensure that the members of the board of directors ... responsible for the failed condition of the covered financial company are removed\"; and 6. not take an equity interest in or become a shareholder of any covered financial company.\nTitle II limits judicial review over the FDIC's actions as receiver. Specifically, Title II provides that except as otherwise provided, no court has jurisdiction over (1) claims for payment from or a determination of rights with respect to the assets of a company in receivership, or (2) any claim relating to acts or omissions of such companies or the FDIC as receiver. Moreover, except as otherwise provided, \"no court may take any action to restrain or affect the exercise of powers or functions of the receiver,\" and \"any remedy against the [FDIC] or receiver shall be limited to money damages.\"",
"Title II allows for the creation of an \"Orderly Liquidation Fund\" (OLF) funded with money the FDIC may borrow from the Treasury Department. The FDIC's borrowing cannot exceed 10 percent of a financial company's total consolidated assets during the first 30 days of a receivership, or 90 percent of total consolidated assets that are available for repayment thereafter. The FDIC can \"in its discretion\" and \"as necessary and appropriate\" make OLF funds \"available to the receivership,\" including by making loans to the company in receivership or purchasing or guaranteeing its assets. However, the FDIC can use the OLF only after developing an orderly liquidation plan for a company in receivership \"that is acceptable to\" the Treasury Secretary.\nDespite granting the FDIC the authority to make loans to a company in receivership from the OLF, Title II provides that taxpayers \"shall bear no losses\" from an OLA resolution. Any funds expended in the liquidation of a financial company must be \"recovered from the disposition of assets of such financial company, or shall be the responsibility of the financial sector, through assessments.\" Any loans the FDIC makes to a company in receivership from the OLF enjoy priority over all other unsecured creditors. If a company's assets are insufficient to pay the sums borrowed from the Treasury Department within 60 months of their issuance, the FDIC must charge \"one or more risk-based assessments\" on any creditors that received \"additional payments\" from the FDIC pursuant to its authority to treat some creditors more favorably than similarly situated creditors. If those funds are also inadequate to satisfy the FDIC's obligations to the Treasury Secretary, the FDIC must impose additional assessments on \"eligible financial companies\" and financial companies with total consolidated assets equal to or greater than $50 billion.",
"Title II contains a number of provisions addressing QFCs, which are defined to encompass \"any securities contract, commodity contract, forward contract, repurchase agreement, swap agreement, and any similar agreement that the [FDIC] determines by regulation, resolution, or order to be a [QFC] for purposes of this paragraph.\" As in FDIC bank resolutions, Title II stays the exercise of any direct default rights under a QFC—that is, rights against the institution in receivership triggered by the institution's placement into receivership—for one business day. If the FDIC transfers a QFC to a third party, including a bridge financial company, Title II permanently stays the exercise of direct default rights. Moreover, unlike the rules governing FDIC resolutions, Title II addresses cross-default rights under QFCs using a similar procedure. Specifically, Title II empowers the FDIC to \"enforce contracts of subsidiaries or affiliates\" of a company in receivership that are guaranteed or otherwise support by or linked to the company, notwithstanding any cross-default rights. If a QFC is supported by a guarantee or otherwise supported by a company in receivership, the FDIC must take certain steps to protect the QFC counterparty's interests by the end of the business day following the company's entry into receivership.",
"The OLA has never been used. However, federal agencies have promulgated a number of rules that affect Title II in important ways. Section 209 of Dodd-Frank directs the FDIC, in consultation with FSOC, to \"prescribe such rules or regulations as the [FDIC] considers necessary or appropriate to implement [Title II], including rules and regulations with respect to the rights, interests, and priorities of creditors, counterparties, security entitlement holders, or other persons with respect to any covered financial company.\" A number of other provisions also direct the FDIC to promulgate rules addressing specific issues under Title II. Moreover, other provisions in Dodd-Frank and federal statutes allow federal regulatory agencies to promulgate rules that have important implications for Title II. This subsection provides a general overview of some of the key administrative rules related to Title II.",
"In January 2011, the FDIC promulgated a rule addressing a variety of discrete topics. Among other things, the rule addressed the provisions in Title II that allow the FDIC as receiver to pay certain creditors more than similarly situated creditors if it makes certain findings related to maximizing recovery for the receivership. Responding to criticism that the relevant statutory provision permitted it to bailout favored creditors, the FDIC clarified that it will not use this authority to make such \"additional payments\" to creditors who hold certain unsecured senior debt with a term of more than 360 days or to holders of subordinated debt or shareholders. The FDIC explained that it will evaluate whether to make \"additional payments\" to holders of shorter-term debt \"on a case-by-case basis\" and that such payments will be \"very rare.\" Possible examples of creditors who might receive such payments, the FDIC noted, include providers of \"essential and necessary service[s],\" and creditors with contract claims that are tied to performance bonds or other credit support needed for the company to continue other valuable contracts.\nIn July 2011, the FDIC promulgated another rule addressing a variety of issues. Among other things, the rule provided that for purposes of Title II's provision allowing the FDIC to recover compensation from executives and directors \"substantially responsible\" for the failure of a covered financial company, a person will be deemed \"substantially responsible\" if \"he or she failed to conduct his or her responsibilities with the degree of skill and care of an ordinarily prudent person in a like position would exercise under similar circumstances.\" In establishing a negligence standard for recovery of executive or director compensation, the FDIC rejected proposals to adopt a stricter standard such as gross negligence. The FDIC's rule further provided that a senior executive or director will be presumed to be \"substantially responsible\" for the failure of a covered financial company in certain circumstances.",
"Arguably, the FDIC's most prominent refinement of its Title II authorities has involved its general strategy for resolving a financial company in receivership. In December 2013, the FDIC proposed for public comment a notice describing its \"Single Point of Entry\" (SPOE) strategy for implementing its Title II authority. As background, in the United States, large financial institutions are generally organized under a holding company structure, with a top-tier parent company and sometimes hundreds or even thousands of subsidiaries spanning different countries. Functions and business lines often are not aligned with the structures of individual subsidiaries, and funding is often allocated among subsidiaries as needed. Moreover, many holding companies own bank and non-bank subsidiaries that are subject to different insolvency regimes, complicating their orderly resolution.\nUnder its SPOE approach, the FDIC would be appointed as receiver of only the top-tier U.S. holding company of a troubled financial institution, and the institution's subsidiaries would remain open and continue operations. The FDIC would create a bridge financial company into which it would transfer the assets of the holding company. Certain liabilities of the holding company (principally, the company's long-term debt) would remain in the receivership, and losses would be allocated among the holding company's creditors according to the statutory priorities established under Title II. In exchange for their claims, the holding company's creditors would receive debt, equity, or contingent securities (such as warrants or options) in the newly established bridge company. As a result of this process, the bridge company would no longer be burdened by certain debts of the holding company, leaving it with a stronger balance sheet.\nUnder the SPOE approach, the FDIC would select new management for the bridge company, and the holding company's subsidiaries would continue operating, \"allowing them to continue critical operations for the financial system and avoid the disruption that would otherwise accompany their closings.\" While the FDIC indicated that it \"intends to maximize the use of private funding\" in a Title II resolution, it noted that it could provide guarantees of new debt issued by the bridge company, or provide the bridge company with funding from the OLF in order to facilitate an orderly resolution.\nIn its December 2013 notice, the FDIC sought comment on a number of aspects of its SPOE strategy, including the level and types of capital and debt that large institutions should be required to maintain to optimize the SPOE resolution strategy, how the OLF should be used in a resolution, and the treatment of the foreign operations of a failed financial company under Title II. The comment period ended on January 13, 2014, and the FDIC has yet to promulgate a final rule concerning its SPOE strategy.",
"In December 2016, pursuant to its authority under Section 165 of Dodd-Frank to impose enhanced prudential standards on large bank holding companies, the Federal Reserve finalized a rule imposing \"total loss-absorbing capacity\" (TLAC) and \"clean holding company\" requirements on such companies —a rule that some commentators have described as \"essential to the execution of the SPOE resolution strategy.\" Under the rule, bank holding companies of U.S. global systemically important banks (G-SIBs) and top-tier U.S. intermediate holding companies of foreign G-SIBs are required to maintain minimum levels of long-term debt and certain types of capital (which together represent a bank's TLAC). The \"clean holding company\" requirements prohibit the relevant holding companies from (1) issuing short-term debt to third parties (i.e., to entities other than their subsidiaries), (2) entering into QFCs with third parties, (3) having liabilities that are guaranteed by their subsidiaries or subject to contractual offset rights for their subsidiaries' creditors, or (4) issuing certain guarantees of their subsidiaries liabilities, if the liabilities provide default rights based on the resolution of the holding company.\nThe TLAC requirements supplement other regulatory capital requirements, which \"are intended to ensure that a banking organization has sufficient capital to remain a going concern.\" Like other regulatory capital requirements, the TLAC rule is directed at strengthening the resiliency of large bank holding companies in the event that they experience financial distress. However, the TLAC requirements also have the additional goal of improving the resolvability of such companies in the event of distress or failure. The requirements attempt to accomplish this goal by requiring that large bank holding companies hold minimum levels of long-term debt, which can serve as the source of new capital in the event of financial distress. Specifically, unlike regulatory capital (which is likely to be significantly depleted as a result of financial distress) and short-term debt (which must be continually refinanced or \"rolled over,\" and is susceptible to \"runs\" in the event of financial distress), long-term debt can serve as the source of new capital because it can be reduced in a resolution or bankruptcy proceeding, increasing the ratio of a firm's assets to its liabilities and thereby increasing its equity. Commentators have accordingly argued that because of the loss-absorbing capacity of long-term debt, the availability of TLAC at the holding company level \"generate[s] market confidence to help avoid runs on deposits and other liabilities ... that could otherwise lead to financial contagion.\" Similarly, the \"clean holding company\" requirements have the potential to help facilitate the orderly resolution of a financial institution by simplifying the holdings of its top-level holding company.",
"In 2017, the Federal Reserve, FDIC, and Office of the Comptroller of the Currency (OCC) finalized rules restricting the types of QFCs into which certain regulated banks and bank holding companies can enter. The rules were directed at plugging gaps in provisions of the Bankruptcy Code, FDIC receivership authority, and Title II involving default rights under QFCs.\nAs discussed above, the Bankruptcy Code generally subjects creditors to an automatic stay that prevents them from enforcing certain rights (for example, to terminate a contract, set-off obligations, or liquidate collateral) upon the filing of a bankruptcy petition. However, the Bankruptcy Code also provides a \"safe harbor\" that allows counterparties to a variety of financial contracts—including certain securities and commodities contracts, swaps, forwards, and repos—to exercise their rights against a debtor that are triggered by its entry into bankruptcy. Moreover, the Bankruptcy Code does not stay the exercise of cross-default rights (i.e., rights against a company triggered by the entry of a company's parent, subsidiary, or affiliate into bankruptcy). These \"safe harbors\" potentially exacerbate the risk of \"runs\" against a company or its affiliates triggered by bankruptcy proceedings.\nBy contrast, as noted above, in non-Title II bank resolutions under the Federal Deposit Insurance Act (FDIA), counterparties to QFCs—a term defined as encompassing many of the same financial contracts exempt from the Bankruptcy Code's automatic stay—are stayed from exercising direct default rights for one business day, and are permanently stayed from exercising such rights if the FDIC transfers QFCs to a third party. However, there is no similar stay applicable to cross-default rights. Accordingly, while derivatives counterparties are temporarily stayed from exercising default rights against a bank triggered by the bank's entry into a non-Title II FDIC resolution, they are not stayed from exercising default rights against a parent or affiliate of a bank triggered by the bank's entry into a non-Title II FDIC resolution. The absence of such a stay creates the possibility that a bank's entry into a non-Title II FDIC resolution could trigger \"runs\" on its parent holding company or its affiliates. Moreover, commentators have raised the possibility that foreign courts may not enforce the FDIA's stay-and-transfer provisions concerning direct default rights, disadvantaging domestic QFC counterparties relative to foreign QFC counterparties, and exacerbating the risk of \"runs\" against a bank's parent or affiliates.\nFinally, in a Title II resolution, QFC counterparties are stayed from exercising direct default rights for one business day, and are permanently stayed from exercising such rights if the FDIC transfers a QFC to a third party (as in non-Title II FDIC resolutions). Moreover, the FDIC can \"enforce contracts of subsidiaries or affiliates\" of a company in receivership that are guaranteed or otherwise supported by or linked to the company, notwithstanding any cross-default rights. However, as with non-Title II FDIC resolutions, commentators have raised the possibility that foreign courts may not enforce Title II's stay-and-transfer provisions.\nIn promulgating its QFC rules, the Federal Reserve, FDIC, and OCC were concerned with plugging certain gaps the Bankruptcy Code, the FDIA, and Title II involving default rights under QFCs. Specifically, the agencies were concerned with scenarios in which the entry of one institution into bankruptcy, a non-Title II FDIC resolution, or a Title II resolution would prompt a \"run\" by its derivatives counterparties or by the derivatives counterparties of its parent, subsidiary, or affiliate. The QFC rules provide that certain institutions regulated by the agencies may enter into a QFC only if (1) the QFC includes terms explicitly providing that, in the event that the institution enters into a Title II proceeding or a non-Title II resolution, any default rights or transfer restrictions under the QFC are subject to the stay-and-transfer limitations imposed under the relevant insolvency scheme, and (2) the QFC does not allow counterparties to exercise cross-default rights against the institution.\nThe QFC rules accordingly require QFCs entered into by the relevant institutions to affirmatively opt into the stay-and-transfer provisions of the FDIA and Title II, thereby minimizing the risk that a QFC counterparty in a foreign court would successfully challenge stay-and-transfer actions taken by the FDIC. Moreover, the rule prohibits the relevant institutions from entering into QFCs that give counterparties cross-default rights against them, thereby minimizing the risk that the bankruptcy or resolution of the institutions' parents or affiliates will trigger \"runs\" against them.",
"Title II has attracted criticism and generated a number of alternative proposals concerning the resolution of large financial institutions. Some critics have argued that the broad powers that Title II grants the FDIC—both in determining whether to place a firm into receivership and in conducting a resolution—create uncertainty about creditors' rights, raising the cost of credit for financial institutions. Other commentators have contended that by granting the FDIC the authority to extend credit to companies in receivership, Title II effectively formalizes a practice of bailing out large financial institutions. Still others have criticized the imposition of ex post assessments on the financial industry to recoup OLF expenditures not recovered from a firm in receivership, arguing that \"taxing\" prudently operated firms for the benefit of mismanaged firms creates moral hazard and free-rider problems. Finally, some observers have raised constitutional concerns with Title II's (1) 24-hour period for judicial review of the FDIC's decision to place a firm into receivership, (2) limitation of judicial review to only two of the seven factors the Treasury Secretary must consider in making a systemic risk determination, (3) imposition of criminal penalties on persons who disclose information about a systemic risk determination or related judicial proceedings, and (4) allowance of compensation claw-backs from executives and directors determined to have been \"substantially responsible\" for the failure of a firm in receivership.\nDefenders of Title II have rejected the argument that the OLA promotes moral hazard, noting that a Title II resolution would result in \"the extinction of the firm's equity and the wholesale replacement of its board and management.\" Others have rejected arguments that Title II puts taxpayers at risk, noting that it requires that the FDIC be reimbursed in full for any OLF expenditures.\nIn responding to the argument that Title II grants the FDIC excessive discretion, commentators have argued that the level of discretion granted by Title II is \"fundamentally the same\" as that which the FDIC is granted in resolving failed commercial banks. Moreover, in reflecting on crisis management, former Treasury Secretary and President of the New York Fed Timothy Geithner has argued that a certain level of uncertainty regarding \"how fast a government will escalate its support\" and \"how far that support will extend\" is beneficial, \"leav[ing] investors in and creditors of financial institutions with a healthy sense of fear\" that \"should lessen the harmful incentives that a strong backstop creates.\"\nIn responding to constitutional concerns regarding Title II's limitations on judicial review, one commentator has argued that \"it is within Congress's power to set the standard for judicial review,\" analogizing the deferential standards imposed under Title II to those imposed by the Administrative Procedure Act. This commentator has argued that the 24-hour period for judicial review of a decision to invoke the OLA \"is appropriate for the urgency of the issue,\" and that Title II accordingly provides for due process, if not \"as much process as some might like.\"\nOther commentators have focused on the shortcomings of bankruptcy in defending Title II. Some observers have argued that bankruptcy does not offer the speed or opportunity for coordination with foreign financial regulators required to resolve a large institution during a period of financial turmoil. Other defenders of Title II have argued that during times of financial distress, bankruptcy could function effectively for a large financial institution only with \"massive government assistance\" such as debtor-in-possession financing, effectively allowing the federal government \"to call the shots in the bankruptcy,\" because \"that is what [debtor-in-possession] lenders do.\" According to this view, an effective form of financial institution bankruptcy (in which the federal government could lend to troubled institutions in periods when private financing is likely to be unavailable) would end up replicating many of the features its proponents dislike about Title II.",
"",
"Legislation proposed in both the House of Representatives and the Senate has focused on amending the Bankruptcy Code to enhance its ability to resolve large financial institutions, either as a replacement for Title II or as a supplement to it.\nDuring the post-crisis debate over financial reform, a bill introduced in the House ( H.R. 3310 , 111 th Cong.) proposed a new Chapter 14 to the Bankruptcy Code to address the resolution of large non-bank financial institutions. In the proposed Chapter 14, the Bankruptcy Code's \"safe harbor\" provisions for certain derivatives contracts would not have automatically applied. Instead, the bankruptcy court would make a specific determination upon a motion by the debtor whether the debtor should be subject to any or all of the special provisions of the Bankruptcy Code exempting derivatives and other financial contracts from the automatic stay. The bill would also have prohibited a trustee for an institution in Chapter 14 bankruptcy from obtaining credit \"if the source of that credit either directly or indirectly is the United States.\"\nScholars at the Hoover Institution have also developed proposed amendments to the Bankruptcy Code directed at resolving large financial institutions. In 2010, Professor Thomas Jackson published a proposal to create a new chapter of the Bankruptcy Code in which exclusions for banks, insurance companies, and broker-dealers would not apply. Under the proposal, a financial institution's primary regulator could file an involuntary bankruptcy petition, and a bankruptcy case would be assigned by the Chief Judge of the relevant federal court of appeals to a member of a previously designated panel of special masters. Pursuant to Professor Jackson's proposal, QFCs secured by cash or \"cash-like\" collateral would enjoy the benefits of the Bankruptcy Code's \"safe harbor,\" but all other QFCs would be subject to the automatic stay and other Bankruptcy Code provisions. The financial institution's regulator would be given special standing to raise motions and the right to file a plan of reorganization. Unlike H.R. 3310 (the bankruptcy bill introduced during debates over financial reform), the institution's regulator would be allowed to provide the bankrupt firm with debtor-in-possession financing subject to the Bankruptcy Code's traditional rules governing the priority of claims. Professor Jackson has released a number of revised versions of his proposal since 2010.\nThese proposals appear to have served as the basis for a series of legislative proposals to amend the Bankruptcy Code. In April 2017, the House of Representatives passed one of these bills, the Financial Institution Bankruptcy Act of 2017 (FIBA). FIBA creates a new subchapter V of Chapter 11 of the Bankruptcy Code for bank holding companies and financial institutions with over $50 billion in assets. Bankruptcy proceedings under subchapter V would be heard by one of 10 bankruptcy judges designated by the Chief Justice of the Supreme Court. While a case under the new subchapter V could be commenced only by a financial institution itself (and not involuntarily by a regulator), federal regulators could \"appear and be heard on any issue in any case or proceeding\" under subchapter V. As in the SPOE approach developed by the FDIC for Title II resolutions, a holding company entering subchapter V bankruptcy could transfer certain assets (primarily its equity in subsidiaries and derivatives) to a newly formed bridge company upon the court's determination that the transfer is \"necessary to prevent serious adverse effects on financial stability,\" among other things. The Act also would impose a 48-hour automatic stay on the termination, acceleration, or modification of certain contracts, including QFCs of a financial institution or its affiliates.\nThe Financial CHOICE Act of 2017, which passed the House in June 2017, also proposes a number of changes to the Bankruptcy Code. The relevant CHOICE Act provisions largely track the reforms in FIBA concerning the creation of a new subchapter V; the appointment of a bankruptcy judge drawn from a panel designated by the Chief Justice of the Supreme Court; the commencement of a bankruptcy case; the transfer of property to a bridge company; and the automatic stay. However, unlike FIBA, the CHOICE Act would repeal Title II.\nOther proposals to amend the Bankruptcy Code to deal with large financial institutions have been introduced in the Senate. S. 1840 , the Taxpayer Protection and Responsible Resolution Act (introduced in the 114 th Congress), differs from FIBA and the CHOICE Act as a formal matter by creating a separate Chapter 14 of the Bankruptcy Code as opposed to a new subchapter of Chapter 11. However, like FIBA and the CHOICE Act, S. 1840 would have provided that (1) a bankruptcy judge drawn from a panel of 10 judges designated by the Chief Justice would preside over proceedings under the new regime; (2) only a financial institution could commence bankruptcy proceedings, but federal regulators could appear and be heard in a bankruptcy case; (3) the court could approve the transfer of an institution's assets to a bridge company after making certain determinations; and (4) certain contractual rights against a debtor institution would be stayed for 48 hours. Like the CHOICE Act (but unlike FIBA), S. 1840 would have repealed Title II. Moreover, unlike FIBA and the CHOICE Act, S. 1840 would have explicitly prohibited the Federal Reserve from making advances to a financial corporation in bankruptcy or to a bridge company.",
"The Trump Administration's Treasury Department has endorsed efforts to amend the Bankruptcy Code to deal with large financial institutions, and expressed support for reforming (but not repealing) Title II. In February 2018, the Treasury Department issued a report in which it recommended retaining Title II \"as an emergency tool for use under only extraordinary circumstances,\" but proposed a number of reforms to address what it characterized as \"serious defects\" in its original design. The report \"unequivocally\" concluded that \"bankruptcy should be the resolution method of first resort\" for large financial institutions, while recommending \"significant reforms to make bankruptcy a more effective option for financial firms.\"\nIn recommending changes to Title II, the Treasury Department proposed reforms aimed at (1) limiting the FDIC's discretion in managing a receivership, (2) protecting taxpayers against losses, and (3) strengthening judicial review of the decision to invoke Title II. Specifically, in order to limit the FDIC's discretion, the Treasury Department proposed (1) restricting the FDIC's ability to treat similarly situated creditors differently in a Title II resolution, (2) providing that a bankruptcy court (instead of the FDIC) adjudicate claims against a Title II receivership, (3) clarifying the circumstances in which a financial company is \"in default or in danger of default\" for purposes of invoking Title II, (3) repealing the tax-exempt status of a bridge company in a Title II receivership, and (4) confirming that the FDIC is committed to the SPOE strategy.\nIn order to protect taxpayers against losses, the Treasury Department proposed (1) limiting the duration of any advances from the OLF, (2) that loan guarantees be preferred over direct lending to companies in receivership, (3) that the FDIC lend to companies in receivership only on a secured basis, and (4) imposing any industry-wide assessments necessary to recoup OLF funds \"as soon as reasonably possible.\"\nIn order to strengthen judicial review of the decision to invoke Title II, the Treasury Department recommended allowing a court to review all seven of the Treasury Secretary's required findings (as opposed to only two), and allowing for ex post judicial review after a receiver is appointed, without a statutory time limit for the court to issue a decision.",
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{
"question": [
"What have policymakers done in the past when financial institutions have become distressed?",
"How was the significance of the TBTF problem highlighted by the 2007-2009 financial crisis?",
"How did the crisis serve to highlight the inadequacies of the existing system?",
"What did the government do in response to the financial crisis?",
"How does this act target the issues that have been posed by this specific crisis?",
"What is the specific purpose of Title I?",
"What is the specific purpose of Title II?",
"What companies does the Title I regime apply to?",
"What companies have been designated as systematically important?",
"How have any companies designated as systematically important changed?",
"How does Title II protect institutions?",
"What was the OLA developed as an alternative to?",
"How does the OLA benefit FDIC?",
"What do consequences for the OLA concern?",
"What has happened with regards to changing Title II?",
"Why might there have been attempts to repeal Title II?"
],
"summary": [
"When large, interconnected financial institutions become distressed, policymakers have historically faced a choice between (1) a taxpayer-funded bailout, and (2) the destabilization of the financial system—a dilemma that commentators have labeled the \"too-big-to-fail\" (TBTF) problem.",
"The 2007-2009 financial crisis highlighted the significance of the TBTF problem. During the crisis, a number of large financial institutions experienced severe distress, and the federal government committed hundreds of billions of dollars in an effort to rescue the financial system.",
"According to some commentators, the crisis underscored the inadequacy of existing prudential regulation of large financial institutions, and of the bankruptcy system for resolving the failure of such institutions.",
"In response to the crisis, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in 2010.",
"Titles I and II of Dodd-Frank are specifically directed at minimizing the systemic risk created by TBTF financial institutions.",
"In order to minimize the risks that large financial institutions will fail, Title I of Dodd-Frank establishes an enhanced prudential regulatory regime for certain large bank holding companies and non-bank financial companies.",
"In order to \"resolve\" (i.e., reorganize or liquidate) systemically important financial institutions, Title II establishes a new resolution regime available for such institutions outside of the Bankruptcy Code.",
"The Title I regime applies to (1) all bank holding companies with total consolidated assets of $50 billion or more, and (2) any non-bank financial companies that the Financial Stability Oversight Council (FSOC) designates as systemically important.",
"To date, FSOC has designated four non-bank financial companies for enhanced supervision: AIG, GE Capital, Prudential, and MetLife.",
"However, FSOC has rescinded its designations of AIG and GE Capital as a result of changes to those companies, and MetLife successfully challenged its designation in federal court, leaving Prudential as the sole remaining designee as of the publication of this report.",
"Title II of Dodd-Frank creates an \"Orderly Liquidation Authority\" (OLA) pursuant to which the Federal Deposit Insurance Corporation (FDIC) can serve as the receiver for failing financial companies that pose a significant risk to the financial stability of the United States.",
"The OLA, which was developed as an alternative to the Bankruptcy Code, is similar to the mechanisms the FDIC uses to resolve failed commercial banks.",
"The OLA grants the FDIC broad powers to manage the liquidation or sale of a failed financial company, and Title II includes provisions that offer financial institutions more robust protections against \"runs\" by their derivatives counterparties than they would have under the Bankruptcy Code.",
"The FDIC, Federal Reserve, and Office of the Comptroller of the Currency have promulgated a number of rules that have important consequences for the OLA concerning the FDIC's powers as receiver, its general strategy for resolving failed institutions, \"loss-absorbing capacity\" requirements for certain bank holding companies, and derivatives contracts.",
"There have also been a number of proposals to reform Title II.",
"A bill that would (among other things) repeal Title II passed the House in June 2017, and bills to amend the Bankruptcy Code to allow it to deal more effectively with the failure of large financial institutions have been introduced in the House and the Senate (H.R. 10 (115th Cong.), H.R. 1667 (115th Cong.), S. 1840 (114th Cong.))."
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GAO_GAO-15-705
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{
"title": [
"Background",
"Impact of Safety Inspections on Vehicle Safety Is Unclear as Benefits and Costs Are Difficult to Quantify",
"Officials in States with Vehicle Safety Inspection Programs Said Their Programs Enhance Vehicle Safety",
"Research Examining Effect on Crash Rates is Inconclusive, in Part Due to Limited Data",
"States Generally Do Not Directly Track Costs of Operating Safety Inspection Programs",
"State Challenges Include Oversight and Paper-Based Data Systems",
"NHTSA Could Improve Communications with States",
"Conclusions",
"Recommendation",
"Agency Comments and our Response",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: List of States that Have Required Vehicle Safety Inspections, 1929-2015",
"States Currently Requiring Annual Safety Inspections State",
"Appendix III: Studies Reviewed that Examine Vehicle Inspections and Crash Rates",
"Appendix IV: Estimated Number of Crashes Listed with Vehicle Component Failure 2009- 2013 with Lower and Upper Bound 95% Confidence Intervals (CI)",
"Appendix V: Comments from the Department of Transportation",
"Appendix VI: GAO Contacts and Staff Acknowledgements",
"GAO Contact",
"Staff Acknowledgements"
],
"paragraphs": [
"NHTSA’s mission is to prevent motor vehicle crashes and reduce injuries, fatalities, and economic losses associated with these crashes. To carry out this mission, NHTSA conducts a range of safety-related activities, including: providing guidance and other assistance to states to help address setting vehicle safety standards; investigating possible safety defects and taking steps to help ensure that products meet safety standards and are not defective (through recalls if necessary); collecting and analyzing data on crashes; and traffic safety issues, such as drunk driving and distracted driving.\nNHTSA also develops uniform guidelines for states’ highway safety programs. In the past, these guidelines were referred to as standards, and if a state failed to implement these standards, DOT could withhold a percentage of federal-aid highway funds apportioned to the state. As shown in figure 1, this authority changed in 1976 when legislation limited NHTSA’s authority to withhold apportioned funds. Since that change, states have been able to choose whether or not to follow the guidelines in developing their highway safety programs.\nNHTSA’s guideline on state motor vehicle inspection programs, included in its Uniform Guidelines for State Highway Safety Programs, recommends that states should have a program for periodic inspection of all registered vehicles to reduce the number of vehicles with existing or potential conditions that may contribute to crashes or increase the severity of crashes that do occur, and should require the owner to correct such conditions. We found that 16 states operate periodic motor vehicle inspection programs. See figure 2 below. These states develop the specific rules that govern their programs. For example, 11 of the 16 states with inspection programs require an annual vehicle safety inspection, three states require a biennial inspection, and two states require time frames other than annual or biennial. Further, some states allow certain vehicles to be exempted from the safety inspections, such as newer model vehicles (up to 5 years from the model year) or vehicles at least 25 years old and registered as historical vehicles. Some states couple the safety inspection with emissions inspections.\nVehicle safety inspection programs are administered by the state motor vehicle administration, department of transportation, or law enforcement agency, and in all of the states, except Delaware, state-licensed private inspection stations perform the inspections. The number of these private inspection stations per state ranges from around 295 (Rhode Island) to 17,000 (Pennsylvania). With a few exceptions, states do not limit the number of private inspection stations that may participate in the safety However, inspection program; it is typically a market-driven process.states require these inspection stations to obtain certification or licenses from the state. Delaware operates four state-run safety inspection sites. The fees charged to vehicle owners for safety inspections are mostly set by the state, though five states allow a market-driven fee which is set by individual inspection stations. State officials we spoke with provided information on the fees collected from drivers at the time of inspection. These fees ranged from $0 (Delaware) to $55 (Rhode Island, but this includes an emissions inspection).\nIn addition to the guideline for states on periodic motor vehicle inspection, NHTSA has issued Vehicle In Use Inspection Standards, which set inspection criteria for several vehicle systems.system standards for brakes (hydraulic, vacuum, air, electric and service brakes), steering, suspension, tires, and wheel assemblies. For example, the standards specify that tread on a tire shall not be less than two thirty– seconds (2/32”) of an inch deep and provides an inspection procedure for examining the tire for this depth. These minimum standards apply to all states that choose to implement a vehicle safety inspection program. However, states with programs include more vehicle systems in their inspections than are specified in the standards. For systems not covered by these standards, each state determines what will constitute a passed or failed component. Examples of other systems generally incorporated into state vehicle safety inspections are lighting (such as headlights, brake lights, and turn signals), seatbelts, horns, windshields, wiper blades and the vehicle’s undercarriage.",
"",
"According to officials in 15 states with existing vehicle safety inspection programs whom we interviewed, these programs help improve the condition of vehicles; these officials point to data on the number of failed inspections as evidence of the safety benefit of these programs. Officials whom we interviewed from all 15 states said their programs help identify vehicles with safety problems and remove these unsafe vehicles from the roadways or compel owners to make repairs that otherwise might not be performed. Most of these states (12 of 15) collect data on the number of vehicles that fail inspection—the failure rate—and officials from 9 of these states cited their failure rate data to demonstrate the effectiveness of their programs. For example, Pennsylvania officials provided 2014 data showing that more than 529,000 vehicles (about 20 percent of the state’s 2.7-million registered vehicles) underwent repairs in order to pass inspection after initially failing. Virginia officials told us they believed that their state’s roadways were safer because their program identified safety problems in over 1.4 million—or 19 percent—of the state’s 7.5-million vehicles, in 2014. According to Virginia officials, 700,000 of those vehicles were rejected for brake-related issues such as worn, contaminated, or defective linings or drums, disc pads, or disc rotors. Safety problems most frequently found in other states in 2014 included: problems with glass, which resulted in 47,172 failed inspections in Utah; malfunctioning brake lights, which resulted in more than 13,000 failed inspections in Delaware; and tire deficiencies, which resulted in almost 6,000 failed inspections in Rhode Island.\nAdditionally, officials in three states said that vehicle safety inspections are valuable because the average age of passenger vehicles is increasing and, in some areas, weather conditions and roadway treatments such as salt may contribute to vehicle deterioration. For example, Rhode Island officials stated that their inspection program is necessary in part because the state’s snow and icy weather requires road treatments that can corrode a vehicle’s chassis, steel brake lines, suspension, steering linkages, and ball joints. Further, these officials said that their inspection program is important because vehicles are staying in service longer—with some cars accruing more than 300,000 miles— exposing vehicle systems to more use and risk of developing safety issues. DOT data show that the average age of passenger vehicles has consistently increased from 1995 to 2013, from an average age of 8.4 to 11.4 years. Similarly, Vermont and West Virginia officials told us that their states’ snow and associated road treatments, coupled with rough terrain and poor roadways, increase vehicle deterioration. They said that their programs mitigate seasonal weather challenges by reducing the number of unsafe cars in use.",
"Despite the consensus among the state inspection program officials we interviewed that these programs improve vehicle condition, research remains inconclusive about the effect of safety inspection programs on crash rates. There is little recent empirical research on the relationship between vehicle safety inspection programs and whether these programs reduce crash rates. What is available has generally been unable to establish any causal relationship.on vehicle safety inspection programs in 1990, there have been three econometric studies conducted examining the relationship between vehicle inspections and crashes in the U.S. and three studies examining these programs in other countries. Among the three studies of U.S. vehicle inspection programs, none were able to establish a statistically significant effect of safety inspection programs on crashes involving either fatalities or injuries. Specifically, the studies examined crash rates in all 50 states and did not find statistically significant differences in crash rates in states with inspection programs compared to those without. International studies have also not been able to establish a link between Since GAO last conducted a review safety inspection programs and crash rates involving either fatalities or injuries. For example, only one study suggested that safety inspections potentially reduce the likelihood of crashes, but noted the magnitude of the reduction could not be clearly established.information on each of the studies.\nSee appendix III for more While our literature review did not yield any studies establishing that vehicle safety inspections reduce crashes, this does not necessarily demonstrate that inspections do not have such an effect. Nationwide studies involving crashes related to vehicle component failure are hindered, in part, due to a lack of nationwide crash data. There is no comprehensive database for all police reported crashes in the United States. NHTSA maintains two data sources that capture some vehicle crash incidents related to component failure. NHTSA’s Fatality Analysis Reporting System (FARS) is a census of all fatal traffic crashes in the United States that provides uniformly coded, national data on police- reported fatalities, and contains information on crashes in which vehicle component failure was noted, but is limited to crashes involving fatalities. NASS-GES is a nationally representative sample of police-reported motor vehicle traffic crashes, which is also uniformly coded and contains information on crashes in which vehicle component failure was noted in the police report. However, the sample is not set up to be representative at the state level; therefore, it cannot be used to compare states with and without safety inspection programs. Some researchers have used FARS in their analyses in order to perform state-by-state comparisons, but detecting the effect of inspection programs on crash rates is difficult because few crashes involve fatalities, and relatively few of those fatal crashes are noted in police reports as having vehicle component failure as a potential contributing factor.\nAccording to our analysis of NHTSA’s NASS-GES crash data from 2009 through 2013, crashes with noted vehicle component failure constituted around 2 percent of all crashes nationwide. We also found that the three most common failures were related to 1) tires, 2) brakes, and 3) steering. These categories make up the majority of failures reported with the next biggest category being “other.” (See fig. 3.) These components are inspected as part of all state inspection programs.\nIn addition to looking at NASS-GES data, we attempted to examine crash rates before and after the elimination of safety inspection programs in four states and D.C., but were able to get sufficient crash data for two of these states, New Jersey and Oklahoma.vehicle component failure were generally between 2 and 3 percent of all crashes and varied little from year to year, even after the elimination of the inspection programs. We also calculated the crash rate—controlling for vehicle miles traveled—and found that the rate did not significantly change for either state. However, this analysis does not provide sufficient In both cases, crashes involving evidence to conclude that inspection programs did not have an effect on crash rates because additional factors—such as implementation or increased enforcement of traffic safety laws—could influence crash rates.\nThe number of crashes related to vehicle component failure may also be generally underreported. Some literature and safety advocate organizations we spoke with noted that police officers filling out accident reports often do not have the time and resources to conduct a thorough vehicle check to determine if a vehicle component failure contributed to the crash. Other factors, such as driver behavior, may be more easily ascertained. For a 2008 NHTSA crash causation survey, researchers conducted thorough investigations of over 5,000 crashes over a 2-year period (2005—2007) to determine factors that contributed to the crashes. While this study did not identify vehicle component failure as necessarily the cause of the accident, vehicle component failures were found to be present in 6.8% of crashes. The crash causation survey utilized a more comprehensive mechanical examination of the vehicle(s) involved in crashes than the police accident reports used as the data collection instrument for the NASS-GES crash data. The results of the crash causation survey suggest that the percentage of crashes related to vehicle component failure is higher than the estimates produced by the NASS-GES because of the more detailed analysis of the vehicles involved in the crashes.",
"States with vehicle safety inspection programs generally do not directly track the costs of managing and overseeing such programs. Officials from 8 of the 15 states with vehicle safety inspection programs we interviewed told us they do not track the cost of their vehicle inspection program. Officials from several of these states explained that costs for the inspection program cannot be broken out, because the costs for operating the inspection program are co-mingled with other programs or activities. For example, in New York, North Carolina, and Vermont, officials told us the staff who oversee the safety inspection programs also perform oversight of the emissions testing program, motorcycles or heavy-duty vehicles inspections, or have other state DOT duties. Consequently, the administrative costs for programs and activities were co-mingled. Similarly, officials from seven states reported tracking their program costs, but several of them also acknowledged some cost estimates included costs from other programs, since inspection program staff and overhead may be multi-tasked for other related programs.\nFunding for vehicle safety inspection programs comes from general state funding or through fees related to safety inspections. States typically receive some of the fee charged to drivers for safety inspections, while the remainder is retained by the inspection station. As explained by state officials, generally the amount that goes to the state is between $0 and $5 per inspection, though some states receive greater amounts with the most being $33.25. In some cases, states generate revenue by selling inspection stickers to the stations that conduct the inspection; these stickers are used to indicate that a vehicle has passed the inspection. States may also collect fees at the time of vehicle registration. These revenue sources may go to the state’s general fund, to other funds or departments (such as a highway maintenance fund), or to the larger programmatic department (state patrol or department of transportation), before being allocated to the inspection program. No state reported using federal funds to support its inspection program. NHTSA officials also said that no state had ever applied to use federal funding for a safety inspection program.",
"Officials in the 15 states we spoke with primarily cited oversight and paper-based data systems as challenges they have faced when operating their vehicle safety inspection programs.\nEleven of 15 states cited oversight efforts as a challenge. Oversight efforts involve addressing or preventing fraudulent behavior and ensuring that private inspection stations perform inspections in compliance with program requirements. To conduct oversight, states with private inspection stations generally perform some combination of routine, random, and covert audits. Because the inspection station is a private entity, states do not have direct control over how inspections are performed. For example, one state official said it can be a challenge to ensure that stations do not attempt to make unneeded repairs for profitable gain, while officials in a second state said it was a challenge to ensure that stations do not intentionally pass vehicles that should have failed the inspection. Officials in a third state explained that it is challenging to ensure thoroughness and quality of the inspection because doing so is a labor-intensive process. Similarly, officials in four of the five states that we spoke with that had eliminated programs told us that oversight efforts were also a challenge for them in operating their programs. For example, officials in one state told us that inspection stations were able to make more money by providing other automotive services and believed the safety inspections were not as profitable. Consequently, some inspection station mechanics issued inspection stickers without properly conducting inspections. In addition, some states cited challenges with inadequate staffing resources for oversight efforts. For example, officials from four states mentioned that they had relatively few state auditors to oversee their safety inspection programs. According to officials in one state, oversight can be a particular problem because private inspection stations can span thousands of miles, and it can be difficult to retain qualified state personnel if state wages are relatively low.\nFour of 15 states cited their paper-based data systems as a challenge. Paper-based inspection data systems can be inefficient and, according to some state officials, can limit states’ ability to monitor their programs. Generally, in a paper-based data system, private inspection stations record inspection results on paper forms rather than into an electronic database. Officials in one state said they would like an electronic database because inspection station results would be more quickly shared with the state, resulting in better program monitoring. These officials said they would first need to ensure that the benefits of an electronic database outweigh the costs and was a viable solution before requiring inspection stations to use it. Officials in another state physically scan and enter paper-based data received from inspection stations into the state’s database, a process that they said is time consuming. To help manage the state’s data- entry work flow, officials limit the number of safety inspections that inspection stations may conduct in a single day. These officials said that the lack of Internet access at some of the inspection stations in the state made it difficult to require the use of an electronic inspection database. Other states with paper-based systems do not collect statewide inspection data, preventing the state from analyzing data and determining, for example, the number of vehicles that fail inspections in a given year. Officials from one of these states cited a lack of funds as a major impediment to creating an electronic data system, and an official from the other state told us they were preparing a request for proposals to develop an electronic database.\nOther Challenges: State officials mentioned additional challenges, including state legislatures’ attempts to eliminate or alter programs (two states) and customer service challenges or general public irritation with the program (two states). For example, officials in two states told us they either relaxed or eliminated some non-safety related standards (such as using certain tools to check headlight aim) or exempted newer-model vehicles from safety inspections as a compromise with state legislatures to continue their programs. With regard to customer service challenges, officials in two states told us it was challenging for them to deal with customers who complained when their vehicle failed the inspection, had to be re-inspected, or they endured long wait times.\nLiterature that we reviewed and other stakeholders whom we interviewed, including representatives from safety groups, vehicle manufacturer industry groups, and DOT officials, also cited challenges that states face in operating their programs. Four studies cited oversight challenges. For example, a 1999 study noted that inspectors can either intentionally or unintentionally fail to report safety problems—sometimes to minimize the level of trouble to customers and increase the number of inspections performed. A 2008 state study found that one of the major criticisms of safety inspection programs is the difficulty that one state had in ensuring the quality and uniformity of inspections. The study stated that a thorough inspection, if performed to state regulations, should take between 15 and 30 minutes, according to program managers and industry representatives. However, according to the study, safety inspections in this state were taking 5 minutes, on average, raising questions about whether consumers’ vehicles were receiving thorough inspections. In addition, four stakeholders told us that state legislatures’ attempts to eliminate states’ programs either were or may be a challenge for states. Also, three stakeholders told us that public frustration associated with what the public perceives as unneeded repairs or the personal inconvenience vehicle owners feel when having to get their vehicles inspected either were or may be challenges for states.\nSome states have taken action to address their challenges, including implementing more stringent program rules, preparing manpower studies, and developing electronic database systems. Officials in one state told us that in 2012, they implemented stricter program rules for inspection stations to follow in an attempt to reduce fraudulent behavior (specifically, issuing stickers for vehicles that should have failed the inspection). In addition, officials in a second state said they recently added requirements that inspection station mechanics use fingerprint scanners for proper identification before performing inspections. To address challenges with staffing resources, officials in a third state told us they completed a manpower study to better identify the resources needed to operate their program. An official in another state told us that state officials were currently developing a request for proposals to create an electronic database system to replace its paper-based system.\nWhile some states have tried various ways to address their program challenges, other states have eliminated their vehicle safety inspection programs altogether. Since we last reported on vehicle safety inspections in 1990, five states and the District of Columbia have dropped their programs, some citing a lack of evidence proving the program’s effectiveness or saving financial resources as reasons. For example: In 2001, an Oklahoma Senate Press Release stated there was no evidence that vehicle safety inspection programs resulted in decreased highway accidents or injuries statewide and that eliminating the program would save Oklahomans $12 million.\nIn 2009, the District of Columbia eliminated its safety inspection program primarily because there was no available data to show that the program was beneficial, according to a District official. For example, a District official told us that an analysis of crash data before the program was eliminated showed that the majority of vehicle accidents resulted from driver behavior, not from vehicular mechanical failure.\nIn 2010 when New Jersey eliminated its program, the New Jersey Motor Vehicle Commission Chief Administrator announced that with a lack of conclusive data on program effectiveness and with the current (2010) fiscal crisis, New Jersey could not justify the program’s expense, and that dropping the program would yield an estimated annual savings of $17 million.",
"Officials in all 15 states with inspection programs that we spoke with told us that additional guidance and information from NHTSA would help in operating their programs. The majority of state officials (11 of 15) would like more guidance in the area of new vehicle safety technologies in order to determine how and whether new technologies should be incorporated into their inspection programs. The example most frequently cited by state officials was light-emitting diode (LED) brake lights. LED brake lights have multiple “light-emitting diodes” that contribute to the visibility of the light. See figure 4 below for a diagram of an LED light. The number of LEDs in a light can vary, depending on the vehicle manufacturer or model. According to state officials, they do not know how many diodes, if any, could malfunction before the light is considered unsafe, making it difficult for them to set pass or fail criteria for LED lights. Since brake lighting is critical to alert other drivers to changing conditions, it is important for states with inspection programs to have criteria to judge whether lights are working sufficiently well. Officials in three states also noted that such criteria are important because failing a car on the basis of individual diodes being out can result in a costly repair for consumers ranging from a few hundred to several thousand dollars, depending on the vehicle.\nState officials provided a range of criteria they have chosen to use for LED brake lights:\n50% of the diodes must function to pass inspection (5 states),\n70% must function (1 state),\n100% must function (3 states), and not yet specifically addressed in the inspection program (1 state).\nFederal Motor Vehicle Safety Standard No. 108: Lamps, reflective devices, and associated equipment, 49 C.F.R. § 571.108.\nNHTSA could sponsor research in the area of LED brake lighting as it has done in the past that might be helpful to states.\nFurther, officials in two states said that they are concerned about how their programs may be impacted by new autonomous vehicle technologies. Officials did not state specific concerns, but said that with new advanced vehicle technologies coming on the market, it is not clear how or what they should be inspecting. We have previously reported that automobile manufacturers have begun to equip some newly manufactured vehicles with sensor-based crash avoidance and autonomous technologies intended to prevent accidents.officials from these two states noted that such technologies may add a new layer to their inspection programs if the state decides the technologies need to be included in inspections.\nState officials in eight states with safety programs we interviewed also said that additional information from NHTSA on new safety technologies required by the agency’s safety standards for vehicle manufacturers would help them in operating their inspection programs. These state officials told us they generally track new vehicle safety standards implemented by NHTSA, but it is not always clear to program officials whether or how new standards might be incorporated into their inspection programs. Two recent vehicle standards cited by state officials were the requirements for tire-pressure monitoring systems (three state officials) and back-up cameras (two state officials). Specifically, these states would like guidance on whether they should check to see that these technologies are functioning correctly for vehicles that were manufactured with the technologies. Officials in one state told us that their state required the tire-pressure monitoring system to work and then eliminated that requirement because the system often malfunctioned and the inspectors could readily check whether the tires are properly inflated and holding air. A 2013 study contracted by NHTSA to gather information for updating inspection standards found “State directors welcomed the suggestion that, when NHTSA issues a new regulation, the rulemaking be accompanied by guidance on how to inspect a vehicle to ensure that the required equipment is still functioning.” However, the last update to the standards was in 1979, thus technologies that have been developed since that time—such as anti-lock brake systems—are not included. NHTSA officials told us that the determination of whether or how to include new vehicle safety technologies in inspection programs should be made by the states.\nFurther, NHTSA conducts research that could be useful to states with inspection programs, but state officials may not be aware of this information. For example, in April 2015, NHTSA issued the results of a defect investigation on brake lines, which recommended to consumers who drive vehicles from model year 2007 and earlier and live in cold- weather states to have a qualified mechanic inspect brake lines and other components under the vehicle at least twice a year, which is more frequent than the most strict state inspection requirements. Although the recommendation was not directed at state inspection officials, this information could help state inspection officials identify such problems during their inspections. However, NHTSA did not disseminate this information directly to states with inspection programs. According to officials from the American Association of Motor Vehicle Administrators (AAMVA)—the national group representing motor vehicle and law enforcement agencies, which administer safety inspection programs in states—they would share this type of information from NHTSA with their members. However, the AAMVA officials were not aware of this study. According to NHTSA officials, NHTSA issues press releases to the media and stakeholders on a regular distribution list, but AAMVA is not currently on this distribution list.\nAccording to NHTSA officials, there are no NHTSA staff designated to answer questions related to state inspection programs or disseminate relevant information to program officials because agency resources are currently focused on areas that have a greater impact on crash rates, such as driver behavior. NHTSA officials also noted that current evidence on vehicle safety inspection programs does not warrant a more prescriptive approach and that state officials should make determinations on what is most effective for their individual programs. Considering the variation among state programs and state needs it seems appropriate for states to determine much of their vehicle safety inspection program’s structures. However, state vehicle safety inspection program officials sometimes have questions about incorporating new technologies in their programs. Given that NHTSA has a guideline recommending that states implement vehicle inspection programs and that the agency’s mission includes assisting states with traffic safety programs, it is reasonable that state officials would look to NHTSA for guidance when these questions arise. While NHTSA does not dedicate staff to vehicle inspection issues, the agency has a broad range of vehicle technical experts in various parts of the organization who are knowledgeable about related issues. For example, NHTSA officials said the agency currently has 20 engineers who work on Federal Motor Vehicle Safety Standards that are relevant to vehicle inspection guidelines, along with 10 support professionals, such as economists and lawyers. Although NHTSA could update or produce additional regulation, Executive Order 13563 states that agencies should be identifying and assessing available alternatives to regulation including providing information upon which choices can be made. Establishing a communication channel, such as by designating a point of contact, could provide information transfer between knowledgeable NHTSA staff and state vehicle inspection program officials, and could help state inspection program officials operate their programs more effectively. Once established, such a channel would not necessarily require extensive NHTSA resources. For example, NHTSA could leverage the communication channel that AAMVA currently has with states, or set up a web-based forum through which state officials can ask questions, receive information from NHTSA, and share information with other states on how they are addressing new vehicle technologies and standards in their programs.",
"While the benefits and costs of state vehicle inspection programs are difficult to quantify, state program officials we spoke to are confident that their programs improve vehicle safety, despite the challenges they face in operating the programs. However, some state officials told us they sometimes have questions about new technologies and other issues related to vehicle safety, and have not been able to get clear answers from NHTSA. With no recent federal guidance, state officials have implemented different criteria or chosen not to include new technologies in their inspection programs, potentially reducing the safety benefits of their inspection program. Further, NHTSA’s work in the areas of Federal Motor Vehicle Safety Standards and defects investigation touches on vehicle component and safety information that could be useful to state vehicle safety inspection program officials, but this information is not being provided directly to these officials nor to the national group that represents these officials. NHTSA’s decision to not devote significant resources to state vehicle inspection programs is consistent with research showing that vehicle component failures are a relatively minor contributor to traffic crashes. However, establishing a communication channel to answer questions from state officials and convey information could assist states in improving their vehicle safety inspection programs. To minimize resources needed to establish and maintain a communication channel, NHTSA could potentially create a web-based forum to share information and respond to questions and collaborate with AAMVA to disseminate information to state officials.",
"To improve assistance to states in regard to the periodic motor vehicle inspection guideline, the Secretary of Transportation should direct the Administrator of NHTSA to establish and maintain a communication channel with states to convey relevant information related to vehicle inspections and respond to questions from state safety inspection program officials.",
"We provided a draft of this report to DOT for review and comment. DOT provided written comments, which are reprinted in appendix V. In its written comments, DOT stated that NHTSA agreed with our recommendation, and supports our conclusion that establishing a communication channel with state vehicle safety inspection program officials would be beneficial.\nWe are sending copies of this report to the appropriate congressional committees, and the Secretary of Transportation. This report will also be available at no charge on the GAO website http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-2834 or flemings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI.",
"We conducted a review of state motor vehicle inspection programs and National Highway Traffic Safety Administration’s role in assisting these programs. This report assesses: 1) what is known about the safety benefits and costs of operating state vehicle safety inspection programs, 2) any challenges states have faced in operating these programs, and 3) any actions NHTSA could take to assist states with these programs.\nTo identify what is known about the costs and safety benefits of state vehicle inspection programs, we conducted a literature search for studies that analyzed relationships between safety inspections and outcomes, such as crash rates, vehicle component failures, and vehicle fleet age. We limited our literature search to those articles and reports published since 1990—the last time GAO conducted a comprehensive literature review. We identified existing studies from peer-reviewed journals, government reports, trade publications, and conference papers based on searches of various databases, such as ProQuest, Academic OneFile, and Transportation Research International Documentation. Search parameters included studies across the United States and in other countries. We also conducted interviews with organizations that assist states with traffic safety efforts and asked them to recommend additional research. The literature review parameters and interviews resulted in 185 abstracts or studies. Of these, we determined that 29 studies appeared to be relevant—eliminating, for example, studies that focused on emissions inspections. We assessed the relevance and methodological quality of the selected studies by performing an initial review of the findings (here we eliminated any studies based on data from before 1980), and then performed an independent assessment of the study’s methodology. After these reviews, we determined that 6 studies published from 1992 through 2013 were sufficiently reliable for the research objective on the safety benefits and costs of operating state vehicle safety inspection programs (see appendix III) and 4 studies were sufficiently reliable for the research objective on any challenges that states face in operating these programs.\nTo determine what is known about safety benefits of state vehicle inspections, we also analyzed crash data. Because of known data limitations raised in the studies we reviewed during the literature search, we attempted to compare crash rates related to vehicle component failure before and after program elimination in states that eliminated their inspection program since 1990. Six states fit this criterion: South Carolina (1995), Arkansas (1998), Oklahoma (2001), Washington D.C., (2009), New Jersey (2010), and Mississippi (2015). Because Mississippi dropped its program during the course of our assessment, we did not do a before and after comparison. For the other five states, we attempted to collect data on the number of crashes recorded in the state and the number of crashes recorded with vehicle component failures 5 years before and 5 years after program elimination. We were only able to obtain this data for two of the five states: Oklahoma and New Jersey. For Oklahoma we were able to obtain data for 1995-2013. We focused on the five years before and after 2001 when the program was eliminated to see if there was a difference in trend. Because New Jersey eliminated its program in 2010, we were not able to get 5 years of crash data after the program was eliminated. For New Jersey we reviewed data from 2005 to 2013. We also analyzed national level crash data from NHTSA’s National Automotive Sampling System General Estimates System (NASS-GES) for the years 2009-2013. NASS-GES consists of data collected from an annual sample of about 50,000 police accident reports and is statically weighted to be a nationally representative of all police-reported crashes that occur in the United States each year. We analyzed this data to determine the estimated number of total crashes with vehicle factors nationwide as well as the specific vehicle component failures that were reported, such as issues with brakes, tires, and steering. We express our confidence in the precision of estimates as 95 percent confidence intervals. This is the interval that would contain the actual population values for 95 percent of the NASS-GES samples that NHTSA could have drawn. Because of the sample design used to collect GES, we are limited to reporting trends on a national level and could not use this data to look at individual state trends. For each of these data sets, we interviewed relevant officials and analyzed the data for possible errors. We determined that these data were sufficiently reliable for the purposes of estimating the number of reported crashes that occur with vehicle component failures.\nTo determine challenges states faced in operating their inspection programs and what actions, if any, NHTSA could take to assist states with their vehicle safety inspection programs, we reviewed federal and state policy and program documents related to inspection programs. We reviewed federal statutes, regulations, guidelines, and guidance documents, state laws authorizing safety inspection programs, state program reports, state officials’ testimony before their state legislators and state inspection guidance and manuals. We observed safety inspections in Delaware at a state-run inspection station and in Virginia at a privately owned and operated inspection station. In selecting these sites we worked with state officials to identify an inspection station where we could view an actual inspection take place. We conducted structured interviews with officials in 15 of the 16 states that currently have a safety inspection program. We attempted multiple times to speak with the one remaining state—New Hampshire—but were unsuccessful. We also interviewed state officials in five of six jurisdictions (four states and the District of Columbia) that eliminated their programs since 1990. South Carolina eliminated its program in 1995 and did not have any officials knowledgeable about the program. We also interviewed NHTSA officials, researchers at Carnegie Mellon University, and representatives from the American Association of Motor Vehicle Administrators, safety groups (Center for Auto Safety and Public Citizen), and automotive industry groups (Automotive Service Association, Auto Care Association, and Motor & Equipment Manufacturers Association).",
"",
"",
"Article Sutter, David and Poitras, Marc (2002). The Political Economy of Automobile Safety Inspections. Public Choice, 133 (3-4), 367-387.\nMethodology Regression analysis using 1981-1993 panel data of 50 states.\nConclusions Unable to establish a statistically significant effect of vehicle inspection program on fatalities or injury rates.\nMerrell, David, Poitras, Marc, and Sutter, Daniel (1999). The Effectiveness of Vehicle Safety Inspections: An Analysis Using Panel Data. Southern Economic Journal, 65 (3), 571-583.\nRegression analysis using 1981-1993 panel data of 50 states.\nUnable to establish a statistically significant effect of vehicle inspection program on fatalities or injury rates.\nHoldstock, J., Hagarty, D., & Zalinger, D. (1994). Review of a mandatory vehicle inspection program. Project report.\nRegression analysis using 1990-1991 data for 50 states, District of Columbia, and 10 Canadian provinces.\nUnable to establish a statistically significant effect of vehicle inspection program on fatalities or injury rates.\nKeall, M. D., & Newstead, S. (2013). An evaluation of costs and benefits of a vehicle periodic inspection scheme with six- monthly inspections compared to annual inspections. Accident Analysis & Prevention, 58, 81-87.\nRegression analysis using merged New Zealand crash data (2004-2009), licensing data (2003-2008), and inspection data (2003-2009).\nGoing from annual to biannual inspections may reduce likelihood of crashes (8%) and the prevalence of vehicle defects (13.5%), but the wide confidence interval for the drop in crash rate (0.4–15%) indicated considerable statistical uncertainty.\nChristensen, Peter and Elvik, Rune (2007). Effects on Accidents of Periodic Motor Vehicle Inspection in Norway. Accident Analysis and Prevention 39, 47-52.\nObservational study using insurance data and 1998-2002 inspection data in Norway.\nInspections improved the technical condition of inspected cars, but did not have a statistically significant effect on crash rates. The study’s findings suggested that following inspections, the accident rate of inspected cars did not decline, but rather showed a weak tendency to increase.\nFosser, Stein (1992). An Experimental Evaluation of the Effects of Periodic Motor Vehicle Inspection on Accident Rates. Accident Analysis and Prevention 24 (6), 599-612.\nExperimental design over 4 years (1986- 1990) in Norway.\nInspection improved the technical condition of inspected cars, but the differences found in technical condition had no influence on accident rates.",
"Appendix IV: Estimated Number of Crashes Listed with Vehicle Component Failure 2009- 2013 with Lower and Upper Bound 95% Confidence Intervals (CI)",
"",
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"In addition to the contact named above, Sara Vermillion (Assistant Director), Carl Barden, Namita Bhatia Sabharwal, Timothy Bober, Melissa Bodeau, Jennifer Clayborne, Leia Dickerson, Amanda Miller, Sara Ann Moessbauer, Josh Ormond, Cheryl Peterson, Oliver Richard, Stephen Sanford, Amy Suntoke, Friendly Vang-Johnson, Michelle Weathers, and Jade Winfree made key contributions to this report."
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"question": [
"What challenges do state safety inspection program officials face?",
"How have these challenges been addressed?",
"How have these challenges been handled differently in some cases?",
"What did officials say would help in operating their programs?",
"What problem is there with what officials say would be helpful?",
"Specifically, what sort of new technologies did officials say would be helpful?",
"Why is it important that states have information about new vehicle safety technologies?",
"Why have NHTSA officials taken a hands-off approach to state vehicle inspection programs?",
"Despite this approach, why would improved communication help state officials?",
"What was GAO asked to review?",
"What does this report assess?",
"How did GAO get information for this report?"
],
"summary": [
"State safety inspection program officials GAO interviewed primarily cited the oversight of inspection activities and paper-based data systems as challenges they have faced in operating vehicle safety inspection programs.",
"To address challenges, some states have taken actions such as implementing more stringent program rules and exploring the development of electronic data systems.",
"Other states have eliminated their inspection programs altogether.",
"Program officials in all 15 states said that additional information from NHTSA—for example, information related to new vehicle safety technologies—would help in operating their programs.",
"However, there is no designated channel for communication between NHTSA and program officials. State officials also said that it is not clear whether or how to inspect new safety technologies, such as tire pressure monitoring systems, required by NHTSA for new vehicles.",
"Several state officials noted that they would like more information on new technologies such as light-emitting diode (LED) brake lights.",
"Without information, states have implemented different inspection pass-fail criteria or chosen not to include new technologies in their inspections, potentially reducing the safety benefit of their programs.",
"NHTSA officials told GAO they have adopted a hands-off approach to state vehicle inspection programs because the agency devotes its resources primarily to areas that contribute more heavily to crashes, such as driver behavior.",
"However, consistent with NHTSA's mission to assist states in implementing traffic safety programs, improving communication with state officials on vehicle safety issues could help these officials in operating their inspection programs.",
"GAO was asked to review these state programs and NHTSA's assistance to states.",
"This report assesses: 1) what is known about the safety benefits and costs of operating state vehicle safety inspection programs, 2) challenges that states have faced in operating these programs, and 3) actions NHTSA could take to assist states with these programs.",
"GAO analyzed NHTSA 2009—2013 data and state data for crash trends related to vehicle component failure; reviewed studies that analyzed relationships between safety inspections and outcomes; and interviewed officials in 15 states that have inspection programs. GAO also interviewed officials in 5 states that eliminated their programs since 1990, NHTSA officials, and representatives from safety groups and automotive industry groups."
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GAO_GAO-13-733
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{
"title": [
"Background",
"Unpaid Federal Tax Debt Owed",
"Laws and Regulations Governing the Security- Clearance Process",
"Security-Clearance Process",
"Improvements to the Federal Security-Clearance Process",
"More Than 8,000 Individuals Eligible for Security Clearances Owe about $85 Million in Federal Taxes; About Half Are on Payment Plans with the IRS",
"Federal Agencies Have Mechanisms to Detect Tax Debt, but Opportunities Exist to Strengthen Detection Capabilities",
"Investigation Mechanisms Include Self-Reporting and Validation Techniques",
"Self-Reporting",
"Agencies Do Not Routinely Monitor Current Clearance Holders for Tax Debt",
"Opportunities Exist to Improve Detection of Tax Debt Owed by Security- Clearance Applicants and Clearance Holders",
"Conclusions",
"Recommendation for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Federal Investigative Standards",
"Appendix II: Revised Adjudicative Guidelines for Determining Eligibility for Access to Classified Information",
"Appendix III: Scope and Methodology",
"Data-Reliability Assessment",
"Appendix IV: Comments from the Department of Homeland Security",
"Appendix V: Comments from the Office of the Director of National Intelligence",
"Appendix VI: Comments from the Office of Personnel Management",
"Related GAO Products"
],
"paragraphs": [
"",
"As of September 30, 2012, the tax debt of individuals and businesses that owed the U.S. government was about $364 billion, according to the IRS.\nThe tax-debt inventory is the sum of all taxes owed to the IRS at a particular point in time, including debts from the current year and debts from previous years that fall within the 10-year statute of limitations on collections. The inventory of tax debts comprises tax assessments that are not collected along with related penalty and interest charges. Federal taxes that are owed become tax debts when the tax is assessed but not paid. Millions of individual and business taxpayers owe billions of dollars in unpaid federal tax debts, and the IRS expends substantial resources trying to collect these debts.\nGAO, High-Risk Series: An Update, GAO-13-283 (Washington, D.C.: February 2013). workforce (approximately 312,000 individuals).contain a comparison of the delinquency rates of federal employees with the general population.",
"Passed in 2004, the Intelligence Reform and Terrorism Prevention Act (IRTPA) mandates the President to identify a single entity responsible for, among other things, directing the day-to-day oversight of investigations and adjudications for personnel security clearances throughout the U.S. government. Additionally, agencies may not establish additional investigative or adjudicative requirements without approval from the selected entity, nor may they conduct an investigation where an investigation or adjudicative determination of equal level exists.\nExecutive Order 13467 (June 30, 2008) designates ODNI as the Security Executive Agent and assigns responsibility for developing uniform and consistent policies and procedures to ensure the effective, efficient, and timely completion of investigations and adjudications related to determinations of eligibility for access to classified information or eligibility to hold a sensitive position. Executive Order 13467 also designates the Director of OPM as the Suitability Executive Agent responsible for developing and implementing uniform and consistent policies and procedures for investigations and adjudications related to determinations of suitability for federal employment, as well as eligibility for electronic and physical access to secure facilities.outlines a process for continuous evaluation of individuals that are determined to be eligible or currently have access to classified information. Continuous evaluation means reviewing the background of an individual who has been determined to be eligible for access to classified information (including additional or new checks of commercial databases, government databases, and other information lawfully available to security officials) at any time during the period of eligibility to determine whether that individual continues to meet the requirements for eligibility for access to classified information. Executive Order 12968 (August 4, 1995) authorized establishment of uniform security policies, procedures, and practices, including the Federal Investigative Standards used by investigators conducting security-clearance investigations. In December 2012, the Security and Suitability Executive Agents (ODNI and OPM) jointly issued a revised version of Federal Investigative Standards for the conduct of background investigations for individuals that work for or on behalf of the federal government.",
"Personnel security clearances are required for access to classified national-security information, which may be classified at one of three levels: confidential, secret, or top secret. A top-secret clearance is generally also required for access to Sensitive Compartmented Information or Special Access Programs. The level of classification denotes the degree of protection required for information and the amount of damage that unauthorized disclosure could reasonably be expected to cause to national security. Unauthorized disclosure could reasonably be expected to cause (1) “damage,” in the case of confidential information; (2) “serious damage,” in the case of secret information; and (3) “exceptionally grave damage,” in the case of top-secret information.\nAs shown in figure 1, to ensure the trustworthiness and reliability of personnel in positions with access to classified information, government agencies rely on a personnel security-clearance process that includes multiple phases: application, investigation, adjudication, and reinvestigation (where applicable, for renewal or upgrade of an existing clearance).\nThe application phase. To determine whether an investigation would be required, the agency requesting a security-clearance investigation is to first conduct a check of existing personnel-security databases to determine whether there is an existing security-clearance investigation underway or whether the individual has already been favorably adjudicated for a clearance in accordance with current standards. If such a security clearance does not exist for that individual, a security officer from an agency is to (1) request an investigation of an individual requiring a clearance; (2) forward a personnel-security questionnaire (SF-86) to the individual to complete using OPM’s Electronic Questionnaires for Investigations Processing (e-QIP) system; (3) review the completed questionnaire; and (4) send the questionnaire and supporting documentation, such as fingerprints, to OPM or another designated investigative service provider.\nThe investigation phase. OPM conducts a majority of the government’s background investigations; however, some agencies, such as State, are delegated to conduct their own background investigations. Federal investigative standards and agencies’ internal guidance are used to conduct and document the investigation of the applicant (see app. II). The scope of information gathered during an investigation depends on the level of clearance needed. For example, federal standards require that investigators collect information from national agencies, such as the Federal Bureau of Investigation, for all initial and renewal clearances. For an investigation for a confidential or secret clearance, investigators gather much of the information electronically. For an investigation for a top- secret clearance, investigators gather additional information through more-time-consuming efforts, such as traveling to conduct in-person interviews to corroborate information about an applicant’s employment and education. After the investigation is complete, the resulting investigative report is provided to the agency.\nThe adjudication phase. Adjudicators from an agency use the information from the investigative report to determine whether an applicant is eligible for a security clearance. To make clearance-eligibility decisions, national policy requires adjudicators to consider the information against the 2005 Revised Adjudicative Guidelines for Determining Eligibility for Access to Classified Information. The adjudication process is a careful weighing of a number of variables, to include disqualifying and mitigating factors, known as the “whole-person” concept. When a person’s life history shows evidence of unreliability or untrustworthiness, questions can arise as to whether the person can be relied on and trusted to exercise the responsibility necessary for working in a secure environment where protecting national security is paramount. As part of the adjudication process, the adjudicative guidelines require agencies to determine whether a prospective individual meets the adjudicative criteria for determining eligibility, including personal conduct and financial considerations. If an individual has conditions that raise a security concern or may be disqualifying, the adjudicator must evaluate whether there are other factors that mitigate such risks (such as a good-faith effort to repay a federal tax debt). On the basis of this assessment, the agency may make a risk-management decision to grant the security-clearance eligibility determination, possibly with a warning that future incidents of a similar nature may result in revocation of access.\nThe reinvestigation phase. Personnel cleared for access to classified information may have their clearance renewed or upgraded if determined necessary to the performance of job requirements. Reinvestigation covers the period since the previous investigation. Renewal of a clearance at the same level currently undergoes the above process every 10 years for secret or 5 years for top secret. Applicants for clearance upgrades undergo additional steps necessary to obtain the higher clearance level (such as a subject interview for a top-secret clearance).",
"We have previously reported on issues related to the federal security- clearance process. For example, in 2005, we designated DOD’s personnel security-clearance program—which comprises the vast majority of government wide clearances—as a high-risk area. This designation continued through 2011 because of concerns regarding continued delays in the clearance process and security-clearance documentation, among other things.personnel security-clearance program as a high-risk area, DOD, in Since we first identified the DOD conjunction with Congress and executive-agency leadership, took actions that resulted in significant progress toward improving the processing of security clearances. Congress held more than 14 oversight hearings to help oversee key legislation, such as the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA), which helped focus attention and sustain momentum of the government-wide reform effort. In 2011, we removed DOD’s personnel-security clearance program from our high-risk list because of the agency’s progress in improving timeliness, development of tools and metrics to assess quality, and commitment to sustaining progress.\nIn 2012, we found that OPM’s reported costs to conduct background investigations increased by about 80 percent, from about $600 million in fiscal year 2005 to almost $1.1 billion in 2011 (in fiscal year 2011 dollars). OPM’s background investigation program has several cost drivers, including investigation fieldwork and personnel compensation for OPM’s background-investigation federal workforce. OPM attributed cost increases to, in part, an increase in the number of top-secret clearance investigations, which involve additional field work and more comprehensive subject interviews and compliance with investigation timeliness requirements.",
"About 240,000 employees and contractors of civilian executive-branch agencies, excluding known employees and contractors of DOD and intelligence agencies, had a federal security clearance or were approved for secret and top-secret clearances due to a favorable adjudication from April 1, 2006, through December 31, 2011. These consist of both initial investigations when an individual is applying for a clearance and reinvestigations when an individual is upgrading to a higher clearance level or renewing an existing clearance. About 8,400 of the 240,000 people (approximately 3.5 percent) had unpaid federal tax debt as of June 30, 2012, totaling about $85 million. The characteristics and nature of these 8,400 individuals with tax debt are discussed below.\nAbout half of the individuals are in a repayment plan with the IRS. According to IRS data, about 4,200 of these 8,400 individuals with tax debt had a repayment plan with the IRS to pay back their debt as of June 30, 2012. plan was approximately $35 million.\nThe tax debt owed by those on a repayment\nAbout half of individuals with tax debt were federal employees.\nRepayment plans, or installment agreements, are monthly payments made to the IRS that allow individuals or entities to repay their federal tax debt over an extended period. time frame (April 1, 2006, to December 31, 2011), while the others were favorably adjudicated as eligible for a secret clearance.\nMost individuals accrued tax debt after clearance adjudication.\nApproximately 6,300 individuals (about 76 percent) accrued tax debts only after the issuance of the security clearance. Approximately 2,000 individuals (about 25 percent) accrued their tax debt before the approval for the security clearance.\nAge and amount of tax debt ranges widely. About 16 percent of the $85 million in unpaid federal taxes were delinquent more than 3 years, and approximately 6 percent of the unpaid federal taxes were delinquent more than 5 years. Further, the unpaid tax debt of each individual ranged from approximately $100 to over $2 million, and the median tax-debt amount owed by these individuals was approximately $3,800.\nIn addition, we analyzed 13 nongeneralizable case examples—7 federal contractors and 6 federal employees from the DOE, DHS, and State—to determine whether existing investigative and adjudication mechanisms detected unpaid tax debt during the security-clearance process. In 8 of these 13 cases, the individual had a top-secret clearance, with the remaining 5 having secret clearances. In 5 of the 13 cases, the individual had a reinvestigation of the security clearance after the period of our analysis (April 1, 2006, to December 31, 2011). In 11 of these 13 cases, the individual’s tax debt accrued before the favorable adjudication of the security clearance. For all 11 of these cases, the tax debt was identified either through the initial investigation or through the reinvestigation. In 2 of the 13 cases, the individual’s tax debt accrued after the favorable adjudication of the security clearance, and no indication of the federal tax debt was found in the security clearance files. On the basis of our review of IRS records, our analysis found that 12 of the 13 individuals filed their tax returns late for at least 1 tax year, and 6 of the 13 individuals did not file at least one annual tax return.discussed throughout the report.",
"To detect federal tax debt for clearance applicants, consistent with federal law, federal investigators rely primarily on two methods: (1) applicants self-reporting tax debts, and (2) validation techniques, such as the use of credit reports or in-person interviews. Each of these methods has shortcomings in detecting unpaid federal tax debts for clearance applicants. Moreover, federal agencies do not routinely monitor individuals after the security clearance is favorably adjudicated to identify tax debt accrued subsequent to the clearance approval. Additional mechanisms that provide large-scale, routine detection of federal tax debt could improve federal agencies’ ability to detect tax debts owed by security-clearance applicants and current clearance holders.",
"",
"As part of the application-submission phase of the security-clearance process, applicants must submit various background and biographical information using OPM form SF-86. In addition, new federal employees typically complete the Declaration for Federal Employment form (OF- 306). Both of these forms require applicants to disclose if they are delinquent on any federal debt, including tax debts. The SF-86 is used in conducting background investigations, reinvestigations, and continuous evaluations of federal employees and contractors. The SF-86 requires that applicants declare if they did not file or pay any federal taxes within the past 7 years. The SF-86 also requires applicants to disclose whether any liens were placed on their property for failure to pay tax debts and whether they are currently delinquent on any federal debts (including tax debts). Similar to the SF-86, the Declaration for Federal Employment requires applicants to disclose if they are delinquent on any federal debt, including tax debts. If the applicant is delinquent, the applicant is required to disclose, among other things, the type and amount of debt and any steps taken to repay the debt. An excerpt of the SF-86 where applicants are required to disclose any tax issues are illustrated in figure 2.\nOf the 13 individuals we examined from our nongeneralizable sample, 11 had accrued debt prior to the clearance being granted. Our review of the SF-86 documentation for this sample of 11 selected cases found that 5 individuals did not properly disclose their tax debts. Each of these individuals owed at least $12,000 at the time of our review. As discussed later in this report, our past work has focused on the inadequacies of relying on self-reported information without independent verification and review.\nDuring the investigative phase, the investigative agency can perform several activities in an effort to validate applicants’ certifications about the nature and extent of their tax debts, but each of the techniques has limitations, as discussed below.\nObtaining credit reports of the applicants. According to OPM officials, credit reports, which contain public records including federal tax liens, are the primary method of identifying federal tax debts that were not self- reported. However, credit reports only contain information on tax debts for which the IRS filed a lien on the debtor’s property, both real and personal, for the amount of the unpaid tax. Circumstances do not warrant a lien being filed in all cases, such as when the amount of the debt is in dispute or when the IRS determines that filing a lien would hamper collection of the debt because the debtor is trying to obtain a loan to pay it off. In addition, the IRS generally does not file liens until after the debt has moved out of the notice status and there is property on which a lien can be placed. The amount owed can increase with interest and penalties or can decrease as the debtor makes payments, but neither change is reflected in the recorded tax lien amount. Our analysis found that about 450 of the approximately 8,400 delinquent taxpayers (about 5 percent) who were favorably adjudicated as eligible for security clearances had a tax lien filed on them. For the 13 cases that we reviewed, 4 of the cases identified during the investigative process had tax liens filed against the individuals.\nConducting in-person interviews. As part of the investigation, investigators may conduct interviews with the applicant and his or her friends, former spouses, neighbors, and other individuals associated with the applicant. According to OPM, during the course of the in-person interviews, the tax debt could be disclosed, but there is no systematic way to identify tax debt during the interviews. For example, according to State officials, state tax debt is usually an indicator that the individual also owes federal taxes. Thus, during the course of their in-person interviews, investigators will often inquire with the applicant whether he or she owes federal taxes when a state tax debt is discovered. However the in-person interviews can be a time-consuming and resource-intensive process, and OPM does not have assurance that it identifies all tax debt information through the interview process.",
"Federal agencies generally do not have routine mechanisms to review federal tax compliance for individuals who hold security clearances. Specifically, there is no process to detect unpaid federal tax debts accrued after an individual has been favorably adjudicated as eligible for a security clearance unless it is self-reported, reported by a security manager due to garnishment of wages, or discovered during a clearance reinvestigation (renewal) or upgrade. Given that individuals who hold security clearances are reinvestigated every 10 years for secret clearances and every 5 years for top-secret clearances, if an individual accrues tax debt after a security clearance is granted, the unpaid federal tax debt may not be detected for up to 5-10 years. As previously discussed, in 2 of our 13 case studies, the individuals’ tax debt accrued after the favorable adjudication of the security clearance, and we found no indication that the federal tax debt was identified in the security- clearance file. In addition, if the tax debt is not found in the initial investigation, the federal agency may not detect the tax debt until the next security clearance reinvestigation. In 5 of the cases that we reviewed, existing federal tax debt was not identified in the original adjudication of the security clearance but through the subsequent reinvestigation of the security clearance, meaning the individuals had tax debt unknown to the federal agency while holding a clearance for some period of time. This gap represents a risk that could be mitigated by a mechanism to routinely obtain tax-debt information, as discussed later in this report.",
"Additional mechanisms that provide large-scale detection of federal tax debt could improve federal agencies’ ability to detect tax debts owed by security-clearance applicants and security-clearance holders, but statutory privacy protections limit access to this information. Specifically, access to the federal tax information needed to obtain the tax payment status of applicants is restricted under section 6103 of the Internal Revenue Code, which generally prohibits disclosure of taxpayer data to federal agencies and others, including disclosures to help validate an applicant’s certifications about the nature and extent of his or her tax debt. During our interviews, ODNI, DHS, DOE, and State officials expressed interest in establishing additional mechanisms to provide large-scale detection of unpaid tax debt owed by security-clearance applicants. ODNI officials stated that they formed a working group in 2012, in collaboration with OPM and other federal agencies, to, among other things, explore whether an automated process for reviewing federal tax compliance can be established. However, restrictions to taxpayer information under section 6103 may present challenges to their efforts. For example, in 2011 and 2012, State requested the IRS to provide it a listing of State employees who owed federal taxes. The IRS did not formally respond in writing to the State letters, according to State officials, but stated that the IRS could not provide them this list due to section 6103 restrictions. According to IRS officials, based on their analysis of the applicable tax laws, IRS cannot disclose tax information of federal employees without taxpayer consent request.\nFederal agencies may obtain information on federal tax debts directly from the IRS if the applicant provides consent. For example, agencies can use IRS form 4506-T, Request for Transcript of Tax Return, to obtain tax transcripts that provide basic taxpayer information, including marital status, type of return filed, adjusted gross income, taxable income, and later adjustments, if any, if the individual provides written consent. However, this form may not be useful in conducting routine checks with the IRS during the initial investigation and reinvestigation processes for three reasons. First, the use of the IRS form 4506-T is a manual process and thus it is not conducive to the large-scale detection of unpaid federal taxes owed by security-clearance applicants, according to OPM, DHS, and State officials. Instead, this method is typically performed when a federal tax debt is disclosed by the applicant or discovered during the investigation. Second, the IRS form 4506-T generally provides limited visibility into an applicant’s overall tax debt status because the form requires the requesting agency to identify the specific tax modules (generally, time periods) that the agencies are requesting to be disclosed, and, as such, agencies may not obtain the complete tax debt history of the individual. Finally, the IRS form 4506-T has a 120-day time limit from date of the applicant’s signature providing consent to process the form with the IRS. Officials from State stated that this limited time frame could hinder their ability to obtain the requested tax information if this form was provided at the time the security-clearance application was completed. As highlighted in our past work, it is important that the establishment of any federal tax-compliance check not delay the timeliness of security- clearance decisions. Specifically, timeliness concerns were one of the reasons that we designated the security-clearance process as high risk from 2005 to 2011. As we concluded in July 2012, delays in the security-clearance process could pose risks to national security, impede the start of classified work and hiring the best-qualified workers, and increase the government’s cost of national-security-related contracts.\nThe Department of the Treasury’s Offset Program (TOP), or a similar mechanism, may provide an opportunity for federal agencies to perform an automated check of both security-clearance applicants and current clearance holders to determine whether they have unpaid federal debts that would include tax debts, while not violating IRS section 6103 requirements. TOP is an automated process administered by the Department of the Treasury in which certain federal payments, such as contractor and federal salary payments, are reduced to collect certain delinquent tax and nontax debts owed to federal agencies, including the IRS. Each week, the IRS sends the Department of the Treasury’s Bureau of the Fiscal Service office (Fiscal Service) an extract of its tax- debt files, which are uploaded into TOP and matched against Fiscal Service payment data (such as federal contractor payments, federal salary payments, and Social Security Administration retirement payments). If there is a match and the IRS has completed all statutory notifications, any federal payment owed to the debtor is reduced (levied) to help satisfy the unpaid federal taxes.\nAs we concluded in our past work, since TOP comingles information regarding tax debt and nontax debt, the existence of an employee’s name in TOP would generally not be considered taxpayer information subject to section 6103 of the tax code. Thus, TOP could be used to identify individuals who may owe federal debts, which includes federal taxes, without compromising privacy protections provided by section 6103. TOP currently reports a federal debt indicator (comprising both federal tax and nontax debts) to the System for Award Management (SAM) on whether a federal contractor or grant recipient has federal debts.\nSAM is a government-wide database used to track the status of agency procurements.\nAs of September 2012, the IRS had referred approximately $167 billion (approximately 44 percent) of the $373 billion of the total unpaid tax assessment inventory in tax debts to TOP; thus, this program is an important repository of tax-debt data for federal workers and contractors. The IRS typically sends the tax debts to TOP except in cases where (1) the IRS has not completed its notification process,(2) tax debtors have filed for bankruptcy protection or other litigation, (3) tax debtors have agreed to pay their tax debt through monthly installment payments or have requested to pay less than the full amount owed through an offer in compromise, (4) the IRS determined that the tax debtors are in financial hardship, (5) tax debtors are filing an amended return, or (6) the IRS determined that specific circumstances (such as a criminal investigation) exist that warrant special exclusion from FPLP.\nThus, debts that are typically sent to TOP are those where the taxpayer has not shown a willingness to resolve his or her tax debts. As such, it is important that these individuals are identified because it can be an important factor in determining whether an individual should be eligible for a security clearance, as inability or unwillingness to satisfy debts is a potentially disqualifying factor according to the adjudicative guidelines. Our analysis found that 1,600 (approximately 20 percent) of the 8,400 taxpayers that had been granted security clearances during this 5-year period had tax debts that were referred to TOP.\nA mechanism similar to or using TOP could be useful in identifying individuals who have not shown a willingness to resolve their tax debts and who are applying for a security clearance or already have one. This type of mechanism can be especially advantageous in monitoring clearance holders to identify circumstances (such as the nonpayment of federal taxes) that might warrant a reevaluation of an individual’s security- clearance eligibility.individuals (approximately 76 percent) had their tax debt accrued after the approval for the security clearance.\nAs discussed earlier, our analysis found that 6,375 While ODNI officials reported forming a working group with OPM and other federal agencies to explore an automated process for reviewing federal tax compliance, ODNI, IRS, and Fiscal Service officials stated that they have not explored the use of TOP for identifying individuals who owe federal debts, including tax debts. ODNI officials stated that they would be supportive of processes that automatically checked security-clearance applicants for federal tax debts. Fiscal Service officials stated that they did not foresee any potential operational issues with using TOP more broadly for these purposes. However, IRS and Fiscal Service officials stated that a legal analysis would need to be performed to determine if the TOP information could be used for the purpose of performing background investigations.\nSeparate from TOP, agencies may determine that a change in law is required to access taxpayer information without having to get consent from the individual. If it is determined that a change in law would be required, the IRS and federal agencies could consider various factors in determining whether they should seek legislative action for disclosing taxpayer information as part of the security-clearance process. Specifically, as we concluded in December 2011, it is important that Congress consider both the benefits expected from a disclosure of federal tax information and the expected costs, including reduced taxpayer privacy, risk of inappropriate disclosure, and negative effects on tax compliance and tax-system administration.\nWhile knowingly making false statements on federal security-clearance forms is a federal crime and may deter some from lying about their tax debt, much of our prior work has focused on the inadequacies of using voluntary, self-reported information without independent verification and review. detection and monitoring component of our agency’s fraud-prevention framework and is a fraud-control best practice. Routinely obtaining federal debt information from the Department of the Treasury would allow investigative agencies to conduct this independent validation.\nSee, for example, GAO, Recovery Act Tax Debtors Have Received FHA Mortgage Insurance and First-Time Homebuyer Credits, GAO-12-592 (Washington, D.C.: May 29, 2012); Service-Disabled Veteran-Owned Small Business Program: Governmentwide Fraud Prevention Control Weaknesses Leave Program Vulnerable to Fraud and Abuse, but VA Has Made Progress in Improving Its Verification Process, GAO-12-443T (Washington, D.C.: Feb. 7, 2012); and Energy Star Program: Covert Testing Shows the Energy Star Program Certification Process Is Vulnerable to Fraud and Abuse, GAO-10-470 (Washington, D.C.: Mar. 5, 2010). holders to identify tax debt accrued after the initial clearance has been approved without having to wait until the reinvestigation. Additionally, we found that some individuals misrepresented the nature of their tax debt to investigators and adjudicators. Reliance on self-reporting and the relatively time-consuming and resource-intensive investigative interviewing process presents vulnerabilities that may be mitigated by additional mechanisms to expedite the security-clearance process. A mechanism such as TOP may provide an opportunity for federal agencies to improve their identification of federal debts, including tax debts, owed by security-clearance applicants. Enhancing federal agencies’ access to tax-debt information for the purpose of both investigating and adjudicating security-clearance applicants, as well as ongoing monitoring of current clearance holders’ tax-debt status, would better position agencies to make fully informed decisions about eligibility. This could include further exploration, through the existing working group, of routinely accessing TOP, or otherwise developing a legislative proposal, in consultation with Congress, to authorize access to tax-debt information.",
"Complete and accurate information on the tax-debt status of those applying for federal security clearances is important in helping limit potential vulnerabilities associated with granting clearances to those who might represent a security risk. Additional mechanisms to help investigative agencies access this information could help federal agencies apply the adjudicative guidelines, which call for weighing an individual’s federal tax debt as it relates to an individual’s financial and personal conduct when making security-clearance determinations. OPM and ODNI are currently overseeing several efforts to improve the investigative and adjudication process, including the development of a working group to explore options for establishing an automated process for reviewing federal tax compliance. As part of this effort, exploring the feasibility of investigative agencies routinely obtaining tax-debt information from the Department of the Treasury, for the purposes of investigating and adjudicating clearance applicants, as well as to conduct ongoing monitoring of current clearance holders’ tax-debt status, could help determine how, if at all, mechanisms such as TOP could be leveraged to gain access to this information and enhance OPM’s ability to conduct investigations and federal agencies’ ability to assess clearance eligibility. If these methods are found to be impractical, developing a legislative proposal, in consultation with Congress, to authorize access to tax-debt information could address existing legal barriers to such information.",
"We recommend that, as part of its working group, the Director of National Intelligence, as the Security Executive Agent, in consultation with OPM and the Department of the Treasury, evaluate the feasibility of federal agencies routinely obtaining federal debt information from the Department of the Treasury’s TOP system, or a similar automated mechanism that includes federal taxes, for the purposes of investigating and adjudicating clearance applicants, as well as for ongoing monitoring of current clearance holders’ tax-debt status. If this is found to be impractical, ODNI should consider whether an exception to section 6103 is advisable and, if so, develop a legislative proposal, in consultation with Congress, to authorize access to tax-debt information.",
"We provided a draft copy of this report to DHS, DOE, the IRS, ODNI, OPM, State, and the Department of the Treasury’s Fiscal Service for their review. Letters from DHS, ODNI, and OPM are reprinted in appendixes IV, V, and VI. Both ODNI and OPM concurred with our recommendation. In its response, ODNI stated that it will recommend that the working group consider routine access of TOP for purposes of investigating, adjudicating, and monitoring security-clearance holders and applicants. This action will likely address the recommendation we proposed. If the working group determines this action is not feasible, ODNI may want to consider drafting a legislative proposal to authorize access to tax-debt information. In addition, DHS, the IRS, and OPM provided technical comments on our draft, which we incorporated as appropriate. In e-mails received on August 12, 2013, August 9, 2013, and August 8, 2013, officials from DOE, State, and the Department of the Treasury’s Fiscal Service, respectively, said that they did not have any comments on the draft report.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Homeland Security, the Secretary of Energy, the Director of National Intelligence, the Director of OPM, the Secretary of State, and the Secretary of the Treasury. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-6722 or LordS@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report.",
"The Office of Personnel Management (OPM), federal, or contract investigators conduct security-clearance investigations by using government-wide standards. OPM conducts background investigations for the majority of federal employees to determine their suitability for federal employment. OPM also conducts background investigations as part of the security-clearance process. For all these investigations, information that applicants provide on electronic applications is checked against numerous databases. Many investigation types contain credit and criminal-history checks, while top-secret investigations also contain citizenship, public-record, and spouse checks, as well as reference interviews and an in-person, Enhanced Subject Interview to gain insight into an applicant’s character. Although it is not standard, the Enhanced Subject Interview can also be triggered for lower-level investigations if an investigation contains issues that need to be resolved in accordance with the Federal Investigative Standards. Table 1 highlights the investigative components generally associated with the suitability, and with the secret and top-secret clearance levels.",
"In making determinations of eligibility for security clearances, the national- security adjudicative guidelines require adjudicators to consider (1) guidelines covering 13 specific areas of concern; (2) adverse conditions or conduct that could raise a security concern and factors that may mitigate (alleviate) the condition for each guideline; and (3) general factors related to the whole person.\nFirst, the guidelines state that eligibility determinations require an overall common-sense judgment based upon careful consideration of the following 13 guidelines in the context of the whole person: allegiance to the United States; personal conduct, such as deliberately concealing or falsifying foreign influence, such as having a family member who is a citizen of a foreign country; foreign preference, such as performing military service for a foreign country; sexual behavior; alcohol consumption; drug involvement; emotional, mental, and personality disorders; outside activities, such as providing service to or being employed by a relevant facts when completing a security questionnaire; financial considerations; criminal conduct; security violations; misuse of information-technology systems.\nSecond, for each of these 13 areas of concern, the guidelines specify (1) numerous significant adverse conditions or conduct that could raise a security concern that may disqualify an individual from obtaining a security clearance; and (2) mitigating factors that could allay those security concerns, even when serious, and permit granting a clearance. For example, the financial consideration guideline states that individuals could be denied security clearances on the basis of having a history of not meeting financial obligations. However, this security concern could be mitigated if one or more of the following factors were present: the behavior was not recent, resulted from factors largely beyond the person’s control (such as loss of employment), or was addressed through counseling.\nThird, the adjudicator should evaluate the relevance of an individual’s overall conduct by considering the following general factors: the nature, extent, and seriousness of the conduct; the circumstances surrounding the conduct, to include knowledgeable participation; the frequency and recency of the conduct; the individual’s age and maturity at the time of the conduct; the voluntariness of participation; the presence or absence of rehabilitation and other pertinent behavioral changes; the motivation for the conduct; the potential for pressure, coercion, exploitation, or duress; and the likelihood of continuation or recurrence.\nWhen the personnel-security investigation uncovers no adverse security conditions, the adjudicator’s task is fairly straightforward because there is no security condition to consider.",
"Our objectives were to determine: (1) how many individuals with unpaid federal taxes, if any, are in the Office of Personnel Management (OPM) security-clearance database and what is the magnitude of any unpaid federal tax debt? and (2) to what extent do federal agencies have mechanisms to detect unpaid tax debt during the security-clearance approval process?\nTo determine the magnitude of unpaid federal taxes owed by individuals approved for a security clearance, we obtained and analyzed OPM data of individuals eligible for a secret or top-secret security clearance due to a favorable adjudication, either during an initial investigation or a reinvestigation, from April 1, 2006, to December 31, 2011. Our review did not include the review of confidential clearance holders or public-trust positions. Department of Energy (DOE) and U.S. Nuclear Regulatory Commission (NRC) “Q” and “L” clearances are equivalent to the top- secret and secret clearances. Thus, for the purposes of our report, we considered “Q” and “L” clearances issued by DOE and NRC to be treated as top-secret and secret clearances, respectively. We identified the OPM Central Verification System (CVS) database as the appropriate data for our analysis after meeting with OPM officials and discussing the types of data available. We used this time frame because prior to April 1, 2006, the provision of the date a clearance was granted was not required and was therefore not consistently available for analysis. OPM provided us with an extract of the OPM database that included information only on executive-branch, non–Department of Defense (DOD), and non- intelligence-community employees and contractors who were eligible for a clearance during our time frame. The OPM CVS database does not maintain information on the denial of security clearances on the basis of an individual’s nonpayment of federal taxes. Thus, we were not able to determine the number of individuals who were denied security clearances for this reason.To determine the extent to which individuals eligible for a security clearance had unpaid federal taxes, we used the taxpayer identification number (TIN) as a unique identifier and electronically matched the Internal Revenue Service’s (IRS) tax-debt data to the OPM data of individuals eligible for a security clearance. Specifically, we used the IRS Unpaid Assessment file as of June 30, 2012, to match against the OPM CVS data. The IRS Unpaid Assessment file used for our analysis contains all tax modules that are unpaid as of June 30, 2012. The June 30, 2012, file was used because it contained the most-recent unpaid assessment information at the time we conducted our analysis. To avoid overestimating the amount owed and to capture only significant unpaid federal taxes, we excluded from our analysis tax debts meeting specific criteria to establish a minimum threshold in the amount of tax debt to be considered when determining whether a tax debt is significant.\nThe criteria we used to exclude tax debts are as follows: (1) unpaid federal taxes the IRS classified as compliance assessments or memo accounts for financial reporting, and (2) recipients with total unpaid federal taxes of $100 or less. Specifically, compliance assessments or memo accounts were excluded because these taxes have neither been agreed to by the taxpayers nor affirmed by the court, or these taxes could be invalid or duplicative of other taxes already reported. We excluded tax debts of $100 or less because the IRS considers it a de minimis amount. Additionally, for the purposes of our engagement, we included individuals from the Business Master File (BMF) and Non-Master File (NMF), who were an exact Social Security number (SSN)/TIN match, as well as an exact name match with the OPM CVS data. We only included exact matches so we would be able to match and use the information from the OPM CVS database. Additionally, the Spouse Individual Master File (IMF) was not used in the magnitude analysis. This is because we were unable to determine which agency each spouse was affiliated with on the basis of the information available in both the IRS and OPM data. Additionally, the debt of a spouse may not have any effect on the security-clearance adjudication determination. As a result, the results reported may be understated.\nUsing these criteria, we identified about 8,400 of these individuals who had unpaid federal tax debt as of June 30, 2012. Our final estimate of tax debt does include some debt that is covered under an active IRS installment plan or beyond normal statutory time limits for debt collection. Our analysis determined the magnitude of known unpaid federal taxes owed by individuals in the OPM database and cannot be generalized to individuals that were granted eligibility for security clearances by DOD, the legislative branch, or the intelligence community.\nTo determine whether existing investigative and adjudication mechanisms detect unpaid tax debt during the security-clearance process and possible additional improvements to federal tax-debt detection mechanisms, we interviewed knowledgeable officials from the Office of the Director of National Intelligence (ODNI), which serves as Security Executive Agent for the federal government and has authority and responsibility over security-clearance protocols, and from OPM, which conducts security- clearance investigations for most federal agencies. In addition, we conducted interviews with officials from the Department of Homeland and Security (DHS), Department of Energy (DOE), and Department of State (State). DHS, DOE, and State were selected because these agencies had the highest number of security clearances adjudicated from April 1, 2006, to December 31, 2011, collectively representing over 50 percent of clearances granted in OPM’s CVS database, and also represented over 50 percent of the tax debt owed. In addition, we also reviewed and analyzed applicable laws, regulations, and ODNI guidance, as well as applicable policies and procedures for OPM, DHS, DOE, and State regarding the investigation and adjudication of security clearances. Finally, we conducted interviews with the Department of the Treasury’s Bureau of the Fiscal Service (Fiscal Service) and the IRS to obtain their views on any initiatives and barriers in sharing tax-debt information. We compared verification mechanisms with the fraud control framework we developed in our past work and other fraud control best practices. We also used Federal Investigative Standards (see app. I) and the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information (see app. II) to evaluate the current mechanisms used to identify and evaluate unpaid federal tax debt as part of the security- clearance process.\nTo develop case-study examples, we identified a nonprobability sample of 13 individuals for detailed reviews from the above analyses of security- clearance holders from DHS, DOE, and State who had federal tax debt. We stratified our matches using the following characteristics: (1) adjudicating agency; (2) amounts of unpaid federal taxes in the IRS Unpaid Assessment database as of June 30, 2012; (3) type of security clearance granted or approved, clearance date, and dollar amount of unpaid tax debt; and (4) whether tax debt was recorded prior to or after the security-clearance grant date. We selected 12 cases from these four strata. Additionally, we randomly selected one case with indications that IRS was assessing a trust-fund recovery penalty. Once the nonprobability sample was selected, we requested all investigative and adjudicative case-file notes from the adjudicating agency; IRS notes, detailed account transcripts, and other records from the IRS; and security-clearance files from DHS, DOE, and State for these 13 individuals. For 2 of the 13 individuals that had accrued debt only after favorable adjudication, we reviewed the adjudicative files to determine whether the agency was aware of the federal tax debt through its reinvestigation. The clearance files and IRS paperwork were systematically reviewed using a structured data-collection instrument, looking at whether the tax debt was revealed in the investigative or adjudicative processes, and, if so, how it was handled in the adjudication. Each case file was independently reviewed by two analysts. After completion of each case review, the files were compared to identify discrepancies. Potential discrepancies between case-file reviews were resolved by a third-party reviewer. These cases were selected to illustrate individuals with unpaid federal tax debt that had security clearances but the results cannot be generalized beyond the cases presented.",
"To assess the reliability of record-level IRS unpaid assessments data, we used the work we perform during our annual audit of the IRS’s financial statements and interviewed knowledgeable IRS officials about any data- reliability issues. While our financial-statement audits have identified some data-reliability problems associated with tracing the IRS’s tax records to source records and including errors and delays in recording taxpayer information and payments, we determined that the data were sufficiently reliable to address this report’s objectives.\nTo assess the reliability of record-level OPM security-clearance data, we reviewed documentation from OPM, interviewed OPM officials who administer these information systems, and performed electronic testing of required elements. We determined that the data were sufficiently reliable to identify the individuals eligible for clearances with unpaid federal tax debt and select cases to illustrate potential vulnerabilities.\nWe conducted this performance audit from November 2011 to September 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our audit findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"",
"",
"",
"Personnel Security Clearances: Further Actions Needed to Improve the Process and Realize Efficiencies. GAO-13-728T. Washington, D.C.: June 20, 2013.\nMedicaid: Providers in Three States with Unpaid Federal Taxes Received over $6 Billion in Medicaid Reimbursements. GAO-12-857. Washington, D.C.: July 27, 2012.\nSecurity Clearances: Agencies Need Clearly Defined Policy for Determining Civilian Position Requirements. GAO-12-800. Washington, D.C.: July 12, 2012.\nPersonnel Security Clearances: Continuing Leadership and Attention Can Enhance Momentum Gained from Reform Effort. GAO-12-815T. Washington, D.C.: June 21, 2012.\nRecovery Act: Tax Debtors Have Received FHA Mortgage Insurance and First-Time Homebuyer Credits. GAO-12-592. Washington, D.C.: May 29, 2012.\nRecovery Act: Thousands of Recovery Act Contract and Grant Recipients Owe Hundreds of Millions in Federal Taxes. GAO-11-485. Washington, D.C.: April 28, 2011.\nFederal Tax Collection: Potential for Using Passport Issuance to Increase Collection of Unpaid Taxes. GAO-11-272. Washington, D.C.: March 10, 2011.\nMedicare: Thousands of Medicare Providers Abuse the Federal Tax System. GAO-08-618. Washington, D.C.: June 13, 2008.\nTax Compliance: Federal Grant and Direct Assistance Recipients Who Abuse the Federal Tax System. GAO-08-31. Washington, D.C.: November 16, 2007.\nMedicaid: Thousands of Medicaid Providers Abuse the Federal Tax System. GAO-08-17. Washington, D.C.: November 14, 2007.\nTax Compliance: Thousands of Organizations Exempt from Federal Income Tax Owe Nearly $1 Billion in Payroll and Other Taxes. GAO-07-1090T. Washington, D.C.: July 24, 2007.\nTax Compliance: Thousands of Organizations Exempt from Federal Income Tax Owe Nearly $1 Billion in Payroll and Other Taxes. GAO-07-563. Washington, D.C.: June 29, 2007.\nTax Compliance: Thousands of Federal Contractors Abuse the Federal Tax System. GAO-07-742T. Washington, D.C.: April 19, 2007.\nMedicare: Thousands of Medicare Part B Providers Abuse the Federal Tax System. GAO-07-587T. Washington, D.C.: March 20, 2007."
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"question": [
"What did GAO find about 4,700 of the individuals who adjudicated as eligible for a security clearance from April 2006 to December 2011?",
"What did GAO find about 4,200 of these individuals?",
"What data did GAO use for its review?",
"Why was GAO unable to determine the number of individuals who were denied security clearances?",
"What mechanisms have federal agencies established?",
"How do federal investigators detect federal tax debt?",
"What problems do federal investigator methods have?",
"What is a shortcoming of the ability of credit reports identifying tax debt?",
"What are federal agencies not doing that may lead to problems in federal investigator methods?",
"What could improve federal agencies' ability to detect tax debts owed by security clearance applicants and current clearance holders?",
"How can federal agencies obtain information on federal tax debts?",
"How could a mechanism to collect delinquent federal debts be useful?",
"What would this mechanism better position federal agencies to do?",
"What is the problem with having tax debt?",
"What was GAO asked to review?",
"What did GAO specifically examine?",
"What did GAO compare in its review?",
"How did GAO get examples for its review?",
"What agencies and offices did GAO interact with for its review?"
],
"summary": [
"GAO found that about 4,700 of the approximately 8,400 individuals were federal employees while the remainder was largely federal contractors.",
"Additionally, about 4,200 of these individuals had a repayment plan with the Internal Revenue Service (IRS) to pay back their debt.",
"For this review, GAO used clearance data from the Office of Personnel Management (OPM) Central Verification System (CVS) database.",
"The CVS database does not maintain information on the denial of security clearances on the basis of an individual's nonpayment of federal taxes. Thus, GAO was not able to determine the number of individuals who were denied security clearances for this reason.",
"Federal agencies have established mechanisms aimed at identifying unpaid federal tax debt of security-clearance applicants; however, these mechanisms have limitations.",
"To detect federal tax debt for clearance applicants, federal investigators primarily rely on two methods: (1) applicants self-reporting tax debts; and (2) validation techniques, such as the use of credit reports or in-person interviews.",
"Each of these methods has shortcomings in detecting unpaid federal tax debts of clearance applicants.",
"For example, credit reports are the primary method for identifying tax debt that was not self-reported, but these reports only contain information on tax debts for which the IRS filed a lien on the debtor's property.",
"Additionally, federal agencies generally do not routinely review federal tax compliance of clearance holders. There is no process to detect unpaid federal tax debts accrued after an individual has been favorably adjudicated unless it is self-reported, reported by a security manager due to garnishment of wages, or discovered during a clearance renewal or upgrade.",
"Additional mechanisms that provide large-scale, routine detection of federal tax debt could improve federal agencies' ability to detect tax debts owed by security-clearance applicants and current clearance holders, but statutory privacy protections limit access to this information.",
"Federal agencies may obtain information on federal tax debts directly from the IRS if the applicant provides consent.",
"In addition, federal agencies do not have a mechanism, such as one that the Department of the Treasury (Treasury) uses, to collect delinquent federal debts. Such information could help federal agencies perform routine, automated checks of security-clearance applicants to determine whether they have unpaid federal debts, without compromising statutory privacy protections. Such a mechanism could also be used to help monitor current clearance holders' tax-debt status.",
"Gaining routine access to this federal debt information, if feasible, would better position federal agencies to identify relevant financial and personal-conduct information to make objective assessments of eligibility for security-clearance applicants and continued eligibility of current clearance holders.",
"Federal laws do not prohibit an individual with unpaid federal taxes from holding a security clearance, but tax debt poses a potential vulnerability.",
"GAO was requested to review tax-debt detection during the clearance process.",
"GAO examined (1) the number of individuals with unpaid federal taxes, if any, in the OPM security-clearance database and the magnitude of any federal tax debt, and (2) the extent to which federal agencies have mechanisms to detect unpaid tax debt during the security-clearance-approval process.",
"GAO compared OPM's security-clearance information to the IRS's known tax debts.",
"To provide examples, GAO conducted a detailed review of IRS and security adjudication files of 13 individuals selected, in part, on the basis of tax debt amount and type of security clearance.",
"GAO also reviewed relevant laws and regulations and interviewed officials from the Office of the Director of National Intelligence (ODNI), Treasury, OPM, and three selected federal agencies that represented more than half of the clearance holders in OPM's database."
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CRS_R44318
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{
"title": [
"",
"Introduction",
"Scope of the Report",
"A Note on Terminology",
"Highlights of Recent Congressional Activity",
"FEC Structure, Organization, and Commissioners",
"Staff and Budget",
"The FEC and Before: A Brief History",
"Original, Invalidated Appointment Structure",
"Current Appointment Structure",
"Party Balance and Terms",
"Expired Terms and Holdover Status",
"At Least Four Agreeing Votes Required for Most Actions",
"Loss of Policymaking Quorum in 2008",
"Selected Policy and Organizational Issues",
"Matters Primarily Concerning Campaign Finance Policy",
"Agency Response to Citizens United",
"Deadlocked Votes",
"What Counts as a Deadlock?",
"Debating Deadlocks: Potential Implications",
"The FEC's Legislative Recommendations",
"Matters Primarily Concerning Commission Administration or Operations",
"Senior Staff Vacancies and Staff Morale",
"Reorganization Proposals",
"Commission Interaction with the Public and with Those It Regulates",
"Administering Disclosure",
"Information Technology",
"Security Concerns",
"Website Upgrade",
"Potential Considerations for Congress and Concluding Comments",
"Legislation and Hearings Substantially Devoted to FEC Organization, Operations, or Oversight"
],
"paragraphs": [
"",
"Throughout the early and mid-1970s, Congress laid the foundation of modern campaign finance policy. Before and after the Watergate scandal, Congress debated whether or how to regulate contributions, expenditures, and disclosure of campaign finance activities. In particular, the 1974 FECA amendments established much of the regulatory framework that remains today. The Supreme Court considered those matters in its landmark Buckley v. Valeo decision (1976). To this day, these topics continue to structure the policy debate.\nPerhaps because monumental questions surrounding how and whether to regulate political contributions and spending occupied Congress and the courts, a significant component of the 1974 FECA amendments—creating a new federal agency to administer FECA—received comparatively limited attention. That agency, the Federal Election Commission (FEC), would come to symbolize the fierce debate that occupies campaign finance policy overall. The FEC is responsible for civil enforcement of federal campaign finance law. The commission also administers public financing of presidential campaigns (applicable to participating candidates) and conducts outreach and educational activities. Members of the public, the media, campaign practitioners, and policymakers rely on campaign finance data disclosed on the FEC website—the agency's most public activity.\nSome allege that Congress designed the FEC to fail, most notably through a bipartisan, six-member structure that requires agreement from at least four commissioners for substantive action. Furthermore, some contend that recent years have marked a particularly problematic period in which, amid policy stalemates, some areas of campaign finance law have gone without adequate interpretation or enforcement. Others respond, equally vigorously, that Congress purposely insulated the FEC from excessive partisanship in the wake of Watergate and in one of the most sensitive areas of constitutionally protected political speech. They also caution that the commission cannot or should not do via regulation what Congress has declined to do by statute.\nWhether by design or coincidence, fundamental tensions about campaign finance law and regulation have been evident at the FEC throughout its history. Nonetheless, attention to working relationships among commissioners is increasingly part of the narrative about how the commission functions. Some commissioners have openly criticized their colleagues and the agency. As the FEC marked its 40 th anniversary in 2015, according to one media account, \"officials past and present argued about whether to rent a theater, whether to publish a report, whether to serve bagels or doughnuts, and whether, in fact, the agency even had an anniversary worth noting.\" These and similar reports highlighting alleged dysfunction at the FEC are common. Some may be relevant for congressional needs as the House and Senate examine the FEC and form their own opinions on the agency. Discussions of the FEC's organization, duties, and major areas of policy debate—the focus of this report—are less common, but are at least as relevant for Congress.",
"The report provides background information about key areas of controversy and context that might be relevant for Congress as the House and Senate approach their oversight duties, appropriate funds, consider nominations, and explore options for restructuring the FEC or maintaining the status quo. As discussed throughout this report, issues ranging from minor administrative matters to fundamental changes in campaign finance law might be relevant as Congress considers the FEC. Because there appears to be little congressional consensus about how or whether to address the FEC and its functions, this report provides a resource for Congress to examine which policy questions and options are of particular interest, if any. The report is not a legal analysis of commission activity, nor does it provide detailed discussion of relationships with potentially related agencies such as the Department of Justice or Internal Revenue Service. Another CRS report discusses the FEC's role in enforcing campaign finance law and regulation.",
"This report uses the terms \"FEC,\" \"commission,\" and \"agency\" interchangeably. Some discussions of the FEC's authority, which are generally beyond the scope of this report, use the term \"commission\" to denote members of the FEC as opposed to agency staff. This distinction is not central to this report but is relevant for some enforcement debates, as noted primarily in another CRS report.",
"Table 1 below summarizes recent legislation substantially devoted to the FEC. Congress most recently held an oversight hearing focusing on the FEC in 2011, as discussed later in this report. The Appendix at the end of this report lists major legislation devoted to the FEC and oversight hearings dating to 1995.",
"The FEC is a six-member independent regulatory agency whose members serve six-year terms. They may continue in \"holdover\" status after those terms end. Commissioners are appointed by the President and subject to Senate confirmation. As discussed below, the current appointment method differs from the process Congress originally enacted but that was later invalidated. The Senate most recently confirmed commissioners in 2013, as shown in Table 2 . Congress most recently reauthorized the FEC in 1980 (FY1981).",
"A professional staff of approximately 350 employees does the FEC's daily work. Most of these staff members are civil servants. FECA specifies two statutory staff positions: a staff director and general counsel. The commission also has a congressionally mandated inspector general. Figure 1 below shows major commission offices.\nAs an independent agency, the FEC transmits its budget requests directly to Congress, and concurrently to the Office of Management and Budget (OMB). In FY2015, Congress appropriated $67.5 million to the FEC. The agency requested approximately $76.1 million for FY2016 in anticipation of negotiating a new lease on its office space. In recent years, the Financial Services and General Government (FSGG) appropriations bills ( H.R. 2995 and S. 1910 for FY2016) provided the initial legislative vehicle for FEC funding.",
"Proposals for an entity resembling the FEC date to at least the early 1960s. Modern campaign finance policy took root in the 1970s with enactment of FECA and related amendments—where this report begins. Congress first vested campaign finance administrative authority within the House and Senate, and with the Comptroller General. Administering campaign finance first fell to those entities amid debate over whether Congress could or should cede overseeing its campaign activities to an outside body. At first, those duties primarily meant administering disclosure of financial activity, as the 1971 FECA principally mandated reporting requirements similar to those in place today. In what has been described as a \"compromise\" surrounding separation-of-powers matters and institutional prerogatives in the 1971 FECA, \"Congress divide[d] the administrative and enforcement responsibilities for [FECA] among three supervisory offices.\" The Clerk of the House and Secretary of the Senate were responsible for administering the act for each chamber, respectively, while the Comptroller General, head of the General Accounting Office (GAO, now the Government Accountability Office), handled presidential campaign finance compliance. Longtime Committee on House Administration Chairman Wayne Hays championed the \"supervisory officer\" framework and staunchly opposed an independent campaign finance regulatory agency.\nThe \"supervisory officer\" system generally facilitated effective disclosure of campaign finance activity, but enforcement concerns persisted. Some Members of Congress and other observers also raised concerns that three officers who were employed by the House and Senate were not sufficiently independent to administer and enforce the new law. Fundraising controversies in the 1972 election cycle increased calls for an independent campaign finance agency. As the Watergate scandal emerged in 1973-1974, congressional demand for an independent agency took on new momentum, eventually overcoming Representative Hays's preferred approach. The 1974 FECA amendments created the first version of the FEC. As noted below, the Supreme Court's 1976 Buckley decision invalidated the FEC's initial appointment structure.\nIndependent campaign finance administration and enforcement was central to the early 1970s congressional debates over FECA and the 1974 amendments. The House and Senate considered proposals with different numbers of commissioners, appointment structures, and enforcement powers. The three-three structure (plus two later-invalidated ex officio members, discussed below) was unique but reflected elements of various congressional proposals. As campaign finance historian Robert Mutch explains, \"No other government agency was so constructed. This unique appointment process appears to have been a grudging acquiescence to [a] form of independence while retaining as much congressional control as possible\" through the House and Senate leadership's initial appointment powers.\nOver time, the FEC's bipartisan structure became central to its identity and to its controversy. Congress's choice to establish a politically balanced and even-numbered membership has been both praised as insulating the agency and criticized as thwarting its effectiveness. From the beginning, the bipartisan structure has made compromise on the most contentious issues difficult and has opened individual commissioners to charges of partisan bias.",
"Congress originally designed eight positions for the FEC: six commissioners and two non-voting ex officio members (the Clerk of the House and Secretary of the Senate). Under that structure, two commissioners were appointed by the President, two by the President pro tempore of the Senate, and two by the Speaker of the House.\nTwo federal court decisions altered the FE C's original design. First and most significantly, in Buckley the Supreme Court of the United States invalidated the original appointments method, holding that congressional appointments violated the Constitution's Appointments Clause. Almost 20 years later, a federal court again found fault with the FEC's appointment structure. In 1993, the U.S. Court of Appeals for the District of Columbia held in FEC v. NRA Political Victory Fund that the presence of the two congressional ex officio members violated constitutional separation of powers.",
"In a broad revision of FECA in 1976, undertaken in response to the Buckley decision, Congress adopted the current appointment method. Today, all commissioners are presidentially appointed with Senate advice and consent. Members of the congressional leadership or committees of jurisdiction (the House Committee on House Administration and Senate Rules and Administration Committee) apparently continue to influence the appointment process.\nFECA specifies few qualifications for FEC commissioners, noting simply that they \"shall be chosen on the basis of their experience, integrity, impartiality, and good judgment.\" As one former general counsel notes, although many commissioners are lawyers, \"a commissioner does not have to be a lawyer and the commission has a long history of having non-lawyers serve as members.\" Commissioners typically have experience as congressional staffers, political professionals, election lawyers, or some combination thereof.",
"Occasional vacancies reduce the number of sitting commissioners, but the FEC may exercise its core functions with as few as four members. No more than three commissioners may be affiliated with the same political party. In practice, the commission has been divided equally among Democrats and Republicans, although, as noted in Table 1 , one current commissioner identifies as an independent. FECA staggers commissioner terms so that two terms expire every other April 30 during odd-numbered years (e.g., 2017, 2019, etc.). This arrangement means that, at least by design, two new commissioners would assume office biennially. However, the President is under no obligation to make biennial nominations.",
"Currently, FEC commissioners may serve a single six-year term. As another CRS report explains, for some federal boards and commissions, including the FEC, \"[a]n individual may be nominated and confirmed for a seat for the remainder of an unexpired term in order to replace an appointee who has resigned (or died). Alternatively, an individual might be nominated for an upcoming term with the expectation that the new term will be underway by the time of confirmation.\" In fact, some FEC commissioners have assumed office when the term for which they were nominated was well underway. For example, on June 24, 2008, the Senate confirmed Donald F. McGahn and Steven T. Walther to terms that expired just 10 months later, on April 30, 2009. Both continued serving in their seats past the expiration of their terms, although they could have been replaced through subsequent appointments.\nThese and other commissioners could remain in office because FECA permits FEC members to remain in office in \"holdover\" status, exercising full powers of the office, after their terms expire \"until his or her successor has taken office as a Commissioner.\" As Table 2 above shows, as of late 2015, most current commissioners are serving in holdover status. Expired terms are, in and of themselves, not necessarily a policy concern because commissioners may remain in office until replaced. But, if the commission's membership fell below four members, as it did in 2008 (discussed below), it would lose its policymaking quorum.",
"FECA requires affirmative votes from at least four commissioners to authorize most consequential agency activity, including making, amending, or repealing rules; issuing advisory opinions (AOs); and approving enforcement actions and audits. Matters without at least four votes for or against an action can have the effect of leaving questions of law, regulation, or enforcement unresolved, as some view the issues in question as having been neither approved nor rejected. The \" Deadlocked Votes \" section provides additional detail.",
"The significance of the four-vote threshold became particularly evident in 2008. Following expired recess appointments and amid ongoing Senate consideration of FEC nominations, the agency had just two commissioners for the first six months of the year. In late 2007, in anticipation of only two commissioners remaining in office in 2008, commissioners amended the FEC's rules of internal procedure to permit executing some duties if the agency lost its four-member policymaking quorum. These revisions to the FEC's Directive 10 permit the commission to continue meeting with fewer than four members to approve general public information, such as educational guides; appoint certain staff; and approve other basic administrative and employment matters. After the Senate confirmed nominees in June 2008, the new commissioners faced a backlog of enforcement matters, advisory opinions, and other agency business. The FEC has maintained a full policymaking quorum since then.",
"Throughout its history, the FEC has been controversial. Topics such as disagreements among commissioners and dueling perspectives on what the agency should do, and how, receive the most prominent and consistent attention in Congress, within the FEC, and in the media. Other topics, such as staffing and information technology, are less prominent but can substantially affect the agency's daily business. This section briefly summarizes selected but recurring areas of debate that might be relevant for Congress.",
"Throughout its history, the FEC has been criticized for failing to reach consensus on key policy questions covering various topics. Perhaps most consequentially, these disagreements can include stalemates over rulemakings and enforcement actions. Both are major topics that this report does not cover in depth but which are addressed in other CRS products. In brief, some contend that the content of FEC rules—or protracted rulemakings—has undermined congressional intent in some cases. These criticisms were especially prominent after Congress enacted the 2002 Bipartisan Campaign Reform Act (BCRA), the most recent overhaul of federal campaign finance law. Complicated subject matter, protracted debate among commissioners, and litigation made some rulemakings lengthy and controversial. Rulemaking disagreements also occurred during other periods.\nIn some cases, such as the post-BCRA environment, policy disagreements outside the agency can affect the rulemaking process at least as much as internal division. Public and interest-group perspectives can shape rulemakings through submitted comments. The FEC must attempt to reconcile those competing perspectives—as well as its own internal disagreements—to implement the law as written by Congress, and, often, as interpreted by courts. As noted below, most recently, the Supreme Court's 2010 Citizens United ruling has shaped the commission's policy debates and operating environment.",
"Particularly after the Supreme Court issued its Citizens United decision, disagreements in areas ranging from disclosure to enforcement have been prominent at the FEC, in Congress, and beyond. In brief, Citizens United invalidated FECA's prohibitions on corporate and union treasury funding of independent expenditures and electioneering communications, thereby permitting new forms of corporate and union electoral activity. The decision did not affect the FEC per se, but it greatly influenced the environment in which the commission operates.\nMirroring similar debate in Congress, the commission was unable to agree on rules implementing Citizens United for almost five years after the Supreme Court issued its decision in January 2010. A December 2011 Notice of Proposed Rulemaking (NRPM) posing questions about what form post- Citizens United rules should take remained open until late 2014, reflecting an apparent stalemate over the scope of the agency's Citizens United response. In October 2014, the commission approved rules to remove portions of existing regulations that Citizens United had invalidated, such as spending prohibitions on corporate and union treasury funds. The 2014 rules did not require additional disclosure surrounding independent spending, which some commenters had urged, but which others argued was beyond the agency's purview.\nThose favoring a deregulatory approach generally argue that the FEC has little additional role in issuing post- Citizens United rules, particularly without major statutory changes from Congress. Others argue that the FEC should instead pursue other rules, particularly to require additional disclosure surrounding spending that was previously prohibited. In one prominent recent instance, two commissioners even took initial steps to file a rulemaking petition with their fellow commissioners, calling for more expansive post- Citizens United rules. As stalemate over some policy areas has continued, some campaign lawyers have urged the commission to try to find compromise on potentially less dramatic but nonetheless consequential compliance questions, such as amending the agency's reporting forms to reflect recently permissible campaign activities. In other cases, some campaign practitioners have turned to the advisory opinion (AO) process to answer specific questions in lieu of final rules on overarching policy questions.",
"\"Deadlocked\" votes are the most prominent and enduring indicator of policy disagreements within the FEC. Although 3-3 votes are the most obvious deadlocks, they may include any vote without at least four votes for or against a decision (e.g., 2-2; 3-2; 2-3, etc.). Unlike matters that a majority of the commission has definitively approved or rejected, actions without at least four votes for or against can have the effect of leaving questions of law, regulation, or enforcement unresolved. In these cases, deadlocked votes essentially halt substantive commission action on the matters in question.\nThe FEC does not regularly compile and release summary deadlocks data. Most recently, the commission appears not to have produced an official, publicly available statistical summary since 2009. Using those data, CRS found that in 2008-2009, the FEC deadlocked on no rulemakings; on approximately 13% of closed Matters Under Review (MURs, the FEC's most significant enforcement cases); and on approximately 17% of advisory opinions (AOs). A CRS analysis of more recent FEC vote tallies found that in calendar year 2014, commissioners deadlocked on 24.4% of closed MURs. Results from other analyses vary based on methodology, time period, and the types of votes studied.\nRecently, commissioners and outside observers have disagreed at commission meetings and in the media about what deadlocks represent. That debate includes heated exchanges about whether deadlocks are, in effect, an effort to prevent reasonable rulemaking or enforcement, to prevent overzealous rulemaking or enforcement, or something else. Ambiguity surrounding deadlocks notwithstanding, apparent stalemates among commissioners—regardless of whether they are regarded as \"deadlocks\" per se—have featured prominently in consequential policy questions at the commission, such as the post- Citizens United rules; enforcement questions surrounding coordination among various political committees; and filling senior staff vacancies. Additional discussion appears elsewhere in this report.\nAt the same time, some current and former commissioners (and outside observers) have noted that the FEC finds agreement on most issues. As then-FEC chairman Lee Goodman noted in his 2014 summary, \"our Commission managed to act by majority vote in 93% of all matters (administrative and substantive), and to act by majority vote in 86% of substantive matters.\"",
"Part of the ambiguity surrounding deadlocks arises because there is no standard method for counting deadlocks. Debate over how to count deadlocks typically centers around which things should be counted and which actions or time periods should be included. For example, Matter Under Review (MUR) 6729, which concerned disclaimers and reporting requirements, and which the FEC closed in 2014, illustrates that the episode could be counted at least two different ways. The commission took five votes on various questions regarding MUR 6729 at the agency's September 16, 2014, meeting. Three of those votes involved 3-3 deadlocks on motions supporting \"reason to believe\" that FECA either had or had not been violated and authorizing additional action. If using MURs as the \"unit of analysis\" (the thing being counted), MUR 6729 would be counted as a single deadlock because any one of the votes arguably precluded substantially resolving the matter. From this perspective, it matters more that the commission could not issue a decision and less why it could not do so. When examining votes, however, the analysis becomes more ambiguous. Should three deadlocks be counted? Should the two votes on which the commission reached agreement mitigate the deadlocks that occurred on other votes, etc.? Here, the individual disagreements are perhaps more important than the overall halt to the commission's decisionmaking that deadlocks imply. Both approaches might be valid, and both might be viewed as under-counting or over-counting deadlocks.",
"Given their controversy and political sensitivity, deadlocked votes occupy much of the debate about the FEC's functioning. For some, deadlocks represent a failure to enforce campaign finance law or provide clear boundaries through rulemakings. For others, they signal that the commission is carefully considering what the law permits and prohibits. Focusing on deadlocks might or might not provide meaningful information. Deadlocks are about vote outcomes. In and of themselves, they reveal little about why the commission made its decision (or declined to make a decision) and what that might suggest for the future. Focusing on deadlock statistics could understate conflict if, for example, the commission postponed a vote—thereby avoiding a formal deadlock—because it feared that a deadlock would occur. On the other hand, focusing only on deadlock statistics can overstate deadlocks' importance if they overshadow the commission's ability to find consensus in other areas.\nAs Congress determines whether oversight or other action regarding deadlocked votes is necessary, a threshold issue may be to consider whether deadlocks represent a public policy concern and if so, how. Occasional deadlocks might be expected given the complexity (and sometimes controversy) embodied in federal campaign finance law and regulation. In fact, Congress appears to have anticipated that the commission might be unable to reach consensus in some controversial cases, and perhaps intended for deadlocks to occur. According to one analysis, \"In order to ensure that the Commission would not become a vehicle for partisan purposes, the Congress created an unusual conflict within the FEC\" through the six-member structure. Commenting on the four-vote requirement, former commissioner Scott E. Thomas and his executive assistant, Jeffrey H. Bowman, continued, \"These provisions were specifically designed to ensure that formal action on a matter before the Commission could go forward only on the affirmative vote of a mixed majority of Commission members.\" In addition, deadlocks might be viewed positively if enforcement actions being considered are perceived as unwarranted or excessive. Nonetheless, deadlocks mean that the commission has been unable to reach consensus about some element of law or regulation. As a result, at least in specific circumstances, deadlocks prevent campaign finance law from being enforced or preclude those seeking guidance from clearly knowing whether their planned activities will run afoul of the law.",
"Despite disagreements in some areas, the FEC has consistently reached agreement on certain requests for legislative change. The FEC has varied its legislative requests in frequency, number, and prioritization over time. Congress is under no obligation to act on those recommendations. Recently the House and Senate have chosen not to do so, although Members have introduced legislation reflecting some recommendations. Figure 2 below shows those requests submitted at least twice since 2005.\nEspecially high-priority items, based on frequency of the commission's recommendations, include the following:\nThe FEC has proposed requiring Senate political committees (e.g., campaigns) to file their campaign finance reports electronically. Currently, Senate committees typically file paper reports. Paper filing causes delay and expense in making complete Senate data publicly available. Congress has declined to enact legislation requiring electronic filing. In some cases, electronic-filing legislation has been subject to amendments containing unrelated or controversial campaign finance provisions. Two requested changes concern campaign misconduct. First, the FEC has recommended broadening existing prohibitions on \"fraudulent misrepresentation\" of campaign authority, such as fundraising for fictitious political committees. Second, and somewhat similarly, the FEC has asked Congress to extend current restrictions on personal use of campaign funds to other kinds of political committees (e.g., parties or PACs). Both recommendations appear to reflect ongoing FEC concerns that some areas of questionable campaign conduct do not squarely fall within FECA or commission regulations. Particularly in the \"personal use\" instance, FEC audit staff have raised concerns over the past several years about embezzlement or other financial mismanagement as more money flows through political committees that, in many cases, remain largely volunteer operations. Congress has not actively addressed either topic through recent legislation or oversight. The agency has proposed making permanent the Administrative Fine Program (AFP), which provides streamlined enforcement for late or missing reports. The 113 th Congress extended the AFP until 2018. The AFP generally is noncontroversial and regarded as an effective tool for increasing FEC efficiency and encouraging compliance. The commission has requested authorization to convert some of its Senior Level (SL) management positions to Senior Executive Service (SES) status. The FEC contends that offering SES positions could provide a larger applicant pool because SES positions offer some additional benefits not available to SL appointees. It is unclear whether SES positions would, in fact, encourage more applicants. In general, SES appointees occupy the most senior civilian management positions in executive branch agencies. SL positions are more common in agencies that provide specialized or technical services and expertise. Congress has not recently considered legislation on this proposal.\nMore detailed analysis could be relevant if Congress chooses to pursue any or all of the agency's recommendations.",
"",
"Commissioners have the greatest impact on agency policy, but administrative leadership and daily FEC management falls to staff. As Figure 3 below shows, as of late 2015, the FEC lacked permanent occupants in several senior positions. As the FEC IG noted in October 2015, some senior positions had been vacant for more than a year. Perhaps most notably, these include a vacancy in the general counsel position—the agency's chief enforcement official and legal advisor—dating to July 2013. Amid reported stalemate over how to fill the position, and reportedly reflecting commissioners' divisions over enforcement, the general counsel position was vacant for more than two years between June 2013 and August 2015. The commission appointed FEC attorney Daniel Petalas as acting general counsel in August 2015.\nThe FEC Inspector General (IG) has raised concerns that \"frequent turnover\" in the general counsel, chief financial officer (CFO), and deputy staff director for management and administration positions \"hinders the organization from efficiently and effectively carrying out the [FEC's] mission.\" FEC management has responded that it \"understands the importance of filling these key, vacant positions\" but that permanently doing so is \"challeng[ing].\" As noted in the \" Information Technology \" section, the IG also has questioned having a single person occupying the staff director and chief information officer (CIO) positions.\nIn addition, although not necessarily related to senior-staff vacancies, FEC personnel consistently report low morale. In 2015, for example, responding FEC employees' \"global satisfaction index,\" an Office of Personnel Management (OPM) measure of overall satisfaction with jobs, pay, organization, and \"whether they would recommend their organization as a good place to work,\" stood at 43%. The FEC ranked 39 th of 41 small agencies.",
"Since the agency's inception, some Members of Congress have proposed reorganizing the FEC to alter the number of commissioners or otherwise change the agency's structure. Most prominently, critiques typically propose eliminating the even-number commissioner structure to make deadlocks less likely. For some, in choosing the current bipartisan structure, Congress intentionally made the FEC \"weak\" with the agency being \"designed to promote deadlock along party lines on issues that really mattered.\" Other observers warn that an odd number of commissioners could invite politicized decisionmaking. As one analysis explains, \"The FEC's bipartisan design ... allows its regulations to carry weight. If not for this bipartisan design, every FEC action would be tinged with politics and viewed by some as illegitimate.\"\nRestructuring the FEC in any form that eliminated the even number of commissioners could reduce the potential for deadlocks and, therefore, perhaps improve the odds of consensus. Major restructuring could, however, also entail reforms well beyond addressing the comparatively narrow topic of deadlocked votes. In addition, a legislative overhaul of the agency is likely to be controversial. No overarching campaign finance legislation has been enacted since BCRA (2002). This context suggests that efforts to revamp the FEC may be difficult. On the other hand, the cyclical nature of support for campaign finance legislation suggests that changing the commission—or pursuing other major policy goals—could be accomplished provided sufficient demand exists within Congress or perhaps the broader public sphere.\nIt is also important to note that although changing the number of commissioners is the most recurring and prominent restructuring option, it is by no means the only consideration that might be relevant. For example, scholars and other observers have occasionally proposed providing the general counsel with tie-breaking authority on deadlocked matters. A more enforcement-oriented agency with a powerful chair and administrative law judges is another option. Analysis of these and other options is beyond the scope of this report, but regardless of the reorganization option Congress considered, various questions of agency design and appointments likely would need to be addressed.",
"Although commissioners have disagreed on many topics, in general, recent discussions at open meetings suggest that they see consensus on at least some transparency issues, such as initiating a major update to the agency's website, discussed in the \" Website Upgrade \" section of this report. The FEC also has found agreement on providing more formal ways for those regulated by the commission to interact with the agency. For example, in 2009, the FEC began permitting those seeking advisory opinions to appear before the commission to answer questions about the requests. This initiative is designed to address the \"frustrat[ing]\" situation in which requesters or their attorneys were in the audience during open meetings at which AOs were considered, but were not permitted to answer questions commissioners raised. Some have also proposed that the commission permit other interested parties to appear before the agency to comment on AO requests. The agency rejected such proposals in 2009 and 2015, although anyone may still submit written comments.\nCommissioners appear to be less unified on their views about some other transparency matters, such as largely unstructured public forums held in 2015 to solicit feedback on campaign finance and the agency generally. In these debates, commissioners do not necessarily differ on transparency per se, but on their interpretation of how and whether public input should be limited to those who are directly affected by a commission decision—such as a particular enforcement action or advisory opinion—or whether the commission also should solicit public feedback about campaign finance policy generally rather than on specific regulatory matters.",
"Disclosure—a term of art referring to public reporting of information about contributions and expenditures—is a long-standing principle in campaign finance policy. Since the 1970s, Congress has relied on disclosure to prevent real or apparent corruption in campaign transactions. Even as more contentious policy questions, such as regulating the amounts one can give or spend, have evolved, Congress generally has continued to favor disclosure and courts generally have upheld it as within the government's purview. Facilitating disclosure falls to the FEC.\nAlthough some previous consensus on disclosure has eroded as recent Congresses have debated which transactions should be reported or by whom, the FEC generally is praised for its role in publicizing campaign finance data. \"[W]hile most observers are content to dismiss the commission as a bureaucratic sideshow on the American political landscape, most also are willing to credit the agency with at least one major success.... [T]he FEC has built on earlier attempts to make campaign finance data open to public scrutiny and has made disclosure of campaign dollars an accepted and expected part of the electoral process.\" That assessment was written after the FEC's 10 th anniversary in 1985, not after its 40 th in 2015. Yet, the same observations ring true today. Although the commission's disclosure systems are sometimes criticized as outdated, the agency is generally well-regarded for providing timely access to campaign finance data.\nIn FY2014, the FEC received almost 69,000 disclosure documents containing more than 26 million transactions. Presidential and House reports are generally available to the public via the FEC website within 48 hours. Because Senate reports are filed on paper and with the Secretary of the Senate, which then transmits them to the FEC, availability of those reports is delayed. As the FEC has explained, \"A Senate campaign filing often consists of thousands of pages, and data from these filings consume a disproportionate amount of time to be integrated into the Commission's searchable databases.\" As the section on \" The FEC's Legislative Recommendations \" notes, the FEC has recommended that Congress require Senate political committees to file reports electronically and directly with the commission.",
"Information technology (IT) is central to the FEC's public outreach and internal operations. This includes maintaining and upgrading the commission website, enhancing network security, and making ongoing updates to various software and hardware capabilities. IT costs routinely occupy more of the FEC's budget than any expense except personnel. For FY2016, the FEC expects IT to account for approximately 16% of the agency's budget. That amount is consistent with other recent requests.",
"The FEC's IG \"has identified [IT] security as a challenge for the agency\" since FY2004. IT security became more publicly prominent in 2013 when reports emerged that the FEC website had been subject to several successful and attempted breaches. At least some of those attacks appear to have significantly impeded public access to data. Some of the website intrusions reportedly occurred during the October 2013 government shutdown. According to one media account, \"[i]t took the agency weeks to get its campaign-finance disclosure system fully back up to speed after an attack by hackers in China disrupted its operation\" when most agency staff were furloughed.\nWhile acknowledging some subsequent progress on IT issues, the IG and an auditor contracted by the IG continued to raise concerns about the commission's information security and various IT practices. The IG also has questioned the decision to permit one person to serve as both staff director and CIO. The FEC has agreed with some of the IG's IT recommendations.\nConcern about the FEC's IT challenges, and the agency's response to those challenges, appears to be ongoing. However, citing various \"management actions and a recent commitment to establish more robust IT security standards, the OIG has removed Information Technology Security as a management challenge\" from its October 2015 review. The IG reported that the agency nonetheless \"continues to struggle with implementing IT projects\" and said that it would continue to monitor the FEC's progress on IT issues.",
"The FEC's website is the agency's primary outreach tool. Practitioners rely on the site for compliance information. The media and the public rely heavily on it for campaign finance reports and background information.\nRevamping the FEC website has been a major priority. The FEC began soliciting formal feedback about its website in 2009. In 2014, the commission partnered with 18F, \"a digital services delivery team in the General Services Administration (GSA)\" to solicit feedback from various governmental and nongovernmental sources about how they use the site and what features should be included on a new site. In October 2015, the commission launched a new \"beta site\" with substantially enhanced data analysis features. Work on the new site continues.",
"The Federal Election Commission is one of the most roundly criticized agencies in Washington. Some contend that the commission has done too little and others say that it has done too much. These criticisms are familiar, but examining the agency's mission and the context in which it operates is less common. Because policy consensus has not yet emerged, this report has emphasized recurring topics that might rise to Congress's attention. If Congress decides to reexamine the FEC, more in-depth analysis of individual policy questions or matters of agency design likely would be required.\nAs Congress examines the nation's campaign finance enforcement agency, it might first desire to consider whether the FEC established 40 years ago meets current needs. Broadly speaking, what should the FEC do and how should it do those things? If Congress chooses to alter the FEC at all, do the House and Senate primarily want a different agency or do they want a different set of laws for the agency to enforce? The latter option suggests a broad reexamination of federal campaign finance policy as it has existed for decades. For those who view the status quo as antiquated, reconsidering major topics such as contribution limits, disclosure requirements, and independent spending might be preferable to narrower technical changes. On the other hand, fundamental changes to campaign finance policy are likely to be controversial and protracted. Altering the FEC also likely would be contentious, but the approach would be more modest than overhauling campaign finance policy. The following questions raise more specific points for consideration.\nDoes Congress want to change the status quo at all? If so, in which areas and how? Does Congress want the FEC to be primarily an enforcement agency, primarily a disclosure agency, or something else? If Congress wants the FEC to focus on one task over others, should another agency take on other duties? Is it sufficient for some tasks to be de-prioritized, etc.? To what extent should the commission have discretion to prioritize some aspects of its mission over others? Does Congress want to provide more or new direction? Does Congress want to retain the FEC's six-member, bipartisan structure? If Congress chose instead an odd number of commissioners, how, if at all, might that affect perceptions of the agency's legitimacy or partisanship? Does the FEC have sufficient appropriations to carry out its current mission and future ones? Does Congress want to examine relations among commissioners? If so, does it want to try to affect those relations through oversight, by influencing nominations, etc.? Does Congress want to consider the FEC's legislative recommendations? If so, which ones? Does Congress want to consider findings from outside critiques of the agency, such as those conducted by the FEC's inspector general or advocacy groups?\nAs Congress considers the questions presented above and the issues noted throughout this report, it might also be important to ask which decisions are within the commission's purview and which things only Congress can change. The FEC can control much of its agenda. Commissioners can determine those areas where they can compromise and where they must disagree. They can set the overall tone for the agency and its staff. They can decide how to allocate resources and where to prioritize enforcement. Other factors are beyond the FEC's control. The agency cannot establish its own statutory mandate. It cannot unilaterally reconcile complex and sometimes ambiguous campaign finance law. Most importantly, the FEC cannot change the First Amendment provisions that so closely protect the very conduct that Congress has charged the commission with regulating.",
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"How did Congress arrive at a bipartisan, even-numbered structure for the FEC?",
"What are the pros and cons of this structure?",
"Why do people criticize the FEC?",
"How are commissioners appointed to head the FEC?",
"What restrictions are there on the FEC’s commissioner makeup?",
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"Congress arrived at this bipartisan, even-numbered structure amid debate over how to properly insulate the campaign finance agency from political pressures.",
"Although this structure ensures that commissioners must reach bipartisan agreement to make most decisions, it has not saved the agency from bipartisan criticism.",
"Throughout its history, critics have alleged that the FEC fails to adequately regulate campaign finance activity or does so too stringently.",
"Six presidentially appointed commissioners, who are subject to Senate advice and consent, head the FEC.",
"No more than three members may be affiliated with the same political party.",
"As the FEC heads toward a half-century of regulating campaigns, perhaps the most fundamental question facing Congress and the commission is what the agency's mission should be today and in the future.",
"As Congress monitors the FEC, it perhaps faces a choice similar to that facing the agency itself: whether to focus on major change—if any—or to emphasize managing routine business.",
"Recent Congresses have engaged in oversight activities surrounding the FEC's enforcement practices and agency transparency.",
"For more than 20 years, Congress occasionally has considered legislation to restructure the agency, particularly to change the number of commissioners, thereby reducing possibilities for deadlocked votes."
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CRS_R40860
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{
"title": [
"",
"What Is a Small Business?",
"How Big Is Small?",
"Who Makes the Call?",
"Early Definitions of Small Business Vary in Approach and Criteria",
"The Small Business Act of 1953's Definition of Small Provides Room for Interpretation",
"Industry Challenges the SBA's Initial Size Standards, Claiming They Are Too Restrictive",
"GAO and Several Members of Congress Challenge the SBA's Size Standards, Claiming They Are Too Broad",
"SBA Proposes More Restrictive Size Standards Based on Industry Competitiveness",
"SBA Proposes to Streamline Its Size Standards",
"SBA Adopts a Targeted Approach and Reduces the Number of Receipt Based Size Standards",
"Congress Requires Periodic Size Standard Reviews",
"SBA's Definitions for Small Business",
"Alternative Size Standards",
"Industry Size Standards",
"Other Federal Agency Size Standards",
"Other Recent Legislation",
"Congressional Policy Options",
"Appendix. SBA Size Standard Reviews, 2011-2016"
],
"paragraphs": [
"",
"The Small Business Act of 1953 (P.L. 83-163, as amended) authorized the U.S. Small Business Administration (SBA) and justified the agency's existence on the grounds that small businesses are essential to the maintenance of the free enterprise system. In economic terms, the congressional intent was to assist small businesses as a means to deter monopoly and oligarchy formation within all industries and the market failures caused by the elimination or reduction of competition in the marketplace. Congress decided to allow the SBA to establish size standards to ensure that only small businesses were provided SBA assistance.\nSpecifically, the Small Business Act of 1953 defines a small business as one that\nis organized for profit; has a place of business in the United States; operates primarily within the United States or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor; is independently owned and operated; and is not dominant in its field on a national basis.\nThe business may be a sole proprietorship, partnership, corporation, or any other legal form.\nThe SBA conducts an analysis of various economic factors, such as each industry's overall competitiveness and the competitiveness of firms within each industry, to determine its size standards. The analysis is designed to ensure that only small businesses receive SBA assistance and that these small businesses are not dominant in their field on a national basis.\nThe SBA currently uses two types of size standards to determine SBA program eligibility: (1) industry-specific size standards and (2) alternative size standards based on the applicant's maximum tangible net worth and average net income after federal taxes. The SBA's industry-specific size standards are also used to determine eligibility for federal small business contracting purposes.\nThe SBA's industry-specific size standards determine program eligibility for firms in 1,036 industrial classifications (hereinafter industries) in 23 sub-industry activities described in the 2017 North American Industry Classification System (NAICS). Given its mandate to promote competition in the marketplace, the SBA includes an economic analysis of each industry's overall competitiveness and the competitiveness of firms within the industry in its size standards methodology. The size standards are based on four measures: (1) number of employees (505 industries), (2) average annual receipts in the previous three (may soon be the previous five) years (526 industries), (3) average asset size as reported in the firm's four quarterly financial statements for the preceding year (5 industries), or (4) a combination of number of employees and barrel per day refining capacity (1 industry). Overall, about 97% of all employer firms qualify as small. These firms represent about 30% of industry receipts.\nIn the absence of precise statutory guidance and consensus on how to define small, the SBA's size standards have often been challenged, typically by industry representatives seeking to increase the number of firms eligible for assistance. The size standards have also been challenged by Members of Congress concerned that the size standards may not adequately target federal assistance to firms that they consider to be truly small.\nThis report provides a historical examination of the SBA's size standards and assesses competing views concerning how to define a small business. It also discusses\nP.L. 111-240 , the Small Business Jobs Act of 2010, which authorized the SBA to establish an alternative size standard using maximum tangible net worth and average net income after federal taxes for both the 7(a) and 504/CDC loan guaranty programs; established, until the SBA acted, an interim alternative size standard for the 7(a) and 504/CDC programs of not more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carry-over losses) for the two full fiscal years before the date of the application; and required the SBA to conduct a detailed review of not less than one-third of the SBA's industry size standards every 18 months beginning on the new law's date of enactment (September 27, 2010) and ensure that each size standard is reviewed at least once every five years. P.L. 112-239 , the National Defense Authorization Act for Fiscal Year 2013, which directs the SBA not to limit the number of size standards and to assign the appropriate size standard to each NAICS industrial classification. This provision addressed the SBA's practice of limiting the number of size standards it used and combining size standards within industrial groups as a means to reduce the complexity of its size standards and to provide greater consistency for industrial classifications that have similar economic characteristics. P.L. 114-328 , the National Defense Authorization Act for Fiscal Year 2017, which authorizes the SBA to establish different size standards for agricultural enterprises using existing methods and appeal processes. Previously, the small business size standard for agricultural enterprises was set in statute as having annual receipts not in excess of $750,000. P.L. 115-324 , the Small Business Runway Extension Act of 2018, which directs federal agencies proposing a size standard (and, based on report language accompanying the act, presumably the SBA as well) to use the average annual gross receipts from at least the previous five years, instead of the previous three years, when seeking SBA approval to establish a size standard based on annual gross receipts. Legislation introduced during the 112 th Congress ( H.R. 585 , the Small Business Size Standard Flexibility Act of 2011), 113 th Congress ( H.R. 2542 , the Regulatory Flexibility Improvements Act of 2013, and included in H.R. 4 , the Jobs for America Act), 114 th Congress ( H.R. 527 , the Small Business Regulatory Flexibility Improvements Act of 2015, and its Senate companion bill, S. 1536 ), and 115 th Congress ( H.R. 33 , the Small Business Regulatory Flexibility Improvements Act of 2017, and its Senate companion bill, S. 584 , and included in H.R. 5 , the Regulatory Accountability Act of 2017) to authorize the SBA's Office of Chief Counsel for Advocacy to approve or disapprove a size standard requested by a federal agency for purposes other than the Small Business Act or the Small Business Investment Act of 1958. The SBA's Administrator currently has that authority.",
"In 2016 (the most recent available data), there were over 5.95 million employer firms and over 24.8 million nonemployer (self-employed) firms.\nAs Table 1 indicates, there were 5,954,684 employer firms in the United States employing 126,752,238 people and providing total payroll of $6.43 trillion in 2016.\nMost employer firms (61.6%) had 4 or fewer employees, 78.6% had fewer than 10 employees, 89.1% had fewer than 20 employees, 98.1% had fewer than 100 employees, and 99.7% had fewer than 500 employees in 2016. The table also provides data concerning other economic factors that might be used to define a small business: an employer firm's number of employees as a share (cumulative percentage) of the total number of employer firms, as a share of employer firm total employment, and as a share of employer firm total annual payroll.\nAs will be discussed, the SBA has traditionally applied economic factors to specific industries, not to cumulative statistics for all employer firms, to determine which firms are small businesses. Nonetheless, the data in Table 1 illustrate how the selection of economic factors used to define small business affects the definition's outcome. For example, for illustrative purposes only, if the mid-point (50%) for these three economic factors was used to define what is a small business, three different employee firm sizes would be used to designate firms as small:\nBusinesses would be required to have no more than 4 employees to be defined as small if the definition for small used the mid-point (50%) share of the total number of employer firms (employer firms with no more than four employees accounted for 61.6% of the total number of employer firms in 2016). Businesses would be required to have no more than 999 employees to be defined as small if the definition for small used the mid-point (50%) share of employer firm total employment (employer firms with no more than 999 employees accounted for 52.6% of employer firm total employment in 2016). Businesses would be required to have no more than 1,999 employees to be defined as small if the definition for small used the mid-point (50%) share of employer firm total annual payroll (employer firms with no more than 1,999 employees accounted for 51.8% of employer firm total annual payroll in 2016).\nOther economic factors that might be used to define a small business include the value of the employer firm's assets or its market share, expressed as a firm's sales revenue from that market divided by the total sales revenue available in that market or as a firm's unit sales volume in that market divided by the total volume of units sold in that market.",
"The Small Business Act of 1953 (P.L. 83-163, as amended) authorized the SBA to establish size standards for determining eligibility for SBA assistance. More than sixty years have passed since the SBA established its initial small business size standards on January 1, 1957. Yet, decisions made then concerning the rationale and criteria used to define small businesses established precedents that continue to shape current policy. Moreover, as mentioned previously, the SBA relies on an analysis of various economic factors, such as each industry's overall competitiveness and the competitiveness of firms within each industry, in its size standards methodology to ensure that businesses receiving SBA assistance are not dominant in their field on a national basis. However, in the absence of precise statutory guidance and consensus on how to define small, the SBA's size standards have often been challenged, typically by industry representatives seeking to increase the number of firms eligible for assistance and by Members of Congress concerned that the size standards do not adequately target the SBA's assistance to firms that they consider to be truly small.\nOver the years, the SBA typically reviewed its size standards piecemeal, reviewing specific industries when the SBA determined that an industry's market conditions had changed or the SBA was asked to undertake a review by an industry claiming that its market conditions had changed. On five occasions, in 1980, 1982, 1992, 2004, and 2008, the SBA proposed a comprehensive revision of its size standards. The SBA did not fully implement any of these proposals, but the arguments presented, both for and against the proposals, provide a context for understanding the SBA's current size standards, and the rationale and criteria that have been presented to retain and replace them.\nAs mentioned previously, P.L. 111-240 requires the SBA to conduct a detailed review of not less than one-third of the SBA's industry size standards during the 18-month period beginning on the date of enactment (September 27, 2010) and during every 18-month period thereafter. The act also requires the SBA to review each size standard at least once every five years. The SBA completed its first five-year review of all SBA industry size standards in 2016. As a result of its five-year review, the SBA estimates that more than 72,000 small businesses gained SBA eligibility.",
"There is no uniform or accepted definition for a small business. Instead, several criteria are used to determine eligibility for small business spending and tax programs. This was also the case when Congress considered establishing the SBA during the early 1950s. For example, in 1952, the House Select Committee on Small Business reviewed federal statutes, executive branch directives, and the academic literature to serve as a guide for determining how to define small businesses.\nThe Select Committee began its review by asserting that the need to define the concept of small business was based on a general consensus that assisting small business was necessary to enhance economic competition, combat monopoly formation, inhibit the concentration of economic power, and maintain \"the integrity of independent enterprise.\" It noted that the definition of small businesses in federal statutes reflected this consensus by taking into consideration the firm's size relative to other firms in its field and \"matters of independence and nondominance.\" For example, the War Mobilization and Reconversion Act of 1944 defined a small business as either \"employing 250 wage earners or less\" or having \"sales volumes, quantities of materials consumed, capital investments, or any other criteria which are reasonably attributable to small plants rather than medium- or large-sized plants.\" The Selective Service Act of 1948 classified a business as small for military procurement purposes if \"(1) its position in the trade or industry of which it is a part is not dominant, (2) the number of its employees does not exceed 500, and (3) it is independently owned and operated.\"\nThe Select Committee also found that, for data-gathering purposes, the executive branch defined small businesses in relative, as opposed to absolute, terms within specific industries. For example, the Bureau of Labor Statistics \"defined small business in terms of an average for each industry based on the volume of employment or sales. All firms which fall below this average are deemed to be small.\" The U.S. Census Bureau also used different criteria for different industries. For example, manufacturing firms were classified as small if they had fewer than 100 employees, wholesalers were considered small if they had annual sales below $200,000, and retailers were considered small if they had annual sales below $50,000. According the Census Bureau, in 1952, small businesses accounted for \"roughly 92 percent of all business establishments, 45 percent of all employees, and 34 percent of all dollar value of all sales.\"\nThe Select Committee also noted that in 1951, the National Production Authority's Office of Small Business proposed defining all manufacturing firms with fewer than 50 employees as small and any with more than 2,500 employees as large. Manufacturers employing between these numbers of employees would be considered large or small depending on the general structure of the industry to which they belonged. The larger the percentage of total output produced by large firms, the larger the number of employees a firm could have to be considered small. Using this definition, most manufacturing firms with fewer than 50 employees would be classified as small, but others, such as an aircraft manufacturer, could have as many as 2,500 employees and still be considered small.\nFor procurement purposes, the Select Committee found that executive branch agencies defined small businesses in absolute, as opposed to relative, terms, using 500 employees as the dividing line between large and small firms. Federal agencies defended the so-called 500 employee rule on the grounds that it \"had the advantage of easy administration\" across federal agencies.\nIn reviewing the academic literature, the Select Committee reported that Abraham Kaplan's Small Business: Its Place and Problems defined small businesses as those with no more than $1 million in annual sales, $100,000 in total assets, and no more than 250 employees. Applying this definition would have classified about 95% of all business concerns as small, and would have accounted for about half of all nonagricultural employees.\nBased on its review of federal statutes, executive branch directives, and the academic literature, the Select Committee decided that it would not attempt \"to formulate a rigid definition of small business\" because \"the concept of small business must remain flexible and adaptable to the peculiar needs of each instance in which a definition may be required.\" However, it concluded that the definition of small should be a relative one, as opposed to an absolute one, that took into consideration variations among economic sectors:\nThis committee is also convinced that whatever limits may be established to the category of small business, they must vary from industry to industry according to the general industrial pattern of each. Public policy may demand similar treatment for a firm of 2,500 employees in one industry as it does for a firm of 50 employees in another industry. Each may be faced with the same basic problems of economic survival.",
"Reflecting the view that formulating a rigid definition of small business was impractical, the Small Business Act of 1953 provided leeway in defining small businesses. It defined a small firm as \"one that is independently owned and operated and which is not dominant in its field of operation.\" The SBA was authorized to establish and subsequently alter size standards for determining eligibility for federal programs to assist small business, some of which are administered by the SBA. The act specifies that the size standards \"may utilize number of employees, dollar volume of business, net worth, net income, a combination thereof, or other appropriate factors.\" It also notes that the concept of small is to be defined in a relative sense, varying from industry to industry to the extent necessary to reflect \"differing characteristics\" among industries.\nThe House Committee on Banking and Currency's report accompanying H.R. 5141, the Small Business Act of 1953, issued on May 28, 1953, provided the committee's rationale for not providing a detailed definition of small:\nIt would be impractical to include in the act a detailed definition of small business because of the variation between business groups. It is for this reason that the act authorizes the Administration to determine within any industry the concerns which are to be designated small-business concerns for the purposes of the act.\nThe report did not provide specific guidance concerning what the committee might consider to be small, but it did indicate that data on industry employment, as of March 31, 1948, \"reveals that on the basis of employment, small business truly is small in size. Of the approximately 4 million business concerns, 87.4% had fewer than 8 employees and 95.2% of the total number of concerns, employed fewer than 20 people.\"",
"Initially, the SBA created two sets of size standards, one for federal procurement preferences and another for the SBA's loan and management training services. At the request of federal agencies, the SBA adopted the then-prevailing small business size standard used by federal agencies for procurement, which was no more than 500 employees. The SBA retained the right to make exceptions to the no more than 500 employee procurement size standard if the SBA determined that a firm having more than 500 employees was not dominant in its industry.\nFor the SBA's loan and management training services, the SBA's staff reviewed economic data provided by the Census Bureau to arrive at what Wendell Barnes, SBA's Administrator, described at a congressional hearing in 1956 as \"a fairly accurate conclusion as to what comprises small business in each industry.\" Jules Abels, SBA's economic advisor to the Administrator, explained at that congressional hearing how the SBA's staff determined what constituted a small business:\nThere are various techniques for the demarcation lines, but in a study of almost any industry, you will find a large cluster of small concerns around a certain figure.... On the other hand, above a certain dividing line you will find relatively few and as you map out a picture of an industry it appears that a dividing line at a certain point is fair.\nOn January 5, 1956, the SBA published a notice of proposed rulemaking in the Federal Register announcing its first proposed small business size standards. During the public comment period, representatives of several industries argued that the proposed standards were too restrictive and excluded too many firms. In response, Mr. Abels testified that the SBA decided to adjust its figures to make them \"a little bit more liberal because there was some feeling on the part of certain industries that they were too tight and that they excluded too many firms.\" The SBA published its final rule concerning its small business size standards on December 7, 1956, and they became effective on January 1, 1957.\nThe SBA decided to use number of employees as the sole criterion for determining if manufacturing firms were small and annual sales or annual receipts as the sole criterion for all other industries. Mr. Abels explained at the congressional hearing the SBA's rationale for using number of employees for classifying manufacturing firms as small and annual sales or annual receipts for all other firms:\nin the absence of automation which would give one firm in an industry a great advantage over another, roughly speaking if the firms were mechanized to the same extent, a firm with 400 employees would have an output which would be twice as large as the output of a firm with 200 employees.... However when you depart from the manufacturing field and go into, say, a distributive field or trade, it then becomes necessary to discard the number of employees, because it is a matter of judicial notice, that one man for example in the distributive trades can sell as much as 100 men can sell. One small construction firm possibly can do a lot more business than one with a lot more employees. A service trade again has its volume geared to something other than the number of employees. So I think that one can say with reasonable certainty that it is only within the manufacturing field that the employee standard is the uniform yardstick, but that other than manufacturing the dollar volume is the appropriate yardstick.\nThe SBA's initial size standards defined most manufacturing firms employing no more than 250 employees as small. In addition, the SBA considered manufacturing firms in some industries (e.g., metalworking and small arms) as small if they employed no more than 500 employees, and in some others (e.g., sugar refining and tractors) as small if they employed no more than 1,000 employees. To be considered small, wholesalers were required to have annual sales volume of $5 million or less; construction firms had to have average annual receipts of $5 million or less over the preceding three years; trucking and warehousing firms had to have annual receipts of $2 million or less; taxicab companies and most firms in the service trades had to have annual receipts of $1 million or less; and most retail firms had to have annual sales of $1 million or less.\nMr. Abels testified that the SBA experienced \"continual\" protests of its size standards by firms denied financial or support assistance because they were not considered small. He also testified that in each case, the SBA denied the protest and determined, in his words, that the standard was \"valid and accurate.\"",
"In 1977, the U.S. General Accounting Office (GAO, now the U.S. Government Accountability Office) was asked by the Senate Select Committee on Small Business to review the SBA's size standards. At that time, most of the SBA's size standards remained at their original 1957 levels, other than a one-time upward adjustment for inflation in 1975 for industries using annual sales and receipts to restore eligibility to firms that may have lost small-business status due solely to the effect of inflation.\nGAO's report, issued in 1978, found that the SBA's size standards \"are often high and often are not justified by economic rationale.\" Specifically, GAO reported that\nmany size standards may not direct assistance to the target group described in SBA regulations as businesses \"struggling to become or remain competitive\" because the loan and procurement size standards for most industries were established 15 or more years ago and have not been periodically reviewed; SBA records do not indicate how most standards were developed; and the standards often define as small a very high percentage of the firms in the industries to which they apply.\nGAO recommended that the SBA reexamine its size standards \"by collecting data on the size of bidders on set-aside and unrestricted contracts, determining the size of businesses which need set-aside protection because they cannot otherwise obtain Federal contracts\" and then consider reducing its size standards or \"establishing a two-tiered system for set-aside contracts, under which certain procurements would be available for bidding only to the smaller firms and others would be opened for bidding to all businesses considered small under present standards.\"\nCiting the GAO report, several Members objected to the SBA's size standards at a House Committee on Small Business oversight hearing conducted on July 10, 1979. Representative John J. LaFalce, chair of the House Committee on Small Business Subcommittee on General Oversight and Minority Enterprise, stated that \"what we have faced from 1953 to the present is virtually nothing other than acquiescence to the demands of the special interest groups. That is how the size standards have been set.\" Representative Tim Lee Carter, the subcommittee's ranking minority member, stated that \"it seems to me that we may be fast growing into just a regular bank forum not just to small business but to all business.\" At that time, approximately 99% of all firms with employees were classified by the SBA as a small business.\nRoger Rosenberger, SBA's associate administrator for policy, planning and budgeting, testified at the hearing that the SBA would undertake a comprehensive economic analysis of industry data to determine if its size standards should be changed. However, he also defended the validity of the SBA's size standards, arguing that the task of setting size standards was a complicated and difficult one because of \"how market structure and size distribution of firms vary from industry to industry.\" He testified that some industries are dominated by a few large firms, some are comprised almost entirely of small businesses, and others \"can be referred to as a mixed industry.\" He argued that each market structure presents unique challenges for defining small businesses within that industry group. For example, he argued that it was debatable whether the SBA should provide any assistance to any of the businesses within industries where \"smaller firms are flourishing.\"",
"On March 10, 1980, the SBA issued a notice of proposed rulemaking designed to \"reduce administrative complexity\" by replacing its two sets of size standards, one for procurement preferences and another for its loan and consultative support services, with a single set of size standards for both purposes. The SBA also proposed to use a single factor, the firm's number of employees, for definitional purposes for nearly all industries instead of using the firm's number of employees for some industries, the firm's assets for others, and the firm's annual gross receipts for still others. The SBA argued that\nwhen size standards are denominated in dollars, i.e., annual revenues, its ability to help the small business sector is undermined by inflation. Using employment, as opposed to dollar sales, will provide greater stability for SBA and its clients; will remove inter-industry distortions generated by differential inflation rates; and reduce the need for SBA to make frequent revisions in the size standards merely to reflect price increases.\nIn setting its proposed new size standards for each industry (ranging from no more than 15 to no more than 2,500 employees), the SBA first placed each industry into one of three groups: concentrated (characterized by a highly unequal distribution of sales among the firms in the industry), competitive (characterized by a more equal distribution of sales in the industry), or mixed (industries that do not meet the criteria of competitive or concentrated industries).\nThe SBA determined that there were 160 concentrated industries, 317 competitive industries, and 249 mixed industries. The SBA argued that establishing a size standard for the 160 concentrated industries was a \"straight-forward task—simply identify and exclude those few firms which account for a disproportionately large share of the industry's sales.\" For competitive industries, the SBA argued that the size standard should be set \"relatively low, so as to support entry and moderate growth.\" The SBA argued that mixed industries require \"relatively high size standards ... to reinforce competition and offset the pressures to increase the degree of concentration in these industries.\"\nThe proposed new SBA size standards would have had the net effect of reducing the number of firms classified as small by about 225,000. In percentage terms, the number of firms classified as small would have been reduced from about 99% of all employer firms to 96%.\nOver 86% of the more than 1,500 public comments received by the SBA concerning its proposed new size standards criticized it. Most of the criticism was from firms that would no longer be considered small under the new size standards. In addition, several federal agencies indicated that the proposed size standards in the services and construction industries were set too low, reducing the number of small firms eligible to compete for procurement contracts below levels they deemed necessary to ensure adequate competition to prevent agency costs from rising.\nOn October 21, 1980, Congress required the SBA to take additional time to consider the consequences of the proposed changes to the size standards by adopting the Small Business Export Expansion Act of 1980 ( P.L. 96-481 ). It prohibited \"the SBA from promulgating any final rule or regulation relating to small business size standards until March 31, 1981.\" In the meantime, the Reagan Administration entered office, and, as is customary when there is a change in Administration, replaced the SBA's senior leadership.\nThe SBA's new Administrator, Michael Cardenas, was sympathetic to the concerns of federal agencies that the proposed size standards in the services and construction industries were set too low to meet those agencies' procurement needs. As a result, he indicated that the SBA would modify its size standards proposal by (1) increasing the proposed size standards for 51 industries, mostly in the services and construction industries; (2) lowering the proposed size standards in 157 manufacturing industries (typically from no more than 2,500 employees to no more than 500 employees) to prevent one or more of the largest producers in those industries from being classified as small; and (3) increasing the SBA's proposed lowest size standard from no more than 15 employees to no more than 25 employees (affecting 93 service and trade industries). The net effect of these changes would have restored eligibility for approximately 60,000 of the 225,000 firms expected to lose eligibility under the previous Administration's proposal.\nThe SBA subsequently met with various trade organizations and federal agency procurement officials to discuss the proposal. As these consultations took place, the SBA experienced another turnover in its senior leadership.\nThe SBA, headed by the new appointee, James C. Sanders, issued a notice of proposed rulemaking concerning its size standards on May 3, 1982. The proposal differed from its March 10, 1980, predecessor in three ways:\nFirst, the range of size standards was narrowed to a range of 25 employees to 500 employees. This reflected a widespread view that 15 employees was too low a cutoff while 2,500 employees was too high. Second, SBA proposed a 500-employee ceiling, focusing on smaller firms. Third, SBA responded to sentiments within many procurement-sensitive industries that the proposed size standards in some cases were too low to accommodate the average procurement currently being performed by small business. Therefore, SBA proposed higher size standards in a number of procurement-sensitive industries, while maintaining the 500-employee cap.\nThe SBA received over 500 comments on the proposed rule, with about 72% of those comments opposing the rule.\nTaking those comments into consideration, the SBA reexamined its size standards once again, and, after a year of further consultation with various trade organizations and federal agency procurement officials, issued another notice of proposed rulemaking on May 6, 1983. The 1983 proposal (1) replaced the use of two sets of size standards, one for procurement and another for the SBA's loan and consultative support services, with a single set for all programs; (2) retained most of the size standards that were expressed in terms of average annual sales or receipts; (3) adjusted those size standards for inflation (an upward adjustment of 81%); (4) retained most of the size standards for manufacturing; and (5) made relatively minor changes to the size standards in other industries, with a continued emphasis on a 500-employee ceiling for most industries. The SBA received 630 comments on the proposed rule, with almost 70% supporting it.\nSBA Administrator Sanders characterized the SBA's revised size standard proposal as \"a fine-tuning of current standards which has the basic support of both the private sector and the Federal agencies that use the basic size standards to achieve their set-aside procurement goals.\" He also added that \"since almost no size standard is proposed to decrease, and most will in fact increase, very few firms will lose their small business status. We estimate that about 39,000 firms will gain small business status.\" He testified that in percentage terms, in 1983, 97.9% of the nation's 5.2 million firms with employees were classified by the SBA as small. Under the SBA's proposal, 98.6% of all firms with employees would be classified as small. The final rule was published in the Federal Register on February 9, 1984.\nRepresentative Parren J. Mitchell, chair of the House Committee on Small Business, expressed disappointment in the SBA's final rule, stating at a congressional oversight hearing on July 30, 1985, that \"the government and the business community are still victimized by that same ad hoc, sporadic system that the SBA promised to fix some six years ago.\" He introduced legislation ( H.R. 1178 , a bill to amend the Small Business Act) that would have required the SBA to adjust its size standard for an industrial classification downward by at least 20% if small business' share of that market equaled or exceeded 60%, and at least 40% of the market share was achieved through the receipt of federal procurement contracts. The bill also mandated a minimum 10% increase in the SBA's size standard for an industrial classification if small business' share of that market was less than 20% and less than 10% of the market share was achieved through the receipt of federal procurement contracts. The bill was opposed by various trade associations, the SBA, and federal agency procurement officials, and was not reported out of committee.",
"On December 31, 1992, the SBA issued a notice of proposed rulemaking \"to streamline its size standards\" by reducing the number of fixed size standard levels from 30 to 9. The nine proposed size standards were no more than 100, 500, 750, 1,000, or 1,500 employees; and no more than $5 million, $10 million, $18 million, or $24 million in annual receipts. The annual receipts levels reflected an upward adjustment of 43% for inflation. The SBA argued that the proposed changes would make the size standards more user-friendly for small business owners and restore eligibility to nearly 20,000 firms that were no longer considered small solely because of the effects of inflation. The proposed rule was later withdrawn as a courtesy to allow the incoming Clinton Administration time to review it. The SBA ultimately decided not to pursue this approach because it felt that converting \"receipts based size standards in effect at that time to one of four proposed receipts levels created a number of unacceptable anomalies.\"\nOver the subsequent decade, the SBA reviewed the size standards for some industries on a piecemeal basis and, in 1994, adjusted for inflation its size standards based on firm's annual sales or receipts (an upward adjustment of 48.2%). The SBA estimated that the adjustment would restore eligibility to approximately 20,000 firms that lost small-business status due solely to the effects of inflation.\nIn 2002, the SBA adjusted for inflation its annual sales and receipts based size standards for the fourth time (an upward adjustment of 15.8%). The SBA estimated that the adjustment would restore eligibility to approximately 8,760 firms that lost small-business status due solely to the effects of inflation. The rule also included a provision that the SBA would assess the impact of inflation on its annual sales and receipts based size standards at least once every five years. Then, on March 19, 2004, the SBA, once again, issued a notice of proposed rulemaking to streamline its size standards.\nThe proposed rule would have established size standards based on the firm's number of employees for all industries, avoiding the need to adjust for inflation size standards based on sales or receipts. At that time, the SBA size standards consisted of 37 different size levels: 30 based on annual sales or receipts, 5 on the number of employees (both full- and part-time), 1 on financial assets, and 1 on generating capacity. Under the proposed rule, the SBA would use 10 size standards, 5 new employee size standards (adding no more than 50, 150, 200, 300, and 400 employees), and the existing 5 employee size standards (no more than 100, 500, 750, 1,000, and 1,500 employees).\nThe proposed rule would not have changed any existing size standards based on number of employees. The SBA argued that the use of a single size standard would \"help to simplify size standards\" and \"tends to be a more stable measure of business size\" than other measures. It added that the proposed rule would change 514 size standards and that, after the proposed conversion to the use of number of employees, of the \"approximately 4.4 million businesses in the industries with revised size standards, 35,200 businesses could gain and 34,100 could lose small business eligibility, with the net effect of 1,100 additional businesses defined as small.\"\nA majority (51%) of the more than 4,500 comments on the proposed rule supported it, but with \"a large number of comments opposing various aspects of SBA's approach to simplifying size standards.\" In addition, the chairs of the House Committee on Small Business and Senate Committee on Small Business and Entrepreneurship opposed the proposed rule, largely because they were concerned about potential job losses resulting from more than 34,000 small businesses losing program eligibility. The SBA withdrew the proposed rule on July 1, 2004.\nIn 2005, the SBA adjusted for inflation size standards based on firms' annual sales or receipts (an upward adjustment of 8.7%). The SBA estimated that the adjustment restored eligibility to approximately 12,000 firms that lost small-business status due solely to inflation. In 2008, the SBA made another adjustment for inflation to its annual sales and receipts based standards (another upward adjustment of 8.7%). The SBA estimated that the adjustment restored eligibility for approximately 10,400 firms that lost small-business status due solely to inflation.",
"In June 2008, the SBA announced that it would undertake a comprehensive, two-year review of its size standards, proceeding one industrial sector at a time, starting with Retail Trade (NAICS Sector 44-45), Accommodations and Food Services (NAICS Sector 72), and Other Services (NAICS Sector 81). The SBA argued that it was concerned that \"not all of its size standards may now adequately define small businesses in the U.S. economy, which has seen industry consolidations, technological advances, emerging new industries, shifting societal preferences, and other significant industrial changes.\" It added that its reliance on an ad hoc approach \"scrutinizing the limited number of specific industries during a year, while worthwhile, leaves unexamined many deserving industries for updating and may create over time a set of illogical size standards.\"\nThe SBA announced that it would begin its analysis of its size standards by assuming that \"$6.5 million [later increased to $7.5 million] is an appropriate size standard for those industries with receipts size standards and 500 employees for those industries with employee size standards.\" It would then analyze the following industry characteristics: \"average firm size; average asset size (a proxy for startup costs); competition, as measured by the market share of the four largest firms in the industry; and, the distribution of market share by firm size—that is, are firms in the industry generally very small firms, or dominated by very large firms.\" Then, before making its final determination on the size standard, it would \"examine the participation of small businesses in federal contracting and SBA's guaranteed loan program at the current size standard level. Depending on the level of small business participation, additional consideration may be given to the level of the current size standard and the analysis of industry factors.\"\nIn April 2009, the SBA announced that was simplifying the administration and use of its size standards by reducing the number of receipts based size standards from 31 to 8 when establishing a new size standard or reviewing an existing size standard:\nFor many years, SBA has been concerned about the complexity of determining small business status caused by a large number of varying receipts based size standards (see 69 FR 13130 (March 4, 2004) and 57 FR 62515 (December 31, 1992)). At the start of current comprehensive size standards review, there were 31 different levels of receipts based size standards. They ranged from $0.75 million to $35.5 million, and many of them applied to one or only a few industries. The SBA believes that to have so many different size standards with small variations among them is unnecessary and difficult to justify analytically. To simplify managing and using size standards, SBA proposes that there be fewer size standard levels. This will produce more common size standards for businesses operating in related industries. This will also result in greater consistency among the size standards for industries that have similar economic characteristics.\nUnder the current comprehensive size standards review, SBA is proposing to establish eight \"fixed-level\" receipts based size standards: $5.0 million, $7.0 million, $10.0 million, $14.0 million, $19.0 million, $25.5 million, $30.0 million, and $35.5 million. These levels are established by taking into consideration the minimum, maximum and the most commonly used current receipts based size standards.\nThese eight receipts based size standards were increased to $5.5 million, $7.5 million, $11.0 million, $15.0 million, $20.5 million, $27.5 million, $32.5 million, and $38.5 million in 2014 to account for inflation.\nThe SBA also announced that it would\nuse eight employee based size standards when establishing a new size standard or reviewing an existing size standard (no more than 50, 100, 150, 200, 250, 500, 750, and 1,000 employees) instead of seven (no more than 50, 100, 150, 500, 750, 1,000, and 1,500 employees); and continue to use one asset based size standard, one megawatt hours size standard (based on electrical output over the preceding fiscal year), and one size standard based on a combination of the number of employees and barrel per day refining capacity.\nThe SBA also announced that \"to simplify size standards further\" it \"may propose a common size standard for closely related industries.\" The SBA argued\nalthough the size standard analysis may support a separate size standard for each industry, SBA believes that establishing different size standards for closely related industries may not always be appropriate. For example, in cases where many of the same businesses operate in the same multiple industries, a common size standard for those industries might better reflect the Federal marketplace. This might also make size standards among related industries more consistent than separate size standards for each of those industries.\nBecause SBA size standards remain in force until after they are reviewed, the number of size standards did not immediately drop from 41 to 19 in 2009. Instead, the number of size standards began to decline gradually as new size standard final rules were issued. In addition, from 2010 through 2016, the SBA decided, in most instances, not to lower size standards (which would have made it more difficult for businesses to qualify) even if the data supported lowering them because unemployment at that time was relatively high and doing so would \"run counter to numerous Congressional and Administration's initiatives and programs to create jobs and boost economic growth.\" As a result of this policy decision, several size standards that would have otherwise been eliminated remained in place. Also, in 2016, the SBA added a new employee based size standard (no more than 1,250 employees) and reinstated the use of another (no more than 1,500 employees) when establishing a new, or revising an existing, size standard.\nThe SBA's decisions in 2009 to reduce the number of receipts based size standards and to propose a common size standard for closely related industries were opposed by some industry groups. They argued that these policies could lead to the SBA to classify an industry \"for the sake of convenience\" into a size standard that the agency's own economic analysis indicates should be in a different (easier to qualify) size standard. Congress adopted legislation in 2013 ( P.L. 112-239 , National Defense Authorization Act for Fiscal Year 2013) that included provisions directing the SBA not to limit the number of size standards and to assign the appropriate size standard to each NAICS industrial classification.\nThe SBA currently has 27 SBA industry size standards in effect (16 receipts based size standards, 9 employee based sized standards, 1 asset based size standard, and 1 size standard based on a combination of the number of employees and barrel per day refining capacity). That number is expected to increase given the SBA's directive not to limit the number of size standards.",
"As mentioned previously, P.L. 111-240 requires the SBA to conduct a detailed review of not less than one-third of the SBA's industry size standards during the 18-month period beginning on the date of enactment (September 27, 2010) and during every 18-month period thereafter.\nThe act directs the SBA to \"make appropriate adjustments to the size standards\" to reflect market conditions, and to report to the House Committee on Small Business and the Senate Committee on Small Business and Entrepreneurship and make publicly available \"not later than 30 days\" after the completion of each review information regarding the factors evaluated as part of each review, the criteria used for any revised size standard, and why the SBA did, or did not, adjust each size standard that was reviewed. The act also requires the SBA to ensure that each industry size standard is reviewed at least once every five years.\nOn July 7, 2011, the SBA announced that its \"comprehensive review of all small business size standards\" would begin with the following six industries:\nEducational Services (final rule was issued on September 24, 2012); Health Care and Social Assistance Services (final rule was issued on September 24, 2012); Real Estate Rental and Leasing (final rule was issued on September 24, 2012); Administrative and Support, Waste Management and Remediation Services (final rule was issued on December 6, 2012); Information (final rule was issued on December 6, 2012); and Utilities (final rule was issued on December 23, 2013).\nThe SBA subsequently completed size standard reviews for all industries in January 2016 (listed by when the final rule was issued):\nProfessional, Scientific and Technical Services (final rule was issued on February 24, 2012); Transportation and Warehousing (final rule was issued on February 24, 2012); Agriculture, Forestry, Fishing and Hunting (final rule was issued on June 20, 2013); Arts, Entertainment, and Recreation (final rule was issued on June 20, 2013); Finance and Insurance (final rule was issued on June 20, 2013); Management of Companies (final rule was issued on June 20, 2013); Support Activities for Mining (final rule was issued on June 20, 2013); Construction (final rule was issued on December 23, 2013); Wholesale Trade (final rule was issued on January 25, 2016); Industries with Employee Based Size Standards not Part of Manufacturing, Wholesale Trade, or Retail Trade (final rule was issued on January 26, 2016); and Manufacturing (final rule was issued on January 26, 2016).\nA summary of the final rules issued for each industry is provided in Table A-1 .\nDuring the first five-year review cycle, the SBA increased 621 size standards, decreased 3 (to exclude potentially dominant firms from being considered small), and retained 388 at their pre-existing levels. Of the 388 retained size standards, 214 were retained based on the results of the SBA's economic analysis and 174 were retained based on the SBA's policy of generally not lowering any size standard, even though the results of the economic analysis supported lowering them, due to national economic conditions.\nThe SBA has started its second five-year review of its size standards and anticipates issuing its first final rules in the second five-year review cycle in 2019, using new size standard methodology announced in April 2018 (discussed in the next section). The SBA also announced in April 2018 that its policy of generally not lowering size standards when the analysis indicates that a lower standard is justified would no longer be in force, at least initially, during the second five-year review cycle:\nthe decision to raise, lower, or retain a size standard will primarily be driven by analytical results, with due considerations of public comments, impacts of changes on the affected businesses, and other factors SBA considers important. All of these decisions will be detailed in individual rulemakings. It will take several years to complete the five-year review of all size standards … during which the state of the economy may change. It is, therefore, not possible to state now … what impact, if any, the future economic environment would have on the SBA's policy decision regarding size standards.",
"As mentioned earlier, the SBA, relying on statutory language, defines a small business as a concern that is organized for profit; has a place of business in the United States; operates primarily within the United States or makes a significant contribution to the economy through payment of taxes or use of American products, materials, or labor; is independently owned and operated; and is not dominant in its field on a national basis. The business may be a sole proprietorship, partnership, corporation, or any other legal form.\nThe SBA uses two measures to determine if a business is small: industry specific size standards or a combination of the business's net worth and net income. For example, the SBA's Small Business Investment Company (SBIC) program allows businesses to qualify as small if they meet the SBA's size standard for the industry in which the applicant is primarily engaged, or an alternative net worth and net income based size standard which has been established for the SBIC program. The SBIC's alternative size standard is currently set as a maximum net worth of not more than $19.5 million and average after-tax net income for the preceding two years of not more than $6.5 million. All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard. The SBA decided to apply the net worth and net income measures to the SBIC program \"because investment companies evaluate businesses using these measures to decide whether or not to make an investment in them.\"\nBusinesses participating in the SBA's 504/Certified Development Company (504/CDC) loan guaranty program are to be deemed small if they did not have a tangible net worth in excess of $8.5 million and did not have an average net income in excess of $3 million after taxes for the preceding two years. As discussed below, P.L. 111-240 increased these threshold amounts on an interim basis to not more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes for the two full fiscal years before the date of the application. All of the company's subsidiaries, parent companies, and affiliates are considered in determining if it meets the size standard. Also, before May 5, 2009, businesses participating in the SBA's 7(a) loan guaranty program, including its express programs, were deemed small if they met the SBA's size standards for firms in the industries described in NAICS.",
"Using authority provided under P.L. 111-5 , the American Recovery and Reinvestment Act of 2009, the SBA temporarily applied the 504/CDC program's size standards as an alternative for 7(a) loans approved from May 5, 2009, through September 30, 2010. Firms applying for a 7(a) loan during that time period qualified as small using either the SBA's industry size standards or the 504/CDC program's size standard. The provision's intent was to enhance the ability of small businesses to access the capital necessary to create and retain jobs during the economic recovery.\nP.L. 111-240 made the use of alternative size standards for the 7(a) program permanent. The act directs the SBA to establish an alternative size standard for both the 7(a) and 504/CDC programs that uses maximum tangible net worth and average net income as an alternative to the use of industry standards. The act also establishes, until the date on which the alternative size standard is established, an interim alternative size standard for the 7(a) and 504/CDC programs of not more than $15 million in tangible net worth and not more than $5 million in average net income after federal taxes (excluding any carry-over losses) for the two full fiscal years before the date of the application.",
"The SBA Administrator has the authority to establish and modify size standards for particular industries. Overall, about 97% of all employer firms qualify as small under the SBA's size standards. These firms account for about 30% of industry receipts.\nThe SBA generally \"prefers to use average annual receipts as a size measure because it measures the value of output of a business and can be easily verified by business tax returns and financial records.\" However, historically, the SBA has used the number of employees to determine if manufacturing and mining companies are small.\nBefore a proposed change to the size standards can take effect, the SBA's Office of Size Standards (OSS) undertakes an analysis of the change's likely impact on the affected industry, focusing on the industry's overall degree of competition and the competitiveness of the firms within the industry. The analysis includes an assessment of the following four economic factors: \"average firm size, average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as a measure of industry competition, and size distribution of firms.\" The SBA also considers the ability of small businesses to compete for federal contracting opportunities and, when necessary, several secondary factors \"as they are relevant to the industries and the interests of small businesses, including technological change, competition among industries, industry growth trends, and impacts of size standard revisions on small businesses.\"\nThe specifics of SBA's size standards methodology have evolved over the years with the availability of new industry and federal procurement data and staff research. For example, the SBA previously presumed less than $7.0 million (increased to less than $7.5 million in 2014 to account for inflation) as an appropriate \"anchor\" size standard for the services, retail trade, construction, and other industries with receipts based size standards; 500 or fewer employees as an appropriate anchor size standard for the manufacturing, mining and other industries with employee based size standards; and 100 or fewer employees as an appropriate anchor size standard for the wholesale trade industries. These three anchor size standards were used as benchmarks or starting points for the SBA's economic analysis. To the extent an industry displayed \"differing industry characteristics,\" a size standard higher, or in some cases lower, than an anchor size standard was used.\nIn April 2018, the SBA replaced the \"anchor\" approach with a \"percentile\" approach, primarily because the anchors were no longer representative of the size standards being used (just 24% of industries with receipt-based size standards and 22% of those with employee based size standards have the anchor size standards) and the anchor approach entails \"grouping industries from different NAICS sectors thereby making it inconsistent with section 3(a)(7) of the [Small Business] Act,\" which limits the SBA's ability to create common size standards by grouping industries below the 4-digit NAICS level.\nSpecifically, when assessing the appropriateness of the current size standards, the SBA now\nevaluates the structure of each industry in terms of four economic characteristics or factors, namely average firm size, average assets size as a proxy of start-up costs and entry barriers, the 4-firm concentration ratio as a measure of industry competition, and size distribution of firms using the Gini coefficient. For each size standard type ... SBA ranks industries both in terms each of the four industry factors and in terms of the existing size standard and computes the 20 th percentile and 80 th percentile values for both. SBA then evaluates each industry by comparing its value for each industry factor to the 20 th percentile and 80 th percentile values for the corresponding factor for industries under a particular type of size standard.\nIf the characteristics of an industry under review within a particular size standard type are similar to the average characteristics of industries within the same size standard type in the 20 th percentile, SBA will consider adopting as an appropriate size standard for that industry the 20 th percentile value of size standards for those industries. For each size standard type, if the industry's characteristics are similar to the average characteristics of industries in the 80 th percentile, SBA will assign a size standard that corresponds to the 80 th percentile in the size standard rankings of industries. A separate size standard is established for each factor based on the amount of differences between the factor value for an industry under a particular size standard type and 20 th percentile and 80 th percentile values for the corresponding factor for all industries in the same type. Specifically, the actual level of the new size standard for each industry factor is derived by a linear interpolation using the 20 th percentile and 80 th percentile values of that factor and corresponding percentiles of size standards. Each calculated size standard will be bounded between the minimum and maximum size standards levels [see Table 2 ] ... the calculated value for a receipts based size standard for each industry factor is rounded to the nearest $500,000 and the calculated value for an employee based size standard is rounded to the nearest 50 employees for Manufacturing and industries in other sectors (except Wholesale and Retail Trade) and to the nearest 25 employees for employee based size standards for Wholesale Trade and Retail Trade.\nThe SBA anticipates that its shift from using the anchor approach to the percentile approach will have minimal impact, both in terms of the direction and magnitude of changes, to its industry size standards.\nAny changes to size standards must follow the rulemaking procedures of the Administrative Procedure Act. A proposed rule changing a size standard is first published in the Federal Register , allowing for public comment. It must include documentation establishing that a significant problem exists that requires a revision of the size standard, plus an economic analysis of the change. Comments from the public, plus any other new information, are reviewed and evaluated before a final rule is promulgated establishing a new size standard.\nThe SBA currently uses employment size to determine eligibility for 505 of 1,036 industries (48.6%), including all 360 manufacturing industries, 24 mining industries, and 71 wholesale trade industries. As of October 1, 2017,\n98 manufacturing industries have an upper limit of 500 employees (27.2%); 91 have an upper limit of 750 employees (25.2%); 89 have an upper limit of 1,000 employees (24.7%); 56 have an upper limit of 1,250 employees (15.6%); and 26 have an upper limit of 1,500 employees (7.2%). 3 of the 24 mining industries have an upper limit of 250 employees (12.5%), 7 have an upper limit of 500 employees (29.2%), 7 have an upper limit of 750 employees (29.2%), 2 have an upper limit of 1,000 employees (8.3%), 3 have an upper limit of 1,250 employees (12.5%), and 2 have an upper limit of 1,500 employees (8.3%). 25 of the 71 wholesale trades industries have an upper limit of 100 employees (35.2%), 16 have an upper limit of 150 employees (22.5%), 21 have an upper limit of 200 employees (29.6%), and 9 have an upper limit of 250 employees (12.7%).\nThe SBA currently has nine employee based industry size standards in effect (no more than 100, 150, 200, 250, 500, 750, 1,000, 1,250, and 1,500 employees).\nThe SBA uses average annual receipts over the three (soon to be five) most recently completed fiscal years to determine program eligibility for most other industries (526 of 1,036 industries, or 50.8%). The SBA also uses average asset size as reported in the firm's four quarterly financial statements for the preceding year to determine eligibility for five finance industries, and a combination of number of employees and barrel per day refining capacity for petroleum refineries.\nThe SBA currently has 16 receipts based industry size standards in effect. In some instances, there is considerable variation in the size standards used within each industrial sector. For example, the SBA uses 11 different size standards to determine eligibility for 66 industries in the retail trade sector. In general,\nmost administrative and support service industries have an upper limit of either $15.0 million or $20.5 million in average annual sales or receipts; most agricultural industries have an upper limit of $0.75 million in average annual sales or receipts; most construction of buildings and civil engineering construction industries have an upper limit of $36.5 million in average annual sales or receipts, and most construction specialty trade contractors have an upper limit of $15.0 million in average annual sales or receipts; most educational services industries have an upper limit of either $7.5 million or $11.0 million in average annual sales or receipts; most health care industries have an upper limit of either $7.5 million or $15.0 million in average annual sales or receipts; most social assistance industries have an upper limit of $11.0 million in average annual sales or receipts; there is considerable variation within the professional, scientific, and technical service industries, ranging from an upper limit of $7.5 million in average annual sales or receipts to $38.5 million; there is considerable variation within the transportation and warehousing industrial sector, ranging from an upper limit of $7.5 million in average annual sales or receipts to $38.5 million for 43 industries and from an upper limit of 500 employees to 1,500 employees for 15 industries); and most finance and insurance industries have an upper limit of $38.5 million in average annual sales or receipts.\nThe SBA also applies a $550 million average asset limit (as reported in the firm's four quarterly financial statements for the preceding year) to determine eligibility in five finance industries: commercial banks, saving institutions, credit unions, other depository credit intermediation, and credit card issuing.",
"Many federal statutes provide special considerations for small businesses. For example, small businesses are provided preferences through set-asides and sole source awards in federal contracting and pay lower fees to apply for patents and trademarks. In most instances, businesses are required to meet the SBA's size standards to be considered a small business. However, in some cases, the underlying statute defines the eligibility criteria for defining a small business. In other cases, the statute authorizes the implementing agency to make those determinations.\nUnder current law, a federal agency that decides that it would like to exercise its authority to establish its own size standard through the federal rulemaking process is required to, among other things, (1) undertake an initial regulatory flexibility analysis to determine the potential impact of the proposed rule on small businesses, (2) transmit a copy of the initial regulatory flexibility analysis to the SBA's Chief Counsel for Advocacy for comment, and (3) publish the agency's response to any comments filed by the SBA's Chief Counsel for Advocacy in response to the proposed rule and a detailed statement of any change made to the proposed rule in the final rule as a result of those comments. In addition, the federal agency must provide public notice of the proposed rule and an opportunity for the public to comment on the proposed rule, typically through the publication of an advanced notice of proposed rulemaking in the Federal Register and notification of interested small businesses and related organizations. Also, prior to issuing the final rule, the federal agency must have the approval of the SBA's Administrator. Under current practice, the SBA's Administrator, through the SBA's Office of Size Standards, consults with the SBA's Office of Advocacy prior to making a final decision concerning such requests. The Office of Advocacy is an independent office within the SBA.\nDuring the 112 th Congress, H.R. 585 , the Small Business Size Standard Flexibility Act of 2011, was reported by the House Committee on Small Business on November 16, 2011, by a vote of 13 to 8. The bill would have retained the SBA's Administrator's authority to approve or disapprove size standards for programs under the Small Business Act of 1953 (as amended) and the Small Business Investment Act of 1958 (as amended). The Office of Chief Counsel for Advocacy would have assumed the SBA Administrator's authority to approve or disapprove size standards for purposes of any other act.\nSimilar legislative provisions have been introduced during the 113 th Congress ( H.R. 2542 , the Regulatory Flexibility Improvements Act of 2013, and included in H.R. 4 , the Jobs for America Act), 114 th Congress ( H.R. 527 , the Small Business Regulatory Flexibility Improvements Act of 2015, and its Senate companion bill, S. 1536 ), and 115 th Congress ( H.R. 33 , the Small Business Regulatory Flexibility Improvements Act of 2017, and its Senate companion bill, S. 584 , and included in H.R. 5 , the Regulatory Accountability Act of 2017).\nAdvocates of splitting the SBA Administrator's small business size standards' authority between the Office of Chief Counsel for Advocacy and the SBA's Administrator have argued that\nShould an agency wish to draft a regulation that adopts a size standard different from the one already adopted by the Administrator in regulations implementing the Small Business Act, the agency must obtain approval of the Administrator. However, that requires the Administrator to have a complete understanding of the regulatory regime of that other act—knowledge usually outside the expertise of the SBA. However, the Office of the Chief Counsel for Advocacy, an independent office within the SBA, represents the interests of small businesses in rulemaking proceedings (as part of its responsibility to monitor agency compliance with the Regulatory Flexibility Act, 5 U.S.C. 601-12, (RFA)) does have such expertise. Therefore, it is logical to transfer the limited function on determining size standards of small businesses for purposes other than the Small Business Act and Small Business Investment Act of 1958 to the Office of the Chief Counsel for Advocacy….\nthe Administrator is not the proper official to determine size standards for purposes of other agencies' regulatory activities. The Administrator is not fluent with the vast array of federal regulatory programs, is not in constant communication with small entities that might be affected by another federal agency's regulatory regime, and does not have the analytical expertise to assess the regulatory impact of a particular size standard on small entities. Furthermore, the Administrator's standards are: very inclusive, not developed to comport with other agencies' regulatory regimes, and lack sufficient granularity to examine the impact of a proposed rule on a spectrum of small businesses.\nOpponents have argued that\nWhen an agency is seeking to use a size standard other than those approved by the SBA, the agency may consult with the Office of Advocacy. Such consultation is sensible, as the Office of Advocacy has significant knowledge of the regulatory environment outside of the canon of SBA law. However, the SBA's Office of Size Standards, with its historical involvement, expertise, and staff resources in this area, remains the appropriate entity to approve such size standards….\nWhile the legislation permits the SBA to continue to approve size standards for its enabling statutes, it removes SBA's authority to do so for other statutes. The result would be to create a duplicate size standard authority in both the SBA and the Office of Advocacy. Both the SBA and the Office of Advocacy would have personnel who would analyze and evaluate size standards. Through the bifurcation of these responsibilities, taxpayers would effectively be forgoing the economies of scale that are currently enjoyed by the operation of a single Office of Size Standards in the SBA….\nHaving two such entities that have the same mission is not a transfer of function, but an inefficient and duplicative reorganization.… Instead of having one central office, there will now be two—further muddling small businesses' relationship with the federal government.",
"Two bills were introduced during the 114 th Congress ( H.R. 3714 , the Small Agriculture Producer Size Standards Improvements Act of 2015, and H.R. 4341 , the Defending America's Small Contractors Act of 2016) to authorize the SBA to establish size standards for agricultural enterprises not later than 18 months after the date of enactment. The size standard for agricultural enterprises was, at that time, set in statute as having annual receipts not in excess of $750,000. H.R. 4341 , among other provisions, would have also limited an industry category to a greater extent than provided under the North American Industry Classification codes for small business procurement purposes if further segmentation of the industry category is warranted.\nH.R. 4341 was introduced on January 7, 2016, and ordered to be reported with amendment by the House Committee on Small Business on January 13, 2016. H.R. 3714 was introduced on October 8, 2015, considered by the House under suspension of the rules on April 19, 2016, and agreed to by voice vote.\nP.L. 114-328 , the National Defense Authorization Act for Fiscal Year 2017, includes a provision which authorizes the SBA to establish different size standards for agricultural enterprises using existing methods and appeal processes.\nAlso, as mentioned previously, P.L. 115-324 , the Small Business Runway Extension Act of 2018, directs federal agencies proposing a size standard (and, based on report language accompanying the act, presumably the SBA as well) to use the average annual gross receipts from at least the previous five years, instead of the previous three years, when seeking SBA approval to establish a size standard based on annual gross receipts.\nThe SBA has not announced if it will continue to use the average annual gross receipts over three years to determine receipts-based size standards or if it will use the average annual gross receipts from the previous five years.",
"Historically, the SBA has relied on economic analysis of market conditions within each industry to define eligibility for small business assistance. On several occasions in its history, the SBA attempted to revise its small business size standards in a comprehensive manner. However, because (1) the Small Business Act provides leeway in how the SBA is to define small business; (2) there is no consensus on the economic factors that should be used in defining small business; (3) federal agencies have generally opposed size standards that might adversely affect their pool of available small business contractors; and (4) the SBA's initial size standards provided program eligibility to nearly all businesses, the SBA's efforts to undertake a comprehensive reassessment of its size standards met with resistance. Firms that might lose eligibility objected. Federal agencies also objected. As a result, in each instance, the SBA's comprehensive revisions were not fully implemented.\nThe SBA's congressionally mandated requirement to conduct a detailed review of at least one-third of the SBA's industry size standards every 18 months was imposed by P.L. 111-240 , the Small Business Jobs Act of 2010, to prevent small business size standards from becoming outdated. More frequent reviews of the size standards were expected to increase their accuracy and, generally speaking, result in (1) increased numbers of small businesses found to be eligible for SBA assistance and (2) an increase in the number and amount of federal contracts awarded to small businesses (primarily by preventing large businesses from being misclassified as small and by increasing the number of small businesses eligible to compete for federal contracts).\nAs expected, the SBA's economic analyses during the recent five-year review cycle often supported an increase in the size standards for many industries. However, the SBA's economic analyses also occasionally supported a decrease in the size standards for some industries. Despite the SBA's decision to, in most circumstances, make no changes when their economic analyses indicated that a decrease was warranted, it could be argued that the increased frequency of the reviews has generally prevented the SBA's size standards from becoming outdated. This, in turn, has, at least to a certain extent, improved the accuracy of the size standards (as measured by the extent to which the size standard is in alignment with the SBA's economic analyses).\nIn a related matter, the SBA continues to adjust its receipts based size standards for inflation at least once every five years, or more frequently if inflationary circumstances warrant, to prevent firms from losing their small business eligibility solely due to the effects of inflation. The most recent adjustment for inflation took place on July 14, 2014. Prior to that, the last adjustment for inflation took place in 2008. The SBA also continues to review size standards within specific industries whenever it determines that market conditions within that industry have changed.\nCongress has several options related to the SBA's ongoing review of its size standards. For example, as part of its oversight of the SBA, Congress can wait for the agency to issue its proposed rule before providing input or establish a dialogue with the agency, either at the staff level or with Members involved directly, prior to the issuance of its proposed rule. Historically, Congress has tended to wait for the SBA to issue proposed rules concerning its size standards before providing input, essentially deferring to the agency's expertise in the technical and methodological issues involved in determining where to draw the line between small and large firms. Congress has then tended to respond to the SBA's proposed rules concerning its size standards after taking into consideration current economic conditions and input received from the SBA and affected industries.\nWaiting for the SBA to issue its proposed rule concerning its size standards before providing congressional input has both advantages and disadvantages. It provides the advantage of insulating the proposed rule from charges that it is influenced by political factors. It also has the advantage of respecting the separation of powers and responsibilities of the executive and legislative branches. However, it has the disadvantage of heightening the prospects for miscommunication, false expectations, and wasted effort, as evidenced by past proposed rules concerning the SBA's size standards that were either rejected outright, or withdrawn, after facing congressional opposition.\nAnother policy option that has not received much congressional attention in recent years, but which Congress may choose to address, is the targeting of the SBA's resources. When the SBA reviews its size standards, it focuses on the competitive nature of the industry under review, with the goal of removing eligibility of firms that are considered large, or dominant, in that industry. There has been relatively little discussion of the costs and benefits of undertaking those reviews with the goal of targeting SBA resources to small businesses in industries that are struggling to remain competitive. GAO recommended this approach in 1978 and Roger Rosenberger, then SBA's associate administrator for policy, planning, and budgeting, testified at a congressional hearing in 1979 that it was debatable whether the SBA should provide any assistance to any of the businesses within industries where \"smaller firms are flourishing.\"\nRevising the SBA's size standards using this more targeted approach would likely reduce the number of firms eligible for assistance. It would also present the possibility of increasing available benefits to eligible small firms in those industries deemed \"mixed\" or \"concentrated\" by the SBA without necessarily increasing overall program costs. Perhaps because previous proposals that would result in a reduction in the number of firms eligible for assistance have met with resistance, this alternative approach to determining program eligibility has not received serious consideration in recent years. Nonetheless, it remains an option available to Congress should it decide to change current policy.",
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"question": [
"Why are small business size standards of congressional interest?",
"What is debated about in Congress regarding small business size standards?",
"What is the Small Business Act of 1953?",
"What does the SBA currently use as size standards to determine SBA program eligibility?",
"What do SBA's industry-specific size standards determine program eligibility for?",
"What are the size standards based off of?",
"As what type of firm do most employers qualify?",
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"Small business size standards are of congressional interest because they have a pivotal role in determining eligibility for Small Business Administration (SBA) assistance as well as federal contracting and, in some instances, tax preferences.",
"Although there is bipartisan agreement that the nation's small businesses play an important role in the American economy, there are differences of opinion concerning how to define them.",
"The Small Business Act of 1953 (P.L. 83-163, as amended) authorized the SBA to establish size standards to ensure that only small businesses receive SBA assistance.",
"The SBA currently uses two types of size standards to determine SBA program eligibility: industry-specific size standards and alternative size standards based on the applicant's maximum tangible net worth and average net income after federal taxes.",
"The SBA's industry-specific size standards determine program eligibility for firms in 1,036 industrial classifications in 23 sub-industry activities described in the 2017 North American Industry Classification System (NAICS).",
"The size standards are based on one of four measures: (1) number of employees, (2) average annual receipts in the previous three (may soon be the previous five) years, (3) average asset size as reported in the firm's four quarterly financial statements for the preceding year, or (4) a combination of number of employees and barrel per day refining capacity.",
"Overall, about 97% of all employer firms qualify as small under the SBA's size standards.",
"These firms represent about 30% of industry receipts."
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"title": [
"",
"Policy Background",
"History and Development",
"Deployment and Operational Use",
"Problems and Concerns with Use of Body Scanners",
"Privacy Concerns",
"Health Concerns",
"Screening Individuals with Special Needs",
"Passenger Throughput and Security Delays",
"Scanner Effectiveness",
"TSA Workload and Staffing Requirements",
"TSA's Deployment Strategy",
"Related Legislation"
],
"paragraphs": [
"",
"A long-standing challenge for aviation security is the need to reliably detect explosives and bomb-making components concealed under clothing. The Aviation and Transportation Security Act of 2001 (ATSA; P.L. 107-71 ) mandated 100% explosives detection screening of checked baggage. However, ATSA did not specifically address the threat posed by bombs carried in the aircraft cabin. Terrorist plots, including a December 2001 attempted shoe-bombing incident, the August 2004 downing of two Russian airliners, the August 2006 liquid explosives plot in the United Kingdom, the December 2009 attempted bombing of a Delta-Northwest flight from Amsterdam on approach to Detroit, and the May 2012 discovery of a similar plot orchestrated by terrorist operatives in Yemen, have served to focus policy attention on the threat to civil aviation posed by concealed improvised explosive devices.\nIn 2004, the 9/11 Commission recommended that the Transportation Security Administration (TSA) and Congress give priority to improving the detection of explosives on passengers. The commission further recommended that, as a start, all individuals selected for secondary screening at airport checkpoints undergo explosives screening. Mirroring the 9/11 Commission recommendation, the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA; P.L. 108-458 ) directed TSA to give high priority to developing, testing, improving, and deploying airport checkpoint screening technologies to detect nonmetallic, chemical, biological, and radiological weapons, as well as explosives on passengers and in carry-on items.\nIn 2004, initial field trials of walk-through explosives trace detection portals, or \"puffer\" machines, revealed reliability problems, leading TSA to suspend further deployment of and investment in these systems. TSA instead moved forward with the evaluation and eventual system-wide deployment of whole body imaging (WBI) technologies, which TSA also refers to as Advanced Imaging Technology (AIT) systems. In contrast to the \"puffer\" machines, AIT systems do not search for traces of explosive materials. Instead, they generate images that can reveal anomalies underneath passenger clothing, allowing detection of concealed items, such as explosives, detonators, and both metallic and nonmetallic weapons.\nIn response to the failed December 25, 2009, attempted bombing of a Detroit-bound international flight using an improvised explosive device, TSA accelerated its investment in AIT. Currently, TSA uses AIT systems for primary screening of both randomly selected and targeted passengers in conjunction with walk-through metal detector screening. Passengers selected for AIT screening may elect to either submit to the AIT scan or alternatively undergo a pat-down by a trained same-sex TSA screener.",
"Since 2007, TSA has been procuring and deploying two competing AIT technologies for screening airline passengers: X-ray backscatter and millimeter wave imaging systems.\nX-ray backscatter systems use a low-intensity X-ray beam that moves at high speed to scan the entire surface of the body. The first body scanners using low-intensity X-ray backscatter technology were developed in the early 1990s. The X-ray backscatter systems currently used by TSA have evolved from these early commercial versions, having significantly improved resolution as well as special privacy algorithms that generate front and back images similar to chalk outlines (see Figure 1 ). TSA implemented \"chalk outline\" filtering, known as a privacy algorithm, to allay privacy concerns, as raw, unfiltered X-ray backscatter images resemble high-resolution photographic negatives. Trained TSA screeners review these filtered images.\nMillimeter wave imaging systems emit non-ionizing electromagnetic radio waves in the millimeter wave (30-300 gigahertz) spectrum to render images of what lies directly underneath clothing and near the skin. Deployed systems generate images that look like photographic negatives (see Figure 2 ). Privacy filters are applied to these images to selectively blur faces. Millimeter wave systems are capable of generating a 3-D view by scanning the full 360 degrees around an individual. This 3-D scan renders front and back images that are viewed by trained TSA screeners. However, TSA is currently field testing automated target recognition (ATR) algorithms that are intended to eventually replace human image analysis of millimeter wave images (see Figure 3 ). TSA is currently retrofitting deployed units, and all future millimeter wave systems procured by TSA will come with ATR. ATR is described in further detail in the discussion of \" Privacy Concerns .\"",
"As of August 2012, TSA had deployed about 700 AIT units at more than 180 of the roughly 450 commercial passenger airports. TSA currently plans to acquire and deploy a total of 1,800 units throughout the country by the end of FY2014. Once all FY2012 funds are expended, TSA projects that it will have acquired 1,250 units, about 69% of the planned total.\nThe acquisition cost per unit is about $175,000. In addition, TSA incurs costs associated with installing and maintaining AIT systems, training personnel, and operating the deployed units. TSA hired and trained an additional 8,000 screeners through FY2011 to meet the anticipated workload increases associated with operational deployment of the first 1,000 AIT units. These additional operational costs can add substantially to the overall cost of deploying and operating AIT. Inferring from TSA statements, the annualized cost for purchasing, installing, staffing, operating, supporting, upgrading, and maintaining checkpoint AIT systems currently sums to about $455 million and will increase to about $1.17 billion once the planned 1,800 units are fully deployed. This equates to roughly $655,000 annually per deployed AIT unit. TSA argues that, at about 1,000 deployed AIT units, the operating cost translates to roughly $1 per traveling passenger. However, this figure does not reflect the cost per scan because only a small percentage of passengers undergo a whole body scan. As TSA does not divulge the percentage of passengers screened using AIT, the cost per scan cannot be accurately estimated. TSA selects passengers for AIT screening using both random and targeted selection techniques. TSA considers the specific selection methods to be sensitive security information, and this information is not made public.\nInitially, TSA procurements of X-ray backscatter units were greater, but more recently TSA has acquired larger numbers of millimeter wave systems. As of February 2012, roughly 44% of total AIT deployments were X-ray backscatter units, but that percentage had dropped to about 35% by August 2012. Public perceptions of possible health risks associated with X-ray backscatter systems, coupled with technological advances in second-generation millimeter wave systems that will replace human observers with automated threat detection capabilities, may have influenced TSA toward favoring millimeter wave systems over X-ray backscatter systems.",
"TSA cites several independent polls indicating widespread public support and understanding of the need for and use of AIT. The polling data indicate that about 75% to 80% of Americans support the use of AIT at airport checkpoints. Nonetheless, AIT remains controversial. Among respondents expressing concerns regarding the use of full-body scanners in a 2010 Travel Leaders study, roughly 48% raised privacy issues, 27% worried about potential known or unknown health risks, and about 20% expressed concerns over delays in getting through security. Concerns have also been raised over screening individuals with special needs, the effectiveness of the technology, screener staffing requirements, and TSA's deployment strategy.",
"TSA use of AIT has met with objections from privacy advocates, such as the American Civil Liberties Union (ACLU), that have urged Congress to ban the use of whole body imaging technologies as a method for primary screening on the basis that \"[p]assengers expect privacy underneath their clothing and should not be required to display highly personal details of their bodies.\"\nPrivacy arguments have been raised against other airport screening procedures in the past, but have not been accepted by the courts. Courts characterize a routine search conducted at an airport security checkpoint as a warrantless search, generally not subject to the constitutional prohibition against \"unreasonable searches and seizures\" by the federal government. In a 1973 ruling, the 9 th Circuit Court of Appeals found such a warrantless search, also known as an administrative search, to be acceptable if it is \"no more intrusive or intensive than necessary, in light of current technology, to detect weapons or explosives,\" if it is confined to that purpose, and if individuals may avoid the search by electing not to fly.\nIn more recent case law, the 9 th Circuit Court of Appeals ruled in 2007 that airport searches of passengers are reasonable and do not require consent, as \"… requiring that a potential passenger be allowed to revoke consent to an ongoing airport security search makes little sense in a post-9/11 world. Such a rule would afford terrorists multiple opportunities to attempt to penetrate airport security by 'electing not to fly' on the cusp of detection until a vulnerable portal is found.\"\nThe Supreme Court, however, has not specifically considered whether airport screening searches are a constitutionally reasonable form of administrative search. Moreover, the courts have not specifically considered whether the use of AIT, as either a routine or a risk-based screening method, warrants any special consideration under the law because of its capabilities and surrounding privacy concerns. More specific policy and legal analysis in the current context may be needed to address whether AIT screening and alternative screening procedures, such as pat down searches of individuals, are no more intrusive or intensive than necessary.\nSince deploying AIT, TSA has sought to allay privacy concerns by implementing policies affecting both technology and operational procedures. Specifically, TSA policy requires that image storage capabilities be disabled on all fielded AIT units. TSA also has set up remote imaging locations, so that TSA screeners viewing an image are not able to see the person being scanned. TSA policy forbids TSA employees from taking any image recording devices into these remote viewing areas. Finally, TSA installed privacy filters that, depending on the technology, either blur facial features or render a less detailed image similar to a \"chalk outline\" of the entire body.\nDespite these safeguards, reports of alleged abuses have surfaced. In February 2012 it was reported that several female passengers have levied complaints against TSA, claiming that they were told to go through the scanners, sometimes multiple times, apparently because they were attractive. TSA responded that it is not policy to scan passengers multiple times. Concerns have been raised regarding the selection of children for AIT screening, including concerns over the viewing of their images, potential health effects, and safety when the child is separated from parents or guardians during the screening process. While TSA has modified screening procedures for children (12 years of age and younger), it does not exclude them from possible selection to undergo either AIT screening or a pat-down search. If selected, the child and/or her or his parent(s) or accompanying guardian(s) may choose the method of screening.\nIn FY2011, TSA began installing Automated Target Recognition (ATR) software in its deployed millimeter wave machines, both to allay continuing concerns regarding privacy and to improve screening efficiency. With the introduction of ATR, TSA is working toward the eventual elimination of human image viewers. In the future, TSA plans to rely primarily or exclusively on ATR for threat detection, which automatically reviews and analyzes images for concealed threats. In 2011, TSA upgraded all deployed millimeter wave scanners with ATR software. The ATR algorithms are currently undergoing operational evaluations in which they are being tested side-by-side with existing image review procedures. The ATR displays show only a generic body outline identifying locations of potential concealed threats rather than a full body image. If no threats are detected, the ATR monitor displays no image and an \"OK\" appears on screen against a green background (see Figure 3 ). TSA plans to include ATR capabilities in all future millimeter wave AIT procurements. TSA has not announced whether a similar system will be developed or implemented for X-ray backscatter imagers.",
"The ionizing radiation generated by X-ray backscatter systems has led to policy debate and some public concern over possible human health impacts. Ionizing radiation has been linked to various forms of cancer. TSA contends that the levels of ionizing radiation emitted by certified X-ray backscatter systems are well below those considered unsafe for human exposure. According to the vendor, X-ray backscatter systems in use by TSA deliver a radiation dose that is less than 15% of the Federal Drug Administration (FDA) allowable single dose limit of 25 microrem. DHS claims that the radiation exposure from a single X-ray backscatter image is equivalent to exposure from naturally occurring radiation received during two minutes flying at altitude aboard a commercial airliner and notes that passengers may opt out of the screening.\nThe X-ray aperture in certified backscatter units is very small, measuring roughly 1/28 th of a square inch. While the device emits continuously through this aperture for the duration of the scan, it moves rapidly horizontally and vertically to image the entire human body over a span of about 10 to 20 seconds. Safety measures including redundant monitors and automatic shutdown circuits turn off the X-ray generation if any abnormal conditions are detected—for example, if the X-ray beam is not moving properly.\nTSA-approved backscatter systems comply with American National Standards Institute (ANSI) radiation safety standards and have been evaluated by FDA's Center for Devices and Radiological Health, the National Institute of Standards and Technology, and the Johns Hopkins University Applied Physics Laboratory. These independent evaluations concluded that TSA-certified X-ray backscatter units meet national health and safety standards.\nNonetheless, controversy over exposure to X-ray backscatter persists. In April 2010, faculty members from the University of California, San Francisco, including prominent researchers in biochemistry, biophysics, X-ray imaging, and cancer research, expressed their concerns in a letter to President Obama's assistant for science and technology, John P. Holdren. They suggested that while the radiation dose received from X-ray backscatter imaging would be safe if it were distributed throughout the body, it is instead concentrated only on the skin and underlying tissue, such that \"the dose to the skin may be dangerously high.\" The letter stated that older travelers and those with compromised immune systems may be at particular risk; that some females may be at higher risk of developing breast cancer; that the potential health effects on children, adolescents, pregnant women, and fetuses have not been fully assessed; that the proximity of the testicles to the skin raises concerns over possible sperm mutation; and that the effects on the cornea and the thymus gland have not been determined. It also cautioned that a system malfunction could potentially cause a very high radiation dose to be concentrated on a single spot. TSA and FDA provided a lengthy response to the letter, asserting that the potential health risks from full-body screening using approved systems are minuscule, and that extensive independent data confirm that the systems do not present significant risk to public health.\nMore recently, an independent scientific review of certified X-ray backscatter units by the European Union's Scientific Committee on Emerging and Newly Identified Health Risks concluded that while \"[t]he expected health detriment will probably be very close to zero for any scanned person, … at the population level the possible effect cannot be ignored.\" While the study could not meaningfully evaluate risk for special groups within the population, it raised concern over a higher risk related to exposure in childhood.\nThe millimeter wave systems used by TSA do not emit ionizing radiation. Millimeter wave scanners therefore have not raised the same health concerns as X-ray backscatter systems. A recent statement by the International Commission on Non-Ionizing Radiation Protection found that, while it recommends limiting human exposure to non-ionizing radiation, human exposures from body scanners currently in use are about one-tenth of its recommended guidelines for the general public.",
"TSA asserts that it makes accommodations for individuals with a variety of special needs, usually arising from medical conditions and the use of wearable or implanted medical devices. However, various incidents indicate that TSA does not always provide special accommodations and does not always follow these procedures for individuals with special needs. For example, in May 2012, a diabetic teenager reported that an AIT system damaged her insulin pump while she was being screened at the Salt Lake City International Airport, after a TSA screener reportedly told her that it would not be a problem to undergo AIT screening despite a doctor's note explaining that the sensitive medical device should not go through the body scanner.\nTSA informs passengers that individuals should ask for a pat down inspection if a medical doctor has advised them not to undergo AIT screening because it may affect the functioning or calibration of a wearable or implanted medical device. TSA has created an optional disability notification card that allows individuals to discreetly advise TSA screeners of a health condition, disability, or medical device that may affect screening. TSA has also established TSA Cares, a toll-free hotline (1-855-787-2227) for individuals with disabilities and medical conditions to discuss screening procedures and coordinate checkpoint support when necessary.",
"Despite poll data indicating that roughly 20% of those concerned about AIT expressed specific concern over increased passenger delays, it does not appear that AIT screening has had any significant effect on delays. This is likely attributable in large part to the fact that TSA selects only a small percentage of passengers for AIT screening. In addition, TSA can choose to reduce the number of passengers selected for AIT screening when backlogs occur. Although passengers, if selected for additional screening, can opt for either an AIT scan or a pat down, the AIT is considerably faster, taking about 20 seconds to complete, compared to about 2 minutes for a physical pat down. TSA reports that more than 99% of passengers selected for additional screening choose to be screened by AIT technology over the alternative, suggesting that AIT is perceived as relatively quick and hassle-free.",
"The effectiveness of screening technology can be measured in terms of its ability to accurately detect threats while minimizing false alarms. In operational settings there is a tradeoff between detection and false alarms. False alarm rates are easily measured in operational settings, but detection rates cannot be precisely known because of uncertainty over what may have gone undetected. AIT systems, like all other TSA-certified screening technologies, undergo certification testing performed by the Department of Homeland Security (DHS) Independent Test and Evaluation section of the Transportation Security Laboratory, a component of the DHS Science and Technology Directorate. TSA, in coordination with the Transportation Security Laboratory, sets certification criteria, which are not made public.\nAlthough the effectiveness criteria and parameters for AIT are not public information, outside experts are divided about the effectiveness of AIT systems. For example, it remains unclear whether a whole body scan would have detected the explosives used in the 2009 Christmas Day bombing attempt. Of particular concern is the possibility that terrorists could use concealment tactics to evade detection by AIT. Modeling by independent researchers, based on publicly available performance estimates, found that certain items—including types of explosives used in past terrorism attempts targeting aircraft—could be difficult, if not impossible, to detect using X-ray backscatter systems at current radiation exposure levels. The researchers concluded that \"[e]ven if exposure were to be increased significantly, normal anatomy would make a dangerous amount of plastic explosives with tapered edges difficult if not impossible to detect.\" The researchers did not model the performance of millimeter wave systems, and CRS is not aware of similar evaluations of millimeter wave systems of the type deployed at airports.\nAdditionally, the DHS Office of Inspector General has raised concerns over the adequacy of TSA's on-the-job training to operate AIT units and inconsistencies in the use of calibration procedures to ensure appropriate image quality. The adequacy of training and image quality can both have significant impacts on the overall effectiveness of AIT. TSA currently provides for eight hours of on-the-job training in addition to classroom instruction, and offers screeners additional time to achieve proficiency if needed. While TSA has issued standard procedures for the operation, testing, and maintenance of all AIT equipment, the DHS Office of Inspector General uncovered inconsistencies at various airports in the application and enforcement of these procedures. The DHS Office of Inspector General formally recommended that TSA conduct an assessment to determine appropriate on-the-job training requirements and develop controls to ensure that AIT systems calibrations, particularly for backscatter units, are conducted consistently and documented properly according to established standard operating procedures.",
"Presently, TSA assigns three screeners per AIT unit for each shift. Through FY2011, TSA hired an additional 8,000 screeners to meet the anticipated workload demands associated with the deployment of the first 1,000 AIT units.\nTSA anticipates that the migration to ATR will relieve some screener staffing requirements. The anticipated use of ATR in place of human image viewers will eliminate the screener who views and analyzes images in a remotely located viewing room, in most cases. This could reduce system-wide operational staffing for AIT systems by as much as one-third. However, the effect of this on overall TSA staffing is uncertain, as TSA may need additional staff for secondary screening to resolve potential threat detections identified by the ATR software. The potential increased need for secondary screening to resolve ATR alarms will depend on both detection and false alarm rates for the ATR algorithms compared to those rates for human image viewers. This information is not publicly available.",
"As noted previously, TSA seeks to acquire 1,800 AIT units by the end of FY2014. At present the U.S. aviation system includes about 2,300 screening lanes at roughly 450 commercial passenger airports. However, only about 180 of these airports currently have AIT machines. At some of these airports, AIT is not fully deployed to all terminals and all checkpoints. Even at full operating capacity, not all airports and not all screening lanes will be equipped with AIT under TSA's plan. TSA is deploying systems according to a risk-based prioritization strategy that gives highest priority to the largest airports, those that fall into security category X and category I. Even at full operating capacity, many smaller airports will not have AIT. This creates the possibility that terrorists could attempt to board planes at smaller airports to avoid body scanners they might expect to encounter at larger airports, just as some of the 9/11 terrorists originated their trips at the small airport in Portland, ME, and transferred to other flights in Boston without additional screening.",
"Although TSA has put in place policies and procedures to address concerns regarding AIT scanning, these measures are not tied to specific statutory mandates and could be modified in the future without legislative action. A number of related bills have been introduced in the 112 th Congress. However, none of these bills has moved out of committee.\nThe Aircraft Passenger Whole-Body Imaging Limitations Act of 2011 ( H.R. 1279 ) would require the National Academy of Sciences to determine that AIT does not pose a threat to public health, and would require the use of privacy filters or other privacy-protecting technology before AIT could be used for passenger screening. It would further restrict AIT or pat-down screening from being used as a primary screening method. The bill would also prohibit and establish penalties for storing, transferring, sharing, or copying AIT images. The Checkpoint Images Protection Act of 2011 ( H.R. 685 ) would establish penalties for the unauthorized recording or distribution of security screening images, while the Transportation Security Administration Authorization Act of 2011 ( H.R. 3011 ) would require TSA to certify that ATR software is installed on all deployed AIT machines, and that image retention capabilities on all such machines are disabled.\nAlso, the Traveler Screening Act, or the \"RIGHTS Act\" ( S. 2207 ), would require the TSA Ombudsman's office to better track public complaints about screening, determine best practices to resolve frequent passenger complaints, resolve passenger complaints, and field advance notification calls from individuals with special needs to arrange for accommodation at screening checkpoints. This bill would also require the TSA Ombudsman to appoint TSA employees to serve as passenger advocates at all of the busiest (Category X) airports. Under the conditions specified in the bill, individuals selected as passenger advocates must not have been subject to disciplinary action by TSA and would be required to receive special training in conflict resolution as well as sufficient medical training to recognize legitimate complaints and concerns regarding medical conditions and disabilities."
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"question": [
"Why has TSA focused on the deployment of whole body scanners?",
"How has TSA deployed these body scanners?",
"What do AIT systems include?",
"What does AIT directly address?",
"How does the American public feel about the use of body scanners for passenger screening?",
"What other concerns are there about the use of body scanners for passenger screening?",
"What privacy measures does TSA apply?",
"What privacy measures is TSA working towards?",
"What might reduce TSA staffing requirements?",
"What could TSA staffing requirements depend on?",
"How is ATR currently being used?",
"How might ATR be used in the future?",
"What will determine how ATR will be used in the future?"
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"summary": [
"Responding to the need to reliably detect explosives, bomb-making components, and other potential security threats concealed by airline passengers, the Transportation Security Administration (TSA) has focused on the deployment of whole body scanners as a core element of its strategy for airport checkpoint screening.",
"TSA has deployed about 700 of these scanners, known as whole body imagers (WBI) or advanced imaging technology (AIT), at airports throughout the United States, and plans to have 1,800 in place by the end of FY2014.",
"AIT systems include two technologies: millimeter wave systems and X-ray backscatter systems.",
"AIT directly addresses specific recommendations and mandates to improve the detection of explosives on passengers.",
"Although polling data indicate that the American public generally accepts the use of body scanners for passenger screening, various stakeholders have expressed concerns over privacy, potential health risks, and delays in getting through security.",
"Concerns have also been raised regarding screening individuals with special needs, the overall effectiveness of current technology, screener staffing requirements, and TSA's deployment strategy.",
"While TSA voluntarily applies a number of privacy measures (such as viewing AIT images remotely and providing alternative pat-down screenings on request), U.S. law does not specifically require these actions.",
"Beyond these existing procedural measures to protect privacy, TSA is working toward the eventual elimination of human image viewers, replacing them with automated target recognition (ATR) technology to detect potential threats.",
"If ATR eliminates the need for most image viewers, as expected, this could reduce TSA staffing requirements.",
"If ATR eliminates the need for most image viewers, as expected, this could reduce TSA staffing requirements. However, this depends to an extent on the alarm rate for ATR, since TSA procedures require alarms to be resolved by labor-intensive pat-down searches.",
"ATR is currently being deployed on all newly acquired millimeter wave systems and is being retrofitted into already deployed millimeter wave systems.",
"It has not been announced whether a similar system will be implemented for X-ray backscatter imagers.",
"The availability of ATR on millimeter wave units, coupled with continued public perceptions of potential health concerns associated with X-ray backscatter systems, appear to be key factors influencing TSA's approach to focus future acquisitions and deployments on millimeter wave systems."
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GAO_GAO-19-75
|
{
"title": [
"Background",
"Selected Tribal Entities Reported Barriers to Obtaining Licensed Spectrum",
"Few Tribal Entities Have Obtained Spectrum Licenses, Although Representatives from Selected Tribal Entities Emphasized the Importance of Licensed Spectrum",
"Representatives from Selected Tribal Entities Reported Cost and Other Barriers to Accessing Licensed Spectrum",
"FCC Has Some Efforts to Enhance Tribal Access to Spectrum, but FCC Does Not Collect or Communicate Key Information to Tribal Entities",
"FCC Has Taken Steps to Promote and Support Tribal Entities’ Ability to Obtain Spectrum, However These Efforts Are Not Likely to Address Tribal Spectrum Needs",
"Initiated Proposed Rulemakings on Promoting Tribal Access to Spectrum",
"Adopted Rules to Allocate Additional Spectrum for Broadband Use",
"Conducted Outreach and Training for Tribal Entities on Spectrum-Related Issues",
"FCC Does Not Collect Key Information Related to Spectrum over Tribal Lands or Communicate It to Tribal Entities",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Auctioned Licensed Spectrum Available for Commercial Broadband Services",
"Appendix III: Comments from the Federal Communications Commission",
"Appendix IV: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"The federal government has recognized 573 Indian tribes as distinct, independent political communities with certain powers of sovereignty and self-government, including some power to manage the use of their territory and resources and control economic activity within their jurisdiction. Some tribal lands include reservations—land set aside by treaty or other agreement with the United States, executive order, or federal statute or administrative action for the residence or use of an Indian tribe. Some tribal lands include parcels with different ownership; for example, parcels may be held in trust by the federal government for the benefit of a tribe or an individual tribal citizen. Trust and restricted lands can affect a tribe’s ability to use their land as collateral to obtain a loan. Tribal lands vary in size, demographics, and location. For example, the smallest in size are less than one square mile, and the largest, the Navajo Nation, is more than 24,000 square miles (the size of West Virginia). Tribal land locations can range from extremely remote, rural locations to urban areas. Indian tribes may form governments and subsidiaries to help manage tribal affairs including schools, housing, health, and economic enterprises.\nInternet access in the United States is generally privately financed. Broadband providers build infrastructure and sell broadband services to individual consumers. We previously reported that tribal lands can have conditions that increase the cost of broadband deployment, such as remote areas with challenging terrain, which increases construction costs, as well as relatively low population densities and incomes that make it difficult to recoup deployment costs. These conditions may make it less likely that a service provider will build or maintain a network. Some tribal governments provide Internet access to their members, through an information-technology or utility department, and others have created their own telecommunications companies to provide services. FCC has reported that in many instances, tribal governments must build and pay for their own communications infrastructure to ensure Internet access will be “delivered across Indian Country.”\nThe term “broadband” commonly refers to Internet access that is high speed and provides an “always-on” connection, so users do not have to reestablish a connection each time they access the Internet. Telecommunications providers use a range of technologies to provide broadband service, including cable, fiber, satellite, and wireless. Wireless broadband connects users to the Internet using spectrum to transmit data between the customer’s location and the service provider’s facility, and can be transmitted using fixed wireless and mobile technologies, as shown in figure 1.\nFixed wireless broadband technologies establish an Internet connection between fixed points, such as from a radio or antenna that may be mounted on a tower, to a stationary wireless device located at a home. This technology generally requires a direct line of sight, and can be delivered two ways: (1) as a point-to-point transmission—between two fixed points—or (2) as a point-to-multipoint transmission—from one point to multiple users. Mobile wireless broadband technologies also establish a connection to the Internet that requires the installation of antennas, but this technology provides connectivity to customers wherever they are covered by service, including while on the move, such as with a cell phone.\nSpectrum is the resource that makes wireless broadband connections possible. Spectrum frequency bands each have different characteristics that result in different levels of ability to cover distances, penetrate physical objects, and carry large amounts of information. For example, lower frequency bands are able to transmit signals that travel greater distances, thus requiring the use of fewer antennas, and are able to penetrate solid objects. Higher frequency bands are able to transmit more data, but are more easily obstructed.\nFCC administers spectrum for nonfederal users—such as state, local government, and commercial entities—through a system of frequency allocation and assignment. Allocation involves segmenting the radio spectrum into bands of frequencies designated for use by particular types of radio services or classes of users, such as commercial and nonfederal broadband services. Examples of some of the frequency bands that can be used by commercial and nonfederal entities for broadband services are shown in figure 2. Appendix II presents a full list of the auctioned licensed frequency bands that FCC told us could be used to provide broadband services.\nThe frequency bands that can be used for broadband services are either licensed or unlicensed. For licensed spectrum, FCC can assign licenses through auctions, in which prospective users bid for the exclusive rights to transmit on a specific frequency band within geographic areas, ensuring that interference does not occur. License holders may sell or lease their license, in whole or in part, to another provider, a process that is known as a secondary market transaction, with FCC’s approval. FCC requires license holders to meet specified buildout requirements within a specified amount of time or face penalties, typically termination of all or part of the license. These buildout requirements are designed to ensure that licensees put spectrum to use within a specific period rather than let it sit idle and vary based on the type of license.\nFCC has also assigned licenses administratively in two frequency bands that can be used for broadband services. Specifically, prior to 1996 FCC assigned geographic licenses for exclusive use in the Educational Broadband Service (2496-2690 megahertz (MHz)), and from 2005 to 2015, FCC assigned non-exclusive nationwide licenses in the 3650-3700 MHz band, where use of the band may be shared by other license holders. FCC also authorizes the use of some spectrum for broadband services without a license on a non-exclusive basis. With unlicensed spectrum, an unlimited number of users can share frequencies using wireless equipment certified by FCC, such as wireless microphones, baby monitors, and garage door openers. In contrast to users of licensed spectrum, unlicensed users have no regulatory protection from interference by other licensed or unlicensed users in the bands. If multiple users are operating simultaneously on the same frequency band, the transmissions may be susceptible to interference, which reduces the quality of service.\nFCC’s rulemaking process includes multiple steps as outlined by law with opportunities for the public to participate during each step. In general, FCC initiates a rulemaking in response to statutes, petitions for rulemaking, or its own initiative, and releases a Notice of Proposed Rulemaking (NPRM) to propose new rules or to change existing rules. Any interested person may submit comments as part of the public record through electronic filings and meetings with FCC officials. Following internal analysis of the public record, FCC staff may propose actions for consideration for a vote, such as adopting final rules, amending existing rules, or stating that there will be no changes. All of FCC’s sitting commissioners vote on these items.\nThe American Recovery and Reinvestment Act of 2009 directed FCC to develop a plan to ensure every American had access to high-speed Internet. In March 2010, an FCC task force issued the National Broadband Plan that included a centralized vision for achieving affordability and maximizing use of high-speed Internet. The plan made many recommendations to FCC, including that FCC should take into account the unique spectrum needs of tribal communities when implementing spectrum policies and evaluate its policies and rules to address obstacles to spectrum access by tribal communities. With regard to tribal lands, the plan recommended that FCC increase its commitment to government-to-government consultation with tribal leaders and consider increasing tribal representation in telecommunications planning. FCC established the Office of Native Affairs and Policy (ONAP) in July 2010 to promote the deployment and adoption of communication services and technologies to all native communities, by, among other things, ensuring consultation with tribal governments pursuant to FCC policy.",
"",
"Through our analysis of FCC license data as of September 2018, we identified 18 tribal entities that held active spectrum licenses in bands that can be used to provide broadband services. Because tribal entities may hold licenses using entity names that do not include the search terms we identified in our review of the list of tribes in the Federal Register, there may be additional tribal entities that we have not identified. We found that most of the tribal entities obtained the licenses through FCC administrative assignment rather than through an FCC spectrum auction or secondary market transaction.\nThirteen of the tribal entities we identified in FCC’s license data held administratively assigned licenses, and these licenses are subject to certain limitations and were only available to applicants for limited time periods. Eleven of these administratively assigned licenses are non- exclusive nationwide licenses in the 3.65 GHz frequency band (3550- 3700 MHz) and were available between 2005 and 2015, when FCC issued a new rule for this band and stopped accepting new applications for these licenses. Two of the tribal entities we identified held administratively assigned Educational Broadband Service licenses in the 2.5 GHz frequency band (2496-2690 MHz). These licenses allow for the transmission of educational materials by accredited educational institutions and government organizations, including tribes, engaged in formal education and require that licensees use the spectrum for educational purposes for a certain amount of time each week. Both of these tribal entities obtained these licenses after the last filing window closed in 1996 through a waiver and special temporary authority permit.\nFour tribal entities we identified in FCC’s license data held a total of 13 active licenses obtained through secondary market transactions, such as leases and sales of portions of partitioned licenses. Of these 13 secondary market transactions, 2 involved nationwide providers.\nTwo of the tribal entities we identified held active licenses in bands available for broadband deployment that they obtained through an FCC spectrum auction. One of these tribal entities won with a winning bid of over $800,000 in a 2015 auction, and the other won two licenses with winning bids of under $50,000 in a 2002 auction. This second tribal entity also qualified for but did not win a 2003 auction. In addition to these two tribal entities, we identified the following four tribal entities that had applied to participate in auctions with varying results but did not hold active licenses in frequency bands available for broadband deployment as of September 2018:\nTwo tribal entities each won a single spectrum license. The first won its license, which has since expired, in 2000, and the second won its license, which it has since been transferred to a nationwide provider through a secondary market transaction, in 2003. The first tribal entity also applied but did not qualify to participate in a 2001 auction.\nOne tribal entity qualified to participate but did not win in a 2003 auction, and another tribal entity applied but did not qualify to participate in a 2008 auction.\nIn addition, representatives from 2 of the 16 tribal entities we interviewed that were using wireless technologies told us that they use licensed spectrum that is owned by a private provider through a partnership relationship. We have previously reported that some tribes have formed partnership arrangements with other entities to increase broadband access on tribal lands.\nMost (14 of 16) of the tribal entities we contacted that were using wireless technologies told us that they are accessing various unlicensed bands, such as the 2.4 GHz and 5 GHz bands, to provide service. Representatives from eight of these tribal entities reported using only unlicensed spectrum for their fixed wireless networks. Representatives from 13 tribal entities told us that unlicensed spectrum had the advantage of being free, and representatives from one tribal entity told us that the equipment needed to access these spectrum bands is less expensive than equipment for accessing other spectrum bands. Representatives from some tribal entities reported success in using unlicensed spectrum in certain circumstances. For example, one tribal entity reported using unlicensed spectrum for homes in remote areas where the only potential signal degradation is from trees as well as to set up local hot spots that can serve 5 to 10 users at a time. Another tribal entity reported using primarily unlicensed spectrum to carry signals to end users together with non-exclusive licensed spectrum (3.65 GHz band) for locations where there is congestion in the unlicensed bands.\nHowever, representatives from the tribal entities we contacted that were using wireless technologies emphasized the advantages of licensed spectrum and discussed their experiences with the limitations of unlicensed spectrum. As described earlier, exclusive-use spectrum licenses protect license holders from interference from other users, whereas unlicensed spectrum provides no protection against interference. Representatives from 13 of 16 tribal entities identified the fact that unlicensed spectrum is available at no cost as an advantage of this type of spectrum. However, representatives from 15 of the 16 tribal entities identified limitations associated with unlicensed spectrum, such as interference, as described in table 1.\nTribal associations, an academic group, a tribal consortium, and FCC have all highlighted the importance of exclusive-use licensed spectrum for tribal entities. Specifically, both a tribal association and an academic group we contacted discussed interference and other challenges of unlicensed spectrum. Representatives from one tribal association pointed out that unlicensed spectrum might not be available in the future if it is allocated for other purposes. Representatives from a tribal consortium we contacted told us that they are already using all of the available unlicensed spectrum for providing Internet access and that they cannot expand service without encountering interference and capacity limitations. Lastly, ONAP reported in 2012 that unlicensed spectrum is not an option across all tribal lands and that tribal access to robust licensed spectrum is a critical need.\nRepresentatives from the stakeholders we interviewed told us that there are also non-technological benefits for tribal entities to obtain greater access to licensed spectrum. For example:\nEnhanced ability to deliver additional Internet service.\nRepresentatives from one of the tribal associations, an academic group, and six of the tribal entities said that increased access to licensed spectrum would enable them to deliver their own Internet services and bridge service gaps, thus improving Internet access to their members. For example, representatives from three of these tribal entities said that such access would enable them to deploy in areas where providers that currently hold licenses were not willing to deliver services. In addition, representatives from another tribal entity said that having access to licensed spectrum is one factor that would enable the tribe to establish its own telecommunications company.\nAbility to sell or lease spectrum for profit. Representatives from one tribal association, an academic group, and two tribal entities told us that holding spectrum licenses would enable tribal governments to sell or lease their licenses. For example, we heard from one of these tribal entities that it was able to sell portions of its license that did not cover tribal lands and to use the profits from the sale to invest in its own network infrastructure.\nOpportunities for federal funding. Access to licensed spectrum may also provide tribal entities with more opportunity to obtain federal funding, specifically through two Universal Service Fund programs— the Mobility Fund and the Tribal Mobility Fund. These programs provide funding to broadband service providers to expand service in areas where it is not available, including tribal lands. However, service providers must hold, lease, or show they have access to licensed spectrum to participate in these programs, among other requirements. For example, the National Congress of American Indians stated that two tribal entities submitted applications to participate in the Mobility Fund program but were not eligible to participate in part because they did not hold a spectrum license. Moreover, representatives from two of the tribal entities we interviewed told us that they considered applying for one of these programs but realized they were ineligible because they did not have access to licensed spectrum.\nFurthermore, representatives from one of the tribal associations, an academic group, and seven of the tribal entities told us that having access to licensed spectrum would enable tribes to exercise their rights to sovereignty and self-determination. Representatives from three of the tribal entities we contacted said that they view spectrum as a natural resource that should be managed by the tribe. FCC officials, however, told us that spectrum is not considered a reserved right under treaties with Indian tribes, as it is not explicitly stated. In addition, representatives from four of the tribal entities told us that having access to licensed spectrum would ensure that spectrum is being used in a way that aligns with tribal goals and community needs, further supporting their rights to self-determination.",
"Representatives from the tribal entities we contacted identified several barriers to accessing licensed spectrum through spectrum auctions and secondary market transactions. Regarding spectrum auctions, representatives from tribal entities that provide wireless Internet service most frequently (13 of 16) indicated that spectrum licenses are too expensive for tribal entities. For example, over 60 percent (983 of 1,611) of the winning bids from a 2015 spectrum auction, including bids for spectrum over non-tribal lands, were over $1 million. Representatives from one tribal entity explained that auction licenses are often too expensive for tribal entities because these licenses cover large geographic areas that may include non-tribal urban areas as well as rural tribal areas. Moreover, representatives from eight tribal entities stated that they are unable to obtain financing to participate in auctions because tribal governments cannot use tribal lands as collateral to obtain loans. In addition, representatives from eight tribal entities mentioned that participating in spectrum auctions requires auction-specific expertise that tribal entities may not have.\nTribal entities also face barriers obtaining spectrum through secondary market transactions. Most of the spectrum allocated for commercial use has already been assigned through spectrum auctions and other mechanisms to private providers, including licensees that may not be providing service on tribal lands. In a single geographic area, several frequency bands could be used to deploy broadband services, as shown in figure 2, and licenses for these various frequency bands may be held by different providers. There may be tribal areas where providers hold licenses for bands but are not using the spectrum to provide Internet access. In other tribal areas, services may be offered using one or two of the spectrum licenses with the other licenses in the area remaining fallow and inaccessible to tribal entities. All three of the tribal associations we contacted confirmed that there are unused spectrum licenses over tribal lands, and representatives from a nationwide provider indicated that they only deploy services if there is a business case to support doing so. Accordingly, the secondary market is one of few avenues available to tribal entities that would like to access licensed spectrum. However, representatives from tribal entities we contacted identified the following challenges related to participating in the secondary market:\nLack of willing sellers. Representatives from eight of the tribal entities, one of the tribal representative groups, and an industry association we contacted indicated that spectrum license holders are often unwilling to participate in secondary market transactions, citing a variety of reasons. For example, representatives from one tribal entity stated that large carriers have no business incentive to negotiate secondary market agreements with tribal entities and that tribal entities do not have the resources to make such transactions sufficiently lucrative for license holders. Representatives from another tribal entity stated that license holders may lack knowledge about the areas covered by their licenses, including tribal areas, and therefore may be unwilling to consider secondary market transactions. Representatives from a tribal representative group told us that license holders may be unwilling to consider secondary market transactions with tribal entities because spectrum is a valuable resource that may become even more valuable over time, and a representative from an industry association indicated that transaction costs such as legal fees outweigh any potential income from such transactions. None of the private providers we contacted reported entering into a secondary market transaction with tribal entities, but one of these providers stated that it had never been approached by a tribal entity interested in a secondary market transaction and was unaware of challenges that are unique to tribal entities.\nLicense holders unknown. Representatives from eight of the tribal entities we contacted stated that it is difficult to determine who holds spectrum licenses. For example, two tribal entities had to hire consultants to identify who held licenses for spectrum over the tribes’ lands, and another tribal entity relied on the expertise of its non-tribal partner to identify the license holders.\nUnaware of secondary market transactions. Representatives from six of the tribal entities we contacted were unaware of the possibility of accessing licensed spectrum through a secondary market transaction prior to our contacting them.\nAccordingly, secondary market transactions involving tribal entities are rare. As discussed above, our analysis of FCC license data identified four tribal entities that have successfully accessed licensed spectrum in this manner. Regarding one of these tribal entities’ experiences with the secondary market, the tribal representative we contacted stated that an Indian-owned telecommunications consulting company was pivotal in identifying the license holder and facilitating the transaction and that the transaction would not have happened without the consulting company. Representatives from this company told us that they conducted an analysis to identify unused spectrum licenses over the tribe’s land. The company identified three providers holding such licenses, but only one of those providers was willing to participate in a secondary market transaction. Representatives from another of the tribal entities that accessed licensed spectrum through the secondary market told us that they relied on the expertise of their non-tribal partner to facilitate these transactions.",
"",
"We found that FCC has taken the following actions to increase tribal access to and use of spectrum: (1) initiated proposed rulemakings on promoting tribal access to spectrum, (2) adopted rules to increase spectrum available for broadband use, and (3) conducted outreach and training for tribal entities on spectrum-related issues.",
"FCC issued two NPRMs—one in March 2011 and one in May 2018—that included policy options intended to enhance tribal access to spectrum. At the time of our report, FCC had not adopted new rules or taken further action on the 2011 rulemaking, and FCC had not taken further actions since the comments period ended on September 7, 2018, on the May 2018 rulemaking. According to FCC officials, the 2011 NPRM addressed several recommendations made in the National Broadband Plan to promote the greater use of spectrum over tribal lands. Among other things, the 2011 NPRM sought comments on three proposals to create new spectrum access opportunities for tribal entities (see fig. 3). FCC officials told us that they have reviewed public comments to the proposed rulemaking, but have no current plans to take further actions.\nWe reviewed the public comments FCC received that pertained to the three proposals, which included comments from tribal associations, tribal governments, rural and nationwide industry associations, and tribal and private providers. Based on our analysis of the comments that included positions on the proposal for a tribal licensing priority, eight stakeholders—including industry associations, private providers, and a tribal government—were supportive of this proposal. However, we found that stakeholder views differed on implementing good faith negotiations and on the build-or-divest processes. In general, the tribal stakeholders indicated that they were supportive of these proposals, while the industry associations and private providers were not. In addition to reviewing the public comments, we asked representatives from the tribal and industry associations and private providers that we interviewed about their views of these proposals. Representatives from the three tribal associations and two rural industry associations were generally supportive of all three of the proposals, while representatives from one of the private providers that we interviewed told us they did not support any of the three proposals, because, for example, they said that there are more effective ways to increase broadband service over tribal lands. Representatives from another private provider said that they supported the tribal priority process but did not indicate their views on the other two proposals. Representatives from six tribal entities and a representative from a tribal consortium told us that these types of proposals would help them obtain spectrum.\nIn May 2018, FCC issued an NPRM that sought comments on establishing a tribal priority window for tribal nations located in rural areas as part of a process to re-license the Educational Broadband Service spectrum band. As described above, FCC originally allocated this band to qualifying educational institutions and government organizations for the transmission of educational materials. While FCC permitted licensees to lease their excess capacity to commercial providers, FCC reported that significant portions of this band were not being used, primarily in rural areas. In an effort to make additional spectrum available for broadband use, FCC issued this NPRM seeking comments on options to promote the use of this spectrum over tribal lands. One of the options included implementing a local priority filing window so that tribal entities could get access to unassigned spectrum prior to an FCC auction. In a June 2018 order, FCC extended the comment deadline for the NPRM to August 8, 2018, partly in response to a request for a deadline extension. As a result, FCC also extended the deadline to respond to those comments to September 7, 2018. Because FCC was in the process of responding to these comments at the time of our review, we did not analyze these comments.",
"FCC has made additional unlicensed and licensed spectrum available for broadband use and has implemented rules that according to FCC, may make it easier for rural providers to obtain licenses. However, these efforts were not targeted to tribal entities, and according to ONAP’s 2012 report, allocating additional unlicensed spectrum may not be a technically feasible solution for all tribal entities, and such spectrum may not have the necessary capacity to handle an increase in users. In addition, representatives from the tribal associations and entities we contacted told us that there are limitations to the extent that these efforts can address the spectrum needs of tribal entities. In particular, they discussed the effect of FCC’s changes to the rules on the use of TV white space spectrum and the Citizens Broadband Radio Service spectrum:\nTV white space spectrum: In 2010, FCC made additional unlicensed spectrum available for broadband use by allowing providers to operate in the TV bands at locations where those frequencies were not in use, known as TV white space, but none of the tribal entities we interviewed was using this spectrum. A representative from a tribal consortium said that it used TV white space spectrum, and representatives from three of the tribal entities said that they were considering using it in the future because TV white space spectrum can better pass through some environmental barriers, such as trees, reaching more remote customers. However, representatives from five tribal entities, one tribal consortium, one academic group, and three companies that we interviewed told us about several limitations to the use of TV white space spectrum. For example: limited bandwidth capacity, which causes lower speeds, high latency, and limits the number of households that can be served; equipment needed to access TV whitespace spectrum is expensive and less available; the spectrum may not always be available; and similar to other unlicensed frequency bands, as described above, there is potential for interference and difficulty to pass through extreme terrain.\nCitizens Broadband Radio Service (CBRS) Spectrum: In 2015, FCC made additional licensed spectrum available for broadband use when it issued a new rule for the 3.65 GHz frequency band (3550-3700 MHz). However the tribal entities who held licenses in this band indicated there are limitations to their ability to use this band and their future use of this spectrum remains unknown. As described earlier, FCC had allocated non-exclusive nationwide licenses in this band. In the 2015 rule, FCC created the CBRS, increased the amount of spectrum allocated for commercial broadband use, and implemented a new licensing scheme. This three-tier priority licensing scheme for spectrum sharing included auctioning exclusive-use geographic licenses and allowing non-exclusive use of the band where a license holder is not operating, an approach that is intended to provide a low- cost entry point for users, but will have no protections from interference. Representatives from four of the five tribal entities that we contacted that held licenses in this band said that there were technical advantages to using it, such as the ability for a signal to pass through dense forests. However, representatives from two tribal entities said that the high cost of the equipment needed to access this spectrum prevented them from either using the frequency band extensively or at all. In addition, representatives from two tribal entities said that they were not sure about their ability to access this band in the future given the changes made in FCC’s 2015 rulemaking. FCC’s 2015 rule also created small-sized and shorter-termed licenses, which FCC stated would decrease the costs of obtaining a license and help rural providers access it. However, FCC issued an NPRM in 2017 that sought comments on suggested changes to CBRS, including increasing the geographic area covered by licenses and lengthening the license term. In October 2018, FCC adopted rules that, among other changes, increased the license area from census tracks to counties and extended the license term from 3 to 10 years, which FCC officials told us were modest changes made to accomplish FCC’s goals of creating incentives for investment, including in urban and rural areas, encouraging efficient spectrum use, and promoting robust network deployments.",
"FCC’s ONAP conducts training, consultation, and outreach to tribal entities on spectrum-related issues. For example, ONAP officials told us that they have conducted 21 training and consultation workshops for tribal entities on broadband and telecom since 2012, where spectrum has been discussed in general in the introduction and has been addressed specifically in separate sessions in some of the workshops. These officials also told us that they communicate with tribal entities prior to when FCC holds auctions or when implementing regulatory actions or policies that will affect tribal governments and spectrum over their lands. While representatives from 9 of the 16 tribal entities using wireless technologies told us that they had received some outreach on spectrum- related issues from FCC, representatives from 2 of these entities said that they had not. In addition, ONAP issued a report in 2012 to provide FCC with a review of its work with tribal governments and organizations, including information on its tribal broadband efforts, priorities, and tribal consultations. Among other things, the report included case-study information on tribal entities’ efforts to access spectrum. Although the report stated that this would be the first of such annual reporting, this is the only report that ONAP has issued on tribal issues. According to ONAP officials, ONAP has not published subsequent reports because it provides FCC with information on its work with tribal governments and organizations, including spectrum-related matters, through more frequent informal briefings and regular updates.",
"FCC has not consistently collected information related to tribal access to spectrum. For example, FCC does not collect data on whether holders of spectrum licenses or auction applicants are tribal entities even though it collects self-reported data on licensee type, such as corporation and government entity. To obtain this information, FCC could include an option for the licensee type, along with the other options, in applications for future licenses and auctions that allows an applicant to identify as a tribal government or tribally owned entity. FCC officials told us that they use information on licensee type to determine eligibility for a license. Because eligibility is not based on whether the applicant is a tribal entity, FCC officials said this information is not needed. However, without this information, FCC does not have a comprehensive understanding of the extent that tribal entities are attempting to obtain or access licensed spectrum or have been successful at obtaining and accessing it.\nAdditionally, FCC does not analyze information on unused licensed spectrum that exists over tribal lands, even though FCC has information—broadband availability data from providers and information on geographic areas covered by spectrum licenses—that could be used for such analysis. As we described earlier, representatives from all three of the tribal associations we contacted reported that there are unused spectrum licenses over tribal lands that could present opportunities through the secondary market for tribal entities to obtain spectrum. When we asked FCC officials why they do not analyze the extent that unused spectrum licenses exists over tribal lands, they told us that the spectrum data noted above is not specific enough to allow for a license by license analysis of unused spectrum. For example, they said that broadband availability data from providers is aggregated across wide spectrum bands to minimize reporting burdens on the wireless industry, and the data are not sufficiently detailed to identify which spectrum blocks and licenses are being used in particular areas. However, FCC could use this data to conduct, at a minimum, high-level analysis that would result in useful information on the extent to which unused spectrum exists over tribal lands. In addition, FCC officials told us that they evaluate the effectiveness of FCC’s secondary markets policies, which FCC views as a mechanism to promote the increased use of unused spectrum licenses, but this approach does not include an analysis of unused spectrum licenses as part of these efforts. As a result, FCC’s evaluations of the secondary market may not accurately reflect how these policies affect tribal access to spectrum. Because the secondary market is one of few ways for tribal entities to access licensed spectrum, an analysis of unused licensed spectrum that exists over tribal lands would enable FCC to better promote a robust secondary market that provides additional opportunities for tribes to access spectrum.\nFCC’s 2010 National Broadband Plan stated that ongoing measurement of spectrum utilization should be developed to better understand how spectrum resources are being used because some studies indicated that spectrum goes unused in many places much of the time. The plan also stated that any spectrum utilization studies that FCC conducts should identify tribal lands as distinct entities. In FCC’s February 2018 strategic plan, FCC stated that it will implement ongoing initiatives that will assist in spectrum policy planning and decision making, promote a robust secondary market in spectrum, and improve communications services in all areas of the United States, including tribal areas. Additionally, Standards for Internal Control in the Federal Government state that agencies should use quality information, including information that is complete, to inform the decision-making processes.\nFCC also does not make information on spectrum-license holders available in an easy or accessible manner; such information could be beneficial to the tribes in their efforts to obtain spectrum in the secondary market. As described earlier, the secondary market is a significant mechanism for tribal entities to obtain spectrum licenses, but representatives from the tribal entities we interviewed reported challenges related to participating in the secondary market, such as not knowing whom to contact should they wish to engage in a secondary market transaction to obtain a spectrum license. In July 2014, FCC stopped updating its spectrum dashboard, which provided the public with a way to identify who holds licenses in what areas, including features that allowed users to identify spectrum allocated and assigned in tribal lands. ONAP stated in its 2012 report that this feature represented the first step for individual tribal entities to reach out to licensees and seek leasing, partnership, or other arrangements that could ultimately result in the provision of service over tribal lands. FCC officials told us that the public may view electronic records of all wireless spectrum licenses in FCC’s Universal Licensing System, using a wide range of license and geographic parameters, such as licensee names, radio services, spectrum bands, and geographic locations. However, we attempted to navigate the Universal Licensing System to determine spectrum-license holders for specific tribal lands using geographic parameters, but we were unable to successfully do so because the system is so difficult to use. Furthermore, as described above, representatives from eight of the tribal entities that we contacted stated that it is difficult to determine who holds spectrum licenses. When we asked FCC officials why they do not communicate information to tribes about spectrum-related transactions over tribal lands, FCC officials also told us that they issue public notices on applications for all proposed spectrum transactions and on the winning bidders of all auctions, but they have not made it a practice to reach out directly to tribes to make them aware of when providers have obtained spectrum licenses that cover tribal lands.\nThe National Broadband Plan stated that FCC should make data available that would promote a robust secondary market for spectrum licenses, such as information on how and to whom spectrum is allocated on tribal lands. Additionally, Standards for Internal Control in the Federal Government state the need for federal agencies to communicate with external entities and to enable these entities to provide quality information to the agency that will help it achieve its objectives. Tribal governments are an example of such external entities. The ability of tribal governments to make informed spectrum planning decisions and to participate in secondary market transactions is diminished without information from FCC on the spectrum transactions that occur over tribal lands. Providing this information in a manner that is accessible and easy for tribal entities to obtain could enable them to enter into leasing, partnership, or other arrangements to obtain spectrum.",
"Broadband service on tribal lands continues to lag behind the rest of the country, especially on rural tribal lands, which could hinder tribal efforts to promote self-governance, economic opportunity, education, public safety, and cultural preservation. FCC has reported that wireless technologies that access spectrum to deliver broadband services are cost-effective for remote and sparsely populated areas, such as tribal lands. However, FCC’s efforts to promote and support tribal entities’ access to spectrum have done little to increase tribal use of spectrum, as only very few tribes are accessing spectrum to be able to provide Internet service. Additionally, FCC lacks information that could help inform its decision- making processes related to spectrum policy planning, which is intended to improve communications services in all areas of the United States, including tribal lands. By collecting data on the extent that tribal entities are obtaining and accessing spectrum, FCC could better understand tribal spectrum issues and use this information as it implements ongoing spectrum initiatives. Furthermore, the secondary market is one of few ways for tribal entities to access licensed spectrum to be able to provide Internet service, and FCC has recognized the importance of promoting a robust secondary market. FCC could promote a more robust secondary market by analyzing data to better understand how much unused licensed spectrum exists over tribal lands and using that information to promulgate regulations and to evaluate how FCC policies affect tribal participation in the secondary market. Additionally, by making information on who holds spectrum licenses over tribal lands more accessible and easy to understand, FCC could remove a barrier tribes may face in attempting to obtain spectrum through the secondary market.",
"We are making the following three recommendations to the Chairman of FCC.\nThe Chairman of FCC should collect data on the extent that tribal entities are obtaining and accessing spectrum and use this information as FCC implements ongoing spectrum initiatives. (Recommendation 1)\nThe Chairman of FCC should analyze data to better understand the extent that unused spectrum licenses exist over tribal lands, such as by analyzing the data for a sample of tribal lands, and as appropriate use this information to inform its oversight of the secondary market. (Recommendation 2)\nThe Chairman of FCC should make information on spectrum-license holders more accessible and easy to understand for interested parties, including tribal entities, to promote their ability to purchase or lease spectrum licenses from other providers. (Recommendation 3)",
"We provided a draft of this report to FCC for comment. In its comments, reproduced in appendix III, FCC agreed with the recommendations. FCC also provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Chairman of FCC, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.",
"This report examines (1) what is known about the ability of tribal entities to obtain and access spectrum to provide broadband services on tribal lands and the reported barriers that may exist; and (2) the extent to which the Federal Communications Commission (FCC) promotes and supports tribal entities’ ability to obtain and access spectrum for broadband services.\nTo address both objectives, we reviewed relevant statutes and regulations and FCC documents, including FCC’s Statement of Policy on Establishing a Government-to-Government Relationship with Indian Tribes, the National Broadband Plan, and FCC’s current strategic plan. We interviewed FCC officials and representatives from 3 tribal associations, 7 private providers that deliver Internet services over tribal lands, 3 industry associations that represent rural and urban telecommunications providers, 3 regional consortia, 3 companies that work with tribal entities, and 1 academic group. In addition, we selected 24 tribal entities—13 Indian tribes and nations and 11 tribally owned providers—to interview.\nTo identify tribal entities that were using wireless technologies, we obtained recommendations from stakeholders, reviewed data on relevant federal grants, such as the Broadband Technology Opportunities Program, and conducted Internet research. We then selected 16 tribal entities considering (1) stakeholder suggestions, (2) population, (3) population density, and (4) urban or rural designation. We visited 7 of these tribes in Idaho, New Mexico, and Washington State. The views represented in our report are not generalizable to those of all stakeholders. See table 2 for a complete listing of the entities we interviewed. We also conducted a literature review to identify relevant academic, government, and media publications that were published between January 1, 2013, and January 11, 2018, that discuss the importance of and options to enhance tribal access to spectrum.\nTo identify tribal entities that applied to participate in spectrum auctions or that held active spectrum licenses in bands that can be used to provide broadband service, we analyzed (1) FCC data on entities that applied to participate in auctions for spectrum in these bands and (2) FCC data on spectrum licenses in these bands that were active as of September 6, 2018. We also analyzed FCC license data, together with license information publicly available through FCC’s Universal Licensing System, to determine whether the tribal entities that held active licenses obtained those licenses through an FCC spectrum auction, administrative assignment, or the secondary market. We then reviewed the list of federally recognized tribes in the Federal Register and identified search terms related to these tribes. For example, we identified the following search terms based on the federally recognized tribe, Yurok Tribe of the Yurok Reservation, California, “Reservation, Tribe, and Yurok.” We then used the identified search terms to search for tribal entities in FCC’s data on auction participants and spectrum license holders. We manually reviewed these matches to identify tribal entities based on information from interviews, Internet research, and professional judgment. Because tribal entities may have applied to participate in spectrum auctions or may hold spectrum licenses under names not associated with their tribes, there may be additional tribal entities that we were unable to identify. Through interviews with FCC officials and review of related documentation, we determined that the license and auction participant data are sufficiently reliable for our purpose of identifying some tribal entities that have applied to participate in a spectrum auction or held active spectrum licenses as of September 2018. However, our analysis does not capture the extent that tribal entities may have obtained a license that is no longer active. To identify tribal entities that used unlicensed spectrum to deliver unlicensed service, we interviewed the tribal entities identified above. In addition, we obtained stakeholder views on the advantages and disadvantages of using unlicensed and licensed frequency bands and any barriers that tribal entities face in obtaining spectrum licenses by interviewing the selected stakeholders noted above.\nTo determine the extent to which FCC promotes and supports tribal entities’ efforts to obtain and access spectrum, first, we reviewed FCC’s proposals in its ongoing 2011 Notice of Proposed Rulemaking In the Matter of Improving Communications Services for Native Nations by Promoting Greater Utilization of Spectrum over Tribal Lands and its ongoing 2018 Notice of Proposed Rulemaking In the Matter of Transforming the 2.5 GHz Band. We summarized public comments submitted, as of August 2018, by private and tribal providers, rural and nationwide industry associations, tribal associations, and tribal governments on FCC’s 2011 proposed rulemaking. We did not analyze comments on FCC’s 2018 Notice of Proposed Rulemaking because FCC was in the process of responding to these comments at the time of our review. Second, we reviewed rules that FCC officials identified that increased the availability of unlicensed and licensed frequency bands for broadband use and that may be particularly useful for tribal entities. These rules included FCC’s 2010 and 2012 rules related to TV white space spectrum and its 2015 rule and 2017 Notice of Proposed Rulemaking related to the Citizens Broadband Radio Services (CBRS) spectrum. We identified tribal entities that had been using CBRS frequency bands by reviewing FCC licensed data and TV white space frequency bands through interviews with tribal entities and regional consortia. Third, we identified FCC’s outreach activities to provide tribal entities with assistance on spectrum-related issues by interviewing FCC officials and reviewing documentation on the content of FCC-led trainings and workshops, e-mail correspondences, and related publications, such as public notices. Lastly, we interviewed FCC officials on the information that they collect, analyze, and report related to tribal use of spectrum and reviewed related documentation, including FCC’s Office of Native Affairs and Policy 2012 Annual Report and FCC’s license and auction data. We interviewed stakeholders, as noted above, and summarized their views of FCC efforts. We also compared FCC’s efforts against FCC’s 2018-2022 strategic plan, recommendations made in FCC’s National Broadband Plan, and Standards for Internal Control in the Federal Government related to using quality information.\nWe conducted this performance audit from November 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"We identified the spectrum frequency bands that the Federal Communications Commission (FCC) has made available for commercial broadband services and that FCC assigns licenses through auctions. Table 3 describes these licenses, including the number and date of related auctions.",
"",
"",
"Mark L. Goldstein, (202) 512-2834 or goldsteinm@gao.gov.",
"In addition to the contact named above, Sally Moino (Assistant Director), Anne Doré (Analyst in Charge), Enyinnaya David Aja, Katherine Blair, Stephen Brown, Camilo Flores, Georgeann Higgins, John Mingus, Josh Ormond, Frank Rusco, Rebecca Rygg, Jay Spaan, Andrew Stavisky, James Sweetman, Jr., Hai Tran, and Michelle Weathers made key contributions to this report."
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{
"question": [
"Why is licensed spectrum preferred?",
"What barriers do tribal entities face in obtaining licensed spectrum?",
"Despite barriers, how have some entities obtained licensed spectrum?",
"Why is secondary market one of the few avenues available to tribal entities that would like to access licensed spectrum?",
"To what extent did the identified tribal entities seek secondary market transactions?",
"What has FCC done to promote and support tribal access to spectrum?",
"What does FCC still need to do?",
"What are the advantages and disadvantages of the bands FCC has allowed broadband providers to operate in?",
"What did GAO find about FCC regarding tribal use of spectrum?",
"How could FCC better understand tribal spectrum issues?",
"How could FCC promote a more robust secondary market?",
"How could FCC remove barriers tribes face?",
"What did the FCC state regarding promoting a robust secondary market throughout the U.S., including tribal lands?",
"How do percentages of Americans on tribal lands and Americans overall that lack broadband service compare?",
"How can broadband service be delivered?",
"What would be the result of increasing tribal access to spectrum?",
"Given this information, what was GAO asked to review?",
"What does this report examine?",
"What did GAO analyze for this report?",
"How did GAO get information for this report?"
],
"summary": [
"Licensed spectrum is generally preferred because it offers better quality of service compared to unlicensed spectrum; however, almost all of the tribal entities GAO contacted said that they are accessing unlicensed spectrum to provide Internet service.",
"The tribal entities GAO contacted cited various barriers to obtaining spectrum licenses in bands that can be used to provide broadband services. They identified barriers to obtaining licensed spectrum through auctions and secondary market transactions, barriers such as high costs and, in the case of secondary market transactions, a lack of information on who holds licenses over tribal lands.",
"For example, of these 18 tribal entities, 4 obtained licenses through secondary market transactions—that is, they bought or leased the license from another provider, and 2 obtained a license through an FCC spectrum auction.",
"Because most spectrum allocated for commercial use has already been assigned, the secondary market is one of very few avenues available to tribal entities that would like to access licensed spectrum.",
"For example, of these 18 tribal entities, 4 obtained licenses through secondary market transactions—that is, they bought or leased the license from another provider, and 2 obtained a license through an FCC spectrum auction.",
"For example, FCC issued proposed rulemakings in 2011 and 2018 that sought comment on tribal-specific proposals, such as establishing tribal-licensing priorities and initiating processes to transfer unused spectrum licenses to tribal entities.",
"However, FCC has not finalized these rules and is in the process of responding to comments to the 2018 rulemaking.",
"While stakeholders GAO interviewed cited some advantages of these bands, such as being useful to reach remote customers, they also noted technical and cost limitations that reduced the potential to improve tribal access to spectrum.",
"However, GAO found that FCC has not collected data related to tribal access to spectrum, analyzed unused licensed spectrum that exists over tribal lands, or made data available to tribal entities in an accessible and easy manner that could be beneficial in their efforts to obtain spectrum licenses from other providers.",
"By collecting data on the extent that tribal entities are obtaining and accessing spectrum, FCC could better understand tribal spectrum issues and use this information as it implements ongoing spectrum initiatives.",
"Further, given that the secondary market is one of few ways for tribal entities to access licensed spectrum to be able to provide Internet service, FCC could promote a more robust secondary market by analyzing unused licensed spectrum over tribal lands and using that information to inform FCC's oversight of the secondary market.",
"Additionally, by making information available on who holds spectrum licenses over tribal lands, FCC could remove a barrier tribes may face in attempting to obtain spectrum through the secondary market.",
"FCC stated that it is implementing spectrum initiatives and recognizes the importance of promoting a robust secondary market to improve communications throughout the United States, including tribal lands.",
"In 2018, FCC estimated that 35 percent of Americans living on tribal lands lack broadband service compared to 8 percent of Americans overall.",
"Broadband service can be delivered through wireless technologies using radio frequency spectrum.",
"According to FCC, increasing tribal access to spectrum would help expand broadband service on tribal lands.",
"GAO was asked to review spectrum use by tribal entities—tribal governments and tribally owned telecommunications providers.",
"This report examines (1) tribal entities' ability to obtain and access spectrum to provide broadband services and the reported barriers that may exist, and (2) the extent to which FCC promotes and supports tribal efforts to obtain and access spectrum.",
"GAO analyzed FCC's license and auction data as of September 2018, reviewed FCC's rulemakings on spectrum for broadband services, and interviewed other tribal and industry stakeholders and FCC officials.",
"GAO interviewed 16 tribal entities that were using wireless technologies. Selected entities varied geographically, among other characteristics. GAO analyzed FCC's license and auction data as of September 2018, reviewed FCC's rulemakings on spectrum for broadband services, and interviewed other tribal and industry stakeholders and FCC officials."
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CRS_R43308
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{
"title": [
"",
"Introduction",
"Paying for Surface Transportation Infrastructure",
"Financing Infrastructure Investment",
"Municipal Bonds",
"Tax Credit Bonds",
"Investor Credit",
"Direct-Pay Bonds",
"Grant Anticipation Bonds",
"Private Financing via Public-Private Partnerships (P3s)",
"Federal Loan Programs",
"Transportation Infrastructure Finance and Innovation Act (TIFIA)",
"Railroad Rehabilitation and Improvement Financing (RRIF) Program",
"State Infrastructure Banks",
"Federal Budget Impact of Debt Finance Alternatives",
"Legislative Options",
"Tax-Preferred Bonds",
"America Fast-Forward Bonds",
"Private Activity Bond Proposals",
"Changes to TIFIA and RRIF",
"Public-Private Partnerships",
"National Infrastructure Bank",
"State Infrastructure Banks"
],
"paragraphs": [
"",
"Most spending on surface transportation infrastructure is done on a pay-as-you-go funding basis, meaning today's expenditures are derived from today's revenue sources such as taxes, tolls, and fares. Only a relatively small proportion is financed through public or private borrowing or private (equity) investment. Because government budgets at all levels are strained, however, there is great interest in financing highway and public transportation capital improvements. This is particularly true for very large and costly \"mega-projects,\" such as major interstate highway bridges, which are difficult to construct on a pay-as-you-go basis. New York's $5 billion Tappan Zee Bridge replacement, for example, dwarfs the state's federal highway funding of about $1.7 billion a year, and approaches the state's typical annual highway capital spending of about $6.0 billion. The toll bridge will be largely financed using municipal bonds and a federal loan.\nThe federal government supports surface transportation infrastructure financing mainly by providing a tax preference for bonds issued by state and local governments. Other mechanisms include federal loan programs, such as the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, which can help leverage private investment via public-private partnerships (P3s), and federally authorized state infrastructure banks (SIBs). All have costs for the federal government, but, as this report explains, some have greater costs than others. Nevertheless, none are as costly as federal grant funding. This is because project financing relies more heavily on revenue streams created at the state or local level in order to repay loans or provide a return to private investors. In many cases, revenue to finance a project has been provided by a highway or bridge toll, but it could be, among other possibilities, a pledge of future sales tax or real estate tax revenues.\nThis report outlines current federal programs that support the financing of surface transportation infrastructure investment and the relative impact these have on the federal budget. It goes on to discuss legislative options for modifying the federal role, including provisions related to tax credit bonds, dedicated federal funding for SIBs, and the creation of a national infrastructure bank.",
"Surface transportation infrastructure, the focus of this report, includes the 4-million-mile highway system, as well as more than 80 rail transit systems and 1,200 public bus systems. Public-sector spending on this infrastructure totaled about $256 billion in 2014, the latest year for which data are available ( Table 1 ), in addition to an unknown amount of private investment. About 75% of the $256 billion was spent on highways and 25% on public transportation. The public-sector spending was almost evenly divided between capital investment and operations and maintenance (O&M). Capital investment involves activities such as land acquisition, construction, resurfacing of highways, and purchase of transit vehicles. O&M includes such items as highway maintenance and law enforcement, transit vehicle operation, and administration. Capital costs were more than half of total highway expenditures and about one-third of public transportation expenditures.\nAbout half of all receipts for highway and street expenditures are generated by state governments, about $121 billion in 2014, with local governments generating 30%. The remainder comes from federal aid. Most highway spending is done on a pay-as-you-go basis, with a large majority of the revenue coming either from user fees, such as fuel taxes and tolls, or from general funds ( Table 2 ). Bond issuance, excluding short-term notes and refundings, raised only about 12% of the total revenue collected for highway purposes in 2014. These bonds were issued mainly by state agencies, with local governments accounting for 24% of issuance.\nLike spending on highways, spending on public transportation is mostly done on a pay-as-you-go basis. The major sources of funds are passenger fares, dedicated taxes (particularly sales and fuel taxes), and general funds. Although there is little information on bond issuance or private investment in public transportation, data published by the U.S. Department of Transportation (DOT) indicate that bond issuance for public transportation amounted to about $4 billion in 2010, about 7% of funds generated in that year. Local government provided the most support, followed by passenger fares and other operating income, state government, and the federal government ( Table 3 ).",
"Although less than one-fifth of surface transportation infrastructure expenditures are financed rather than being paid from current revenues, financing mechanisms are extremely important for large projects and, in some cases, are routinely part of state and local transportation budgets. Financing is normally not arranged at the federal level, as the federal government builds few transportation projects directly. Most state and local government budget rules require that debt financing only be for capital investment, not O&M. These general principles, however, have numerous exceptions not only across states but also across all government entities tasked with providing infrastructure.",
"\"Municipal bonds\" is a broad reference to a class of debt instruments that receive preferential income tax treatment. Generally, the interest on municipal bonds is excluded from federal income taxes, both individual and corporate. This tax preference for public-purpose bonds is estimated to reduce federal revenues by $187.7 billion over the FY2015-FY2019 window, including a $36.8 billion reduction in FY2017. Federal law allows for several variants of municipal bonds, not all of which can be used for surface transportation purposes.\nMunicipal bonds issued for transportation represent a significant share of total issuance. In calendar year 2015, $39.1 billion of municipal bonds were issued for transportation projects, or 11% of total issuance. Most of this financing was traditional governmental bonds backed by either a specific revenue stream or the general obligation of the issuing entity.\nMunicipal bonds issued for transportation and secured by revenue generated by the project financed with the bonds, such as a toll or user fee, would be considered private activity bonds in most cases. Congress has approved limited use of tax-exempt private activity bonds (PABs) for selected transportation projects as outlined in Section 142 of the Internal Revenue Code. These include airports, docks and wharves, mass commuting facilities, high-speed intercity rail facilities, and qualified highway or surface freight transfer facilities. The Secretary of Transportation must approve the use of PABs for qualified highway or surface freight transfer facilities and the aggregate amount allocated must not exceed $15 billion. As of July 7, 2016, $11.2 billion of the $15 billion had been allocated ( Table 4 ).\nBecause qualified private activity bonds are dependent on the success of the project for bond repayment, they have a greater level of default risk than general obligation bonds. Bonds that carry more risk compensate the investor for that risk through higher interest rates. Thus, the interest rates issuers must pay on qualified private activity bonds are generally higher than those on general obligation bonds. In many cases, users of the project will pay for the additional cost.\nMunicipal bonds cause a loss in general economic welfare, because the amount of the reduction in federal revenue exceeds the benefit conferred on the issuer. The holder of a tax-exempt bond receives a benefit equal to the amount of the interest payment multiplied by the holder's marginal tax rate. For example, an individual in the top bracket of 39.6% receives a tax benefit of $39.60 for every $100 in interest received. The issuer benefit is the difference between the taxable interest rate and the tax-exempt interest rate. For example, consider the case in which the yield on a 10-year, A-rated tax-exempt bond is 3.00%, while the yield on a 10-year, A-rated corporate bond is 3.50%. An issuer of $1 million in tax-exempt bonds would face an annual interest payment of $30,000, versus $35,000 if the bonds were taxable. The issuer is receiving an annual saving of $5,000, whereas a top-bracket investor in the bonds benefits from a much greater $13,860 annual reduction in tax liability ($35,000 x 39.6%).",
"In addition to traditional municipal bonds, state and local governments may issue tax-favored \"tax credit bonds\" (TCBs). TCBs take one of two forms: (1) investor credit or (2) issuer credit (direct payment). TCBs were first issued in the form of Qualified Zone Academy Bonds (QZABs), which were created by the Taxpayer Relief Act of 1997 (TRA 1997; P.L. 105-34 ) for school districts to use for school renovation (not including new construction), equipment, teacher training, and course materials. The school district is required to partner with a private entity that contributes 10% of bond proceeds for the project. Build America Bonds (BABs) were created in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) and could be used for any type of capital investment. Of total BAB issuance of $181 billion, approximately $40 billion, or 22%, was used for transportation projects before the legal authorization to issue such bonds expired on December 31, 2010.\nQZABs featured an investor credit only. The credit was intended to be set equal to 100% of the interest received. In contrast, BABs featured the direct pay option in addition to the investor credit option and the credit rate was set at 35%.",
"For QZABs with a 100% credit for investors, the method for determining the tax credit rate is the responsibility of the Secretary of the Treasury. The credit rate for investor credit TCBs is set higher than the municipal bond rate to compensate for the credit's taxability. Generally, to attract investors, the credit rate should yield a return greater than the prevailing municipal bond rate and at least equal to the after-tax rate for corporate bonds of similar maturity and risk. Importantly, however, the investor must evaluate the potential that in any given year, it may not have tax liability that it can offset with the credit. This additional risk reduces the value of the credit. Entities without U.S. income tax liability, such as U.S. pension funds and certain international investors, would find the investor tax credit of little value.\nFor issuers of investor tax credit bonds, the interest cost should be less than, or at least equal to, the next best financing alternative. In almost all cases, tax-exempt bonds would be the next best alternative for governmental issuers. For 100% tax credit bonds like QZABs, where the federal government is effectively paying all of the interest for the issuer, there is no question that the tax credit bond has a lower interest cost for issuers than do tax-exempt bonds. As the credit rate drops the issuer incurs a greater share of the interest cost.",
"The direct-pay tax credit bond model was first made available with BABs. In contrast to the earlier versions of tax credit bonds with only the investor credit option, BABs offered issuers the option of receiving the tax credit directly from Treasury rather than allowing investors to claim it. BAB issuers all chose the direct payment over the investor credit.\nWhen presented with the option of issuing an investor credit TCB or issuer direct payment TCB, municipal issuers are likely to choose the option with lowest net interest costs. For example, if the negotiated taxable interest rate on an issuer direct payment TCB is 8% on $100,000 of bond principal, then a bond with 35% credit amount would produce a credit worth $2,800 (8% times $100,000 times 35%). The interest cost to the issuer choosing the direct payment is $8,000 less the $2,800, or $5,200. If the tax-exempt rate of the bond is greater than 5.20% (requiring a payment of greater than $5,200), then the direct payment is a better option for the issuer.\nA U.S. Treasury report estimated that through March of 2010, the bonds had saved municipal issuers roughly $12 billion in interest costs. However, more recent developments, including the increase of marginal personal income tax rates with enactment of the American Taxpayer Relief Act of 2012 ( P.L. 112-240 ) and an Office of Management and Budget ruling that payments to issuers are subject to sequestration under the Budget Control Act of 2011 ( P.L. 112-25 ), have reduced the attractiveness of BABs relative to traditional tax-exempt bonds.",
"Grant anticipation bonds are tax-exempt securities issued by state and local agencies and backed by federal grants expected to be received in the future. The best-known variant is the Grant Anticipation Revenue Vehicle (GARVEE) bond, backed by a pledge of future federal highway apportionments. Similar bonds, known as Grant Anticipation Notes (GANs), may be backed by a pledge of future federal public transportation apportionments or by anticipated discretionary funding such as that from the Capital Investment Grant (New Starts) Program to build rail transit lines and bus rapid transit. In 2015, $1.2 billion of GARVEE bonds were issued by the states.",
"Private investment in surface transportation projects can be obtained by involving a private entity that borrows money from banks, issues bonds, and/or provides equity investment. Because of the costs of putting together such deals, private financing tends to be more suitable for large and costly projects rather than smaller, more routine ones. The public sector often retains a significant role in projects involving private finance, including a public funding or financing component. Private investments, therefore, are usually made in the context of a contractual arrangement with the public sector known as a public-private partnership, or \"P3.\"\nIn general, P3s involve greater private-sector responsibility for project tasks than the traditional model of project delivery, in which private companies bid for separate planning, design, or construction contracts offered by the public sector. Most P3s in surface transportation have been of the design-build variety in which project design and construction are combined into a single contract. Some involve more complicated design-build-finance-operate-maintain contracts, in which the private entity receives a concession to operate the project and collects fees from users for a specified period following the completion of construction.\nOnly a few P3s in the United States have involved long-term private financing. According to one study, from 1989 through early 2011 there were 96 transportation P3s worth a total of $54.3 billion. Of these, 11 projects, built at a total cost of $12.4 billion, included a long-term private financing component. However, a number of P3 deals with private financing have been created more recently. The Federal Highway Administration (FHWA) lists a total of 21 such projects from the late 1980s through June 2015 worth a total of $24.6 billion. P3s and private investment in surface transportation are relatively larger in many other countries, including Portugal, Spain, and Australia.\nTo be viable, P3s involving private financing typically require an anticipated project-related revenue stream from a source such as vehicle tolls, container fees, or, in the case of transit station development, building rents. In some cases, private-sector financing is backed by \"availability payments,\" regular payments made by government to the private entity based on negotiated quality and performance standards. Private-sector resources may come from an initial payment to lease an existing asset in exchange for future revenue, as with the Indiana Toll Road and Chicago Skyway, or they may arise from a newly developed asset that creates a new revenue stream. Either way, a facility user fee is often the key to unlocking private-sector resources.\nAs noted above, P3s delivering new assets have typically been large-scale projects of regional or national scope that rely on public funding and financing in addition to private financing. One example is the $2 billion I-495 High-Occupancy Toll Lanes project that opened for traffic on the Washington beltway in November 2012. Delivered by a P3 between Capital Beltway Express, LLC (a joint venture of Fluor and Transurban) and the Virginia Department of Transportation, the project included about $380 million in private equity and $589 million in private activity bonds, but also a $589 million federal TIFIA loan and almost $500 million in state funding ( Table 5 ).\nThe \"public\" in public-private partnerships typically refers to a state government, local government, or transit agency. The federal government, nevertheless, exerts influence over the prevalence and structure of P3s through its transportation programs, funding, and regulatory oversight. Probably the main way in which the federal government has encouraged P3s and private financing in transportation is through the TIFIA program that provides long-term, low-interest loans and other types of credit to project sponsors.\nDOT has also been mandated to support P3s in other ways. The department was authorized in the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ) to compile and make available best practices in the use of P3s, develop standard P3 model contracts, and provide technical assistance on P3 agreements. The Fixing America's Surface Transportation (FAST) Act ( P.L. 114-94 ) authorized the creation of a new bureau within DOT to consolidate federal transportation financing programs and support for P3s. To fulfill this mandate, DOT established the Build America Bureau in July 2016.\nThe Build America Bureau is responsible for administering TIFIA and the Railroad Rehabilitation and Improvement Financing (RRIF) program, the state infrastructure bank program, the allocation of private activity bonds, and the Nationally Significant Freight and Highway Projects Program (23 U.S.C. §117). It is also responsible for providing help to project sponsors with other DOT grant programs; establishing and disseminating best practices and providing technical assistance with innovative financing and public-private partnerships (P3s); ensuring transparency with P3s; developing procurement benchmarks; and working with project sponsors to navigate environmental reviews and permitting to reduce uncertainty and delays.\nThe FAST Act also allows formula highway funding for \"the creation and operation by a State of an office to assist in the design, implementation, and oversight of public-private partnerships\" (23 U.S.C. 133(b)(14)). In addition, The FAST Act (§1441) authorized a new Regional Infrastructure Accelerator Demonstration Program that will make grants \"to assist entities in developing improved infrastructure priorities and financing strategies for the accelerated development of a project that is eligible for funding under the TIFIA program.\" These projects typically involve other types of innovative financing and P3s. The FAST Act authorized $12 million in FY2016 from the general fund for the program, but these funds were not appropriated.\nOne of the purported advantages of P3s is risk transfer from the public agency to the private partner. The many different types of risks in the development and operation of infrastructure include the risk that construction and maintenance will cost more than planned and, with toll facilities, the risk that there will be less demand, and thus revenue, than estimated. Transferring these and other risks to the private sector is not necessarily a money saver, as the private partner will require compensation for assuming them, but it provides greater certainty for the public sector. However, not all the risks can or should be shifted to the private sector. As the Government Accountability Office points out, a major risk associated with transportation infrastructure projects that the private sector is unlikely to be able to accept is the delay and uncertainty associated with the environmental review process.\nAt least in some cases, the transfer of risk in a P3 may prove illusory, as major miscalculations may force the public sector to renegotiate the P3 contract or to assume project ownership. Difficulties with the 40-mile extension of SH-130 near Austin, TX, opened in October 2012 and financed and built by a P3 between the Texas Department of Transportation (TxDOT) and a private partner, illustrate the point. The toll road has had much lower traffic volumes than forecast and, therefore, is generating much less revenue than the concessionaire needs in order to repay its loans. In March 2013, in an effort to get more trucks to use the toll road, the state decided to subsidize the toll for trucks for one year. TxDOT paid the concessionaire $6 million as compensation for lost revenue. In March 2016, the concessionaire declared bankruptcy. TxDOT and the concessionaire have stated that this will not imperil the agreement or burden Texas taxpayers. However, the bankruptcy may affect the $430 million federal TIFIA loan to the project, the repayment of which was scheduled to begin in June 2017.\nCritics of P3s argue that the amount of private money involved in P3 deals is often a small share of the total, or subsidized by the public sector, or both; that risk transfer from the public to the private sector is often illusory; and that P3 contracts can limit the proper use of and government decisions about the transportation system. The Build America Bureau will also be responsible for ensuring greater transparency of P3s and the completion by the project sponsor of an analysis of the benefits and costs of procuring a project using a P3 versus other types of arrangements. This was one of the recommendations of a special panel set up by the House Transportation and Infrastructure Committee. Opponents of greater oversight worry about the effects of new requirements on the development of P3 agreements because of the extra time, expense, and uncertainties that they may cause.",
"There are several federal loan programs for surface transportation infrastructure. This section discusses the TIFIA and RRIF programs. Another source is Section 129 loans, which allow states to lend apportioned federal highway funding to support a project with a dedicated revenue stream (23 U.S.C. §129(a)(8)). According to FHWA, Section 129 loans have been used to finance two projects. One reason for this limited use may be that TIFIA provides a separate funding source for loans to similar types of projects.",
"TIFIA, enacted in 1998 as part of the Transportation Equity Act for the 21 st Century (TEA-21), provides federal credit assistance in the form of secured loans, loan guarantees, and lines of credit for construction of surface transportation projects. Loans and loan guarantees can be provided up to a maximum of 49% of project costs; lines of credit can be for an amount up to a maximum of 33% of project costs. Projects eligible for TIFIA assistance include highways and bridges, public transportation, intercity passenger bus and rail, intermodal connectors, and intermodal freight facilities. As of July 2016, according to DOT, TIFIA had provided assistance of $24.5 billion to 60 projects. The overall cost of the projects supported is estimated to be $88 billion.\nSeveral features of TIFIA financing make it attractive to project sponsors, including private-sector partners. Federal credit assistance provides funds at a low fixed rate (the Treasury rate for a similar maturity). Loans are available for up to 35 years from the date of substantial completion, repayments can be deferred for up to five years after substantial completion, and amortization can be flexible. TIFIA financing is also available with a senior or subordinate lien, but is typically used as subordinate debt, meaning it is in line to be repaid after the project's operational expenses and senior debt obligations. However, the TIFIA statute includes a provision which requires that in the event of a project bankruptcy, the federal government will be made equal with senior debt holders. This is referred to as the \"springing lien\" and has led some to ask whether TIFIA financing is truly subordinate. The springing lien issue notwithstanding, TIFIA financing is generally thought to reduce project risk, thereby helping to secure private financing at rates lower than would otherwise be possible.\nThere are a number of eligibility criteria for TIFIA assistance. One of the key eligibility criteria is creditworthiness. To be eligible, a project's senior debt obligations and the borrower's ability to repay the federal credit instrument must receive investment-grade ratings from at least one nationally recognized credit rating agency. The TIFIA assistance must also be determined to have several beneficial effects: fostering a public-private partnership, if appropriate; enabling the project to proceed more quickly; and reducing the contribution of federal grant funding. Other eligibility criteria include satisfying planning and environmental review requirements and being ready to contract out construction within 90 days after the obligation of assistance. Generally, a project must cost $50 million or more to be eligible for assistance, but the threshold is $15 million for intelligent transportation system projects and $10 million for transit oriented development projects, rural projects, and local projects. One further eligibility requirement is that loans must be repaid with a dedicated revenue stream, typically a project-related user fee but sometimes dedicated tax revenue. Table 6 provides examples of projects that have received a TIFIA loan and the primary means by which the loan is to be repaid.\nLimiting the federal share of project costs, encouraging private finance, and insisting on creditworthiness standards are ways in which the program attempts to rely on market discipline to limit the federal government's exposure to losses.\nAnother advantage from the federal point of view is that a relatively small amount of budget authority can be leveraged into a large amount of loan capacity. Because the government expects its loans to be repaid, an appropriation need only cover administrative costs and the subsidy cost of credit assistance. According to the Federal Credit Reform Act of 1990 (2 U.S.C. §661(a)) the subsidy cost is \"the estimated long-term cost to the government of a direct loan or a loan guarantee, calculated on a net present value basis, excluding administrative costs.\" A typical rule of thumb is that the average subsidy cost of a TIFIA loan is 10%, meaning that $1 million of budget authority can provide $10 million of loan capacity.\nThe FAST Act reduced the direct authorization of funding for TIFIA, a few years after it had been greatly increased in MAP-21 ( Figure 1 ). Seen in isolation, this reduces DOT's capacity to issue loans by approximately $7.25 billion in FY2016, assuming a 10% subsidy cost and excluding administrative costs. However, the FAST Act also allows states to use funds from two other highway programs, the discretionary Nationally Significant Freight and Highway Projects Program (FAST Act; §1105) and the formula National Highway Performance Program (NHPP) (FAST Act; §1106), to pay for the subsidy and administrative costs of credit assistance. This has the potential to increase TIFIA financing much above the $275 million direct authorization, but at the discretion of state departments of transportation.",
"Under RRIF (45 U.S.C. §821 et seq.), the Federal Railroad Administration (FRA) is authorized to provide loans and loan guarantees up to a total of $35 billion of unpaid principal, with $7 billion reserved for freight projects benefitting railroads other than the large Class I railroads. Direct loans generally can be up to 100% of a project's cost and for a maximum term of 35 years from the completion of the project. Interest is charged at the U.S. Treasury rate of a similar maturity. Eligible borrowers are state and local governments, government-sponsored authorities and corporations, railroads, joint ventures that include at least one of these other entities, freight rail shippers served by one railroad and wanting to connect a facility to a second railroad, and interstate compacts. Eligible projects include buying or improving rail facilities and equipment, refinancing debt for such purposes, developing new rail or intermodal facilities, and commercial and residential development around a station. Operating expenses are not an eligible purpose.\nThe RRIF does not receive an appropriation from Congress, but allows project sponsors to pay the subsidy cost (termed the credit risk premium). FRA evaluates applications for RRIF assistance by eligibility and the ability to repay a loan in terms of the applicant's creditworthiness and the value of collateral offered to secure the loan (45 U.S.C. §822(f)). These and other factors determine the credit risk premium that must be paid.\nThrough 2015 there have been 34 RRIF loan agreements totaling $2.7 billion. Loans have ranged in size from $967 million, made to the New York City Metropolitan Transportation Administration (MTA) in 2015, to $56,000, made in 2011 to C&J Railroad. Most loans have been made to Class II and Class III freight operators that are unable to get loans with comparable interest rates in the private market. Loans are typically at the lower end of the range. Some of the largest loans have been to passenger train operators. FRA announced in 2016 that the RRIF program will lend $2.45 billion to Amtrak, mainly for new trains on the Northeast Corridor.\nIn the last few years there has been greater interest in the RRIF program from less traditional borrowers, namely sponsors of proposed privately owned and operated high-speed passenger rail projects. Federal financing of these sorts of projects may be more risky than usual because the applicants are seeking much larger amounts of money, the projects involve developing new markets for passenger rail travel, and, in some cases, the applicants may have no collateral or collateral of little value if the project does not succeed.\nOne example is the proposal for a new, privately owned and operated high-speed intercity passenger rail service between the outskirts of Los Angeles (Victorville) and Las Vegas, a distance of about 185 miles. The private sponsors of this project, known as XpressWest, estimate its cost at $6.9 billion and have applied to borrow the majority of the funds from the RRIF program, with an additional $1.4 billion coming from private investors. In June 2013, according to a letter from the Secretary of Transportation to XpressWest, FRA suspended its review of the application, primarily it appears because XpressWest could not satisfy Buy America provisions that require iron, steel, and manufactured goods for a project financed with a RRIF loan be produced in the United States. In June 2016, XpressWest terminated its relationship with China Railway International U.S.A. Co. Ltd., which was to supply the trains, and said it intended \"to renew our request for support from the Federal Railroad Administration.\"",
"Another source of financing for surface transportation projects is state infrastructure banks (SIBs). Most of these were created in response to a program originally established by Congress in 1995 ( P.L. 104-59 ). According to a 2012 survey, 32 states had established a federally authorized SIB. Several states, among them California, Florida, Georgia, Kansas, Ohio, and Virginia, have SIBs that are unconnected to the federal program. Local governments have also begun to embrace the idea. For example, the City of Chicago has established a nonprofit organization, the Chicago Infrastructure Trust, as a way to attract private investment for public works projects, and Dauphin County, PA, has established an infrastructure bank to loan funds to the 40 municipalities within its borders and to private project sponsors. Funds for the loans are derived from a state tax on liquid fuels.\nAs part of the federal transportation program, a state can use some of its share of federal surface transportation funds to capitalize an SIB. This authority lapsed at the end of FY2009, but was restored in the FAST Act though FY2020. The FAST Act also provides authority for a TIFIA loan to a state infrastructure bank (SIB) to capitalize a \"rural project fund\" within the bank. There are some requirements in federal law for SIBs connected with the federal program (23 U.S.C. §610), but for the most part their structure and administration are determined at the state level. Most SIBs are housed within a state department of transportation, but at least one (Missouri) was set up as a nonprofit corporation and another (South Carolina) is a separate state entity.\nMost SIBs function as revolving loan funds, in which money is directly loaned to project sponsors and its repayment with interest provides funds to make more loans. Some SIBs, such as those in Florida and South Carolina, have the authority to use their initial capital as security for issuing bonds to raise further money as a source of loans, with loan repayments then used to service the bonds. SIBs also typically offer project sponsors other types of credit assistance, such as letters of credit, lines of credit, and loan guarantees.\nIn general, state infrastructure banks have not been significant participants in financing surface transportation projects. According to one survey, between 1995 and 2012 federal and nonfederal SIBs entered into about 1,100 agreements worth a total of $9 billion, an average of about $8 million per agreement. However, SIB activity has varied widely from state to state. Eight states—Pennsylvania, Ohio, California, Texas, Florida, Kansas, Missouri, and Arizona—account for three-quarters of SIB loans, and five states—South Carolina, Florida, Arizona, Texas, and California—account for three-quarters of the agreement value. The same survey found that 71% of the projects helped by SIBs were highway projects, which accounted for 88% of the value of all projects supported by SIBs. Aviation, water, transit, rail, and other types of projects accounted for the remaining activity.\nSeveral factors may explain the generally low level of activity of state infrastructure banks. It has been suggested that the capitalization of the banks has lagged because the federal funds that could be used have already been committed to traditional projects. Another suggestion is that there are relatively few small, local projects which have the ability to generate sufficient revenue to repay a loan. Tolling, for example, is often infeasible (due to low traffic volumes) or unpopular. Because projects funded by a federally authorized SIB must comply with federal regulations on matters such as environmental review and prevailing wages, project sponsors may decide it is cheaper and quicker to use funding from another source. Other concerns include how an SIB may affect a state's debt limit and credit rating, and also issues with creating an independent entity that can engage in off-budget financing. In some places, state law may inhibit the creation of an SIB.",
"The budget impact of federal assistance for debt finance depends on several factors specific to the type of bond. In addition, the perspective of evaluation is important. For the federal government, if the intent of assistance is to encourage more investment in the selected activity, then the assistance must reduce the cost to the issuer (i.e., the borrower, typically a state or local government) below the next best alternative. Federal assistance for debt finance is typically of two varieties, a tax preference or credit assistance.\nA federal tax preference for debt finance is generally limited to the following tactics: (1) excluding interest paid from investor income and (2) providing a tax credit to investors or issuers. Federal credit assistance may consist of (1) federal guarantee of debt instrument and (2) direct loans from the federal government. The budget impact of these four mechanisms can be viewed in general terms along a continuum.\nDirect loans could confer a fairly significant incentive for borrowers, though the potential budget impact would depend on the level of risk of the selected projects. Loan guarantees would offer similar benefits to issuers, though the structure of the guarantee could limit the risk exposure of the federal government. For example, the federal guarantee could be limited to a portion of the principal borrowed, thereby reducing the federal financial responsibility in the event of default. The nature of credit assistance for capital projects, however, would be most attractive for projects that face the highest alternative financing costs. Generally, this means the riskiest projects would be the most likely applicants for federal credit assistance, in which case, a credit assistance program could be relatively expensive from a budget perspective.\nUse of tax preferences reduces federal government risk relative to credit assistance, but there can still be a significant revenue impact. Tax credit bonds, particularly those with a high credit rate and a long term to maturity, offer the largest subsidy for the issuer. Accordingly, these bonds would generate potentially the largest revenue loss. Tax-exempt bonds offer a significantly smaller subsidy to issuers, but unlike tax credit bonds, they also provide a tax preference for investors. When both the issuer and investor subsidies are taken together, the revenue loss from tax-exempt bonds can exceed the revenue loss associated with a tax credit bond with a low rate and limited term.\nThe impact on the budget of the four debt finance alternatives presented here depends critically on the details of the specific proposal. Generally speaking, for a given amount of potential new capital investment, the largest potential impact would accompany direct loans. With direct loans, the federal government could potentially lose all proceeds loaned to the project. The potential budget impact of a tax-exempt bond subsidy, in contrast, is limited to the taxes that would have been collected on the interest payments on the debt.",
"",
"Tax credit bonds and tax-exempt bonds have often been used to encourage additional investment in selected sectors. As described earlier, public-sector debt finance is afforded unlimited access to tax-exempt bond financing for infrastructure projects under current law where generally applicable taxes (e.g., income taxes, sales taxes, and property taxes) are used to repay the debt. These are often called \"revenue bonds.\" Governments have also acted as conduits for private-sector investment for a variety of projects delineated in the Internal Revenue Code. Nongovernmental issuers, such as nonprofit hospitals and other nonhospital, nonprofit entities, can also issue tax-exempt bonds.",
"The Obama Administration's FY2017 budget includes a number of proposals offering preferential tax treatment for bond-financed infrastructure projects. The proposed America Fast Forward (AFF) Bond would be similar to the now expired BAB, but would offer a 28% direct payment to issuers, significantly less than the BAB program. In contrast to BABs, AFFs would also allow issuance by Section 501(c)(3) nonprofit entities and for all private activities subject to the state-by-state volume cap.\nThe reduced credit amount of 28% might limit interest in the bonds by issuers, particularly in light of possible budget sequester in future fiscal years. BAB payments, as well as all other direct payments for tax credit bonds, were reduced by 6.8% in FY2016. The introduction of AFF bonds is estimated to reduce budget deficits by $3 million over the 2017-2026 budget window.",
"The Administration's FY2017 budget proposal includes two provisions that would allow for an increase in the issuance of tax-exempt, qualified private activity bonds for transportation projects. Under current law, the use of tax-exempt, qualified private activity bonds for transportation projects is limited to a fixed $15 billion for the life of the program. The $15 billion is allocated to specific projects by the Secretary of Transportation. The Administration's FY2017 budget proposal includes a provision to increase this amount to $19 billion. Under current law, these bonds can be issued for \"(1) any surface transportation project, (2) any project for an international bridge or tunnel for which an international entity authorized under Federal or State law is responsible, or (3) any facility for the transfer of freight from truck to rail or rail to truck.\" The Administration's FY2017 budget includes several other provisions that would likely expand the issuance of private activity bonds. Among them was a proposal to create a new category of private activity bonds referred to as qualified public infrastructure bonds (QPIBs). The proposed bonds could be used for certain privately owned infrastructure, including airports, docks and wharves, and mass commuting facilities. These provisions are projected to generate a revenue loss of $4.54 billion over the 2017 to 2026 budget window.",
"Another option for Congress is to increase direct funding for or otherwise adjust the TIFIA and RRIF programs. The FAST Act cut direct funding to the TIFIA program, while allowing states to trade formula grant funding for a larger loan. At the moment states do not have to make that trade because the TIFIA program is not in danger of running out of budget authority. If the TIFIA program does exhaust its direct funding in the future, an unanswered question is whether states will voluntarily choose to use grant funding to pay the subsidy and administrative costs of a loan.\nThe FAST Act made several changes to the TIFIA program to broaden the types of projects eligible for support. This included allowing support for transit oriented development (TOD) projects, and lowering the cost threshold for rural and local projects. To encourage smaller projects, the FAST Act also provided funding to pay the application fees of projects costing $75 million or less. Whether or not these changes will lead to more loans, an overall increase in credit assistance, and thus greater infrastructure investment, is a question that might determine the call for more changes in the future.\nThe RRIF program has been little used over the years, most likely because borrowers have to pay the subsidy cost of credit assistance. This has changed recently due to major borrowing for publicly funded projects by MTA and Amtrak. Another project involving Amtrak, the Hudson River tunnels, has been mentioned as a possible recipient of a large loan. However, private freight railroads, the original focus of the RRIF program, have not borrowed to any great extent. Possibly the most effective way of increasing the use of the RRIF program by private as well as public borrowers would be to provide an appropriation to cover the subsidy cost. Another suggestion is to simplify the application process, particularly for smaller loans.",
"TIFIA and PABs remain important supports for P3s in surface transportation. While the TIFIA program appears to have enough budget authority to make loans for the foreseeable future, there is concern that the $15 billion PAB cap might be reached in the near future, inhibiting P3s. Monitoring, and increasing if necessary, the availability of assistance from these programs is probably the most important task for supporters of P3s at the federal level.\nCongress also may want to monitor whether language in MAP-21 and the FAST Act to support P3s is achieving its goal of increasing private investment in infrastructure.\nP3 skeptics might seek to limit the use of federal financing to encourage the development of P3s or seek to build on the transparency requirements contained in the FAST Act. An idea suggested in the past is for an Office of Public Benefit in FHWA to \"provide for the protection of the public interest in relation to highway toll projects and public-private partnership agreements on Federal-aid highways.\"",
"Many different formulations of a national infrastructure bank have been proposed in Congress over the past few years. Proponents typically see such a bank as a way to provide low-cost, long-term loans, loan guarantees, and lines of credit on flexible terms to support infrastructure projects. Policy choices include the following:\nInfrastructure type . Some proposals focus on one type, such as transportation or energy, but most would support a wider spectrum of sectors. Institutional form and governance . Most current proposals would create a wholly owned government corporation governed by political appointees. But other models exist, including placing the bank inside an existing government department and creating a government-sponsored enterprise with an independent board. Funding source . Under the Federal Credit Reform Act of 1990, credit assistance by the bank would be supported by an appropriation that pays the subsidy and administrative costs. Assuming a 10% subsidy cost, every $1 appropriated beyond the amount of administrative costs would enable the bank to lend $10 to projects. Alternatively, a bank could operate as a revolving fund, such that credit assistance and administrative costs are limited to the size of the appropriation, but funds from repaid loans could be used to make new loans. In some formulations an infrastructure bank would raise its own capital through bond issuance. Most proposals would allow the bank to offset some of its costs by charging fees.\nFive infrastructure bank proposals have been introduced in the 114 th Congress. Each proposes a national infrastructure bank created as a wholly government-owned corporation, but with somewhat different governance, eligibility rules, and funding mechanisms ( Table 7 ). The Green Bank Act is not discussed here, as it limits support to energy projects.\nThe Partnership to Build America Act of 2015 ( H.R. 413 ) would create the American Infrastructure Fund (AIF) with $50 billion of repatriated foreign earnings. The companies repatriating the earnings would receive tax benefits in return for investing a certain share of the earnings in 50-year bonds paying 1% interest. Infrastructure sectors eligible for loans and loan guarantees from the AIF would include transportation, energy, water, communications, and education. In addition, H.R. 413 would permit the AIF to make equity investments (i.e., an ownership stake) up to a maximum of 20% of project costs.\nThe National Infrastructure Development Bank Act ( H.R. 3337 ) proposes to create the National Infrastructure Development Bank (NIDB) as a wholly owned government corporation. The NIDB would be authorized to aid transportation, energy, environmental, and telecommunications infrastructure projects. In addition to providing loans and loan guarantees, the NIDB would be permitted to subsidize the interest on a new type of taxable bond called an American Infrastructure Bond (AIB). AIBs could be issued by eligible infrastructure project sponsors. An amount equivalent to the federal taxes paid by AIB holders would be credited to the NDIB for assistance to other eligible infrastructure projects. The NIDB also would be capitalized with $25 billion from the general fund.\nThe Building and Renewing Infrastructure for Development and Growth in Employment (BRIDGE) Act ( S. 1589 ) proposes to create the Infrastructure Financing Authority (IFA) as a wholly owned government corporation. The IFA would be authorized to provide loans and loan guarantees to sponsors of projects in transportation, energy, and water. Modifications to the list of eligible project types would be possible by a vote of five or more of the seven-member board of directors. The act authorizes an appropriation of $10 billion to capitalize the authority. The act also authorizes the collection of fees from applicants and for recipients of assistance to pay all or part of the federal government's subsidy cost. The act would create an Office of Technical and Rural Assistance within the IFA to identify and develop projects for financing in cooperation with project sponsors. At least 5% of the budget authority made available by the BRIDGE Act would have to be used to assist rural projects.\nThe Build USA Act ( S. 1296 ) would establish the American Infrastructure Bank as a wholly owned government corporation. The bank would be authorized to make loans and loan guarantees to state and local governments for highway projects. The bank would be capitalized with taxes on repatriated foreign earnings, the issuance of its own bonds, and 10% of federal highway formula funds remitted voluntarily by states. The bank would be authorized to return the other 90% of the funds remitted by a state with different and possibly more flexible federal requirements than came with the original formula funds.\nPotential advantages of an infrastructure bank include the leveraging of state, local, and private-sector investment and data-driven project selection. Another potential advantage might be its ability to develop a staff specialized in infrastructure finance, although this might be possible in more traditional settings, as the Build America Bureau illustrates.\nPotential drawbacks of a national infrastructure bank include the limited number of suitable projects for support, politically driven project selection, and the duplication of existing programs, such as the TIFIA program. A bank may also not be the lowest-cost means of increasing infrastructure spending. The Congressional B udget Office notes that a special entity issuing its own debt would not be able to offer the low interest and issuance costs of the U.S. Treasury.",
"One alternative to creating a national infrastructure bank could be enhancing the state infrastructure banks that already exist in many states. One of the biggest stumbling blocks to federally authorized SIBs has been capitalization. This is because federal grant funds that could be used to capitalize a SIB have typically been committed elsewhere. It is too soon to know if a FAST Act provision that provides authority for a TIFIA loan to a SIB will help in this regard. Other ideas that have been proposed but not enacted include dedicating federal funds to SIBs ( H.R. 7 , 112 th Congress) and authorizing SIBs to issue a type of tax credit bond ( S. 1250 , 113 th Congress)."
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"question": [
"How is investment in surface transportation infrastructure funded?",
"Why is financing not normally arranged at the federal level?",
"What does this report discuss?",
"What is the federal government's largest source of support for surface transportation infrastructure?",
"Why must states contribute their own resources?",
"How does the federal government support additional infrastructure?",
"How does the federal government support project finance?",
"What is the most costly financing mechanism?",
"What is the burden of financing with less federal support?",
"How can projects be financed with less federal support?",
"How could Congress modify the federal role in surface transportation financing?"
],
"summary": [
"Investment in surface transportation infrastructure is funded mainly with current receipts from taxes, tolls, and fares, but it is financed by public-sector borrowing and, in some cases, private borrowing and private equity investment.",
"Financing is normally not arranged at the federal level, as the federal government builds few transportation projects directly.",
"This report discusses current federal programs that support the use of debt finance and private investment to build and rebuild highways and public transportation. It also considers legislative options intended to encourage greater infrastructure financing in the future.",
"The federal government's largest source of support for surface transportation infrastructure is the Highway Trust Fund (HTF), which is funded principally by taxes on gasoline and diesel fuel.",
"State governments, local governments, and transit agencies must also contribute their own resources because grants from the HTF do not meet states' entire surface transportation capital needs.",
"The federal government supports additional infrastructure spending by providing a tax exclusion for owners of municipal bonds, or \"munis,\" issued by state and local governments.",
"The federal government also supports project finance through loan programs, such as the Transportation Infrastructure Finance and Innovation Act (TIFIA) program and the Railroad Rehabilitation and Improvement Financing (RRIF) program, which can help leverage private investment via public-private partnerships (P3s), and through federally authorized state infrastructure banks (SIBs).",
"All of these financing mechanisms impact the federal budget, although none are as costly as federal grant funding.",
"With less federal support, financing places a greater burden on state and local governments to identify revenue sources to repay loans or to provide a return to private investors.",
"In many cases, nonfederal revenue to finance a project is provided by a highway or bridge toll, but it could be a pledge of future sales tax or real estate tax revenue.",
"1. Creation of a new type of bond offering federal tax credits to investors in infrastructure. 2. Changes to the TIFIA and RRIF programs. 3. Greater encouragement for P3s. 4. Creation of a national infrastructure bank to provide low-cost, long-term loans for infrastructure on flexible terms. 5. Enhancement of SIBs that already exist in many states, possibly with dedicated federal funding."
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{
"title": [
"",
"Introduction",
"The President's FY2020 Budget Request",
"Federal R&D Funding Perspectives",
"Federal R&D by Agency",
"Federal R&D by Character of Work, Facilities, and Equipment",
"Federal Role in U.S. R&D by Character of Work",
"Federal R&D by Agency and Character of Work Combined",
"Multiagency R&D Initiatives",
"Networking and Information Technology Research and Development Program (NITRD)",
"U.S. Global Change Research Program (USGCRP)",
"National Nanotechnology Initiative (NNI)",
"American Artificial Intelligence Initiative",
"National Quantum Initiative",
"Other Initiatives",
"FY2020 Appropriations Status",
"Department of Defense21",
"Department of Health and Human Services",
"National Institutes of Health29",
"Department of Energy53",
"National Aeronautics and Space Administration55",
"National Science Foundation57",
"Department of Agriculture62",
"Agricultural Research Service",
"National Institute of Food and Agriculture",
"National Agricultural Statistics Service",
"Economic Research Service",
"Department of Commerce",
"National Institute of Standards and Technology67",
"National Oceanic and Atmospheric Administration73",
"Department of the Interior88",
"U.S. Geological Survey",
"Other DOI Components",
"Department of Veterans Affairs96",
"Department of Transportation98",
"Federal Aviation Administration",
"Federal Highway Administration",
"National Highway Traffic Safety Administration",
"Other DOT Components",
"Department of Homeland Security100",
"Environmental Protection Agency101"
],
"paragraphs": [
"",
"The 116 th Congress continues its interest in U.S. research and development (R&D) and in evaluating support for federal R&D activities. The federal government has played an important role in supporting R&D efforts that have led to scientific breakthroughs and new technologies, from jet aircraft and the internet to communications satellites, shale gas extraction, and defenses against disease. In recent years, widespread concerns about the federal debt, recent and projected federal budget deficits, and federal budget caps have driven difficult decisions about the prioritization of R&D, both in the context of the entire federal budget and among competing needs within the federal R&D portfolio. Increases in the budget caps for FY2018 and FY2019 reduced some of the pressure affecting these decisions, but the concerns remain and the caps for FY2020 have not been increased.\nThe U.S. government supports a broad range of scientific and engineering R&D. Its purposes include specific concerns such as addressing national defense, health, safety, the environment, and energy security; advancing knowledge generally; developing the scientific and engineering workforce; and strengthening U.S. innovation and competitiveness in the global economy. Most of the R&D funded by the federal government is performed in support of the unique missions of individual funding agencies.\nThe federal R&D budget is an aggregation of the R&D activities of these agencies. There is no single, centralized source of R&D funds. Agency R&D budgets are developed internally as part of each agency's overall budget development process. R&D funding may be included either in accounts that are entirely devoted to R&D or in accounts that include funding for non-R&D activities. Agency budgets are subjected to review, revision, and approval by the Office of Management and Budget (OMB) and become part of the President's annual budget submission to Congress. The federal R&D budget is then calculated by aggregating the R&D activities of each federal agency.\nCongress plays a central role in defining the nation's R&D priorities as it makes decisions about the level and allocation of R&D funding—overall, within agencies, and for specific programs. In recent years, some Members of Congress have expressed concerns about the level of federal spending (for R&D and for other purposes) in light of the federal deficit and debt. Other Members of Congress have expressed support for increased federal spending for R&D as an investment in the nation's future competitiveness. As Congress acts to complete the FY2020 appropriations process, it faces two overarching issues: the amount of the federal budget to be spent on federal R&D and the prioritization and allocation of the available funding.\nThis report begins with a discussion of the overall level of R&D in President Trump's FY2020 budget request, followed by analyses of R&D funding in the request from a variety of perspectives and for selected multiagency R&D initiatives. The remainder of the report discusses and analyzes the R&D budget requests of selected federal departments and agencies that, collectively, account for approximately 99% of total federal R&D funding.\nSelected terms associated with federal R&D funding are defined in the text box on the next page. Appendix A provides a list of acronyms and abbreviations.",
"On March 11, 2019, President Trump released his proposed FY2020 budget. He provided additional details the following week.\nCompletion of the FY2019 budget process on February 15, 2019, more than four months after the start of FY2019, as well as a government shutdown, led to both a delay in the scheduled release of the President's FY2020 budget request, and the use by the Office of Management and Budget of a mix of estimated continuing appropriations act FY2019 funding levels (generally, for agencies whose FY2019 appropriations were enacted after the start of FY2019) and enacted FY2019 funding levels (generally, for agencies whose appropriations were enacted prior to the start of FY2019). As a result, the aggregate (total) FY2019 R&D funding levels for all agencies in the Analytical Perspectives addendum to the President's FY2020 budget are estimated \"using FY 2019 enacted appropriations where available and annualized Continuing Resolution [levels] for agencies without enacted appropriations prior to Feb. 15, 2019.\" With enactment of the remaining FY2019 appropriations acts in the Consolidated Appropriations Act, 2019 (P.L. 116-6), the Administration's estimated aggregate R&D funding level no longer accurately reflects total enacted FY2019 R&D funding. OMB has not issued a document with comprehensive R&D figures for each agency or in aggregate.\nTherefore, the analysis of government-wide R&D funding in this report, as well as of some of the individual agency analyses, compares the President's request for FY2020 to the FY2018 actual level. As information about the agencies' FY2019 R&D levels becomes available, the agency sections of this report will be updated to reflect that information and to make comparisons to the President's FY2020 request.\nPresident Trump is proposing approximately $134.1 billion for R&D for FY2020, a decrease of $1.7 billion (1.2%) below the FY2018 level of $135.8 billion. Adjusted for inflation, the President's FY2020 R&D request represents a constant-dollar decrease of 5.2% from the FY2018 actual level.\nThe President's request includes continued R&D funding for existing single-agency and multiagency programs and activities, as well as new initiatives. This report provides government-wide, multiagency, and individual agency analyses of the President's FY2020 request as it relates to R&D and related activities. Additional information and analysis will be included as the House and Senate act on the President's budget request through appropriations bills.",
"Federal R&D funding can be analyzed from a variety of perspectives that provide different insights. The following sections examine the data by agency, by the character of the work supported, and by a combination of these two perspectives.",
"Congress makes decisions about R&D funding through the authorization and appropriations processes primarily from the perspective of individual agencies and programs. Table 1 provides data on R&D funding by agency for FY2018 (actual), FY2019 (enacted, for selected agencies), and FY2020 (request). Enacted data for FY2019 is provided only for agencies whose FY2019 appropriations process was completed before the FY2020 budget request was finalized.\nUnder the request, eight federal agencies would receive more than 97% of total federal R&D funding in FY2020: the Department of Defense, 44.3%; Department of Health and Human Services (HHS), primarily the National Institutes of Health (NIH), 25.1%; Department of Energy (DOE), 11.0%; National Aeronautics and Space Administration, 8.4%; National Science Foundation (NSF), 4.3%; Department of Agriculture (USDA), 1.8%; Department of Commerce (DOC), 1.3%; and Department of Veterans Affairs (VA), 1.0%. This report provides an analysis of the R&D budget requests for these agencies, as well as for the Department of Homeland Security (DHS), Department of the Interior (DOI), Department of Transportation (DOT), and Environmental Protection Agency (EPA).\nAll but three federal agencies would see their R&D funding decrease under the President's FY2020 request compared to FY2018. The only agencies with increased R&D funding in FY2020 relative to the FY2018 level would be DOD (up $7.077 billion, 13.5%), VA (up $39 million, 3.0%), and DOT (up $33 million, 3.2%). The agencies with largest R&D funding declines in the FY2020 request compared to FY2018 (as measured in dollars) would occur in the budgets of HHS (down $3.249 billion, 8.8%), DOE (down $2.764 billion, 15.8%), NSF (down $567 million, 29.7%), and NASA (down $475 million, 4.0%).\nAmong agencies for which FY2019 enacted funding is shown in the President's budget, FY2020 R&D funding would increase only for DOD (up $3.631 billion, 6.5%). HHS R&D funding would decline by $4.954 billion (12.8%). DOE R&D funding would decline by $3.075 billion (17.3%). VA R&D funding would decline by $17 million (1.3%). Department of Education R&D funding would decline by $34 million (13.2%). See Table 1 .",
"Federal R&D funding can also be examined by the character of work it supports—basic research, applied research, or development—and by funding provided for construction of R&D facilities and acquisition of major R&D equipment. (See Table 2 .) President Trump's FY2020 request includes $35.164 billion for basic research, down $1.452 billion (4.0%) from FY2018; $40.707 billion for applied research, down $4.264 billion (10.5%); $59.108 billion for development, up $4.543 billion (8.3%); and $3.382 billion for facilities and equipment, down $495 million (12.8%).",
"A primary policy justification for public investments in basic research and for incentives (e.g., tax credits) for the private sector to conduct research is the view, widely held by economists, that the private sector will, left on its own, underinvest in basic research from a societal perspective. The usual argument for this view is that the social returns (i.e., the benefits to society at large) exceed the private returns (i.e., the benefits accruing to the private investor, such as increased revenues or higher stock value). Other factors that may inhibit corporate investment in basic research include long time horizons for achieving commercial applications (diminishing the potential returns due to the time value of money), high levels of technical risk/uncertainty, shareholder demands for shorter-term returns, and asymmetric and imperfect information.\nThe federal government is the nation's largest supporter of basic research, funding 42% of U.S. basic research in 2017. Business funded 30% of U.S. basic research in 2017, with state governments, universities, and other nonprofit organizations funding the remaining 29%. For U.S. applied research, business is the primary funder, accounting for an estimated 55% in 2017, while the federal government accounted for an estimated 33%. State governments, universities, and other nonprofit organizations funded the remaining 12%. Business also provides the vast majority of U.S. funding for development. Business accounted for 85% of development funding in 2017, while the federal government provided 13%. State governments, universities, and other nonprofit organizations funded the remaining 2% (see Figure 1 ).",
"Federal R&D funding can also be viewed from the combined perspective of each agency's contribution to basic research, applied research, development, and facilities and equipment. Table 3 lists the three agencies with the most funding in each of these categories as proposed in the President's FY2020 budget. The overall federal R&D budget reflects a wide range of national priorities, including supporting advances in spaceflight, developing new and affordable sources of energy, and understanding and deterring terrorist groups. These priorities and the mission of each individual agency contribute to the composition of that agency's R&D spending (i.e., the allocation among basic research, applied research, development, and facilities and equipment). In the President's FY2020 budget request, the Department of Health and Human Services, primarily NIH, would account for nearly half (47.7%) of all federal funding for basic research. HHS would also be the largest federal funder of applied research, accounting for about 45.6% of all federally funded applied research in the President's FY2020 budget request. DOD would be the primary federal funder of development, accounting for 87.4% of total federal development funding in the President's FY2020 budget request. DOE would be the primary federal funder of facilities and equipment, accounting for 50.5% of total federal facilities and equipment funding in the President's FY2020 budget request.",
"For many years, presidential budgets have reported on multiagency R&D initiatives. Often, they have also provided details of agency funding for these initiatives. Some of these efforts have a statutory basis—for example, the Networking and Information Technology Research and Development (NITRD) program, the National Nanotechnology Initiative (NNI), and the U.S. Global Change Research Program (USGCRP). These programs generally produce annual budget supplements identifying objectives, activities, funding levels, and other information, usually published shortly after the presidential budget release. Other multiagency R&D initiatives have operated at the discretion of the President without such a basis and may be eliminated at the discretion of the President. President Trump's FY2020 budget is largely silent on funding levels for these efforts and whether any or all of the nonstatutory initiatives will continue. Some activities related to these initiatives are discussed in agency budget justifications and may be addressed in the agency analyses later in this report. This section provides available multiagency information on these initiatives and will be updated as additional information becomes available.",
"Established by the High-Performance Computing Act of 1991 ( P.L. 102-194 ), the Networking and Information Technology Research and Development program is the primary mechanism by which the federal government coordinates its unclassified networking and information technology R&D investments in areas such as supercomputing, high-speed networking, cybersecurity, software engineering, and information management. In FY2019, 21 agencies are NITRD members; nonmember agencies also participate in NITRD activities. NITRD efforts are coordinated by the National Science and Technology Council (NSTC) Subcommittee on Networking and Information Technology Research and Development.\nP.L. 102-194 , as reauthorized by the American Innovation and Competitiveness Act of 2017 ( P.L. 114-329 ), requires the director of NITRD to prepare an annual report to be delivered to Congress along with the President's budget request. This annual report is to include, among other things, detailed information on the program's budget for the current and previous fiscal years, and the proposed budget for the next fiscal year. The latest annual report was published in August 2018 and related to the FY2019 budget request. President Trump requested $5,277.6 million for NITRD research in FY2019. In FY2017, NITRD funding was $5,126.4 million. The President's FY2020 budget does not identify aggregate funding levels for NITRD for FY2018 (actual), FY2019 (estimate), or FY2020 (request). The FY2020 NSF budget request includes $1.20 billion in NITRD funding for FY2020, a decrease of $98.2 million (7.6%) from FY2018 (actual).\nFor additional information on the NITRD program, see CRS Report RL33586, The Federal Networking and Information Technology Research and Development Program: Background, Funding, and Activities , by Patricia Moloney Figliola. Additional NITRD information also can be obtained at https://www.nitrd.gov .",
"The U.S. Global Change Research Program coordinates and integrates federal research and applications to understand, assess, predict, and respond to human-induced and natural processes of global change. The program seeks to advance global climate change science and to \"build a knowledge base that informs human responses to climate and global change through coordinated and integrated Federal programs of research, education, communication, and decision support.\" In FY2018, 13 departments and agencies participated in the USGCRP. USGCRP efforts are coordinated by the NSTC Subcommittee on Global Change Research. Each agency develops and carries out its activities as its contribution to the USGCRP, and funds are appropriated to each agency for those activities; those activities may or may not be identified as associated with the USGCRP in the President's annual budget proposal or each agency's budget justification to Congress.\nThe Global Change Research Act of 1990 (GCRA) (P.L. 101-606) requires each federal agency or department involved in global change research to report annually to Congress on each element of its proposed global change research activities, as well as the portion of its budget request allocated to each element of the program. The President is also required to identify those activities and the annual global change research budget in the President's annual budget request to Congress. Some, but not all, participating agencies provide the required information in their budget justifications.\nIn addition, in almost each of the past 17 years, language in appropriations laws has required the President to submit a comprehensive report to the appropriations committees \"describing in detail all Federal agency funding, domestic and international, for climate change programs, projects, and activities … including an accounting of funding by agency….\" The President's most recent report was submitted in January 2017 for the FY2017 request. This section will be updated when the USGCRP updates its budget information.\nThe President's FY2020 budget does not identify aggregate funding levels for USGCRP for FY2018 (actual), FY2019 (estimate), or the FY2020 (request). Without budget reports pursuant to the GCRP Act or appropriations laws, the budget authority or expenditures publicly reported by agencies is generally insufficient to independently build a complete and consistent estimate of funding for the USGCRP. Below are results of CRS research for selected agencies, which incompletely represent federal funding in recent years thats support the USGCRP.\nThe President's FY2020 budget does not identify aggregate funding levels for USGCRP for FY2018 (actual), FY2019 (estimate), or the FY2020 (request). Without budget reports pursuant to the GCRP Act or appropriations laws, the budget authority or expenditures publicly reported by agencies is generally insufficient to independently build a complete and consistent estimate of funding for the USGCRP. Table 5 presents results of CRS research for selected agencies, which incompletely represent federal funding in recent years that supports the USGCRP.\nFor additional information on the USGCRP, see CRS Report R43227, Federal Climate Change Funding from FY2008 to FY2014 , by Jane A. Leggett, Richard K. Lattanzio, and Emily Bruner. Additional USGCRP information also can be obtained at http://www.globalchange.gov .",
"Launched in FY2001, the National Nanotechnology Initiative is a multiagency R&D initiative to advance understanding and control of matter at the nanoscale, where the physical, chemical, and biological properties of materials differ in fundamental and useful ways from the properties of individual atoms or bulk matter. In 2003, Congress enacted the 21 st Century Nanotechnology Research and Development Act ( P.L. 108-153 ), providing a legislative foundation for some of the activities of the NNI. NNI efforts are coordinated by the NSTC Subcommittee on Nanoscale Science, Engineering, and Technology (NSET). In FY2019, the President's request included NNI funding for 16 federal departments and independent agencies and commissions with budgets dedicated to nanotechnology R&D. The NSET includes other federal departments and independent agencies and commissions with responsibilities for health, safety, and environmental regulation; trade; education; intellectual property; international relations; and other areas that might affect or be affected by nanotechnology.\nP.L. 108-153 requires the NSTC to prepare an annual report to be delivered to Congress at the time the President's budget request is sent to Congress. This annual report is to include detailed information on the program's budget for the current fiscal year and the program's proposed budget for the next fiscal year, as well as additional information and data related to the performance of the program. The latest annual report was published in August 2018. President Trump requested $1,395.6 million for NNI research in FY2019. In FY2017, NNI funding was $1,552.3 million. The President's FY2020 budget does not identify aggregate funding levels for NNI for FY2018 (actual), FY2019 (enacted), or FY2020 (request). The NSF budget request includes $389 million in NNI funding for FY2020, $179 million (31.4%) less than in FY2018.\nFor additional information on the NNI, see CRS Report RL34401, The National Nanotechnology Initiative: Overview, Reauthorization, and Appropriations Issues , by John F. Sargent Jr. Additional NNI information also can be obtained at http://www.nano.gov .",
"In February 2019, President Trump signed Executive Order 13859 establishing an American Artificial Intelligence Initiative to accelerate national leadership in artificial intelligence (AI). Among other things, the EO directs the heads of implementing agencies that perform or fund R&D to consider AI as an agency R&D priority, in accordance with their missions and consistent with applicable law. In particular, the EO directs the Secretaries of Defense, Commerce, Health and Human Services, and Energy, the Administrator of the National Aeronautics and Space Administration, and the Director of the National Science Foundation to prioritize the allocation of high-performance computing resources for AI-related applications through increased assignment of discretionary funding and any other appropriate mechanisms. According to Analytical Perspectives, the President's FY2020 budget would provide approximately $850 million for this initiative to the Department of Energy, National Institutes of Health, National Institute of Standards and Technology, and National Science Foundation.",
"In December 2018, President Trump signed the National Quantum Initiative Act (P.L. 115-368) establishing a National Quantum Initiative with the stated purpose of ensuring \"the continued leadership of the United States in quantum information science [QIS] and its technology applications.\" The act requires the establishment of a 10-year plan to accelerate the development of QIS and technology applications. According to Analytical Perspectives , the President's FY2020 budget includes approximately $430 million for this initiative at DOD, DOE, NIST, and NSF.",
"A number of presidential initiatives without statutory foundations were in operation at the end of the Obama Administration, but have not been addressed explicitly in President Trump's FY2018, FY2019, or FY2020 budgets. Two of these are part of the Advanced Manufacturing Partnership (AMP): the National Robotics Initiative (NRI) and Manufacturing USA (formerly known as the National Network for Manufacturing Innovation or NNMI).\nAccording to Analytical Perspectives , the President's FY2020 budget\nprioritizes R&D aimed at advances in manufacturing and the integration of those advances into the domestic supply chain to reduce U.S. reliance on foreign sources of critical products. Budget priorities include intelligent manufacturing systems, materials and processing technologies, advances in semiconductor design and fabrication, and innovations in food and agricultural manufacturing.\nOther initiatives include the Cancer Moonshot, the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative, the Precision Medicine Initiative (PMI), the Materials Genome Initiative (MGI), and an effort to double federal funding for clean energy R&D. Some of the activities of these initiatives are discussed in agency budget justifications and the agency analyses later in this report.",
"The remainder of this report provides a more in-depth analysis of R&D in 12 federal departments and agencies that, in aggregate, receive nearly 99% of total federal R&D funding. Agencies are presented in order of the size of their FY2020 R&D budget requests, with the largest presented first.\nAnnual appropriations for these agencies are provided through 9 of the 12 regular appropriations bills. For each agency covered in this report, Table 7 shows the corresponding regular appropriations bill that provides primary funding for the agency, including its R&D activities.\nBecause of the way that agencies report budget data to Congress, it can be difficult to identify the portion that is R&D. Consequently, R&D data presented in the agency analyses in this report may differ from R&D data in the President's budget or otherwise provided by OMB.\nFunding for R&D is often included in appropriations line items that also include non-R&D activities; therefore, in such cases, it may not be possible to identify precisely how much of the funding provided in appropriations laws is allocated to R&D specifically. In general, R&D funding levels are known only after departments and agencies allocate their appropriations to specific activities and report those figures.\nAs of the date of this report, the House had completed action on none of the 12 regular appropriations bills for FY2020; the Senate had completed action on none of the bills. None of the 12 had been enacted as law.\nThis report will be updated as Congress takes additional actions to complete the FY2020 appropriations process.\nIn addition to this report, CRS produces individual reports on each of the appropriations bills. These reports can be accessed via the CRS website at http://www.crs.gov/iap/appropriations . Also, the status of each appropriations bill is available on the CRS web page, Status Table of Appropriations , available at http://www.crs.gov/AppropriationsStatusTable/Index .",
"The mission of the Department of Defense is to provide \"the military forces needed to deter war and ensure our nation's security.\" Congress supports research and development activities at DOD primarily through the department's Research, Development, Test, and Evaluation (RDT&E) funding. These funds support the development of the nation's future military hardware and software and the science and technology base upon which those products rely.\nMost of what DOD spends on RDT&E is appropriated in Title IV of the annual defense appropriations bill. (See Table 8 .) However, RDT&E funds are also appropriated in other parts of the bill. For example, RDT&E funds are appropriated as part of the Defense Health Program, the Chemical Agents and Munitions Destruction Program, and the National Defense Sealift Fund. The Defense Health Program (DHP) supports the delivery of health care to DOD personnel and their families. DHP funds (including the RDT&E funds) are requested through the Defense-wide Operations and Maintenance appropriations request. The program's RDT&E funds support congressionally directed research on breast, prostate, and ovarian cancer; traumatic brain injuries; orthotics and prosthetics; and other medical conditions. Congress appropriates funds for this program in Title VI (Other Department of Defense Programs) of the defense appropriations bill. The Chemical Agents and Munitions Destruction Program supports activities to destroy the U.S. inventory of lethal chemical agents and munitions to avoid future risks and costs associated with storage. Funds for this program are requested through the Defense-wide Procurement appropriations request. Congress appropriates funds for this program also in Title VI. The National Defense Sealift Fund supports the procurement, operation and maintenance, and research and development associated with the nation's naval reserve fleet and supports a U.S. flagged merchant fleet that can serve in time of need. In some fiscal years, RDT&E funding for this effort is requested in the Navy's Procurement request and appropriated in Title V (Revolving and Management Funds) of the appropriations bill.\nRDT&E funds also have been requested and appropriated as part of DOD's separate funding to support efforts in what the George W. Bush Administration termed the Global War on Terror (GWOT) and what the Obama and Trump Administrations have referred to as Overseas Contingency Operations (OCO). In appropriations bills, the term Overseas Contingency Operations/Global War on Terror (OCO/GWOT) has been used; President Trump's FY2020 budget uses the term Overseas Contingency Operations. Typically, the RDT&E funds appropriated for OCO activities go to specified Program Elements (PEs) in Title IV.\nAccording to the Comptroller of the Department of Defense, the FY2020 OCO request is divided into three requirement categories—direct war, enduring, and OCO for base. For purposes of this report, these categories of OCO funding requests will be reported collectively.\nIn addition, OCO/GWOT-related requests/appropriations have included money for a number of transfer funds. In the past, these have included the Iraqi Freedom Fund (IFF), the Iraqi Security Forces Fund, the Afghanistan Security Forces Fund, and the Pakistan Counterinsurgency Capability Fund. Congress typically has made a single appropriation into each such fund and authorized the Secretary to make transfers to other accounts, including RDT&E, at his discretion. These transfers are eventually reflected in Title IV prior-year funding figures.\nFor FY2020, the Trump Administration is requesting $104.294 billion for DOD's Title IV RDT&E PEs (base plus OCO), $8.334 billion (8.7%) above the enacted FY2019 level. (See Table 8 .) In addition, the request includes $732.3 million in RDT&E through the Defense Health Program (DHP; down $1.447 billion, 66.4% from FY2019), $875.9 million in RDT&E through the Chemical Agents and Munitions Destruction program (down $10.8 million, 1.2% from FY2019), and $3.0 million for the Inspector General for RDT&E-related activities (down $1.0 million, 25.4% from FY2019). The FY2020 budget included no RDT&E funding via the National Defense Sealift Fund, the same as the FY2019 enacted level.\nRDT&E funding can be analyzed in different ways. RDT&E funding can be characterized organizationally. Each of military department requests and receives its own RDT&E funding. So, too, do various DOD agencies (e.g., the Missile Defense Agency and the Defense Advanced Research Projects Agency), collectively aggregated within the Defense-Wide account. RDT&E funding also can be characterized by budget activity (i.e., the type of RDT&E supported). Those budget activities designated as 6.1, 6.2, and 6.3 (basic research, applied research, and advanced technology development, respectively) constitute what is called DOD's Science and Technology program (S&T) and represent the more research-oriented part of the RDT&E program. Budget activities 6.4 and 6.5 focus on the development of specific weapon systems or components for which an operational need has been determined and an acquisition program established. Budget activity 6.6 provides management support, including support for test and evaluation facilities. Budget activity 6.7 supports the development of system improvements in existing operational systems.\nMany congressional policymakers are particularly interested in DOD S&T program funding since these funds support the development of new technologies and the underlying science. Some in the defense community see ensuring adequate support for S&T activities as imperative to maintaining U.S. military superiority into the future. The knowledge generated at this stage of development may also contribute to advances in commercial technologies. The FY2020 request for Title IV S&T funding (base plus OCO) is $14.135 billion, $1.524 billion (9.7%) below the FY2019 enacted level. Within the S&T program, basic research (6.1) receives special attention, particularly by the nation's universities. DOD is not a large supporter of basic research when compared to NIH or NSF. However, over half of DOD's basic research budget is spent at universities. The Trump Administration is requesting $2.320 billion for DOD basic research for FY2020, $208.4 million (8.2%) below the FY2019 enacted level. DOD is a substantial source of federal funds for university R&D in certain fields, such as aerospace, aeronautical, and astronautical engineering (40%); electrical, electronic, and communications engineering (39%); mechanical engineering (28%); computer and information sciences (28%); and materials science (25%).",
"The mission of the Department of Health and Human Services (HHS) is \"to enhance and protect the health and well-being of all Americans ... by providing for effective health and human services and fostering advances in medicine, public health, and social services.\" This section focuses on HHS research and development funded through the National Institutes of Health, an HHS agency that accounts for nearly 97% of total HHS R&D funding. Other HHS agencies that provide funding for R&D include the Centers for Disease Control and Prevention (CDC), Centers for Medicare and Medicaid Services (CMS), Food and Drug Administration (FDA), Agency for Healthcare Research and Quality (AHRQ), Health Resources and Services Administration (HRSA), and Administration for Children and Families (ACF); additional R&D funding is attributed to departmental management.",
"NIH is the primary agency of the federal government charged with performing and supporting biomedical and behavioral research. It also has major roles in training biomedical researchers and disseminating health information. The NIH mission is \"to seek fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to enhance health, lengthen life, and reduce illness and disability.\" The agency consists of the NIH Office of the Director (OD) and 27 institutes and centers (ICs).\nThe OD sets overall policy for NIH and coordinates the programs and activities of all NIH components, particularly in areas of research that involve multiple institutes. The ICs focus on particular diseases (e.g., National Cancer Institute), areas of human health and development (e.g., National Institute on Aging), or scientific research fields or support (e.g., National Center for Advancing Translational Sciences). Each IC plans and manages its own research programs in coordination with OD. As shown in Table 9 , separate appropriations are provided to 24 of the 27 ICs, as well as to OD, the Innovation Account (established by the 21 st Century Cures Act, P.L. 114-255), and an intramural Buildings and Facilities account. The other three centers, which perform centralized support services, are funded through the other ICs.\nNIH supports and conducts a wide range of basic and clinical research, research training, and health information dissemination across all fields of biomedical and behavioral sciences. According to NIH, about 10% of the NIH budget supports intramural research projects conducted by the nearly 6,000 NIH federal scientists, most of whom are located on the NIH campus in Bethesda, MD. More than 80% of NIH's budget goes to the extramural research community in the form of grants, contracts, and other awards. This funding supports research performed by more than 300,000 nonfederal scientists and technical personnel who work at more than 2,500 universities, hospitals, medical schools, and other research institutions.\nFunding for NIH comes primarily from the annual Labor, HHS, and Education (LHHS) appropriations act, with an additional amount for Superfund-related activities from the Interior/Environment appropriations act. Those two appropriations acts provide NIH's discretionary budget authority. In addition, NIH has received mandatory funding of $150 million annually provided in the Public Health Service Act (PHSA), Section 330B, for a special program on type 1 diabetes research. Some funding is also transferred to NIH pursuant to the \"PHS Evaluation Tap\" Transfer authority. The total funding available for NIH activities, taking account of add-ons and PHS tap transfers, is known as the NIH program level.\nPresident Trump's FY2020 budget request would provide NIH a total program level of $34.368 billion, a decrease of $4.941 billion (12.6%) compared with FY2019 enacted levels. The proposed FY2020 program level total would include $33.410 billion provided through LHHS appropriations (including the full amount authorized by the 21 st Century Cures Act); $741 million from the PHS evaluation transfer; $66.581 million provided through Interior/Environment appropriations for Superfund-related activities; and $150 million in proposed funding for the mandatory type 1 diabetes program. Under the FY2020 budget proposal, all existing ICs and budget activity lines, except for Buildings and Facilities, would receive a decrease compared to FY2019 enacted levels (see Table 9 ). The Buildings and Facilities appropriation of $200 million would not change from FY2019 to FY2020.\nAdditionally, the FY2020 Budget Request proposes consolidating the Agency for Healthcare Research and Quality into NIH, forming a 28 th IC—the National Institute for Research on Safety and Quality (NIRSQ). The creation of a new NIH institute would require an amendment to PHSA Section 401(d), which specifies that \"[i]n the National Institutes of Health, the number of national research institutes and national centers may not exceed a total of 27.\" Under the request, NISRQ would receive $256 million in funding for FY2020.\nThe main funding mechanism NIH uses to support extramural research is research project grants (RPGs), which are competitive, peer-reviewed, and largely investigator-initiated. Historically, over 50% of the NIH budget is used to support RPGs, which include salaries for investigators and research staff. The FY2020 budget proposes to reduce the average cost of RPGs by capping the percentage of an investigator's salary that can be paid with grant funds to 90%.\nThe FY2020 Trump budget proposal includes $150 million in mandatory funding for research on type 1 diabetes authorized under the PHS Act Section 330B within the budget of the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK). For this proposal, Congress and the President would need to enact legislation to extend the special diabetes program funding, because under current law, no new funding will be available for this program after September 30, 2019. Additionally, the FY2020 program level request includes $741 million in funding transferred to NIH by the PHS evaluation tap. Discretionary funding for certain programs at NIH and other HHS agencies that are authorized under the PHS Act can be subject to an assessment under Section 241 of the PHS Act (42 U.S.C. §238j). This provision authorizes the Secretary to use a portion of eligible appropriations to study the effectiveness of federal health programs and to identify improvements. Although the PHS Act limits the tap to no more than 1% of eligible appropriations, in recent years, annual LHHS appropriations acts have specified a higher amount (2.5% in FY2019) and have also typically directed specific amounts of funding from the tap for transfer to a number of HHS programs. The assessment has the effect of redistributing appropriated funds for specific purposes among PHS and other HHS agencies. NIH, with the largest budget among the PHS agencies, has historically been the largest \"donor\" of program evaluation funds; until recently, it had been a relatively minor recipient. Provisions in recent LHHS appropriations acts have directed specific tap transfers to NIH, making NIH a net recipient of tap funds.\nThe FY2020 NIH budget request also includes $492 million made available through the 21 st Century Cures Act (see text box below; hereinafter referred to as \"The Cures Act\"). The Cures Act ( P.L. 114-255 ) specifies that $149 million is for the Precision Medicine Initiative, $140 million is for the BRAIN Initiative, $195 million is for cancer research, and $8 million is for research on regenerative medicine for FY2020.\nThe President's FY2020 budget identifies several research priorities for NIH in the coming year. The overview below outlines some of these priority themes in the budget request.\n1. Confronting the Opioids Crisis\nThe request includes $1.3 billion designated for opioids and pain research across NIH, with $500 million of the total for the Helping to End Addiction Long-Term (HEAL) initiative. The HEAL Initiative, launched in April 2018, aims to accelerate the development of new medications and devices to treat opioid addiction. In addition, NIH plans to support research on neonatal abstinence syndrome, chronic pain, and other opioids-related issues.\n2. Pediatric Research\nThe FY2020 request proposes $50 million in designated funding for a pediatric cancer initiative. The initiative, designed to complement existing pediatric cancer research, would aggregate data on pediatric cancer cases and coordinate existing datasets to create a \"comprehensive, shared resource to support research on childhood cancer in all its forms.\" The request also designates $15 million for the Institutional Development Award (IDeA) States Pediatric Clinical Trials Network to support pediatric clinical studies, such as on the \"dosing, safety, and efficacy of drugs that are commonly prescribed to children.\"\n3. Supporting the Next Generation of Researchers\nThe request would provide $100 million in dedicated funding for the Next Generation Researchers Initiative, which aims to support new and early stage scientists in attaining their first NIH grants. Through the program, NIH ICs are to create funding pathways and other strategies targeted at new and early-stage scientists, and would be required to collect data and evaluate their outcomes.\n4. Ending the HIV Epidemic\nAs a part of a proposed HHS wide plan, \"Ending the HIV Epidemic: A Plan for America,\" the FY2020 request designates $6 million in funding to Centers for AIDS Research to collect data and inform HHS on best practices for the initiative. The goal for the plan is to reduce new infections by 75% in the next 5 years, and by 90% in the next 10 years.\n5. New Technologies and Biomedical Research\nNIH plans to continue to support biomedical innovations using new technologies, including for diagnosis, monitoring, and treatment. An example includes a smartphone-based system for people with diabetes to monitor blood glucose levels. NIH also aims to accelerate scientific discovery through new data science methods. In June 2018, NIH released a Strategic Plan for Data Science, with an agency-wide plan for increasing and improving its use of large biomedical datasets. In addition, NIH plans to convene a new working group on artificial intelligence, machine learning, and biomedical research.\nAlong with the above priorities, the President's budget request identifies ongoing support related to precision medicine, universal flu vaccine, and NIH buildings and facilities.",
"The Department of Energy (DOE) was established in 1977 by the Department of Energy Organization Act ( P.L. 95-91 ), which combined energy-related programs from a variety of agencies with defense-related nuclear programs that dated back to the Manhattan Project. Today, DOE conducts basic scientific research in fields ranging from nuclear physics to the biological and environmental sciences; basic and applied R&D relating to energy production and use; and R&D on nuclear weapons, nuclear nonproliferation, and defense nuclear reactors. The department has a system of 17 national laboratories around the country, mostly operated by contractors, that together account for about 40% of all DOE expenditures.\nThe Administration's FY2020 budget request for DOE includes about $12.783 billion for R&D and related activities, including programs in three broad categories: science, national security, and energy. This request is 18.6% less than the enacted FY2019 amount of $15.712 billion. (See Table 10 for details.)\nThe request for the DOE Office of Science is $5.546 billion, a decrease of 15.8% from the FY2019 appropriation of $6.585 billion. Funding would decrease for each of the office's six major research programs. In Basic Energy Sciences, almost half the proposed decrease would result from the approaching end of construction on the Linac Coherent Light Source II (no funding requested for FY2020, down from $129 million in FY2019). Funding for Biological and Environmental Research would decrease by $211 million (29.9%), with reductions concentrated in the Earth and Environmental Systems Sciences subprogram. In Advanced Scientific Computing Research, the Office of Science Exascale Computing Project would receive $189 million, down 18.9% from $233 million in FY2019. Funding for Fusion Energy Sciences would decrease by $161 million (28.6%), including a $25 million (18.9%) decrease in the U.S. contribution to construction of the International Thermonuclear Experimental Reactor (ITER), a fusion energy demonstration and research facility in France.\nThe request for DOE national security R&D is $4.925 billion, an increase of 11.8% from $4.406 billion in FY2019. Funding for Weapons Activities RDT&E would increase 37.9%, including an increase of $123 million for Advanced Simulation and Computing and an increase of $95 million (190.3%) for Enhanced Capabilities for Subcritical Experiments. In Defense Nuclear Nonproliferation R&D, reactor conversion activities would transfer to a non-R&D account; excluding this accounting change, funding for the remaining program would increase by 3.8%. Funding for the Naval Reactors program would decrease by 7.8% overall, with increases for operations, infrastructure, and technology development offset by previously planned decreases in funding for construction and two major multiyear projects.\nThe request for DOE energy R&D is $2.313 billion, a decrease of 51.0% from $4.721 billion in FY2019. Many of the proposed reductions in this category are similar to the Administration's FY2019 budget proposals. Funding for energy efficiency and renewable energy R&D would decrease by 66.3%, with reductions in all major research areas and a shift in emphasis toward early-stage R&D rather than later-stage development and deployment. Funding for fossil energy R&D would decrease by 24.1%, with reductions focused particularly on coal carbon capture and storage ($69 million, down from $199 million in FY2019) and natural gas technologies ($11 million, down from $51 million in FY2019). The request for fuel cycle R&D is $90 million (down from $264 million in FY2019), and nuclear energy would decrease by 37.9%, with no funding requested for the Integrated University Program ($5 million in FY2019) or the Supercritical Transformational Electric Power (STEP) R&D initiative ($5 million in FY2019). The Advanced Research Projects Agency-Energy (ARPA-E), which is intended to advance high-impact energy technologies that have too much technical and financial uncertainty to attract near-term private-sector investment, would be terminated.",
"The National Aeronautics and Space Administration (NASA) was created in 1958 by the National Aeronautics and Space Act (P.L. 85-568) to conduct civilian space and aeronautics activities. NASA has research programs in planetary science, Earth science, heliophysics, astrophysics, and aeronautics, as well as development programs for future human spacecraft and for multipurpose space technology such as advanced propulsion systems. In addition, NASA operates the International Space Station (ISS) as a facility for R&D and other purposes.\nThe Administration is requesting about $17.845 billion for NASA R&D in FY2020. This is 0.1% less than FY2019 funding of about $17.865 billion. For a breakdown of these amounts, see Table 11 . NASA R&D funding comes through five accounts: Science; Aeronautics; Space Technology (called Exploration Technology in the Administration's budget request); Exploration (Deep Space Exploration Systems in the request); and the ISS, Commercial Crew, and Commercial Low Earth Orbit (LEO) Development portions of Space Operations (called LEO and Spaceflight Operations in the request).\nThe FY2020 request for Science is $6.304 billion, a decrease of 8.7% from FY2019. Within this total, funding for Earth Science would decrease by $151 million (7.8%); funding for Planetary Science would decrease by $136 million (4.9%); and funding for Astrophysics would decrease by $347 million (29.1%). The request for Earth Science includes no funding for the Pre-Aerosol, Clouds, and Ocean Ecosystem (PACE) mission or the Climate Absolute Radiance and Refractivity Observatory (CLARREO) Pathfinder mission. PACE and CLARREO Pathfinder were also proposed for termination in the FY2018 and FY2019 budgets but were funded by Congress. The request for Planetary Science includes $593 million for a mission to Jupiter's moon Europa, but in contrast to prior congressional direction, the mission would launch on a commercial rocket and would not include a lander. The Planetary Science request also includes $210 million for the Lunar Discovery and Exploration program, initiated in FY2019, to fund public-private partnerships for research using commercial lunar landers. The request for Astrophysics does not include funding for the Wide Field Infrared Space Telescope (WFIRST, $312 million in FY2019). The proposed increase of $48 million for the James Webb Space Telescope (JWST) would provide $155 million more for JWST in FY2020 than was projected in the FY2019 budget; this change reflects previously announced cost increases and schedule delays.\nThe FY2020 request for Aeronautics is $667 million, a decrease of 8.0% from FY2019. The request includes $104 million for the Low Boom Flight Demonstrator program, intended to demonstrate quiet supersonic flight.\nThe FY2020 request for Exploration Technology (currently Space Technology) is $1.014 billion, an increase of 9.4% from FY2019. The request proposes $119 million for a mostly new Lunar Surface Innovation Initiative. It proposes $45 million for a restructured In-Space Robotic Servicing program, down from $180 million for the RESTORE-L robotic servicing mission in FY2019.\nThe FY2020 request for Deep Space Exploration Systems (currently Exploration) is $5.022 billion, a decrease of 0.6% from FY2019. This account funds development of the Orion Multipurpose Crew Vehicle and the Space Launch System (SLS) heavy-lift rocket, the capsule and launch vehicle mandated by the NASA Authorization Act of 2010 for future human exploration beyond Earth orbit. The first test flight of SLS carrying Orion but no crew (known as EM-1) is now expected no earlier than June 2020. The first flight of Orion and the SLS with a crew on board (known as EM-2) is expected by April 2023. Funding for Orion, the SLS, and related ground systems (collectively known as Exploration Systems Development) would decrease by $651 million (15.9%). The account also funds Exploration R&D, which would increase by $622 million (64.9%). The request for Exploration R&D includes $821 million for a platform in lunar orbit (known as the Gateway) to serve as a test bed for deep space human exploration capabilities.\nIn the LEO and Spaceflight Operations account (currently Space Operations), the request for Commercial Crew is $102 million, a decrease of 41.1% from FY2019; the request for the ISS is $1.458 billion; and the request for Commercial LEO Development, a new program in FY2019, is $150 million (an increase of 275.0%). The reduction in Commercial Crew funding reflects the expected transition of commercial crew activities from development to operations: the first post-certification crewed flight to the ISS is planned for late FY2019. The Commercial LEO Development program is intended to stimulate a commercial space economy in low Earth orbit, including the commercial provision of NASA's requirements for research and technology demonstration after the proposed end of direct ISS funding in 2025.",
"The National Science Foundation supports basic research and education in the nonmedical sciences and engineering. Congress established the foundation as an independent federal agency in 1950 and directed it to \"promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes.\" The NSF is a primary source of federal support for U.S. university research, especially in mathematics and computer science. It is also responsible for significant shares of the federal science, technology, engineering, and mathematics (STEM) education program portfolio and federal STEM student aid and support.\nNSF has six appropriations accounts: Research and Related Activities (RRA, the main research account), Education and Human Resources (EHR, the main education account), Major Research Equipment and Facilities Construction (MREFC), Agency Operations and Award Management (AOAM), the National Science Board (NSB), and the Office of Inspector General (OIG). Appropriations are generally provided at the account level, while program-specific direction may be included in appropriations acts, or accompanying conference reports or explanatory statements.\nBecause final FY2019 funding was not available at the time the FY2020 budget request was prepared, requested R&D funding is compared to the FY2018 actual funding. FY2019 funding levels, enacted February 15, 2019, are included for reference. These amounts are available only at the account level; FY2019 R&D breakouts and subaccount funding amounts are not yet available for comparison.\nFunding for R&D is included in the RRA, EHR, and MREFC accounts. (The RRA and EHR accounts also include non-R&D funding.) Together, these three accounts comprise 95% of the total requested funding for NSF. Actual R&D obligations for each account are known after NSF allocates funding appropriations to specific activities and reports those figures. The budget request specifies R&D funding for the conduct of research, including basic and applied research, and for physical assets, including R&D facilities and major equipment. Funding amounts for FY2018 actual and FY2020 requested levels are reported by account, including amounts for R&D conduct and physical assets where applicable, in Table 12 .\nOverall . The Administration is requesting $7.07 billion for the NSF in FY2020, $1.01 billion (12.5%) less than the FY2019 enacted amount, and $752 million (9.6%) less than the FY2018 actual amount. The request would decrease budget authority in three accounts relative to the FY2018 enacted level: RRA by $717.4 million (11.2%), EHR by $80.4 million (8.9%), and NSB by $200,000 (4.7%). The request would increase budget authority for the MREFC account by $36.9 million (19.8%) and provide slight increases to the AOAM (2.6%, $8.4 million) and OIG (1.7%, $260,000) accounts. Overall, NSF estimates that, under the FY2020 request, agency-wide funding rates (i.e., the percentage of submitted proposals that are successfully awarded funding) would decrease slightly from 24% to 23%, with 1,317 fewer new competitive awards, compared to FY2018.\nAs a proportion of NSF's total funding, R&D activities account for approximately 81%. For FY2020, $5.72 billion is requested for R&D activities, a 10% decrease from FY2018 actual funding for R&D of $6.36 billion. The total request includes $5.22 billion (91%) for the conduct of R&D, and $506 million (9%) for R&D facilities and major equipment. Of funding requested for the conduct of R&D, 87% is requested for basic research, and 13% for applied research. Overall funding for R&D facilities and major equipment supports not only the construction and acquisition phases, funded through MREFC ($223 million requested), but also the planning, design, and postconstruction operations and maintenance, funded through RRA ($282 million requested).\nResearch . The Administration seeks $5.66 billion for RRA in FY2020, an $857 million (13.1%) decrease compared to the FY2019 enacted funding, and a $717 million (11.2%) decrease compared to FY2018 actual funding. Compared to the FY2018 actual levels, the FY2020 request includes decreases for 8 of the 10 RRA subaccounts. The largest percentage decrease would go to the Office of Polar Programs (19.6%, $98.3 million decrease). The largest percentage increase would go to the U.S. Arctic Research Commission account (6.3%, $90,000 increase). The FY2020 request also includes $151 million for the RRA Established Program to Stimulate Competitive Research (EPSCoR) program, a $19.4 million (11.3%) decrease compared to FY2018 actual funding.\nWithin the RRA account, the FY2020 request includes $5.08 billion for R&D, a decrease of $634 million (11.1%) compared to the FY2018 actual amount. Of this amount, the majority ($4.80 billion, 94%) is requested for the conduct of research, including $4.38 billion for basic research and $417 million for applied research.\nEducation . The FY2020 request for the EHR account is $86.5 million (9.5%) less than the FY2019 enacted amount and $80.4 million (8.9%) less than the FY2018 actual level. By program division, the Division of Human Resource Development would receive an increase of $15.6 million (9.6%) over the FY2018 actual level. The divisions of research on learning in formal and informal settings, graduate education, and undergraduate education would receive decreases of 20.4% ($182 million requested), 5.5% ($244 million requested), and 13.8% ($219 million requested), respectively.\nEHR programs of particular interest to congressional policymakers include the Graduate Research Fellowship Program (GRFP) and National Research Traineeship (NRT) programs. The FY2020 request for GRFP is $257 million, a reduction of $27.9 million (9.8%) from the FY2018 actual level. The FY2020 request for NRT is $49.5 million, a $4.3 million (8.0%) decrease from FY2018.\nWithin EHR, requested funding for R&D is $420 million, which is $37.7 million (8.2%) less than the FY2018 actual funding amount and accounts for approximately 7.3% of the agency's total R&D request. All of the requested funding would support the conduct of R&D, including $150 million for basic research and $270 million for applied research.\nConstruction . The MREFC account supports large construction projects and scientific instruments, with all of the funding supporting R&D facilities. The Administration is seeking $223 million for MREFC in FY2020, $36.9 million (19.8%) more than the FY2018 enacted amount, and $72.5 million (24.5%) less than the FY2018 actual amount.\nRequested MREFC funding would support continued construction of the Large Synoptic Survey Telescope (LSST, $46.3 million requested, 5.1% decrease from FY2019 enacted) and Antarctic Infrastructure Modernization for Science (AIMS, $97.9 million requested, 5.6% decrease from FY2019 enacted). The request includes $33.0 million for upgrades to the Large Hadron Collider in Switzerland, which would represent the first year of a five-year project. Additionally, $45.0 million is requested for Mid-scale Research Infrastructure projects in the $20 million to $70 million range; this is a new funding line-item in the MREFC account meant to manage support for upgrades to major facilities and stand-alone projects in this range as a portfolio.\nOther initiatives . The FY2019 NSF budget request includes funding for three multiagency initiatives. This funding is included in multiple NSF appropriations accounts, and R&D amounts are not separately provided. The National Nanotechnology Initiative would receive $389 million, $179 million (31.4%) less than in FY2018. The Networking and Information Technology Research and Development program would receive $1.20 billion, a decrease of $98.2 million (7.6%). The U.S. Global Change Research Program would receive $224 million, $30.0 million (11.8%) less than in FY2018.",
"The U.S. Department of Agriculture (USDA) was created in 1862, in part to support agricultural research in an expanding, agriculturally dependent country. Today, USDA conducts intramural research at federal facilities with federally employed scientists and supports external research at universities and other facilities through competitive grants and formula-based funding. The breadth of contemporary USDA research spans traditional agricultural production techniques, organic and sustainable agriculture, bioenergy, nutrition needs and food composition, food safety, animal and plant health, pest and disease management, economic decisionmaking, and other social sciences affecting consumers, farmers, and rural communities.\nFour agencies carry out USDA's intramural research and education activities, grouped together into the Research, Education, and Economics (REE) mission area. The agencies involved are the Agricultural Research Service (ARS), National Institute of Food and Agriculture (NIFA), National Agricultural Statistics Service (NASS), and Economic Research Service (ERS).\nThe FY2019 enacted appropriation ( P.L. 116-6 ) provides a total of $3,424.1 million in discretionary spending for the four agencies. The Administration is requesting a total of $2,868.7 million for the four agencies in FY2020, a 16.2% reduction ($555.4 million). Most of that year-over-year reduction (78%) is attributable to the reduced request for ARS salaries and expenses and the ARS buildings and facilities account (see Table 13 ). The remainder of the year-over-year reduction comes from decreases in certain research and education, extension, and integrated activities in NIFA, as well as in NASS and ERS. In addition to discretionary appropriations, agricultural research is funded by state matching contributions and private donations or grants, as well as certain mandatory funding authorized by the farm bill. USDA's FY2019 enacted discretionary appropriations and the Administration's FY2020 request for the four research agencies are discussed below.",
"The Agricultural Research Service is USDA's in-house basic and applied research agency. It operates approximately 90 laboratories nationwide with about 6,600 employees. ARS laboratories focus on efficient food and fiber production, development of new products and uses for agricultural commodities, development of effective controls for pest management, and support of USDA regulatory and technical assistance programs. ARS also operates the National Agricultural Library, one of the department's primary information repositories for food, agriculture, and natural resource sciences.\nFor FY2019, P.L. 116-6 provides $1,303.3 billion for ARS salaries and expenses and $381.2 million for buildings and facilities. The Administration is requesting $1,203.5 billion for ARS salaries and expenses for FY2020, a decrease of $99.8 million (7.6%) from the FY2019 appropriation. For FY2020, the request for the buildings and facilities account is $50.0 million ( Table 13 ).\nARS will assume ownership of the National Bio and Agro-Defense Facility (NBAF) in FY2019 from the Department of Homeland Security (DHS). The FY2019 enacted bill provides $10.6 million to address one-time costs associated with the transfer of the science program from the Plum Island Animal Disease Center to NBAF, and $42.0 million to address stand-up activities and other initial costs to operate and maintain the new facility. NBAF is expected to be fully operational by December 31, 2022. From the total salaries and expenses appropriation for FY2020, the Administration is requesting $13.1 million for NBAF. The FY2019 enacted bill provides an additional $5.0 million for ARS to increase research efforts on foreign animal diseases, and an additional $2.0 million to expand research on resilient dryland farming.\nFY2019 conference report language ( H.Rept. 116-9 ) criticized ARS for not reporting a single specific negative finding by Animal and Plant Health Inspection Service (APHIS) inspections of ARS research facilities that use animals as research subjects. The report noted that numerous violations had been found involving death and serious health issues of animal subjects, and directed ARS to submit a report within 60 days of enactment covering all violations found by APHIS and the actions taken to prevent them from recurring.\nP.L. 116-9 does not support the Administration's request to terminate or redirect various ARS research programs, or the closure of ARS research locations.",
"The National Institute of Food and Agriculture (NIFA) provides federal funding for research, education, and extension projects conducted in partnership with State Agricultural Experiment Stations, the State Cooperative Extension System, land grant universities, colleges, and other research and education institutions, as well as individual researchers. These partnerships include the 1862 land-grant institutions, 1890 historically black colleges and universities (HBCUs) established by the Morrill Acts, the 1994 tribal land-grant colleges, and Hispanic-serving institutions. Federal funds enhance research capacity at universities and institutions through statutory formula funding, competitive awards, and grants.\nFor FY2019, P.L. 116-6 provides $1,471.3 billion in discretionary spending for NIFA activities. The Administration's FY2020 request for NIFA is $1,391.7 billion, a reduction of $79.6 million (5.4%) from FY2019 ( Table 13 ). The enacted bill provides $259.0 million to support Hatch Act formula funding for 1862 land grant university research and education activities. For FY2020, the Administration is requesting $243.2 million for Hatch Act funding, a 6.1% reduction. For Evans-Allen formula funding to the 19 HBCUs, the FY2019 bill provides $58.0 million for research and $19.3 million for education grants. The Administration requests $53.8 million in Evans-Allen funding for FY2020 (7.2% reduction from FY2019), and $18.7 million for education grants. For research grants to the 1994 Tribal institutions, and for education grants to Alaska Native and Native Hawaiian-Serving institutions, the FY2019 appropriation provides $3.8 and $3.2 million, respectively. For FY2020, the Administration requests $3.4 million for the 1994 Tribal institutions, and $0 for education grants to the Alaska Native and Native Hawaiian-Serving institutions.\nFor McIntire-Stennis cooperative forestry research support, P.L. 116-6 provides $36.0 million for FY2019. The Administration is requesting $28.9 million for FY2020, approximately 20% less than FY2019. The FY2019 appropriation also provides $37.0 million for the Sustainable Agriculture Research and Education program. The Administration requests a reduction of $18.0 million (48.6%) for the program in FY2020.\nThe FY2019 enacted bill provides $415.0 million for the Agriculture and Food Research Initiative (AFRI)—USDA's flagship competitive research grants program. The Administration is requesting $500.0 million for the program in FY2020, a 20.5% increase over FY2019. This budget item currently represents about 30% of the total NIFA discretionary budget.\nFor Cooperative Extension support at 1862 land grant universities under the Smith-Lever Act, Sections (b) and (c) formula funding for FY2019, the enacted appropriation provides a total of $315.0 million for these extension activities. The Administration requests $299.4 million for these programs in FY2020. The Smith-Lever Sections (b) and (c) programs include extension services at the HBCUs and the 1994 Tribal colleges, faculty improvement grants to HBCUs, and women and minorities in STEM fields, among other programs.\nP.L. 116-6 provides $86.6 million for Smith-Lever 3(d) activities, including food and nutrition education, new technologies for agricultural extension, and children, youth, and families at risk. For FY2020, the Administration is requesting $58.1 million for Smith-Lever Section 3(d) funding, $55.1 million of which would support the Expanded Food and Nutrition Education Program, and $3.0 million would support Federally-Recognized Tribes Extension Program for programs on American Indian Reservations and Tribal jurisdictions. The Administration is requesting $0 funding in FY2020 for other Smith-Lever Section 3(d) programs.",
"The National Agricultural Statistics Service conducts the quinquennial Census of Agriculture and provides official statistics on agricultural production and indicators of the economic and environmental status of the farm sector.\nFor FY2019, P.L. 116-6 provides $174.5 million to NASS, of which up to $45.3 million is reserved to support the 2017 Census of Agriculture. The enacted bill also provides $600,000 for the Geospatial Improvement Initiative and an increase of $500,000 for the Floriculture Crops Report. The Administration is requesting $163.0 million for NASS in FY2020, and up to $45.3 million to support the 2017 Census. Results of the 2017 Census of Agriculture were released on April 11, 2019.",
"The Economic Research Service supports economic and social science analysis about agriculture, rural development, food, commodity markets, and the environment. It also collects and disseminates data concerning USDA programs and policies. ERS is one of 13 \"principal statistical agencies\" of the Federal Statistical System of the United States.\nFor FY2019, P.L. 116-6 provides $86.8 million for ERS activities. The Administration has requested $60.5 million for ERS in FY2020, a 30.3% decrease.",
"Two agencies of the Department of Commerce have major R&D programs: the National Institute of Standards and Technology (NIST) and the National Oceanic and Atmospheric Administration (NOAA).",
"The mission of the National Institute of Standards and Technology is \"to promote U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology in ways that enhance economic security and improve our quality of life.\" NIST research provides measurement, calibration, and quality assurance methods and techniques that support U.S. commerce, technological progress, product reliability, manufacturing processes, and public safety. NIST's responsibilities include the development, maintenance, and custodial retention of the national standards of measurement; providing the means and methods for making measurements consistent with those standards; and ensuring the compatibility of U.S. national measurement standards with those of other nations.\nThe President is requesting $686.8 million for NIST in FY2020, a decrease of $298.7 million (30.3%) from the FY2019 enacted appropriation of $985.5 million. (See Table 14 .) NIST discretionary funding is provided through three accounts: Scientific and Technical Research and Services (STRS), Industrial Technology Services (ITS), and Construction of Research Facilities (CRF).\nThe President's FY2020 request includes $611.7 million for R&D, standards coordination, and related services in the STRS account, a decrease of $112.8 million (15.6%) from the FY2019 level.\nThe FY2020 request would provide $15.2 million for the ITS account, down $139.8 million (90.2%) from FY2019. Within the ITS account, the request would provide no funding for the Manufacturing Extension Partnership (MEP) program, a reduction of $140.0 million from FY2019; MEP centers in each state would be required to become entirely self-supporting. In his FY2019 request, President Trump proposed ending federal funding for MEP; in his FY2018 request, the President sought $6.0 million \"for an orderly shutdown of the program.\" The request provides $15.2 million provided for Manufacturing USA (also referred to as the National Network for Manufacturing Innovation or NNMI), slightly higher than the FY2019 level of $15.0 million. Of these funds, approximately $10 million would be for continued support of the NIST-sponsored National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL), with the balance (approximately $5 million) to be used for coordination of the Manufacturing USA network.\nThe President is requesting $59.9 million for the NIST CRF account for FY2020, down $46.1 million (43.5%) from the FY2019 enacted level.",
"The National Oceanic and Atmospheric Administration (NOAA) conducts scientific research in areas such as ecosystems, climate, global climate change, weather, and oceans; collects and provides data on the oceans and atmosphere; and manages coastal and marine organisms and environments. NOAA was created in 1970 by Reorganization Plan No. 4. The reorganization was intended to unify elements of the nation's environmental programs and to provide a systematic approach for monitoring, analyzing, and protecting the environment.\nNOAA's administrative structure is organized by six line offices that reflect its diverse mission: the National Ocean Service (NOS); National Marine Fisheries Service (NMFS); National Environmental Satellite, Data, and Information Service (NESDIS); National Weather Service (NWS); Office of Oceanic and Atmospheric Research (OAR); and the Office of Marine and Aviation Operations (OMAO). The line offices are supported by an additional office, Mission Support, which provides cross-cutting administrative functions related to planning, information technology, human resources, and infrastructure. Congress provides most of the discretionary funding for the line offices and Mission Support through two accounts: (1) Operations, Research, and Facilities, and (2) Procurement, Acquisition, and Construction.\nIn 2010, NOAA published its Next Generation Strategic Plan . The strategic plan is organized into four categories of long-term goals including (1) climate adaptation and mitigation, (2) a weather-ready nation, (3) healthy oceans, and (4) resilient coastal communities and economies. The strategic plan also lists three groups of enterprise objectives related to (1) stakeholder engagement, (2) data and observations, and (3) integrated environmental modeling. The strategic plan serves as a guide for NOAA's five-year R&D plan. The most recent five-year R&D plan was published in 2013, and includes R&D objectives to reach strategic plan goals and objectives and targets to track progress toward R&D objectives over time.\nOne of the main challenges identified in the NOAA R&D plan is the need to integrate the diverse perspectives and professional expertise required by the agency's mission. The plan states that \"holistically understanding the earth system is not only understanding its individual components, but understanding and interpreting the way each of the components interact and behave as an integrated composite that is more than the sum of its parts.\"\nFor FY2020, President Trump requested $651.1 million in R&D funding for NOAA, a decrease of $286.9 million (30.6%) below the FY2019 enacted level of $938.0 million. For FY2019, Congress enacted $540.3 million for research (57.6% of total R&D funding), $162.5 million for development (17.3%), and $235.2 million for R&D equipment (25.1%). The enacted FY2019 total R&D amount was 17.0% of NOAA's total discretionary budget authority of $5.509 billion. In FY2020, the President is requesting $352.3 million for research (54.1% of total R&D funding), $106.3 million for development (16.3%), and $192.6 million for R&D equipment (29.6%). The President's request for total R&D is 14.1% of NOAA's total discretionary budget authority request of $4.622 billion.\nTable 15 provides R&D funding levels for FY2019 enacted and the Administration's FY2020 request for each NOAA office. OAR accounts for the majority of R&D in most years. The President is requesting $335.1 million for OAR R&D in FY2020, a decrease of $196.2 million (36.9%) below the FY2019 enacted funding level of $531.4 million.\nOAR conducts research in three major areas: (1) weather and air chemistry; (2) climate; and (3) oceans, coasts, and the Great Lakes. A significant portion of these efforts is implemented through NOAA laboratories and cooperative research institutes. NOAA supports 16 cooperative research institutes and 10 NOAA laboratories in OAR's three research areas. The President's FY2020 request would fund the cooperative institutes and laboratories at $169.6 million, $13.1 million (7.2%) less than the FY2019 enacted funding level of $182.8 million.\nAmong other R&D activities, the President's FY2019 request would also reduce funding to the National Sea Grant College Program. The National Sea Grant College Program is composed of 33 university-based state programs and supports scientific research and stakeholder engagement to identify and solve problems faced by coastal communities. The President's FY2020 request would terminate federal support of the National Sea Grant College Program and its related Marine Aquaculture Research program. In FY2019, Congress appropriated $68.0 million to the National Sea Grant College Program and $12.0 million to the Marine Aquaculture Research program.",
"The Department of the Interior (DOI) was created to conserve and manage the nation's natural resources and cultural heritage, to provide scientific and other information about those resources, and to uphold \"the nation's trust responsibilities or special commitments to American Indians, Alaska Natives, and affiliated island communities to help them prosper.\" DOI has a wide range of responsibilities including, among other things, mapping, geological, hydrological, and biological science; migratory bird, wildlife, and endangered species conservation; surface-mined lands protection and restoration; and historic preservation.\nBecause final FY2019 funding was not available at the time the FY2020 budget was prepared, requested R&D funding is compared to the FY2018 actual funding.\nThe Administration is requesting $12.6 billion in net discretionary funding for DOI in FY2020. Of that amount, $757 million is requested for R&D funding, $148 million (16.3%) below the FY2018 actual level of $905 million. Of the President's FY2020 DOI R&D funding request, 8.9% is for basic research, 73.3% is for applied research, and 17.8% is for development. The U.S. Geological Survey (USGS) is the only DOI component that conducts basic research.\nFunding for DOI R&D is generally included in appropriations line items that also include non-R&D activities. How much of the funding provided in appropriations legislation is allocated to R&D specifically is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels are known only after DOI components allocate their appropriations to specific activities and report those figures.",
"The USGS accounts for approximately two-thirds of all DOI R&D funding. A single appropriations account, Surveys, Investigations, and Research (SIR), provides all USGS funding. USGS R&D is conducted under seven SIR activity/program areas: Ecosystems; Land Resources; Energy, Minerals, and Environmental Health; Natural Hazards; Water Resources; Core Science Systems; and Science Support.\nThe President's total FY2020 budget request for USGS is $984 million. Of this amount, $481 million would be for R&D, a decrease of $119 million (19.8%) from the FY2018 enacted level of $600 million.",
"The President's FY2020 request also includes R&D funding for the following DOI components:\nBureau of Reclamation (BOR): $84.0 million in applied research and development funding for FY2020, down $26.4 million (23.9%) from FY2018. Bureau of Ocean Energy Management (BOEM): $100.4 million in applied research and development funding for FY2020, up $22.1 million (28.2%) from FY2018—the only component that would receive an increase in R&D funding. Fish and Wildlife Service (FWS): $15.5 million in applied research for FY2020, down $17.2 million (52.5%) from FY2018. National Park Service (NPS): $25.9 million in applied research and development for FY2020, down $1.1 million (4.2%) from FY2018. Bureau of Safety and Environmental Enforcement (BSEE): $24.5 million in applied research for FY2020, down $2.2 million (8.2%) from FY2018. Bureau of Land Management (BLM): $19.0 million in applied research and development for FY2020, down $1.9 million (9.0%) from FY2018. Bureau of Indian Affairs (BIA): $5.0 million in applied research for FY2020, equal to the actual amount from FY2018. Wildland Fire Management (WFM): No funding requested for R&D for FY2020, down $3.0 million (100.0%) from FY2018. Office of Surface Mining Reclamation and Enforcement (OSMRE): $1.5 million in applied research for FY2020, up $970,000 (190%) from FY2018.\nTable 16 summarizes FY2018 actual R&D funding and the President's FY2020 R&D funding request for DOI components.",
"The Department of Veterans Affairs (VA) operates and maintains a national health care delivery system to provide eligible veterans with medical care, benefits, and social support. As part of the agency's mission, it seeks to advance medical R&D in areas most relevant to the diseases and conditions that affect the health care needs of veterans.\nThe President is proposing $1.4 billion for VA R&D in FY2020, an increase of $12 million (1%) from FY2019. (See Table 17 .) VA R&D is funded through two accounts—the Medical and Prosthetic Research account and the Medical Care Support account. The Medical Care Support account also includes non-R&D funding, and the amount of funding that will be allocated to support R&D through appropriations legislation is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels from the Medical Care Support account are only known after the VA allocates its appropriations to specific activities and reports those figures. The Medical Care Support account provides administrative and other support for VA researchers and R&D projects, including infrastructure maintenance. The FY2020 request includes $762 million for VA's Medical and Prosthetic Research account, a decrease of $17 million (2%), and $648 million in funding for research supported by the agency's Medical Care Support account, an increase of $29 million (5%).\nAccording to the President's request, FY2020 strategic priorities for VA R&D include increasing the access of veterans to clinical trials; increasing the transfer and translation of VA R&D; and \"transforming VA data into a national resource\" by reducing the time and effort needed to appropriately access, properly understand, and effectively use VA data for research. Clinical priorities for VA R&D in FY2020 include efforts to treat veterans at risk of suicide and research to address chronic pain and opioid addiction, posttraumatic stress disorder, traumatic brain injury, and Gulf War illness.\nThe Medical and Prosthetics R&D program is an intramural program managed by the Veteran Health Administration's Office of Research and Development (ORD) and conducted at VA Medical Centers and VA-approved sites nationwide. According to ORD, the mission of VA R&D is \"to improve Veterans' health and well-being via basic, translational, clinical, health services, and rehabilitative research and to apply scientific knowledge to develop effective individualized care solutions for Veterans.\" ORD consists of four main research services each headed by a director:\nBiomedical Laboratory R&D conducts preclinical research to understand life processes at the molecular, genomic, and physiological levels. Clinical Science R&D supports clinical trials and other human subjects research to determine the feasibility and effectiveness of new treatments such as drugs, therapies, or devices, compare existing therapies, and improve clinical care and practice. Health Services R&D conducts studies to identify and promote effective and efficient strategies to improve the quality and accessibility of the VA health system and patient outcomes, and to minimize health care costs. Rehabilitation R&D conducts research and develops novel approaches to improving the quality of life of impaired and disabled veterans.\nIn addition to intramural support, VA researchers are eligible to obtain funding for their research from extramural sources, including other federal agencies, private foundations and health organizations, and commercial entities. According to the President's FY2020 budget request, these additional R&D resources are estimated at $570 million in FY2020. However, unlike other federal agencies, such as the National Institutes of Health and the Department of Defense, VA does not have the authority to support extramural R&D by providing research grants to colleges, universities, or other non-VA entities.\nTable 17 summarizes R&D program funding for VA in the Medical and Prosthetic Research and the Medical Care Support accounts. Table 18 details amounts to be spent in Designated Research Areas (DRAs), which VA describes as \"areas of importance to our veteran patient population.\" Funding for research projects that span multiple areas may be included in several DRAs; thus, the amounts in Table 18 total to more than the appropriation or request for VA R&D.",
"The Department of Transportation (DOT) was established by the Department of Transportation Act (P.L. 89-670) on October 15, 1966. The primary purposes of DOT research and development activities as defined by Section 6019 of the Fixing America's Surface Transportation Act ( P.L. 114-94 ) are improving mobility of people and goods; reducing congestion; promoting safety; improving the durability and extending the life of transportation infrastructure; preserving the environment; and preserving the existing transportation system.\nFunding for DOT R&D is generally included in appropriations line items that also include non-R&D activities. The amount of the funding provided by appropriations legislation that is allocated to R&D is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels are known only after DOT agencies allocate their final appropriations to specific activities and report those figures.\nThe Administration is requesting $1.089 billion for DOT R&D activities and facilities in FY2020, a decrease of $5.8 million (0.5%) from FY2019. (See Table 19 .) Three DOT agencies—the Federal Aviation Administration (FAA), the Federal Highway Administration (FHWA), and the National Highway Traffic Safety Administration (NHTSA)—would account for over 90% of DOT R&D under the FY2020 request.",
"The President's FY2020 request of $512.3 million for R&D activities and facilities at FAA would be an increase of $10.4 million (2.1%) from FY2019. The request includes $120 million for the agency's Research, Engineering, and Development (RE&D) account, a reduction of $71.1 million (37.2%) from FY2019. Funding within the RE&D account seeks to improve aircraft safety through research in fields such as fire safety, advanced materials, propulsion systems, aircraft icing, and continued airworthiness, in addition to safety research related to unmanned aircraft systems and the integration of commercial space operations into the national airspace.",
"According to the President's budget request\nFHWA's contributions to researching and implementing transformative innovations and technologies are changing the way roads, bridges, and other facilities are planned, designed, built, managed, and maintained across the country to be more responsive to current and future needs.\nThe President's request of $420 million for R&D activities and facilities at FHWA would be an increase of $39 million (10.2%) from FY2019. The request includes $125 million for FHWA's Highway Research and Development program, which seeks to improve safety, enhance the design and construction of transportation infrastructure, provide data and analysis for decision-making, and reduce congestion. The program supports highway research in such areas as the impact of automated driving systems, infrastructure durability, resilience, and environmental sustainability, and the factors that contribute to death and injury related to roadway design, construction, and maintenance. The request also includes $100 million for research to facilitate the development of a connected, integrated, and automated transportation system under the agency's Intelligent Transportation Systems program.",
"The President is requesting $62.1 million in R&D and R&D facilities funding in FY2020 for NHTSA, $13.8 million (18.2%) below FY2019. NHTSA R&D focuses on automation and the study of human machine interfaces, advanced vehicle safety technology, ways of improving vehicle crashworthiness and crash avoidance, reducing unsafe driving behaviors, and alternative fuels vehicle safety.",
"R&D activities are also supported by several other DOT components or agencies (see Table 19 ). The President's FY2020 request includes DOT R&D and R&D facilities funding for\nthe Federal Railroad Administration (FRA), totaling $23.1 million, $21.6 million (48.3%) below the FY2019 level of $44.6 million; the Federal Transit Administration (FTA), totaling $28 million, $2 million (6.7%) below the FY2019 level of $30 million; the Pipeline and Hazardous Materials Safety Administration (PHMSA), totaling $21.5 million, $3 million (12.1%) below the FY2019 level of $24.5 million; the Office of the Secretary (OST), totaling $13.1 million, $14.8 million (53.2%) below the FY2019 level of $27.9 million; and the Federal Motor Carrier Safety Administration (FMCSA), totaling $9.1 million, the same amount as FY2019.",
"The Department of Homeland Security (DHS) has identified five core missions: to prevent terrorism and enhance security, to secure and manage the borders, to enforce and administer immigration laws, to safeguard and secure cyberspace, and to ensure resilience to disasters. New technology resulting from research and development can contribute to achieving all these goals. The Directorate of Science and Technology (S&T) has primary responsibility for establishing, administering, and coordinating DHS R&D activities. Other components, such as the Countering Weapons of Mass Destruction Office, the U.S. Coast Guard, and the Transportation Security Administration, conduct R&D relating to their specific missions.\nThe President's FY2020 budget request for DHS includes $438 million for activities identified as R&D. This would be a reduction of 31.6% from $640 million in FY2019. The total includes $303 million for the S&T Directorate and smaller amounts for six other DHS components. See Table 20 .\nThe S&T Directorate performs R&D in several laboratories of its own and funds R&D performed by the DOE national laboratories, industry, universities, and others. It also conducts testing and other technology-related activities in support of acquisitions by other DHS components. The Administration's FY2020 request of $303 million for the S&T Directorate R&D account is a decrease of 40.7% from $511 million in FY2019. The request includes no funding for cybersecurity R&D ($89.1 million in FY2019), which would instead be conducted in the Cybersecurity Infrastructure Security Agency ($31 million for R&D in the FY2020 request, up from $13 million in FY2019). The remaining thrust areas in the S&T Directorate's Research, Development, and Innovation budget line would all decrease, by amounts ranging from 12.1% (Counter Terrorist) to 40.4% (Border Security). Funding for University Centers of Excellence would decrease from $37 million in FY2019 to $18 million in FY2020.\nIn addition to its R&D account, the S&T Directorate receives funding for laboratory facilities and other R&D-related expenses through its Operations and Support account (not shown in the table). In this account, the FY2020 request for Laboratory Facilities is $116 million, down 4.9% from $122 million in FY2019. The Laboratory Facilities request includes no funding for the National Urban Security Technology Laboratory, which the Administration proposes to close, or for the National Bio and Agro-Defense Facility (NBAF), which the S&T Directorate is building using previously appropriated funds but will transfer to the USDA once it becomes operational. Requested funding in Laboratory Facilities for the National Biodefense Analysis and Countermeasures Center (NBACC) is $29 million, the same as in FY2019.\nThe request for R&D in the Countering Weapons of Mass Destruction Office is $68 million, down from $83 million in FY2019.",
"The U.S. Environmental Protection Agency (EPA), the federal regulatory agency responsible for administering a number of environmental pollution control laws, funds a broad range of R&D activities to provide scientific tools and knowledge that support decisions relating to preventing, regulating, and abating environmental pollution. Since FY2006, Congress has funded EPA through the Interior, Environment, and Related Agencies appropriations acts.\nAppropriations for EPA R&D are generally included in line-items that also include non-R&D activities. Annual appropriations bills and the accompanying committee reports do not identify precisely how much funding provided in appropriations bills is allocated to EPA R&D alone. EPA determines its R&D funding levels in operation through allocating its appropriations to specific activities and reporting those amounts.\nThe agency's Science and Technology (S&T) appropriations account funds much of EPA's scientific research activities, which include R&D conducted by the agency at its own laboratories and facilities, and R&D and related scientific research conducted by universities, foundations, and other nonfederal entities that receive EPA grants. The S&T account receives a base appropriation and a transfer from the Hazardous Substance Superfund (Superfund) account for research on more effective methods remediating contaminated sites.\nEPA's Office of Research and Development (ORD) is the primary manager of R&D at EPA headquarters and laboratories around the country, as well as external R&D. A large portion of the S&T account funds EPA R&D activities managed by ORD, including research grants. Programs implemented by other offices within EPA also may have a research component, but the research component is not necessarily the primary focus of the program.\nAs with the President's FY2019 budget request, the FY2020 request proposes reductions and eliminations of funding for FY2020 across a number of EPA programs and activities. The President's FY2020 request includes a total of $6.07 billion for EPA, $2.78 billion (31%) less than the total $8.85 billion FY2019 enacted appropriations for EPA (after rescissions) provided in Titles II and IV of Division E of the Consolidated Appropriations Act, FY2019 ( P.L. 116-6 ), and $123.4 million (2%) less than the FY2019 request of $6.19 billion for EPA. The reductions proposed in the FY2020 request are distributed across EPA operational functions and activities as well as grants for states, tribes, and local governments. With the exception of the Building and Facilities account, the President's FY2020 request proposes funding reductions below FY2019 enacted levels for the nine other EPA appropriations accounts, although funding for some program areas within the accounts would remain constant or increase. Some Members of Congress expressed concerns regarding proposed reductions of funding for EPA scientific research programs during hearings on the President's FY2020 budget request.\nIncluding a $17.8 million transfer from the Superfund account, the President's FY2020 budget request proposes $480.8 million for EPA's S&T account, $241.1 million (33.4%) less than the FY2019 enacted $722.0 million which includes a $15.5 million transfer and $11.3 million account specific rescissions. The FY2020 request would provide an increase (3.1%) compared to the FY2019 request of $466.4 million, which includes a $17.4 million transfer. The President's FY2020 request proposes a rescission for EPA but does not specify a rescission within the S&T or other appropriations accounts. This accounting difference does not allow for direct comparisons of funding within EPA's S&T account including specific rescissions.\nTable 21 at the end of this section includes the President's FY2020 request for program areas and activities within EPA's S&T account as presented in EPA's FY20 20 Congressional Budget Justification compared to the FY2019 enacted appropriations as reported in the Conference Report ( H.Rept. 116-9 ) accompanying the FY2019 consolidated appropriations that includes the Department of Interior, Environment, and Related Agencies appropriations.\nConsistent with other recent House and Senate Appropriations Committee reports and explanatory statements, the conference report H.Rept. 116-9 accompanying the FY2019 enacted appropriations did not specify funding for all subprogram areas reported in EPA's budget justification. S&T subprogram areas not reported in congressional reports and statements are noted in the Table 21 as \"NR\" (not reported). Additionally, the President's FY2018, FY2019, and FY2020 requests and EPA's congressional budget justifications have modified the titles for some of the program areas relative to previous Administrations' budget requests and congressional committee reports' presentations. The House and Senate Appropriations Committees have generally adopted the modified program area titles as presented in the recent budget requests.\nDuring House and Senate Committee hearings regarding the President's FY2020 budget request for EPA, Members generally did not support a number of the proposed reductions and eliminations of funding for EPA, including proposed reductions in funding for scientific research programs. Reductions proposed in the FY2020 budget request below the FY2019 enacted levels were distributed across EPA operational functions and activities as well as grants for states, tribes, and local governments.\nAs shown in Table 21 , with few exceptions the requested FY2020 amount for the S&T account for individual EPA program area and activity line items would be less than the FY2019 enacted appropriations. The FY2020 request did not propose to completely eliminate funding for the broader program areas; however, eliminations (no funding is requested for FY2020) are proposed for line-item activities below the program areas as indicated in Table 21 . These program areas include\nAtmospheric Protection Program (formerly GHG [greenhouse gas] Reporting Program and Climate Protection Program), Indoor Air Radon Program, and Reduce Risks from Indoor Air.\nFor other program areas, proposed reductions in funding included eliminations of certain programs. For example, the proposed reduction in funding for Research: Air and Energy, Research: Safe and Sustainable Water Resources, Research: Sustainable and Healthy Communities, and Research: Chemical Safety and Sustainability program areas for FY2020 included the proposed elimination of funding for the Science to Achieve Results (STAR) program.\nP.L. 116-6 included $5.0 million for Research: National Priorities within the S&T account for FY2019, an increase compared to $4.1 million included for FY2018. As in the previous Administration's fiscal year requests, the President's FY2020 budget request did not include funding for Research: National Priorities.\nIn addition to clarifying certain funding allocations within the S&T account and consistent with the prior fiscal year appropriations committee reports and explanatory statements, H.Rept. 116-9 provided additional guidance for certain program areas and activities within the S&T account for FY2019. Topics expressly referenced included\nAlternative Testing;\nComputational Toxicology;\nEnhanced Aquifer Use;\nIntegrated Risk Information System (IRIS);\nNanomaterials Research;\nInnovative Research Partnerships;\nIntramural Animal Testing;\nScience to Achieve Results (STAR) Grants;\nHarmful Algal Blooms;\nWater Distribution Systems; and\nWater Security Test Beds.\nThe size and structure of the agency's workforce, as was the case during consideration for the FY2018 and FY2019 appropriations, has been a topic of debate during congressional committee hearings regarding EPA's FY2020 appropriations. Workforce reshaping was introduced in the FY2018 request and described as agency-wide organizational restructuring, \"reprioritization of agency activities,\" and reallocation of resources. The FY2020 request for the Operations and Administration program area within the S&T account includes $6.0 million for agency workforce reshaping and efforts to improve the management of EPA's laboratories. As with the FY2018 enacted appropriations, P.L. 116-6 did not fund the President's FY2019 request for EPA workforce reshaping for FY2019.\nEPA's reported proposed reorganizing strategies, potentially impacting certain aspects of EPA's Office of Research Development (ORD) and the operations of the EPA Office of the Science Advisor (OSA), as well as current EPA laboratories including the National Exposure Research Laboratory (NERL), the National Health and Environmental Effects Research Laboratory (NHEERL), and the National Risk Management Research Laboratory (NRMRL), have also been of interest to some Members of Congress.\nAppendix A. Acronyms and Abbreviations\nAppendix B. CRS Contacts for Agency R&D\nThe following table lists the primary CRS experts on R&D funding for the agencies covered in this report."
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"question": [
"How will most federal agencies be affected by the FY2020 budget request?",
"How will the Department of Defense be affected by the FY2020 budget request?",
"How will the Department of Transportation be affected by the FY2020 budget request?",
"How will the Department of Energy be affected by the FY2020 budget request?",
"What does the President's request represent?",
"How may Congress respond to the President's request?",
"How quickly has Congress completed the annual appropriations process in recent years?",
"How has this affected agencies' execution of their R&D budgets?"
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"summary": [
"Under the President's FY2020 budget request, most federal agencies would see their R&D funding decline.",
"DOD's requested R&D funding for FY2020 is $7.1 billion (13.5%) above the FY2018 level.",
"The Departments of Transportation and Veterans Affairs would see small increases in R&D funding.",
"Among the agencies with the largest proposed reductions in R&D funding in the FY2020 budget compared to the FY2018 actual levels are the Department of Energy ($2.8 billion, 15.8%), the National Science Foundation ($567 million, 9.0%), and National Aeronautics and Space Administration ($475 million, 4.0%).",
"The request represents the President's R&D priorities.",
"Congress may opt to agree with none, part, or all of the request, and it may express different priorities through the appropriations process.",
"In recent years, Congress has completed the annual appropriations process after the start of the fiscal year.",
"Completing the process after the start of the fiscal year and the accompanying use of continuing resolutions can affect agencies' execution of their R&D budgets, including the delay or cancellation of planned R&D activities and the acquisition of R&D-related equipment."
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CRS_R44928
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{
"title": [
"",
"Introduction",
"Background: Electoral College Reform",
"The Electoral College by the Numbers",
"Why Reform the Electoral College?6",
"Public Opinion and Electoral College Reform",
"Reform Options",
"Why Keep It?10",
"Reform Efforts in Congress: The Historical Record",
"Electoral College Reform: Proposals in the 114th and 115th Congresses",
"114th Congress",
"House of Representatives",
"H.J. Res. 102—The 'Every Vote Counts Amendment'",
"Analysis",
"H.J. Res. 103",
"Analysis",
"H.J. Res. 104",
"Analysis",
"Senate",
"S.J. Res. 41",
"Analysis",
"115th Congress",
"H.J.Res. 19",
"Analysis",
"H.J.Res. 65—The 'Every Vote Counts Amendment'",
"Analysis",
"Trends in Electoral College Reform",
"Non-Congressional Activity",
"Trends in Proposed Amendments Introduced in Congress",
"Concluding Observations"
],
"paragraphs": [
"",
"Article II Section 1 of the U.S. Constitution, as modified by the 12 th Amendment, provides for an indirect election of the President and Vice President by presidential electors. Although the states are authorized to appoi nt them \"in such Manner as the Legislature thereof may direct,\" today, presidential electors are themselves elected by qualified voters in all the states. In order to win, candidates must win a majority of the electoral votes. Although the words do not appear in the Constitution, the electors are known collectively as the electoral college, and this arrangement is generally referred to as the electoral college system. It has proved to be a durable institution or process, due in part to the fact that the U.S. Constitution is, by design, not easily amended. Its longevity may also be due to the fact that it has delivered a chief executive who commanded a majority of electoral votes in 53 of 54 presidential contests since the 12 th Amendment took effect in 1804. Also important from the standpoint of democratic principle and majority rule is the fact that the electoral college system has elected the candidates who won the most popular votes—\"the people's choice\"—in 49 of these 54 elections.\nDespite its origins as the handiwork of the Constitution's framers, the electoral college system has been criticized as undemocratic, archaic, cumbersome, and weighted in favor of—or against—different states and groups since the first presidential elections. At the same time, electoral college defenders have asserted that it is a key foundation of federalism, it contributes to a stable and moderate political party system, and that it has delivered \"the people's choice,\" the popular vote winner in 91% of presidential elections since 1804.\nCongress actively considered electoral college reform for nearly 30 years between the late 1940s and 1979, bringing multiple proposals to the floor of the Senate and House of Representatives during this period. Reform advocates, however, were never able to achieve the two-thirds vote required to propose a constitutional amendment in both houses during the same Congress. By the early 21 st century, the questions of reforming electoral college constitutional provisions or substituting direct popular election of the President and Vice President gradually disappeared from the congressional agenda.\nIn 2016, however, for the second time in 16 years, and for the fourth time in the nation's history, a President and Vice President were elected who won a majority of electoral votes, but fewer popular votes than their principal opponents. This outcome occurred because the system requires a majority of electoral votes, rather than of popular votes, to win the presidency. This feature, which is original to the Constitution, has been the object of both criticism and proposals for change since the early days of the republic; its recurrence in 2016 contributed to renewed interest among some in replacement of the electoral college by direct popular election. Following the election, four proposals to establish direct popular election were introduced in the last weeks of the 114 th Congress, while two more have been offered to date in the 115 th Congress. This report identifies and provides an analysis of these proposals and will be updated to report on any additional developments in electoral college reform.",
"",
"Aside from the electoral vote majority requirement, the Constitution gave broad discretion to the states with respect to other elements of the system. Many of the additional features associated with the electoral college system are the product of federal and state laws and party actions.\n1. With today's total of 538 electors, a majority of 270 is necessary to elect the President and Vice President. 2. The voters elect presidential electors in all 50 states and the District of Columbia. 3. Candidates for the office of elector are nominated by the political parties in the states using a broad range of procedures. 4. The electors are chosen on general election day, the Tuesday after the first Monday in November of presidential election years. 5. Forty-eight states and the District of Columbia award their electors on a winner-take-all basis known as the general ticket system. Maine and Nebraska award their electors on a basis of the states' congressional district and statewide popular vote winners. 6. In December, five weeks after the general election, the electoral votes are cast by the electors, who meet separately in their respective states. 7. By tradition, electors are expected, but not constitutionally required, to vote for the candidates to whom they are pledged. 8. The electoral votes are counted by Congress on January 6 of the following year, when the winners are declared. 9. If no candidate receives a majority of electoral votes, then the President is elected by the House of Representatives and the Vice President by the Senate in a process known as contingent election.",
"Critics of the electoral college have offered proposals for its reform or replacement since the early days of government under the Constitution.\nConstitutional and structural criticisms have centered on several of its features: critics note that it is not fully democratic, because it provides indirect election of the President. It can, they assert, result in (1) the election of candidates who win the electoral college but receive fewer popular votes than their opponents, an eventuality referred to by reform advocates as \"wrong winner\" or an electoral college \"misfire\"; and (2) contingent election in Congress if no candidate wins an electoral college majority. They further maintain that it results in electoral vote under- and over-representation in the states between censuses and House reapportionment and the reallocation of electoral votes. They also note that \"faithless\" electors can vote for candidates other than those to whom they are pledged.\nLegislative and political criticisms include the winner-take-all or general ticket system mandated in all but two states, which is said to disenfranchise voters who prefer the losing candidates in the states; various asserted \"biases\" that are alleged to favor different states and groups; and the electoral college \"lock,\" a phenomenon that has been claimed to provide a nearly insuperable advantage to one or the other of the political parties at various points in time.",
"Public opinion has consistently and historically supported reform. The Gallup Poll reported as early as 1967 that 58% of respondents supported direct election, compared with 22% who favored retaining the electoral college; Gallup's 2013 survey recorded that 63% of respondents favored an amendment providing for direct election, while 29% favored retention of the electoral college. Following the 2016 election, however, Gallup reported a shift to greater support for the electoral college system by respondents who identified themselves as \"Republican\" or \"Lean Republican.\" Conversely, already high levels of support for direct popular election among respondents who identified themselves as \"Democratic\" or \"Lean Democratic\" rose to new heights in the post-2016 election Gallup Poll.",
"Reform options have included plans to remedy perceived flaws while retaining the basic electoral college system. Nearly all reform plans of the past century would start by eliminating the office of presidential elector but continue to award electoral votes; this would remove the potential for faithless electors, a major point of criticism of the existing system. Beyond this common feature, three principal options for reform have been advocated over time: the automatic plan, which would mandate the general ticket system in all states and the District of Columbia; the district system, adopted by Maine and Nebraska, which would allocate electoral votes by congressional district and at-large; and the proportional system, which would award electoral votes in direct proportion to the percentage of votes gained by the competing candidates in each state. Moving beyond \"reform\" of the system, the most popular proposal since the late 20 th century has been to eliminate the electoral college system entirely and replace it with direct popular election of the President and Vice President, with either a plurality or majority of the popular vote necessary to win.",
"Electoral college supporters and those who favor a reformed electoral college system reject the claim that it is undemocratic, noting that electors are chosen by the voters in free elections. They assert that the electoral college system is a major component of American federalism, maintaining that the Constitution prescribes a federal election of the President by which votes are tallied in each state, and in which the voters act both as citizens of the United States and members of their state communities when choosing a President. They also cite federalism in defense of the allocation of electors among the states, and deprecate the claims that various groups or political parties are advantaged under the system. Further, they maintain that the electoral college system has historically promoted broad-based and generally moderate political parties. They reject the faithless elector argument: even counting the seven votes cast against instructions in 2016, unfaithful electors have never come close to influencing the outcome of an election. Moreover, they note, most electoral college reform plans would remove even this eventuality by eliminating the office of elector and awarding electoral votes directly. On a practical level, they note that the general ticket system actually tends to magnify the winning ticket's electoral vote margin beyond the popular vote margin, which they claim brings closure to the election process and promotes the winning candidates' legitimacy.",
"As noted previously, the electoral college system has been the subject of discussion and controversy since the first presidential elections. Reform proposals to remedy fatal defects in the original system, by which electors cast two undifferentiated votes for President, were introduced in Congress as early as 1797, and a tie vote for President in the 1800 election led to the nation's first constitutional crisis. When the crisis was resolved by contingent election in the House of Representatives, Congress acted quickly to approve a proposal to require distinct ballots by the electors for President and Vice President. This measure was ratified in 1804 as the 12 th Amendment, becoming the first, and to date the only, specific constitutional reform of the electoral college system. Since that time, amendments have been introduced to reform or replace it with direct popular election in almost every session of Congress. Estimates vary, but reform proposals number at least 752 through the 115 th Congress.\nFor a period of almost three decades in the mid-20 th century, Congress gave the issue of electoral college reform a prominent place on its agenda. Between the late 1940s through 1979, numerous electoral college reform proposals were introduced in both the House of Representatives and the Senate. They embraced a wide range of approaches to the question, but generally followed the outlines set out in the previous section: \"ending it\" by eliminating the entire electoral college system and establishing direct popular election, or \"mending it\" by reforming its more controversial provisions. The question of electoral college reform or replacement was actively considered throughout these years. In the post-World War II era, direct popular election became increasingly popular, but several versions of reform were also considered, most of which started with keeping electoral votes but eliminating the office of elector, thus ending the possibility of faithless electors. Proceeding from that baseline, the most prominent reform variants, as noted previously, included\nthe automatic plan /system , which would award the popular vote winners in each state all that state's electoral votes; the district plan /system , which would award electoral votes to the popular vote winners in congressional districts and the two at-large or \"senatorial electors\" to statewide vote winners; and the proportional plan /system , which would award electoral votes in each state in direct proportion to the number of popular votes won by competing candidates.\nProposed amendments were the subject of hearings in the Senate and House Judiciary Committees on 17 different occasions between 1948 and 1979, and, most notably, electoral college reform proposals were debated in the full Senate on five occasions and twice in the House during this period. Proposals were approved by the necessary two-thirds majority twice in the Senate and once in the House, but never in both chambers during the same Congress.\nFollowing these three decades of legislative activity, the questions of revising electoral college constitutional provisions or substituting direct popular election of the President and Vice President gradually fell from the congressional agenda by the end of the first decade of the 21 st century. This decline was reflected by the number of constitutional amendments to reform or abolish the electoral college introduced in the House or Senate during the ensuing three decades. Proposals to reform the electoral college system or adopt direct election declined from 26 in the 96 th Congress (1979-1981) and an average of eight per Congress for the 101 st (1989-1991) through 110 th (2007-2009) Congresses, to none in the 113 th Congress (2013-2015). Moreover, no electoral college reform proposal has received floor action since 1979.",
"Following the presidential election of November 8, 2016, proposals to establish direct popular election of the President and Vice President were introduced in Congress for the first time since 2011. Four resolutions were offered late in the 114 th Congress and two more have been offered to date in the 115 th Congress. These measures were introduced as joint resolutions, the traditional legislative vehicle for proposed constitutional amendments. They fall into one of two categories; the first includes resolutions that would establish direct popular election but otherwise make few, if any, other changes in the Constitution. The second category would establish direct popular election, and would also enable Congress to provide by law for additional federal authority over a range of election-related issues. These vary from measure to measure, but generally include provisions to enhance and extend federal jurisdiction in such areas as residence standards, definition of citizenship, national voter registration, inclusion of U.S. territories and other associated jurisdictions in the presidential election process, establishment of an election day holiday, and ballot access standards for parties and candidates.",
"The following amendments were introduced in the 114 th Congress; they are arranged by House and Senate origin and chronological order.",
"",
"This measure was introduced on November 17, 2016, by Representative Gene Green and 19 co-sponsors. This resolution included establishment of direct popular election and various other provisions.\nSection 1 of the proposed amendment provided for election of the President and Vice President \"by the people of the several States\" and the District of Columbia. Section 2 defined electors for these offices as persons eligible to vote for Senators and Representatives in Congress from each state, but authorized state legislatures to prescribe \"less restrictive qualifications with respect to residence.\" It also authorized Congress to establish uniform residence and age requirements. Section 3 set a plurality requirement for election: \"[t]he persons having the greatest number of votes ... shall be elected.\" Section 4 incorporated the traditional joint candidacies for President and Vice President as a constitutional requirement and prescribed that voters would cast a single vote for a joint candidacy. Section 5 authorized Congress to provide by law for the case of a candidate's death before the election, and for the case of a tie vote. Section 6 set an effective date for the amendment of one year after the date of ratification, should it have been approved by the states.\nH.J.Res. 102 was referred to the Subcommittee on the Constitution and Civil Justice of the House Judiciary Committee on December 5, 2016. No further action was taken.",
"H.J.Res. 102 was an example of a presidential election reform measure that would provide for direct popular election while also enhancing congressional ability to legislate additional federal authority over the elections process.\nFor instance, Section 2 would have authorized Congress to \"establish uniform age and residence qualifications.\" With respect to age, this would presumably have empowered Congress to set a lower voting age than 18, since the 26 th Amendment effectively prohibits the denial of the right to vote to anyone age 18 or older.\nWith respect to residence, it would have provided Congress the authority to \"establish uniform ... residence qualifications\" and set \"less restrictive [residence] qualifications\" in the states. While two Supreme Court cases effectively limited state residency requirements in the 1970s, legislation implementing this section would arguably constitute an extension of federal authority over a process that has traditionally been administered at the state level, and which has previously been considered a settled question.\nIt may also be noted that H.J.Res. 102 included the customary seven-year ratification deadline for constitutional amendments. It is, however, specifically incorporated in the resolution's preamble or authorizing section, rather than the body of the amendment. This opens the possibility of extending the ratification deadline by congressional action and arguably avoids the amendment expiration issues most notably associated with the proposed Equal Rights Amendment.",
"H.J.Res. 103 was introduced by Representative Charles Rangel on November 17, 2016. Representatives Steve Cohen and Jackie Speier joined as co-sponsors. It would have provided for direct election of the President and Vice President, expanded the right to vote in presidential elections, and established congressional authority to provide by legislation for certain elements of the presidential election process.\nSection 1 proposed direct election of joint tickets of candidates for President and Vice President. It also extended the right to vote for President to \"qualified electors of the ... territories.\" It defined \"electors\" as persons qualified to vote for the most numerous branch of the legislature in their jurisdiction. Section 2 would have empowered Congress to choose the time, place, and manner of holding the election, determine entitlement to inclusion on the presidential ballot, and provide for counting and declaration of the vote.\nH.J.Res. 103 was referred to the Subcommittee on the Constitution and Civil Justice of the House Judiciary Committee on December 5, 2016. No further action was taken.",
"H.J.Res. 103 proposed elimination of the electoral college system and its replacement by direct popular election of the President and Vice President. It also would have authorized Congress to provide by legislation for certain aspects of the presidential election process.\nSince Section 1 did not set a margin for victory, a plurality of the popular vote presumably would have been sufficient to elect. Arguably its most significant provision would have been Section 1's extension of the right to vote in presidential elections to qualified electors in U.S. territories. This would have been the first amendment specifically aimed at expansion of the presidential electorate since the 23 rd Amendment authorized voting for presidential electors in the District of Columbia.\nThe section's definition of electors notably proposed language similar to that of the Constitution's Article 1, Section 2, which similarly defined qualified electors for the House of Representatives as those qualified to vote for \"the most numerous branch of the legislative body where they reside.\"\nSection 2 of the resolution would have added additional authority to regulate the \"times, places, and manner\" of holding presidential elections. Here again, the resolution drew on language from the Constitution, in this case Article I, Section 4, clause 1, with respect to elections for Senators and Representatives. Another noteworthy provision of this section was the extension to Congress of authority over \"entitlement to inclusion on the ballot\" and \"the manner in which the results of the election shall be ascertained and declared.\" These functions have traditionally been provided for in state law and administered by state election authorities.\nH.J.Res. 103 incorporated the seven-year ratification window for constitutional amendments in its authorizing section or preamble, thus opening the possibility of extending the ratification deadline by congressional action.",
"This resolution was introduced by Representative Steve Cohen on December 1, 2016. Representative Jim Cooper joined as a co-sponsor. It proposed elimination of the electoral college system and its replacement by direct popular election of the President and Vice President. It also would have empowered Congress to provide by legislation for authority over certain elements of the presidential election process.\nH.J.Res. 104 was distinguished by its inclusion of a comprehensive preamble, which presented a range of arguments in favor of replacement of the electoral college system by direct popular election. These noted the evolution of democratic government since the Constitution was drafted in 1787; cited constitutional amendments that guarantee universal suffrage and the right to vote; noted the spread of modern information technology that ensures nationwide availability of information on the presidential candidates and the election process; quoted Thomas Jefferson's assertion that \"as new truths are discovered and manners and opinions change, with the change of circumstances, institutions must advance also to keep pace with the times.... \"; and traced the growth of the right to vote and the development of universal suffrage in the United States.\nThe resolution was also noteworthy in that it did not set the customary seven-year ratification deadline for ratification. It would, therefore, have been eligible for ratification indefinitely.\nSections 1 and 2 provided for direct election; set qualifications for electors as those eligible to vote for the most numerous chamber of their state legislature; and empowered Congress to establish uniform age qualifications. Section 3 established the traditional joint candidacies for President and Vice President within the Constitution, while eliminating the arguably archaic prohibition against electors voting \"for a candidate for President or Vice President because either candidate, or both, are inhabitants of the same state as the elector.\" Section 4 established a plurality requirement for the popular vote winners. Section 5 authorized Congress to determine the \"times, places, and manner of holding such elections and entitlement to inclusion on the ballot.\" Section 6 authorized Congress to provide for death or disqualification of a candidate before the election or for the case of a tie vote in any election. Section 7 provided that the amendment would have taken effect on January 1 of the year following ratification.",
"H.J.Res. 104 included many provisions similar or identical to H.J.Res. 102 , the Every Vote Counts Amendment, including direct election on a plurality basis, joint tickets, congressional authority over voter qualifications, \"times, places, and manner\" of holding presidential elections, and instances in which candidates may have died or been disqualified before the election.\nThe non-inclusion of the customary seven-year ratification deadline was arguably particularly noteworthy in H.J.Res. 104 . Amendments that are proposed without this provision are theoretically capable of being ratified for an indefinite period after Congress proposed them. This was the case of the 27 th Amendment, which was proposed without a ratification deadline in 1789, languished for two centuries, and was ultimately revived and ratified in 1992.",
"",
"This resolution was introduced on November 15, 2016, by Senator Barbara Boxer. She was joined by three co-sponsors: Senators Dianne Feinstein, Kirsten E. Gillibrand, and Bill Nelson.\nSection 1 authorized direct popular election of a joint ticket for President and Vice President by \"qualified\" electors of the states, the territories, and the \"District constituting the seat of Government.... \" It defined electors as those qualified to vote for the most numerous branch of the legislature where they reside. Section 2 authorized Congress to determine \"the time, place, and manner of holding the election, standards for ballot inclusion, and procedures by which the results may be \"ascertained and declared.\"\nS.J.Res. 41 was referred to the Senate Committee on the Judiciary on November 15, 2016. No further action was taken.",
"S.J.Res. 41 incorporated provisions similar to those included in contemporary related House of Representatives proposals. The resolution would have established direct popular election, presumably on a plurality basis, although this is not specified in the measure. It would also have established the familiar and traditional joint ticket of presidential and vice presidential candidates as part of the Constitution, and made reference to the original constitutional language governing qualification for electors of the House of Representatives. As with H.J.Res. 103 , it would have expanded the right to vote in presidential elections to qualified voters in U.S. territories. Also in common with previously-cited contemporary House measures, it would have provided congressional authority over the \"time, place, and manner\" of holding presidential elections, ballot access, and procedures concerning ascertainment and declaration of result.",
"Two amendments to establish direct popular election have been introduced to date in the 115 th Congress, both in the House of Representatives.",
"This resolution was introduced on January 5, 2017, by Representative Steve Cohen. To date, he has been joined by five co-sponsors. It is identical to H.J.Res. 104 in the 114 th Congress. The resolution also opens with an identical preamble citing the sponsors' justification for electoral college reform.\nSections 1 and 2 would provide for direct election; set qualifications for electors as those eligible to vote for the most numerous chamber of their state legislature and empower Congress to establish \"uniform age qualifications,\" here again presumably lower age qualifications, but not higher than those established by the 26 th Amendment. Section 3 would extend constitutional authorization to the traditional joint candidacies for President and Vice President, while eliminating the arguably archaic prohibition against electors voting \"for a candidate for President or Vice President because either candidate, or both, are inhabitants of the same state as the elector.\" Section 4 would implicitly set a plurality requirement for the popular vote winners. Section 5 would authorize Congress to determine the \"times, places, and manner of holding such elections and entitlement to inclusion on the ballot.... \" Section 6 would authorize Congress to provide for death or disqualification of a candidate before the election or for the case of a tie vote in any election. Section 7 provides that the article would take effect on January 1 of the year following ratification.\nH.J.Res. 19 was referred to the House Committee on the Judiciary on January 5, 2017, and to its Subcommittee on the Constitution and Civil Justice on January 11.",
"With respect to voting age, the provisions of Section 2 would arguably empower Congress to set a lower voting age than 18, since the 26 th Amendment effectively prohibits the denial of the right to vote to anyone age 18 or older. Another noteworthy provision in H.J.Res. 19 is the absence of the traditional seven-year ratification deadline. As noted previously, amendments proposed without a ratification deadline, either in the preamble/authorizing resolution, or in the body of the amendment, are theoretically capable of being ratified for an indefinite period after Congress sends them to the states. For example, as noted previously, the 27 th Amendment was proposed without a ratification deadline in 1789; after nearly two centuries of neglect, it was revived and ratified in 1992.",
"The proposal was introduced on February 7, 2017, by Representative Gene Green, who has been joined by 23 co-sponsors at the time of this writing. The amendment is identical to H.J.Res. 102 , introduced by Representative Green in the 114 th Congress.\nSection 1 would provide for election of the President and Vice President \"by the people of the several States\" and the District of Columbia. Section 2 defines electors as persons eligible to vote for Senators and Representatives in Congress from each state, but authorizes state legislatures to prescribe \"less restrictive qualifications with respect to residence.\" It also authorizes Congress to establish uniform residence and age requirements. Section 3 sets a plurality requirement for election: \"[t]he persons having the greatest number of votes ... shall be elected.\" Section 4 incorporates the traditional joint candidacies for President and Vice President into the Constitution and prescribes that voters would cast a single vote for a joint candidacy. Section 5 authorizes Congress to provide by law for the cases of a candidate's death before the election, and for the case of a tie vote. Section 6 sets an effective date for the amendment of one year after the date of ratification, should it be approved by the states.\nH.J.Res. 65 was referred to the House Judiciary Committee on February 7, 2017, and to its Subcommittee on the Constitution and Civil Justice on February 14.",
"H.J.Res. 65 , like its 114 th Congress predecessor, H.J.Res. 102 , would provide for direct popular election on a plurality basis, while also incorporating joint presidential-vice presidential tickets into the Constitution. It also proposes congressional authority to provide by law for certain elements of the presidential elections process traditionally administered by the states, such as age and residence requirements, the former presumably within the requirements of the 26 th Amendment, as identified previously. H.J.Res. 65 follows traditional amendment procedures by establishing the customary seven-year ratification window in its preamble, rather than in the body of the amendment. This arguably makes it possible for Congress to extend the ratification deadline by congressional action.",
"Aside from the introduction of new proposals late in the 114 th and the early 115 th Congress, the question of electoral college reform has been largely absent from the congressional agenda in recent years. The issue has, however, been the subject of considerable action in the states and the non-governmental sector over the past decade.",
"Following the presidential elections of 2008 and 2012, a number of states considered alterations in their provisions for awarding electoral votes. Pennsylvania, Wisconsin, and Virginia all considered the district system; Colorado voters rejected a proposal to incorporate a proportional system for awarding votes in that state, while Nebraska considered abandoning the district system and a return to the general ticket, winner-take-all method of awarding electoral votes. To date, however, none of these initiatives has been enacted in the states. They are identified and analyzed in CRS Report R43824, Electoral College Reform: Contemporary Issues for Congress .\nIn the non-governmental sector, a public interest organization, National Popular Vote, Inc., has proposed the National Popular Vote initiative (NPV), which would establish direct election of the President and Vice President through an interstate compact. The origin of, asserted rationale for, and progress of the NPV are examined in CRS Report R43823, The National Popular Vote Initiative: Direct Election of the President by Interstate Compact .",
"Within the context of contemporary congressional interest in electoral college reform and direct election of the President and Vice President, two trends may be identified.\nAmendments introduced in the past decade have all embraced the \"end it\" option, substituting direct popular election for the electoral college. No proposal to reform the electoral college has been introduced since the 107 th Congress. The scope of proposed direct popular election amendments has arguably evolved in complexity and detail.\nGiven the contemporary context, some observers might suggest that the first development reflects a decline in electoral college support, lack of interest in reform proposals, or, alternatively, the absence of a sense of urgency on the part of its potential defenders. There is at present no organization of electoral college advocates or defenders, but that may be due to the issue's relative dormancy in recent years. If a proposal for direct election appeared to be developing momentum in Congress, however, it is arguably likely that supporters of the electoral college would coalesce to defend the current system, reformed, or \"as is,\" if its existence were seriously challenged.\nThe second noteworthy trend in congressional proposals for reform is that, in addition to proposing direct popular election of the President and Vice President, some of them have also included provisions that would enable Congress to provide by law for enhanced federal authority in areas traditionally administered by state and local governments. Some of these elements, most notably \"times, places, and manner,\" uniform residence standards, and candidate vacancy provisions, have been included in most reform proposals since the 1970s, and are derived from similar constitutional language. Other provisions, such as those providing a definition of citizenship for the purposes of voting, national voter registration, inclusion of U.S. territories and other associated jurisdictions in the presidential election process, establishment of an election day holiday, and congressionally-legislated federal ballot access standards for parties and candidates, are proposals that have more recently appeared in reform measures. If approved and ratified, an amendment that includes provisions such as these would provide Congress with enhanced authority to provide by law for broad national election standards, potentially superseding a range of current state, local, and political party practices and requirements, at least with respect to presidential elections.\nThe prospect of an enlarged federal role in the administration of presidential elections raises several potential issues.\nWould expanded federal involvement in traditionally state and local practices impose additional responsibilities and uncompensated costs on state and local governments? If so, such requirements might be considered to be unfunded mandates, as they could impose additional costs on sub-federal governments, and as such would be subject to points of order on the floor of both the House and Senate. One response by the affected state and local governments might be to call for federal funding to meet the increased expenses imposed by federal requirements. Precedent for this exists in the grant program incorporated in the Help American Vote Act of 2002 (HAVA). Alternatively, would some election-administration functions formerly performed at the state and local level be transferred to the federal government? If so, what level of administrative support and infrastructure would be required, and what would the costs be of federal assumption of the management of substantial elements of the presidential election process? A related issue centers on perceptions that such an amendment and resultant legislation might be regarded as federal intrusion in state and local responsibilities. For instance, a far-reaching scenario could include the gradual nationwide assumption of election administration by the federal government. In this hypothetical case, questions could be raised by opponents as to (1) the costs involved; (2) whether a national election administration system could efficiently manage all the varying nuances of state and local conditions; and (3) what would be the long-term implications for federalism. Conversely, it could be asserted by supporters that (1) a national or federal election administration structure is appropriate for national elections; (2) state or local concerns are counterbalanced by the urgent requirement that every citizen be enabled and encouraged to vote; and (3) every vote should be accurately counted.",
"The electoral college system has endured since the first presidential elections in 1789, notwithstanding over 700 reform proposals, three decades of congressional action from the 1940s through the 1970s, and the fact that in two of the five most recent elections a President has been elected with an electoral college majority but fewer popular votes than his principal opponents. What are some of the constitutional and political elements that may have contributed to its longevity?\nPerhaps the most important factor contributing to the durability of the electoral college is Article V of the Constitution, which establishes procedures for constitutional amendments. The founders intentionally made it difficult to revise the Constitution, establishing requirements for three separate super-majority votes: by two-thirds in both houses of Congress and in three-quarters of the states. To this may be added the fact that Congress exercises still further influence on the amendment process because it can choose ratification by state legislatures, or by ad hoc state ratification conventions, at its discretion. In practice, the standard for ratification is even higher, since it is customary to attach a seven-year deadline for ratification to all proposed amendments. To date, no electoral college reform amendment has been able to meet these exacting requirements, notwithstanding sometimes vigorous action in Congress over the years.\nMost successful constitutional amendments have emerged as responses to the stimulus of sudden transformative events, such as the 22 nd Amendment, which established a two-term limit for Presidents in most instances, or benefitted from the \"ripeness\" of an idea that had been before the public for many years, such as the 26 th Amendment, which extended the right to vote to citizens 18 years of age or older. Sometimes both factors contributed to the successful proposal and ratification of a proposed change to the Constitution, as was the case with the 25 th Amendment, which governs presidential succession and disability.\nCommitted and persistent advocacy and leadership among senior Members of both houses of Congress is another factor that has proved essential to the success of proposed constitutional amendments.\nPublic awareness of the issue in question and a broad national consensus that reform was necessary have also historically contributed to the success of proposed amendments.\nThe 12 th Amendment, to date the only major constitutional change to the electoral college system that met these qualifications, was a direct response to turmoil accompanying the presidential election of 1800. The failure of the original constitutional electoral college provisions led to a constitutional crisis that, once surmounted, motivated Congress to propose, and the states to ratify, the 12 th Amendment, in what could be described as record time, considering the era. Although \"public opinion\" in its modern sense can scarcely be said to have existed at the time, America's political elites had been strongly influenced by the election and its aftermath. Today, by comparison, although substantial majorities of Americans, as measured by survey research, approve of direct popular election, neither a compelling national consensus nor the urgency of reform has been demonstrated with respect to the electoral college.\nFinally, as noted above, successful amendments have almost always depended on support and focused effort by congressional leaders who helped move amendments through the legislative process in both chambers of Congress to proposal to the states and ratification by them. For instance, both the 25 th and 26 th Amendments enjoyed the approval and active support of then-House Judiciary Committee Chairman Emanuel Celler and Senator Birch Bayh, then-Chairman of the Senate Judiciary Committee's Subcommittee on the Constitution.\nIn summation, demonstrated need for an amendment, and in some instances demonstrated urgency, widespread awareness of, and a favorable consensus toward, the measure among the public, and committed congressional involvement, particularly in guiding proposals through the rigors of the amending process, have been key to the success of constitutional amendments in the past. The concurrent alignment of these factors would arguably be necessary for the advancement of electoral college reform in the 115 th Congress."
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"question": [
"What is sometimes referred to by reform advocates as an \"electoral college misfire\"?",
"Why is it possible for this to happen?",
"Why is the electoral college opposed by proponents of direct popular election?",
"What was proposed by the constitutional amendments introduced to the 114th Congress following the 2016 election?",
"What changes to the electoral college system have been introduced to the 115th Congress?",
"What other changes to the current election system would H.J.Res. 19 introduce?",
"What happened to both resolutions?",
"What does this report provide?"
],
"summary": [
"The election of Presidents who won a majority of electoral votes but fewer popular votes than their opponents is sometimes referred to, particularly by reform advocates, as an \"electoral college misfire.\"",
"This is possible because the Constitution requires a majority of electoral votes to elect the President, but it does not require a majority or plurality of popular votes to be elected.",
"Proponents of reform, especially of direct popular election, claim the built-in potential for so-called misfires is undemocratic and cite it as a principal argument for change.",
"Following the 2016 election, however, four constitutional amendments introduced late in the 114th Congress proposed eliminating the electoral college and replacing it with direct election.",
"To date in the 115th Congress, two amendments to establish direct popular election have been introduced: H.J.Res. 19, offered on January 5, 2017, by Representative Steve Cohen, would replace the electoral college with direct popular election of the President and Vice President by plurality vote. H.J.Res. 65, the \"Every Vote Counts Amendment,\" introduced by Representative Gene Green on February 7, 2017, provides for direct popular election by plurality, and also provides Congress with additional authority over related activities.",
"It would also authorize Congress to set voter qualifications, times, places, and manner of holding presidential elections, and other election-related policies.",
"Both resolutions have been referred to the House Committee on the Judiciary and to its Subcommittee on the Constitution and Civil Justice.",
"This report provides an analysis of these measures in the 115th Congress."
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CRS_RL30415
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{
"title": [
"",
"Introduction",
"Background",
"Stenberg v. Carhart",
"Federal Proposals to Ban Partial-Birth Abortion",
"106th Congress",
"107th Congress",
"108th Congress",
"Gonzales v. Carhart"
],
"paragraphs": [
"",
"Since 1995, at least thirty-one states have enacted laws banning the so-called \"partial-birth\" abortion procedure. Although many of these laws have not taken effect because of permanent injunctions, they remain contentious to both pro-life advocates and those who support a woman's right to choose. The concern over partial-birth abortion has been shared by Congress. Congress passed bans on the partial-birth abortion procedure in both the 104 th and 105 th Congresses. Unable to overcome presidential vetoes during both congressional terms, the Partial-Birth Abortion Ban Act was reintroduced in each successive Congress until its enactment in 2003. S. 3 , the Partial-Birth Abortion Ban Act of 2003, was passed by Congress in October 2003. The measure was signed by the President on November 5, 2003.\nThe U.S. Supreme Court has also addressed the performance of partial-birth abortions. In Stenberg v. Carhart , a 2000 case, the Court invalidated a Nebraska statute that prohibited the performance of such abortions. Prior to this decision, the U.S. Courts of Appeals remained divided on the legitimacy of state statutes banning partial-birth abortions. In Gonzales v. Carhart , a 2007 case, the Court upheld the Partial-Birth Abortion Ban Act of 2003, finding that, as a facial matter, it is not unconstitutionally vague and does not impose an undue burden on a woman's right to terminate her pregnancy. This report discusses the Court's decisions and the partial-birth abortion measures in the 106 th , 107 th , and 108 th Congresses.",
"The Supreme Court has held that a woman has a constitutional right to choose whether to terminate her pregnancy. Although a state cannot prohibit a woman from having an abortion, it can promote its interest in potential human life by regulating, and even proscribing, abortion after fetal viability so long as it allows an exception for abortions that are necessary for the preservation of the life or health of the mother. In Planned Parenthood of Southeastern Pennsylvania v. Casey , the Court expanded a state's authority to regulate abortion by permitting regulation at the pre-viability stage so long as such regulation does not place an \"undue burden\" on a woman's ability to have an abortion.\nThe term \"partial-birth abortion\" refers generally to an abortion procedure where the fetus is removed intact from a woman's body. The procedure is described by the medical community as \"intact dilation and evacuation\" or \"dilation and extraction\" (\"D & X\") depending on the presentation of the fetus. Intact dilation and evacuation involves a vertex or \"head first\" presentation, the induced dilation of the cervix, the collapsing of the skull, and the extraction of the entire fetus through the cervix. D & X involves a breech or \"feet first\" presentation, the induced dilation of the cervix, the removal of the fetal body through the cervix, the collapsing of the skull, and the extraction of the fetus through the cervix. This report uses the term \"D & X\" to encompass both procedures.\nD & X is one of several abortion methods. The principal methods of abortion are suction curettage, induction, and standard dilation and evacuation (\"D & E\"). The decision to perform one abortion method over another usually depends on the gestational age of the fetus. During the first trimester, the most common method of abortion is suction curettage. Suction curettage involves the evacuation of the uterine cavity by suction. The embryo or fetus is separated from the placenta either by scraping or vacuum pressure before being removed by suction. Induction may be performed either early in the pregnancy or in the second trimester. In this procedure, the fetus is forced from the uterus by inducing preterm labor.\nD & E is the most common method of abortion in the second trimester. Suction curettage is no longer viable because the fetus is too large in the second trimester to remove by suction alone. D & E involves the dilation of the cervix and the dismemberment of the fetus inside the uterus. Fetal parts are later removed from the uterus either with forceps or by suction.\nD & X is typically performed late in the second trimester between the twentieth and twenty-fourth weeks of pregnancy. Although the medical advantages of D & X have been asserted, the nature of the procedure has prompted pro-life advocates to characterize D & X as something akin to infanticide.\nIn Women ' s Medical Professional Corporation v. Voinovich , the U.S. Court of Appeals for the Sixth Circuit discussed the differences between the D & E and D & X procedures in reference to an Ohio act that banned partial-birth abortions:\nThe primary distinction between the two procedures is that the D & E procedure results in a dismembered fetus while the D & X procedure results in a relatively intact fetus. More specifically, the D & E procedure involves dismembering the fetus in utero before compressing the skull by means of suction, while the D & X procedure involves removing intact all but the head of the fetus from the uterus and then compressing the skull by means of suction. In both procedures, the fetal head must be compressed, because it is usually too large to pass through a woman's dilated cervix. In the D & E procedure, this is typically accomplished by either suctioning the intracranial matter or by crushing the skull, while in the D & X procedure it is always accomplished by suctioning the intracranial matter.\nThe procedural similarities between the D & E and D & X procedures have contributed to the concern that the language of partial-birth abortion bans may prohibit both methods of abortion.\nPlaintiffs challenging partial-birth abortion statutes have generally sought the invalidation of such statutes on the basis of two arguments: first, that the statutes are unconstitutionally vague, and second, that the statutes are unconstitutional because they impose an undue burden on a woman's ability to obtain an abortion. The Supreme Court has held that an enactment is void for vagueness if its prohibitions are not clearly defined. Vague laws are found unconstitutional because they fail to give people of ordinary intelligence a reasonable opportunity to know what is prohibited and thus allow them to act lawfully. Moreover, the inability to provide explicit standards is feared to result in the arbitrary and discriminatory enforcement of a statute.\nThe undue burden standard was adopted by the Court in Casey . In that case, the Court held that a state could enact abortion regulations at the pre-viability stage so long as an \"undue burden\" is not placed on a woman's ability to have an abortion. Any regulation which \"has the purpose or effect of placing a substantial obstacle in the path of a woman seeking an abortion\" creates an undue burden and is invalid.\nThe Sixth Circuit was the first to consider whether a ban on partial-birth abortions imposes an undue burden on a woman's ability to have an abortion. In Voinovich , the court found that an Ohio statute that attempted to ban the D & X procedure was unconstitutional under Casey . The court determined that the language of the statute targeted the D & X procedure, but encompassed the D & E procedure. Because the D & E procedure is the most common method of second trimester abortions, the court contended that the statute created an undue burden on women seeking abortions at this point in their pregnancies.",
"In Stenberg v. Carhart , a Nebraska physician who performed abortions at a specialized abortion facility sought a declaration that Nebraska's partial-birth abortion ban statute violated the U.S. Constitution. The Nebraska statute provided:\nNo partial birth abortion shall be performed in this state, unless such procedure is necessary to save the life of the mother whose life is endangered by a physical disorder, physical illness, or physical injury, including a life-endangering physical condition caused by or arising from the pregnancy itself.\nThe term \"partial birth abortion\" was defined by the statute as \"an abortion procedure in which the person performing the abortion partially delivers vaginally a living unborn child before killing the unborn child and completing the delivery.\" The term \"partially delivers vaginally a living unborn child before killing the unborn child\" was further defined as \"deliberately and intentionally delivering into the vagina a living unborn child, or a substantial portion thereof, for the purpose of performing a procedure that the person performing such procedure knows will kill the unborn child and does kill the unborn child.\"\nViolation of the statute carried a prison term of up to twenty years and a fine of up to $25,000. In addition, a doctor who violated the statute was subject to the automatic revocation of his license to practice medicine in Nebraska.\nAmong his arguments, Dr. Carhart maintained that the meaning of the term \"substantial portion\" in the Nebraska statute was unclear and thus, could include the common D & E procedure in its ban of partial-birth abortions. Because the Nebraska legislature failed to provide a definition for \"substantial portion,\" the U.S. Court of Appeals for the Eighth Circuit interpreted the Nebraska statute to proscribe both the D & X and D & E procedures: \"if 'substantial portion' means an arm or a leg - and surely it must - then the ban ... encompasses both the D & E and the D & X procedures.\" The Eighth Circuit acknowledged that during the D & E procedure, the physician often inserts his forceps into the uterus, grasps a part of the living fetus, and pulls that part of the fetus into the vagina. Because the arm or leg is the most common part to be retrieved, the physician would violate the statute.\nThe state argued that the statute's scienter or knowledge requirement limited its scope and made it applicable only to the D & X procedure. According to the state, the statute applied only to the deliberate and intentional performance of a partial birth abortion; that is, the partial delivery of a living fetus vaginally, the killing of the fetus, and the completion of the delivery. However, the Eighth Circuit found that the D & E procedure involves all of the same steps: \"The physician intentionally brings a substantial part of the fetus into the vagina, dismembers the fetus, leading to fetal demise, and completes the delivery. A physician need not set out with the intent to perform a D & X procedure in order to violate the statute.\"\nThe Supreme Court affirmed the Eighth Circuit's decision by a 5-4 margin. The Court based its decision on two determinations. First, the Court concluded that the Nebraska statute lacked any exception for the preservation of the health of the mother. Second, the Court found that the statute imposed an undue burden on the right to choose abortion because its language covered more than the D & X procedure.\nDespite the Court's previous instructions in Roe and Casey , that abortion regulation must include an exception where it is \"necessary, in appropriate medical judgment, for the preservation of the life or health of the mother,\" the state argued that Nebraska's partial-birth abortion statute did not require a health exception because safe alternatives remained available to women, and a ban on partial-birth abortions would create no risk to the health of women. Although the Court conceded that the actual need for the D & X procedure was uncertain, it recognized that the procedure could be safer in certain circumstances. Thus, the Court stated, \"a statute that altogether forbids D & X creates a significant health risk . . . [t]he statute consequently must contain a health exception.\"\nIn its discussion of the undue burden that would be imposed if the Nebraska statute was upheld, the Court maintained that the plain language of the statute covered both the D & X and D & E procedures. Although the Nebraska State Attorney General offered an interpretation of the statute that differentiated between the two procedures, the Court was reluctant to recognize such a view. Because the Court traditionally follows lower federal court interpretations of state law and because the Attorney General's interpretative views would not bind state courts, the Court held that the statute's reference to the delivery of \"a living unborn child, or a substantial portion thereof\" implicated both the D & X and D & E procedures.\nBecause the Stenberg Court was divided by only one member, Justice O'Connor's concurrence raised concern among those who support a woman's right to choose. Justice O'Connor's concurrence indicated that a state statute prohibiting partial-birth abortions would likely withstand a constitutional challenge if it included an exception for situations where the health of the mother is at issue, and if it was \"narrowly tailored to proscribing the D & X procedure alone.\" Justice O'Connor identified Kansas, Utah, and Montana as having partial-birth abortion statutes that differentiate appropriately between D & X and the other procedures.",
"",
"The Partial-Birth Abortion Ban Act of 1999, S. 1692 , was introduced by then Senator Rick Santorum on October 5, 1999. The bill was approved by the Senate on October 21, 1999, by a vote of 63-34. H.R. 3660 , the Partial-Birth Abortion Ban Act of 2000, was introduced by then Representative Charles T. Canady on February 15, 2000. H.R. 3660 was passed by the House on April 5, 2000, by a vote of 287-141. On May 25, 2000, the House passed S. 1692 without objection after striking its language and inserting the provisions of H.R. 3660 . House conferrees were subsequently appointed, but no further action was taken.\nBoth S. 1692 and H.R. 3660 would have imposed a fine and/or imprisonment not to exceed two years for any physician who knowingly performed a partial-birth abortion. Partial-birth abortion was defined as an abortion in which a person \"deliberately and intentionally ... vaginally delivers some portion of an intact living fetus until the fetus is partially outside the body of the mother, for the purpose of performing an overt act that the person knows will kill the fetus\" and actually performs the overt act that kills the fetus. In addition to criminal penalties, S. 1692 and H.R. 3660 provided a private right of action for \"[t]he father, if married to the mother at the time she receives a partial-birth abortion procedure, and if the mother has not attained the age of 18 years at the time of the abortion, the maternal grandparents of the fetus . . . unless the pregnancy resulted from the plaintiff's criminal conduct or the plaintiff consented to the abortion.\"\nWhen President Clinton vetoed a similar partial-birth abortion bill, H.R. 1122 , during the 105 th Congress, he focused on the bill's failure to include an exception to the ban that would permit partial-birth abortions to protect \"the lives and health of the small group of women in tragic circumstances who need an abortion performed at a late stage of pregnancy to avert death or serious injury.\" While S. 1692 and H.R. 3660 would have allowed a partial-birth abortion to be performed when it was necessary to save the life of the mother, such an abortion would not have been available when it was simply medically preferable to another procedure.",
"H.R. 4965 , the Partial-Birth Abortion Ban Act of 2002, was introduced by Representative Steve Chabot on June 19, 2002. The bill was passed by the House on July 24, 2002, by a vote of 274-151. The measure was not considered by the Senate. H.R. 4965 would have prohibited physicians from performing a partial-birth abortion except when it was necessary to save the life of a mother whose life was endangered by a physical disorder, physical illness, or physical injury, including a life-endangering physical condition caused by or arising from the pregnancy itself. The bill defined the term \"partial-birth abortion\" to mean an abortion in which \"the person performing the abortion deliberately and intentionally vaginally delivers a living fetus until, in the case of a head-first presentation, the entire fetal head is outside the body of the mother, or, in the case of breech presentation, any part of the fetal trunk past the navel is outside the body of the mother for the purpose of performing an overt act that the person knows will kill the partially delivered living fetus.\" Physicians who violated the act would have been subject to a fine, imprisonment for not more than two years, or both.\nAlthough H.R. 4965 did not provide an exception for the performance of a partial-birth abortion when the health of the mother was at issue, supporters of the measure maintained that the bill was constitutional. They contended that congressional hearings and fact finding revealed that a partial-birth abortion is never necessary to preserve the health of a woman, and that such an abortion poses serious risks to a woman's health.",
"S. 3 , the Partial-Birth Abortion Ban Act of 2003, was signed by the President on November 5, 2003 ( P.L. 108-105 ). The House approved H.Rept. 108-288 , the conference report for the measure, on October 2, 2003, by a vote of 281-142. The Senate agreed to the conference report on October 21, 2003, by a vote of 64-34.\nIn general, the act resembles the Partial-Birth Abortion Ban Act of 2002 in language and form. The act prohibits physicians from performing a partial-birth abortion except when it is necessary to save the life of a mother whose life is endangered by a physical disorder, physical illness, or physical injury, including a life-endangering physical condition caused by or arising from the pregnancy itself. Physicians who violate the act are subject to a fine, imprisonment for not more than two years, or both.\nAlthough the Supreme Court previously held that restrictions on abortion must allow for the performance of an abortion when it is necessary to protect the health of the mother, the act does not include such an exception. In his introductory statement for the act, then Senator Rick Santorum discussed the act's lack of a health exception. He maintained that an exception is not necessary because of the risks associated with partial-birth abortions. Senator Santorum insisted that congressional hearings and expert testimony demonstrate \"that a partial birth abortion is never necessary to preserve the health of the mother, poses significant health risks to the woman, and is outside the standard of medical care.\"",
"Within two days of the act's signing, federal courts in Nebraska, California, and New York blocked its enforcement. On April 18, 2007, the Court upheld the Partial-Birth Abortion Ban Act of 2003, finding that, as a facial matter, it is not unconstitutionally vague and does not impose an undue burden on a woman's right to terminate her pregnancy. In Gonzales v. Carhart , the Court distinguished the federal statute from the Nebraska law at issue in Stenberg . According to the Court, the federal statute is not unconstitutionally vague because it provides doctors with a reasonable opportunity to know what conduct is prohibited. Unlike the Nebraska law, which prohibited the delivery of a \"substantial portion\" of the fetus, the federal statute includes \"anatomical landmarks\" that identify when an abortion procedure will be subject to the act's prohibitions. The Court noted: \"[I]f an abortion procedure does not involve the delivery of a living fetus to one of these 'anatomical landmarks'—where, depending on the presentation, either the fetal head or the fetal trunk past the navel is outside the body of the mother—the prohibitions of the act do not apply.\"\nThe Court also maintained that the inclusion of a scienter or knowledge requirement in the federal statute alleviates any vagueness concerns. Because the act applies only when a doctor \"deliberately and intentionally\" delivers the fetus to an anatomical landmark, the Court concluded that a doctor performing the D & E procedure would not face criminal liability if a fetus is delivered beyond the prohibited points by mistake. The Court observed: \"The scienter requirements narrow the scope of the act's prohibition and limit prosecutorial discretion.\"\nIn reaching its conclusion that the Partial-Birth Abortion Ban Act of 2003 does not impose an undue burden on a woman's right to terminate her pregnancy, the Court considered whether the federal statute is overbroad, prohibiting both the D & X and D & E procedures. The Court also considered the statute's lack of a health exception.\nRelying on the plain language of the act, the Court determined that the federal statute could not be interpreted to encompass the D & E procedure. The Court maintained that the D & E procedure involves the removal of the fetus in pieces. In contrast, the federal statute uses the phrase \"delivers a living fetus.\" The Court stated: \"D&E does not involve the delivery of a fetus because it requires the removal of fetal parts that are ripped from the fetus as they are pulled through the cervix.\" The Court also identified the act's specific requirement of an \"overt act\" that kills the fetus as evidence of its inapplicability to the D & E procedure. The Court indicated: \"This distinction matters because, unlike [D&X], standard D&E does not involve a delivery followed by a fatal act.\" Because the act was found not to prohibit the D & E procedure, the Court concluded that it is not overbroad and does not impose an undue burden a woman's ability to terminate her pregnancy.\nAccording to the Court, the absence of a health exception also did not result in an undue burden. Citing its decision in Ayotte v. Planned Parenthood of Northern New England , the Court noted that a health exception would be required if it subjected women to significant health risks. However, acknowledging medical disagreement about the act's requirements ever imposing significant health risks on women, the Court maintained that \"the question becomes whether the act can stand when this medical uncertainty persists.\" Reviewing its past decisions, the Court indicated that it has given state and federal legislatures wide discretion to pass legislation in areas where there is medical and scientific uncertainty. The Court concluded that this medical uncertainty provides a sufficient basis to conclude in a facial challenge of the statute that it does not impose an undue burden.\nAlthough the Court upheld the Partial-Birth Abortion Ban Act of 2003 without a health exception, it acknowledged that there may be \"discrete and well-defined instances\" where the prohibited procedure \"must be used.\" However, the Court indicated that exceptions to the act should be considered in as-applied challenges brought by individual plaintiffs: \"In an as-applied challenge the nature of the medical risk can be better quantified and balanced than in a facial attack.\"\nJustice Ginsburg authored the dissent in Gonzales . She was joined by Justices Stevens, Souter, and Breyer. Describing the Court's decision as \"alarming,\" Justice Ginsburg questioned upholding the federal statute when the relevant procedure has been found to be appropriate in certain cases. Citing expert testimony that had been introduced, Justice Ginsburg maintained that the prohibited procedure has safety advantages for women with certain medical conditions, including bleeding disorders and heart disease.\nJustice Ginsburg also criticized the Court's decision to uphold the statute without a health exception. Justice Ginsburg declared: \"Not only does it defy the Court's longstanding precedent affirming the necessity of a health exception, with no carve-out for circumstances of medical uncertainty . . . it gives short shrift to the records before us, carefully canvassed by the District Courts.\" Moreover, according to Justice Ginsburg, the refusal to invalidate the Partial-Birth Abortion Ban Act of 2003 on facial grounds was \"perplexing\" in light of the Court's decision in Stenberg . Justice Ginsburg noted: \"[I]n materially identical circumstances we held that a statute lacking a health exception was unconstitutional on its face.\"\nFinally, Justice Ginsburg contended that the Court's decision \"cannot be understood as anything more than an effort to chip away at a right declared again and again by [the] Court—and with increasing comprehension of its centrality to women's lives.\" Citing the language used by the Court, including the phrase \"abortion doctor\" to describe obstetrician-gynecologists and surgeons who perform abortions, Justice Ginsburg maintained that \"[t]he Court's hostility to the right Roe and Casey secured is not concealed.\" She argued that when a statute burdens constitutional rights and the measure is simply a vehicle for expressing hostility to those rights, the burden is undue."
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{
"question": [
"Why have many of the laws enacted banning partial-birth abortions since 1995 not taken effect?",
"What was at issue in the Stenberg v. Carhart Supreme Court decision?",
"Why did the court invalidate Nebraska's partial-birth abortion ban in Stenberg v. Carhart?",
"What is reviewed by this report?",
"Why did the Supreme Court uphold the Partial-Birth Abortion Ban Act of 2003?",
"What did the court distinguish the Partial-Birth Abortion Ban Act from in Gonzales v. Carhart?"
],
"summary": [
"Although many of these laws have not taken effect because of temporary or permanent injunctions, they remain contentious to both pro-life advocates and those who support a woman's right to choose.",
"This report discusses the U.S. Supreme Court's decision in Stenberg v. Carhart, a case involving the constitutionality of Nebraska's partial-birth abortion ban statute.",
"In Stenberg, the Court invalidated the Nebraska statute because it lacked an exception for the performance of the partial-birth abortion procedure when necessary to protect the health of the mother, and because it imposed an undue burden on a woman's ability to have an abortion.",
"This report also reviews various legislative attempts to restrict partial-birth abortions during the 106th, 107th, and 108th Congresses.",
"On April 18, 2007, the Court upheld the act, finding that, as a facial matter, it is not unconstitutionally vague and does not impose an undue burden on a woman's right to terminate her pregnancy.",
"In reaching its conclusion in Gonzales v. Carhart, the Court distinguished the federal statute from the Nebraska law at issue in Stenberg."
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CRS_R42372
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{
"title": [
"",
"Introduction",
"Asset Risk-Weighting and Credit Ratings",
"BCBS Enhancements: Basel II, Basel II.5, and Credit Ratings",
"Proposed Basel II.5 Implementation Under Section 939A of the Dodd-Frank Act",
"Enhanced Capital and Liquidity Standards",
"BCBS Enhancements: Basel III, Pillar I Requirements",
"Stricter Definition of Capital, Higher Requirements",
"Capital Conservation Buffer",
"Optional Countercyclical Capital Buffer",
"Leverage Ratio",
"Two New Liquidity Risk Measures: Liquidity Coverage Ratio, Net Stable Funding Ratio",
"Capital and Liquidity Enhancements Under the Dodd-Frank Act",
"Section 171: The Collins Amendment",
"Other Requirements from the Dodd-Frank Act and Implementation Issues",
"Conclusion",
"Appendix. Specific Risk-Weight Descriptions"
],
"paragraphs": [
"",
"Lending is inherently risky. Bank assets, which typically include loans made to borrowers, are risky because borrowers can default on their loans. In addition, banks face funding risk because they must continuously borrow short-term liquidity to fund their assets (customer loans). In other words, banks provide longer-term (illiquid) customer loans by borrowing the funds via sequences of shorter-term (liquid) loans at relatively lower rates. Profits are generated from the spread between the long-term rates lenders charge and the successive sequences of shorter-term rates they pay for liquidity until the longer-term loans are repaid in full. If borrowers default on their loans from the lender, the lender potentially could default on repayment of its liabilities, which are the shorter-term loan obligations to depositors and other financial institutions.\nA bank's capital is defined as the difference between its assets and liabilities. If a bank maintains sufficient capital, a default on one of its assets is less likely to translate into a subsequent failure to repay some of its shorter-term obligations. A capital buffer, therefore, protects bank creditors from loan defaults by bank customers. A bank is considered solvent as long as it maintains capital above a minimum threshold level, and it is considered undercapitalized and faces the prospect of being shut down by its regulator should its capitalization fall below the threshold. A bank's asset or lending portfolio may grow proportionately with its capital reserves, and guidelines for this proportion have been established by the Basel Committee on Banking Supervision (BCBS).\nThe BCBS's work on the first Basel Capital Accord, Basel I, provided the international consensus framework for bank safety and soundness regulation. The objective of the first Basel Capital Accord was to promote consistent safety and soundness standards while providing an equitable basis of competition for banking institutions in participating countries. In other words, banks may face a competitive disadvantage with competitors in other countries unless capital reserve requirements are internationally harmonized. Basel I established the amount of capital relative to assets, expressed as a capital-to-asset ratio, that financial institutions needed to maintain. Capital-asset ratios are generally computed using the total amount of capital in the numerator and the total amount of risk-weighted assets in the denominator. The U.S. banking system currently operates under a safety and soundness framework based upon the first Basel Accord, which was adopted by the banking regulatory agencies in 1988.\nThe second Basel Accord, Basel II, attempts to improve upon the methodology for capturing credit risk, which is explained in the next section. In the United States, the federal banking regulatory agencies placed large \"core\" banks under the Basel II framework. Core banks are banking organizations with at least $250 billion of consolidated total assets or at least $10 billion of on-balance-sheet risk associated with foreign asset holdings. Core banks are also required to use the most advanced approaches of the Basel II framework to determine their credit risks. The general \"non-core\" banks may continue to use Basel I or the \"general risk-based\" capital rules to determine the optimal levels of capital to hold. On December 7, 2007, the federal banking regulators published the final regulations for implementing Basel II for core banks that became effective on April 1, 2008.\nIn response to the 2007-2009 global financial crisis, the BCBS issued what is referred to as Basel II.5 as an amendment to Basel II, which increases the requirements on banks' models for evaluating financial risk and requires greater disclosures on banks' securitization activities. The banking regulators issued proposed rules on the adoption of Basel II.5 revisions in the United States on January 11, 2011, which were amended and re-proposed on December 7, 2011.\nIn a further response to the financial crisis, the Basel III reform package revises the definition of regulatory capital and increases the amount that banks must hold. Basel III also would require banks to hold a greater percentage of their assets in cash or in assets that can easily be converted to cash. The quantitative requirements and phase-in schedules for Basel III were approved by the 27-member jurisdictions and 44 central banks and supervisory authorities on September 12, 2010. Basel III requires banks to satisfy all of these enhanced requirements by 2019. Formal implementation of Basel III has not yet begun in the United States; however, a new proposed rule for the adoption of Basel III may be issued in 2012.\nThe Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act; P.L. 111-203 ) also addressed capital reserve requirements for banks. The Collins Amendment of the Dodd-Frank Act amends the definition of capital, establishes minimum capital and leverage requirements, and establishes an implementation timeline that is faster than what was agreed to in the Basel III Accord. In addition, Dodd-Frank removes the requirement that credit ratings be referenced when evaluating the creditworthiness of financial securities. Regulators are required to find other appropriate standards by which to determine the financial risks of bank portfolio holdings while enforcing the mandatory capital requirements. This statutory requirement can potentially complicate implementation of Basel II.5 and Basel III in the United States. Implementation delays may also delay bank lending decisions and strategies. Bankers are likely to reconsider the size and composition of their longer-term asset portfolios in response to the new capital requirements once implementation of the rules is finalized.\nThis report discusses how the Basel Capital Accord framework has been modified to improve the methodology used to capture credit risk, and analyzes selected implementation issues in the United States. The next section explains how the BCBS incorporates credit ratings into the regulatory framework whereas the Dodd-Frank Act eliminates any references to credit ratings in federal financial regulation, and how this may complicate the adoption of Basel II.5 and Basel III. The report also summarizes the enhanced capital and liquidity requirements associated with Basel III and compares them to related provisions in the Dodd-Frank Act. Safety and soundness provisions of the Dodd-Frank Act that apply specifically to systemically important firms, such as a systemic risk tax and stress-testing, are not addressed in this report.",
"Basel I introduced a risk-weighting system that weights (multiplies) the assets in the denominator of the capital-asset ratio by a factor that attempts to capture the relative credit or default risk of bank assets. In the United States, bank assets are assigned into four categories (buckets) that receive weights of 0%, 20%, 50%, and 100%, respectively. The risk weighting system arguably equates lower credit risk with liquidity given that it typically assigns lower weights to more liquid assets and higher weights to less liquid assets. For example, cash and U.S. Treasury securities, which are liquid and considered to have zero default risk, receive a risk weight of 0%. These asset holdings would have no effect on a bank's portfolio capital-asset ratio. On the other hand, a loan secured by residential property receives a risk weight of 50%, and a commercial loan receives a risk weight of 100%. Loans with higher risk weights reduce the overall portfolio capital-asset ratio. In addition, a bank holding a loan that is assigned 100% risk weight would be required to hold 8% of the value of that asset as capital. Should a bank decide to hold less cash and increase its holdings of higher yielding, less liquid loans, then its capital reserves must also increase for its capital-asset ratio to remain intact. Conversely, when capital-asset ratios are low, academic research has found that some banks will substitute toward low risk-weighted asset categories to restore the ratio. The composition of a bank's asset portfolio, therefore, may be influenced by the risk weights assigned to the assets.\nThe weighting system arguably does not sufficiently differentiate among the degrees of risk. To illustrate, Basel I places the same capital charge on all commercial loans regardless of the differences in credit (default) risk. In other words, both high and low credit quality commercial loans receive the same 8% capital charge. Furthermore, the weighting system is unable to capture offsetting risk exposures. The capital surcharge is the same even though holding the loan with lower default risk may compensate for holding the higher risk loan. Hence, banks arguably have the incentive to hold lower quality loans, which makes it possible for institutions to still be undercapitalized given their default risk exposures.\nAnother concern regarding the weighting system is that it may encourage banks to hold government securities such as U.S. Treasuries rather than extend loans where more severe credit shortages may exist. The government securities of nations that are members of the Organisation for Economic Co-operation and Development (OECD) receive a risk weight of 0%. Suppose capital-asset ratios fall below regulatory threshold levels during recessions after an increase in borrower loan defaults. If banks, as discussed earlier, previously had the incentive to hold lower quality loans during an expansionary economic period, they may decide to hold more OECD country sovereign debt rather than make new loans during recessionary periods to keep capital-asset ratios in compliance. These actions may further curtail lending to segments where more severe credit shortages may exist, such as in non-OECD emerging market economies or in the private sector when entering the recovery phase of a business cycle. Hence, the Basel I weighting system results in \"procyclical\" capital requirements, which means they may incentivize excessive risk taking during expansions and impede economic recovery during an economic downturn. Furthermore, a bank's risk exposure may still be understated should the default risk of OECD securities increase.",
"Basel II was developed in response to perceived shortcomings in the asset risk-weighting system and other concerns. Basel II has three components known as Pillars. The methodology for calculating the minimum capital requirements for banks is explained in the first pillar. The weighting system was revised to allow for more risk differentiation. Basel II added more risk weight categories and also proposed the use of external credit assessments or ratings to support the determination of the appropriate risk weight assignment. For example, suppose a Nationally Recognized Statistical Rating Organization (NRSRO) gave its highest investment grade rating to a security that still receives a 100% risk weight under Basel I. The highly rated security could receive a 20% risk weight under Basel II, which arguably better reflects the high credit quality. A residential mortgage that would have received a 50% risk weight under Basel I could receive a higher risk weight if the borrower made a very low downpayment (or high loan-to-value ratio). Second or junior mortgage liens receive higher risk weights than primary mortgage liens. The use of mortgage insurance or other financial insurance such as credit default swaps to mitigate credit risk on a riskier loans may reduce the risk weights assigned to such loans.\nGiven that any risk-weighting system may generate unintended outcomes, pillars two and three of Basel II were added to monitor the rise of misaligned incentives that could stem from pillar one requirements. The second pillar requires banks to maintain management mechanisms to conduct ongoing internal self-evaluation of their risk exposures and compliance with the minimum regulatory capital requirement. The third pillar facilitates market discipline and reporting. Specifically, pillar three addresses problems with operational risks, which include internal operation failures, such as poor accounting, legal and compliance failures, poor and fraudulent managers and traders, and security failures.\nBCBS issued Basel II.5 (as a supplement to Basel II) to better capture credit risk in the \"trading book\" of a bank. The trading book refers to securities that a bank would not hold to maturity and would be accounted for at current market value. A security held to maturity is accounted for in the \"banking book\" at its original book values unless the bank decides to sell it, and then it moves over to the trading book where it is given fair market value accounting treatment. Distinguishing between assets that should be held in the trading and banking books is not always easy, which makes it difficult to determine the proper accounting and risk weighting treatment. Nonetheless, Basel II.5 attempts to prevent regulatory arbitrage or the placement of securities in the book that would provide the most favorable accounting treatment of securities at a particular point in time while resulting in an insufficient capital buffer.",
"As previously stated, federal regulators jointly issued a notification of proposed regulation (NPR) for the implementation of Basel II.5 on January 11, 2011, and again on December 7, 2011. The January NPR asked for comments on the revisions made by the BCBS, particularly with respect to procyclicality concerns as well as other shortcomings involving the capturing of risk, but it did not include methodologies for calculating the specific risk capital requirements for various debt and securitization positions. The December NPR, which amended the January NPR to conform with Section 939A of the Dodd-Frank Act, promulgated a series of alternative approaches for risk-weighting various bank traded debt and securitization positions. The comment period for the December NPR ended on February 3, 2012.\nSection 939 of the Dodd-Frank Act requires the repeal of several statutory provisions that make reference to credit ratings. Given the viewpoint that flawed credit ratings may have contributed to the housing bubble, the Dodd-Frank Act reduced \"over-reliance on ratings and [to] encourage[s] investors to conduct their own analysis.\" Section 939A requires each federal agency to review regulations that would require the use of an assessment of the creditworthiness of a security or money market instrument, and any references to, or requirements in, those regulations regarding credit ratings within one year of enactment (by July 21, 2011). Each agency is then required to modify all regulations such that any reference to or requirement for reliance on credit ratings are removed. The agencies may substitute alternative standards of creditworthiness that are determined to be appropriate and also transmit reports to Congress that contain descriptions of all regulatory modifications made pursuant to the section.\nIn light of Section 939A, implementation of Basel II.5 and Basel III poses challenges for U.S. regulators. Although Basel III addresses excessive reliance on external credit ratings for exposure to default risk by requiring banks to conduct some due diligence on counterparties, it is still the case that credit rating references have been adopted in the framework. Section 939A, therefore, may prevent U.S. bank regulators from adopting salient Basel II.5 and Basel III provisions that contain references to credit ratings. Hence, the U.S. banking regulators may have difficulty implementing safety and soundness standards that would be internationally consistent.\nIn contrast to the four risk categories established under Basel I, the December NPR proposed the assignment of a specific range of risk weights to various types of asset holdings (or exposures) based upon the following seven categories of issuers (of financial securities):\nsovereign entities (i.e., a central government or an agency, department, ministry, or a central bank of a central government); certain multilateral development banks (the December NPR provides a listing) and supranational entities (i.e., the Bank for International Settlements, the European Central Bank, the European Commission, the International Monetary Fund); government-sponsored entities (i.e., the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Farm Credit System, the Federal Home Loan Bank System); depository institutions, foreign banks, and credit unions; public-sector entities (i.e., state, local authority or other government subdivision below the level of a sovereign entity); corporate entities (i.e., an entity that does not fall under the previously listed entities or meet the definition of a securitization) and a financial institution that satisfies the definition provided in the December NPR; and any financial securities that satisfy the definition of a securitization provided in the December NPR.\nThe December NPR applies only to a bank holding company or bank with aggregated trading assets and trading liabilities equal to 10% or more of quarter-end total assets, or $1 billion or more. In other words, the proposed rules do not apply to small banking organizations and are estimated to apply to fewer than 20 of the largest banking organizations. Although the December NPR proposes conceptual approaches for asset risk-weighting for the few large banking organizations with trading books, the final rules arguably may be indicative of the asset risk-weighting approach that will be used to implement Basel III, which may eventually pertain to banks of all sizes. The specific risk weights proposed for seven categories of exposures held in bank trading books are presented in more detail in the Appendix .",
"This section begins with an overview of the enhanced minimum capital and liquidity requirements in Basel III, followed by a summary of the enhanced requirements mandated by the Dodd-Frank Act. Although the requirements may be consistent, the Dodd-Frank Act may require higher standards than Basel III. Challenges associated with simultaneous implementation of both Basel III and the Dodd-Frank Act in the United States are discussed.",
"Basel III, Pillar I modifies the regulatory capital and liquidity requirements, generally in the direction of requiring more and higher quality capital. Specifically, the regulatory reform package revises the definition of Tier I capital; increases the amount of common tangible equity held as minimum regulatory capital; establishes a capital conservation buffer; introduces a countercyclical capital buffer; introduces a leverage ratio; and introduces two new liquidity ratios—the liquidity coverage ratio and the net stable funding ratio. The quantitative requirements and phase-in schedules for Basel III were approved by the 27-member jurisdictions and 44 central banks and supervisory authorities on September 12, 2010.",
"Under Basel I, two types of capital, core and supplementary capital, count toward meeting the capital adequacy requirements. Core or Tier 1 capital is made up of mainly common shareholders' equity (issued and fully paid), disclosed reserves, most retained earnings, and perpetual non-cumulative preferred stock. Supplementary or Tier 2 capital consists of subordinated debt, limited-life preferred stock and loan loss reserves, and goodwill.\nUnder Basel III, the definition of Tier 1 capital is more narrow. To raise the quality, consistency, and transparency of regulatory capital, the committee determined that Tier 1 capital must consist predominantly of common equity and retained earnings. The financial crisis demonstrated that the resources to cushion against credit losses and write-downs came out of retained earnings, which is a part of a bank's tangible equity base. Hence, the Tier 1 capital definition is now closer to the definition of tangible common equity ratio, which must be above 2% for a bank not to be considered critically undercapitalized. In addition to tangible common equity, the central bank governors added mortgage servicing rights, deferred tax assets, and holdings in other financial institutions to be part of Tier 1. These three assets are considered very liquid and can be sold to offset unexpected losses. These assets, however, should not exceed in aggregate more than 15% of a bank's Tier 1 capital. This requirement limits dilution of the amount of common tangible equity in Tier 1 capital.\nTo comply with Basel III, banks must meet a minimum common equity capital requirement of 4.5% by January 1, 2015, up from the Basel II level of 2%. On September 12, 2010, the central bank governors approved a capital requirement policy that would increase the total minimum capital requirement (sum of Tier 1 and Tier 2) to 8% by January 1, 2015, three quarters of which must be Tier 1 capital. By 2019, the total minimum total capital requirement will increase from 8.0% to 10.5% at the rate of 0.0625% per year beginning in January 1, 2016.",
"The BCBS established a capital conservation buffer to ensure banks build capital buffers outside periods of financial stress that can be drawn down should their assets deteriorate, thus improving their resiliency to unanticipated losses. The minimum amount of the conservation buffer is 2.5% of the banks' risk-weighted assets. The capital held in this buffer must be Tier 1 capital. Building this buffer to meet the requirement may occur by reducing discretionary distribution of earnings, dividend payments, and salary bonus payments. According to Basel III, regulators should forbid banks from distributing capital when banks have depleted their capital buffers.\nOn September 12, 2010, the central bank governors agreed to set the capital conservation buffer at 2.5% of risk-weighted assets to cushion against future periods of stress. The 2.5% capital conservation buffer must consist mostly of common tangible equity. The conservation buffer would increase in increments of 0.625% annually. On January 1, 2016, the conservation buffer must be 0.625 and then rise to 2.5% by January 1, 2019.",
"Procyclicality, as discussed earlier, refers to the disproportionate expansion of lending when economic activity is expanding as well as the disproportionate contraction of lending when economic activity is contracting. On September 12, 2010, the central bank governors approved a policy on countercyclical buffers that essentially left it up to the national regulatory authorities to determine when lending growth poses a risk to the stability of the financial system. The BCBS agreed that the countercyclical buffer should be between 0 and 2.5% of total risk-weighted assets and consist of common equity or other fully loss absorbing capital. The buffer would grow during economic expansions and decrease during contractions. The BCBS set no deadline for meeting this requirement given that national governments can decide whether to implement and subsequently determine the buffer's size. Nevertheless, the Basel III schedule does suggest adding capital for those governments requiring the countercyclical buffer at the rate of 0.625% of risk-weighted assets per year between January 1, 2016, and December 31, 2018, which achieves a buffer of 2.5% by January 1, 2019. If the countercyclical capital buffer is implemented in full, the minimum total capital requirement for U.S. banks would be 13.0% of risk-weighted assets.\nIn addition to the capital conservation buffer in Basel III, the committee introduced a series of measures to dampen any excess cyclicality of the minimum capital requirement. The capital requirement would be adjusted over the business cycle so that more capital is required in economic expansions than in economic contractions.",
"The leverage ratio will be defined as gross capital divided by the average total consolidated on-balance sheet assets. Unlike the Tier 1 and Tier 2 ratios, the leverage ratio does not depend upon risk weights. The logic behind this ratio is to illuminate financial risks that could be assigned lower weights yet still translate into substantial losses. For example, large complex financial institutions sponsored financial conduits that allowed mortgages to be funded off the balance sheets of supervised banks. In other words, the conduits could issue debt obligations (i.e., short-term commercial paper) to investors without being subject to traditional safety and soundness capital requirements given that the mortgages were not held in bank portfolios. Instead of being held in portfolio, the bank guaranteed payment if the conduit became illiquid. The guarantee, however, would be assigned a much lower weight than if the assets were held in portfolio, yet the bank was still exposed to off-balance sheet financial risks. The leverage ratio assumes all assets (e.g., loans held in portfolio, asset-backed securities, credit-risk guarantees) have identical levels of credit risk. Banks would be required to maintain a leverage ratio of 3%, which would serve as a capital backstop and ensure that capital does not fall below a minimum threshold.\nOn July 26, 2010, the phased-in arrangement was announced by the BCBS. However, the BCBS did not approve a specific leverage ratio. During the observation period, the committee plans to put in place rigorous reporting processes to monitor the ratio. Based on the results, adjustment will be made in the first half of 2017 and the minimum leverage ratio will be determined and applied on January 1, 2018.",
"The ability to sell an asset immediately for its original face or book value without incurring losses or significant transaction fees is one definition of liquidity. Again, bank portfolios generally consist of illiquid assets (longer-term loans) that are funded by shorter-term loans that must be renewed continuously until the longer-term customer loans are fully repaid. Episodes of uncertainty can cause increases in short-term rates relative to long-term rates, which can translate into distress for financial institutions. For example, institutions holding large amounts of illiquid assets may suddenly find themselves competing to borrow the liquid assets of other institutions, even for a short period of time, which drives up short-term rates. A bank may want to liquidate its holdings of asset-backed securities, but if other banks simultaneously make similar financial decisions, the market for such securities may consist of many sellers but no willing buyers. In both cases, even if banks have sufficient capital reserves and are still considered solvent, the scarcity of liquid funds would result in problems repaying short-term funding obligations. Hence, in addition to having sufficient capital to buffer against loan defaults (credit risk), banks need sufficient amounts of liquidity to buffer against unanticipated reversals in cash flow that could result in asset \"fire sales,\" which occurred in 2007 and into 2008. The BCBS, therefore, introduced two new liquidity risk measures to improve resilience to liquidity stress.\nThe 30-day liquidity coverage ratio is designed to promote short-term resilience to potential liquidity disruptions. The numerator of the liquidity coverage ratio would consist of a bank's stock of high-quality liquid assets, which would consist mostly of government securities and cash, and the denominator would be a measure of its net cash outflows over a 30-day time period. On September 12, 2010, the central bank governors introduced the liquidity coverage ratio requirement. An observation period began on January 1, 2011, and is set to end in December 2014. During the observation period, the committee plans to monitor the ratio and review the effect on financial markets, credit extensions and economic growth. Based on the results, the minimum liquidity coverage ratio is suppose to be determined and made effective on January 1, 2015.\nThe Net Stable Funding Ratio (NSFR) would encourage banks to rely upon more medium- and longer-term funding of its longer-term loans as opposed to relying primarily upon short-term funding. The numerator of the NSFR would be computed using banks' \"available stable funding sources (ASF)\" in the numerator divided by assets that \"require stable funding (RSF)\" in the denominator. Banks fund assets with liabilities and capital, thus the ASF would be calculated as the sum of its liabilities and capital using ASF weights. Bank capital would receive a 100% ASF weight, consumer deposits liabilities would receive 70% ASF weight, and shorter-term liabilities would receive lower or 0% ASF weights. In other words, available stable funding sources with the longer maturities would be assigned higher weights than those with shorter maturities. Bank assets require funding, thus the RSF would be calculated as the sum its assets using RSF weights. Cash assets do not require funding and would receive a 0% RSF weight. Loans that mature in less than a year require funding and would receive an 85% RSF; loans that take a year or longer to mature would receive a 100% RSF. In other words, assets that require stable funding receive higher weights the longer they must be funded. The NSFR cannot be lower than 100%. Hence, a bank must either increase its capital reserves if it chooses to spread the yield curve with shorter-term liabilities or diversify the maturities of its liabilities to maintain a NSFR of 100%. The NSFR will not be introduced as a minimum requirement until 2018.\nTable 1 summarizes the Basel III minimum capital requirements and phase-in arrangements. In 2019, the minimum Tier 1 capital ratio will be 6.0%, and the minimum total capital plus capital conservation buffer increase to 10.5%. If the maximum countercyclical capital buffer is added in full, the minimum total capital requirement would be 13.0% of risk-weighted assets.",
"The Dodd-Frank Act also calls for higher capital and liquidity requirements for banks, which may be stricter than those called for in Basel III. The statutory requirements are summarized below. Federal banking regulators have not yet announced a proposed rule for the adoption of Basel III.",
"The Collins Amendment of the Dodd-Frank Act provides for the development of capital requirements for all insured depository institutions, depository institution holding companies, and systemically important non-bank financial companies. Small bank holding companies with less that $500 million in assets are exempt from the Collins Amendment. In addition, the Collins Amendment would not apply to foreign parents of bank and thrift holding companies. The Federal Home Loan Banks would also be exempt from these requirements.\nSection 171(b) of the Collins Amendment requires the appropriate federal banking agencies to establish minimum-leverage capital and risk-based capital requirements that apply to intermediate U.S. bank holding companies that are subsidiaries of a non-U.S. bank. The minimum requirements cannot be quantitatively lower than the generally applicable leverage capital and risk-based capital requirements that were in effect when the Dodd-Frank Act was passed. The ''generally applicable leverage capital requirements'' refers to the minimum ratio of (Tier 1) capital in the numerator to average total assets in the denominator. The ''generally applicable risk-based capital requirements'' refers to the ratio of regulatory capital components in the numerator of those capital requirements to the risk-weighted assets in the denominator. Hence, these minimum requirements are floors, which means that regulators may set higher but never lower ratio requirements than Basel I and Basel II. On June 28, 2011, the federal banking regulators announced the final rule establishing the two floors that would go into effect on July 28, 2011.\nThe Collins Amendment also excludes a class of securities from the definition of eligible capital. Trust preferred securities, which are directly issued preferred stocks with the tax advantages of debt, along with the preferred stock that the U.S. Treasury purchased under the Troubled Asset Relief Program (TARP), serve as examples of securities that issuers would have an incentive to redeem at some future date. Basel III, however, requires that only perpetual securities, such as common stock that would have no maturity date or incentive to redeem, will be counted as (Tier 1) capital. The Collins Amendment applies this provision to large bank holding companies, but exempts from this requirement small institutions with assets of less than $500 million that are not engaged in significant non-banking activities or off-balance sheet activities. In addition, covered institutions have three years from the date of enactment of the Dodd-Frank Act to comply.",
"Section 616 of the Dodd-Frank Act requires a countercyclical buffer, similar to the optional countercyclical capital buffer proposed under Basel III. In addition, Section 165 has a leverage requirement; however, this requirement differs from the leverage ratio requirement as proposed under Basel III. The term leverage ratio under Basel III refers to an unweighted capital-asset ratio; the Dodd-Frank Act uses the term to refer to a debt-to-equity ratio. The Dodd-Frank Act requires that bank holding companies and nonbank financial companies supervised by the Federal Reserve maintain a debt-to-equity ratio of no more than 15-to-1. Hence, the Dodd-Frank Act mandates capital requirements for U.S. banks that are likely to be higher than those required under Basel III.\nOn November 4, 2011, Federal Reserve Governor Daniel K. Tarullo indicated that the banking regulatory agencies were making recommendations for changes to the liquidity coverage ratio and mentioned other liquidity alternatives. The liquidity coverage ratio has come under scrutiny because, although it may reduce potential episodes of liquidity stress for banks, it could arguably generate widespread unintended consequences. Banks would either have to substitute away from originating higher yielding, illiquid loans and hold more lower yielding, liquid assets. The profitability of lending may be impaired given that banks would need to fund fewer loans to satisfy the liquidity requirements or fund with longer-term borrowings. In addition, if the banking system held enough Treasuries to satisfy the liquidity coverage ratio requirements, other financial and non-financial entities may experience a shortage of liquid securities. Moreover, the entire banking system would be more susceptible to a systemic risk crisis if it had a large concentration of liquid (Treasury) holdings that suddenly experienced an increase in credit risk. Hence, the liquidity ratios will have longer time horizons prior to implementation while bank regulatory officials as well as the BCBS assess the impact of these requirements on the credit and financial markets and make further modifications.",
"Bank lending declined during the recent 2007-2009 recession for several reasons. Numerous U.S. banks found themselves undercapitalized as a result of a sudden surge of loan defaults that occurred over this period. Undercapitalized banks are unable to originate new loans until their capital reserves are restored. U.S. banks that are sufficiently capitalized may have curtailed some lending activity given that higher loan defaults and unemployment rates translate into fewer borrowers able to qualify for loans, and even some qualified borrowers may face uncertain future earnings prospects. Bank lending decisions and strategies may also ensue at a slower pace as a result of the challenges associated with the simultaneous implementation of Basel III and the Dodd-Frank Act. Bankers arguably would want to know what new capital requirements they face before making longer-term commitments to their asset portfolios.",
"The specific risk weights proposed for seven categories of exposures held in bank trading books are presented in more detail below.\nSovereign Entities\nCurrently, the risk-weighting factors for banks that hold sovereign debt positions are based upon whether the sovereign issuer is a member of the Organisation for Economic Co-operations and Development (OECD). Covered debt positions with sovereign entity exposures where the entities are OECD members are assigned a zero percent specific risk-weighting factor, and exposures to non-OECD sovereign entities get an 8.0% specific risk-weighting factor. The December NPR proposed allowing a bank to determine its specific risk-weighting factors for sovereign debt positions based on the OECD's Country Risk Classifications (CRCs), which are published by the OECD and used for sovereign positions, company-specific financial information, and other items. The December NPR noted that \"The OECD is not subject to the sorts of conflicts of interest that affected NRSROs because the OECD is not a commercial entity that produces credit assessments for fee-paying clients, nor does it provide the sort of evaluative and analytical services as credit rating agencies.\"\nThe December NPR also proposes applying a specific risk-weighting factor of 12.0% to sovereign debt positions if the sovereign has defaulted on any exposure during the previous five years. In this context, a default by a sovereign would be defined as noncompliance by a sovereign entity with its external debt service obligations or the inability or unwillingness of a sovereign entity to service an existing obligation according to its terms, as manifested in its inability to make complete and timely payments on such obligations as principal and interest, and arrearages.\nCertain Multilateral Development Banks, Supranational Entities\nBank trading book exposures to certain supranational entities and multilateral development banks (MDBs) are currently assigned specific risk-weighting factors that can range between 0.25% and 1.6%, depending on the remaining maturity. The December NPR proposed to apply a zero percent specific risk-weighting factor to MDB exposure. The regulators argued that the more lenient treatment is warranted given general MDB attributes, which include high-credit quality as well as having shareholder bases primarily composed of highly creditworthy sovereign entities. Additionally, as is the case under Basel II, the December NPR would assign a zero-specific risk weighting to bank exposures to specific supranational entities, such as the Bank for International Settlements, the European Central Bank, the European Commission, and the International Monetary Fund.\nGovernment Sponsored Entities\nBank exposures to government-sponsored entities (GSEs) are currently assigned risk-weights between 0.25% and 1.6%, depending on the maturity of any debt issuances. The December NPR does not alter this approach. Bank exposures to GSE equity, however, would be assigned a risk-weight of 8.0%.\nDepository Institutions, Foreign Banks, and Credit Unions\nBank exposures to other banks incorporated in OECD countries are currently assigned risk-weighting factors ranging between 0.25% and 1.6% based on the maturity of the debt. By contrast, the risk weighting of debt exposures to banks incorporated in non-OECD countries are determined through a more complex methodology that includes credit ratings. The December NPR would eliminate the disparate treatment of exposures to OECD banks and non-OECD banks. Specific risk-weighting factors would be assigned based upon the CRC of a bank's sovereign nation of incorporation and the maturity of the exposure. Exposures to banks based in the highest tier of CRC rated countries would be assigned a specific risk-weighting factor between 0.25% and 1.6%, depending on the maturity. Banks incorporated in the four lowest tier CRC rated countries would receive a specific risk-weighting factor of 8.0% irrespective of maturity.\nExposure to Public Sector Entity Debt Positions\nRisk-weights of public-sector entities (PSEs) currently range between 0.25% and 1.6%, based on maturity. For revenue bonds, assigned risk-weights depend upon an array of factors, including credit ratings. The December NPR would assign risk-weights based on the CRC of the sovereign nation in which the PSE is located with some variability determined by the exposure's maturity and whether the exposure is a general or revenue obligation. The lowest risk weighting would be between 0.25% and 1.6% for general obligations exposures to PSEs in relatively lower CRC rated countries. The highest risk weight of 8% would be given to exposures to PSE general and revenue obligations in countries with middle tier CRC ratings.\nCorporate Debt Positions\nBank-held corporate debt is currently risk-weighted based on the issuer's function, credit rating, and remaining time to maturity of the debt. The December NPR distinguishes between financial and nonfinancial corporations as well as between publicly traded and private corporations. For financial and private company debt positions, bank exposures would be assigned a risk-weight of 8.0%. For debt positions of a publicly traded nonfinancial company, a bank exposure would be assigned a risk-weighting factor of either 8.0% or 12.0%, based on the debt issuer's profitability, stock price volatility, and leverage. The December NPR also solicited comments for alternatives (e.g., bond spreads) that could be used to assign minimum capital requirements for holding corporate debt positions.\nSecuritization Holdings\nIf a bank does not opt to model individual asset risks, it must still determine a risk capital factor for each securitization position, using a standardized methodology. Banks must multiply the absolute value of the current market value of the securitization position by a specified risk-weighting factor that ranges between zero and 8.0%, depending on the credit ratings and remaining time to maturity. The December NPR proposed a simplified supervisory formulaic approach (SSFA) to risk-weight bank securitization positions. The SSFA would be designed to assign higher capital requirements to the more subordinated, risky securitization tranches that typically absorb losses first; lower capital requirements would be assigned to safer, senior tranches. The December NPR included formulas that would allow banks to determine the riskiness of their securitizations based upon the hierarchy of tranches."
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"question": [
"What is the goal of the Basel III Capital Accord?",
"Why is it important to accomplish this goal?",
"How does the Basel III Capital Accord accomplish this goal?",
"What else is recommended by the Basel III Capital Accord?",
"How has Basel III’s phase-in schedule moved forward?",
"What was established by the Collins Amendment to the Dodd-Frank Act?",
"What is removed by the Dodd-Frank Act?",
"What does this require bank regulators to do?",
"What difficulty does this cause for regulators?",
"Why might bank lending decisions and strategies be delayed by Basel III and the Dodd-Frank Act?",
"What is discussed in this report?",
"What requirements associated with Basel III are summarized by this report?",
"How does the Basel Capital Accord conflict with the Dodd-Frank Act?",
"What was proposed by the regulators in December 2011?"
],
"summary": [
"The Basel III Capital Accord, which was produced by the Basel Committee on Banking Supervision at the Bank for International Settlements, is the latest in a series of evolving agreements among central banks and bank supervisory authorities from around the world to establish minimum capital requirements for financial institutions.",
"Capital serves as a cushion against sudden financial shocks (such as an unusually high occurrence of loan defaults), which can otherwise lead to insolvency.",
"The Basel III regulatory reform package revises the definition of regulatory capital and increases the amount that must be held by banking organizations.",
"Basel III also recommends holding more assets that can easily be converted to cash to shield against temporary decreases in liquidity.",
"The quantitative requirements and phase-in schedules for Basel III were approved by the 27-member jurisdictions and 44 central banks and supervisory authorities on September 12, 2010, and endorsed by the G20 leaders on November 12, 2010.",
"The Collins Amendment of the Dodd-Frank Act amends the definition of capital; establishes minimum capital and leverage requirements for banking subsidiaries, bank holding companies, and systemically important non-bank financial companies; and establishes an implementation timeline that is shorter than the timeline agreed to in the Basel III Accord.",
"In addition, Dodd-Frank removes the requirement that credit ratings be referenced when evaluating the creditworthiness of financial securities.",
"In other words, bank regulators (e.g., the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation) are required to find other appropriate standards by which to determine the financial risks of bank portfolio holdings while enforcing the mandatory capital requirements.",
"Regulators face challenges in their attempt to establish credit rating alternatives, which may delay the implementation of Basel III in the United States.",
"Bank lending decisions and strategies, therefore, may also be delayed in anticipation of higher capital reserve requirements stemming from implementation of Basel III and the Dodd-Frank Act. Bankers may prefer knowing how much more capital they would need to hold before greatly expanding their lending portfolios with longer-term assets.",
"This report discusses how the Basel Capital Accord framework has been modified as well as subsequent implementation issues in the United States.",
"The report also summarizes the enhanced capital and liquidity requirements associated with Basel III, related provisions in the Dodd-Frank Act, and some remaining implementation concerns.",
"The report explains how the Basel Committee on Banking Supervision incorporates credit ratings into the regulatory framework whereas the Dodd-Frank Act eliminates references to credit ratings in federal financial regulation, and how this may complicate the adoption of subsequent phases of the Basel framework, namely Basel II.5 and Basel III.",
"The regulators issued a proposed rule in December 2011 for implementing Basel II.5, which may help to inform the future contours of Basel III implementation in the United States."
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GAO_GAO-13-832
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{
"title": [
"Background",
"Most Alien Sex Offenders under ICE- ERO Supervision Were Registered, but About 5 Percent Were Not",
"Alien Sex Offenders May Not Be Informed of Potential Registration Requirements, and Jurisdiction Officials May Not Be Notified When an Offender Is Removed or Released",
"Other Agencies Inform Sex Offenders of Requirements and Notify Jurisdiction Officials, but Are Limited in What They Can Do to Help Ensure Alien Sex Offenders Are Registered",
"ICE-ERO Does Not Notify Relevant Sex Offender Registry and Law Enforcement Officials When an Alien Sex Offender Is Removed or Released under Supervision",
"ICE-ERO Plans to Review Notification Options for Offenders under Supervision, but Has Not Set a Deadline for Doing So, and Does Not Plan to Consider Options for Removed Offenders",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Sex Offender Notification Requirements in the Sex Offender Registration and Notification Act (SORNA) and Other Federal Statutes",
"Appendix III: Comments from the Department of Homeland Security",
"Appendix IV: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments"
],
"paragraphs": [
"The purpose of SORNA is to protect the public from sex offenders and offenders against children by providing a comprehensive set of sex offender registration and notification standards. These standards require convicted sex offenders, prior to their release from imprisonment or within 3 days of their sentencing if the sentence does not involve imprisonment, to register and keep the registration current in the jurisdictions in which they live, work, and attend school, and for initial registration purposes only, in the jurisdiction in which they were convicted, if such jurisdiction is different from the jurisdiction of residence. The registration agency also is to document the text of the provision of law defining the criminal offense for which the offender is registered; the criminal history of the offender, including dates of all arrests and convictions, and any other information SORNA or the Attorney General requires. In addition, jurisdictions are to maintain a jurisdiction-wide sex offender registry and adopt registration requirements that are at least as strict as those SORNA established. The length of time that convicted sex offenders must continue to update their registration is life, 25 years, or 15 years, depending on the seriousness of the crimes for which they were convicted and with possible reductions for maintaining a clean record. The frequency with which sex offenders must update or verify their information—either quarterly, semiannually, or annually—also depends on the seriousness of the crime.\nNCIC is an information system that provides law enforcement agencies with around-the- clock access to federal, state, and local crime data, including criminal record histories and wanted and missing person records. manage sex offender registration and notification activities are exclusively responsible for the inclusion, accuracy, and integrity of the information provided by their respective websites.\nSORNA and other federal laws identify certain points in time when sex offenders should be informed of their registration requirements and when relevant jurisdiction officials—that is, state, territorial, and tribal sex offender registry and law enforcement officials—should be informed that a sex offender has been released in their jurisdiction. For example, 42 U.S.C. § 16917 states that, shortly before the release of the sex offender from custody for the offense giving rise to the duty to register, an appropriate official must (1) inform the sex offender of that person’s duties under SORNA and explain those duties, (2) require the sex offender to read and sign a form stating the duty to register has been explained, and (3) ensure that the sex offender is registered. In addition, 18 U.S.C. § 4042(c) requires BOP and federal probation officers to (1) inform the sex offender of the requirements of SORNA and (2) notify the agency responsible for sex offender registration in the jurisdiction in which the sex offender will reside. BOP is required to take these actions if the offender receives a prison sentence; federal probation officers are required to take these actions when the offender is sentenced to probation. See app. II for additional information about these statutory notification requirements.",
"On the basis of our analysis of a representative sample of 131 alien sex offenders under ICE supervision, and for whom ICE had a record of the alien’s complete date of birth, we estimate that as of September 2012, 72 percent of alien sex offenders were registered in the jurisdictions where they lived, 22 percent were not required to register, and 5 percent did not register but should have. Twenty-two percent of alien sex offenders in our sample (29 of 131) were not required to register in the states where they reside, according to the sex offender registration officials. Reasons these offenders were not required to register include the following:\nThe specific offense did not require registration in those states or the offense had been committed before registration was required (20 offenders), the period during which the offender was required to register had ended (8 offenders), or the offender was deceased (1 offender).\nFor example, 1 alien sex offender was convicted of a sex offense in 1997 and was required to register only while he was on probation, which ended in March 2003. Six other alien sex offenders who were convicted of various sex offenses were not required to register because their conviction or supervised release occurred prior to a statutory requirement to register. Another offender, in Texas, was convicted of operating a “sexually oriented business,” which does not require registration as a sex offender.\nHowever, 6 alien sex offenders in our sample (5 percent) should have been registered but were not, which means that, as of September 2012, an estimated 60 alien sex offenders under orders of supervision nationwide, for whom ICE had a record of their complete birthdays, were not registered but should have been. Law enforcement officials reported having no record of 3 of these 6 offenders, but the crimes these aliens committed should have triggered registration. The ICE-ERO field office did not inform 2 of the 6 alien sex offenders about their registration requirements, but did inform the remaining 4 offenders. However, officials at some field offices identified several reasons why they did not ensure that these offenders actually registered. First, the offender may have moved to another state and no longer resided in the area of responsibility for that particular field office. In this instance, it would be incumbent upon the field office that covers the jurisdiction where the offender currently lives to follow up with the offender regarding registration. Second, the officials explained that when aliens report to their deportation officer, the officer is required, among other things, to check NCIC to determine whether the alien has been arrested for any other crimes, the alien is wanted by another law enforcement agency, or there is a warrant for the alien’s arrest.ask the alien whether or not the alien registered as a sex offender. However, according to ICE-ERO, depending on the individual circumstances, failure to register may not be a sufficient basis to return the alien to ICE custody.",
"Other state and federal correctional and supervision agencies are limited in the information they can provide to and about alien sex offenders to help ensure that these offenders are registered, but ICE-ERO may be in a position to help address these notification gaps. We found that ICE-ERO informs alien sex offenders who are removed from the country about potential registration requirements, but ICE-ERO does not consistently inform alien sex offenders who are released under ICE-ERO supervision about these requirements. Further, relevant jurisdiction officials may not be notified about the whereabouts of an alien sex offender when an alien sex offender is removed from the country or when an alien sex offender is released under ICE-ERO supervision, which could have an impact on jurisdictions’ ability to monitor these offenders if they return to the jurisdictions’ communities. ICE-ERO stated that it is assessing options to best accomplish the goal of sex offender notification programs, including incorporating notification requirements for all alien sex offenders released under ICE-ERO supervision. However, ICE-ERO has not identified a deadline for when it will complete its assessment of the various options, nor does ICE-ERO plan to notify jurisdictions when an alien sex offender is removed from the country.",
"Federal and state correctional and supervision agencies have processes in place to inform sex offenders of their registration requirements and notify jurisdictions when sex offenders are released from criminal custody. However, there are gaps in the information that these agencies can provide regarding alien sex offenders who will be taken into ICE-ERO custody, and ICE-ERO may be in a position to help fill these gaps. For example, we found that BOP has a process in place to inform inmates who are sex offenders about their registration requirements at least 5 days prior to releasing them. Under SORNA, these offenders are then required to register in the jurisdiction where they will reside within 3 business days of being released from prison. However, alien sex offenders with final orders of removal who are transferred to ICE-ERO custody upon their release from prison are not able to register immediately. Rather, if these offenders are not removed from the country, they must wait until they are released by ICE-ERO to register. In these instances, it could be as long as 90 days or more from the time when alien sex offenders are informed of their registration requirements until they are actually able to register.who are responsible for providing guidance to jurisdictions and federal agencies on how to implement SORNA requirements, given the time that would have passed, it would be beneficial to remind alien sex offenders of their potential registration requirements upon their release from ICE-ERO custody.\nAccording to SMART Office officials— Federal probation officers, as well as probation officers in the three states included in our review, are also required to inform sex offenders under their supervision about their registration requirements; this includes alien sex offenders who are simultaneously on probation while under ICE-ERO However, not all alien sex offenders are on probation at the supervision. same time that they are under ICE-ERO supervision, in which case these offenders may not be informed of their potential registration requirements upon release from ICE-ERO custody.\n42 U.S.C §16917(a) and 18 U.S.C. § 4042(c)(3). We were not able to determine whether any of the 131 alien sex offenders in our sample were on probation while under ICE supervision because ICE does not maintain this information in its case management system. register the offenders while they are incarcerated and before they are transferred to ICE-ERO custody; however, federal correctional facilities are not able to do so. SORNA states that sex offenders shall initially register before completing a sentence of imprisonment with respect to the offense giving rise to the registration requirement and that an appropriate official shall, shortly before release of the offender from custody for such an offense, ensure that the offender is registered. State registry and local law enforcement officials we interviewed in Florida, Maryland, and Minnesota said that correctional facilities in their states register sex offenders, including alien sex offenders, prior to releasing them. Officials from two of these states also explained that for alien sex offenders who are released from the state correctional facility and immediately taken into ICE custody, the state correctional facility annotates this in the state registration system. Law enforcement officials stated that this enables them to follow up with ICE on the status of the alien sex offender, which helps them to ensure that the information on the status and location of these offenders is current.\nBOP, on the other hand, is not able to register sex offenders, including alien sex offenders who will be taken into ICE-ERO custody, prior to their release from prison because federal agencies do not have the authority to register sex offenders; rather, that authority lies exclusively with the states, territories, and tribes. However, according to BOP, even if BOP had the authority to register sex offenders, BOP would not have to do so for alien sex offenders who will be taken into ICE-ERO custody upon their release from a BOP facility. BOP considers this to be a transfer, not a release, from BOP custody to ICE-ERO custody, in which case BOP would not be required to ensure that the offender is registered prior to the offender leaving the BOP facility. notify registry and law enforcement officials in the jurisdiction where the offender will reside that the offender has been released from custody.\nICE-ERO stated that from its perspective, when an alien offender is taken into ICE custody following the offender’s release from a BOP facility, this is not a transfer. Rather, the offender’s criminal sentence is considered to be complete when BOP releases the offender, and ICE is exercising its independent authority to take the alien offender into custody thereafter. are taken into ICE-ERO custody upon their release from a BOP facility, in part because BOP does not know where ICE-ERO will detain the offender. BOP officials stated that ICE-ERO would be in the best position to notify jurisdiction officials that the agency has a sex offender in its custody because ICE-ERO would know where the offender is being detained and ultimately where the offender will be released. Figure 1 illustrates the gaps in notifications provided to and about alien sex offenders who are removed from the country or released under ICE-ERO supervision.\nICE-ERO has a mechanism in place to inform alien sex offenders who are being removed from the country about potential registration requirements. In response to concerns raised by the U.S. Marshals Service that alien sex offenders who were being removed from the country were not aware of registration requirements, ICE-ERO, in consultation with DOJ, established a mechanism to inform all removed offenders about these requirements. Persons who are being removed from the United States are required to sign one of two forms—Warning to Alien Ordered Removed or Deported (Form I-294) or Notice to Alien Ordered Removed/Departure Verification (Form I-296)—which are used to provide information to aliens such as the length of time they are prohibited from reentering the United States, among other things. In early 2012, ICE-ERO added a notice to these two forms that explained that alien sex offenders must register if they ever return to the United States, and failure to do so could result in prosecution. Officials from the U.S. Marshals Service— which is responsible for investigating cases in which sex offenders fail to register—stated that having this notification mechanism in place will improve their ability to provide evidence to support the prosecution of offenders who fail to register because it is important for the prosecutor to demonstrate that the offender was aware of the registration requirements.\nInformation about additional steps that ICE has taken, or could take, to determine what, if any, responsibility ICE-ERO has with regard to informing alien sex offenders of their registration requirements was omitted because ICE considered it to be FOUO. to alien sex offenders under order of supervision to inform these offenders about potential registration requirements. Before releasing an alien under order of supervision, ICE-ERO requires aliens to review and sign Department of Homeland Security (DHS) Form I-220B, Order of Supervision, which explains the alien’s conditions of release. The form also allows for additional conditions to be identified in an addendum. The addendum includes the following condition for aliens convicted of a sex offense: “That you register as a sex offender, if applicable, within 7 days of being released, with the appropriate agency(s) and provide ICE with written proof of such within 10 days.” Officials from two of the five ICE- ERO field offices included in our review told us they have an office policy in place that requires deportation officers to inform alien sex offenders under supervision about potential registration requirements. Both offices use the addendum to the Form I-220B to inform these offenders.\nHowever, as part of a broader effort that began in 2009 to review and revise ICE’s policy on reporting requirements under orders of release on recognizance and orders of supervision, ICE-ERO officials indicated that they must take additional steps before finalizing pending revisions. For example, revisions to the Form I-220B must be put through the agency’s formal clearance process before a revised version can be published. Also, given the uncertainty surrounding its legal role in informing alien sex offenders in its custody about potential registration requirements, the agency needs to assess whether there is a legal obligation for ICE-ERO to notify alien sex offenders of their requirements to register. According to ICE officials, if ICE-ERO determines that there is no such obligation, it will then decide whether or not to retain, as a matter of policy, the language in the Form I-220B addendum regarding sex offender registration.\nSORNA states that, shortly before the release of the sex offender from custody for the offense giving rise to the duty to register, an appropriate official must inform the sex offender of that person’s duties under SORNA, which would include registration, and explain those duties. According to SMART officials, other law enforcement agencies, including state correctional and probation agencies, have information and notification processes, even though the agencies are sometimes not explicitly required to do so by law. SMART officials said that these agencies have taken these actions in part because of an overall responsibility to assist other law enforcement when possible.\nICE-ERO’s efforts are positive steps that should help address the uncertainty as to whether SORNA requirements to notify sex offenders of their duty to register apply to ICE-ERO. However, ICE-ERO began its review 4 years ago and has not identified a deadline for when it will finalize its decision on use of the Form I-220B addendum for providing sex offender registration notifications. Standard practices for project management state that managing a project, such as ICE-ERO’s review, A deadline would involves developing a timeline with milestone dates. help ensure timely completion of ICE-ERO’s review of the Form I-220B addendum, which is important because until the review is complete, there will continue to be uncertainty as to whether and how ICE-ERO should be notifying alien sex offenders who are released under order of supervision of their duty to register.\nProject Management Institute’s The Standard for Program Management©.",
"ICE-ERO also does not notify sex offender registry and law enforcement officials when an alien sex offender is removed from the country or released under supervision, in part because ICE-ERO officials stated that the extent to which ICE-ERO has the authority or responsibility to do so is questionable. These officials also stated that contacting local jurisdictions would require significant field office resources and modifications to deportation officer duties.\nSex offender registry and local law enforcement officials that we contacted in the three states in our review said that the officials are not always aware of when ICE-ERO removes alien sex offenders or releases them under ICE-ERO supervision. to ensure that these offenders are registered or that their registration information is current. Sex offender registry and law enforcement officials from two states said that, for alien sex offenders who they know are in ICE custody, the officials typically contact ICE on their own initiative to ask about the status of these offenders. Sex offender registry officials in another state said that even though they have an ICE agent colocated with them, the agent does not consistently inform them when ICE deports or releases an alien sex offender, in part because the agent has other responsibilities and notifying the state registry of the status of alien sex offenders in ICE custody is a collateral duty. These registry officials said that they typically become aware of an alien sex offender who has been released from ICE custody if (1) the offender registers with local law enforcement officials on the offender’s own initiative, (2) the offender’s probation officer notifies them, or (3) they check on the status of the offender—as they routinely do—and determine that the offender has absconded.\nThese three states are Minnesota, Florida, and Maryland. We chose Minnesota and Florida because they are among the states where the largest number of alien sex offenders in our sample who were not in the public website reside. We chose Maryland because local law enforcement officials had raised concerns about not being notified of alien sex offenders who are removed from the country or released under order of ICE- ERO supervision. office stated that they know of instances—although they were not able to provide the specific number—when they expended resources searching for an alien sex offender who they thought had absconded only to find that ICE-ERO had the offender in custody, removed the offender, or released the offender. Officials from another local law enforcement agency said that ICE should notify the state registry of the alien sex offenders in ICE custody so that state and local law enforcement officials are aware of the location of the alien sex offenders and do not expend resources looking for them. State registry and local law enforcement officials in our review also provided examples of how their lack of awareness about removed alien sex offenders, in particular, could pose a risk to public safety. For example, registry officials in one state said that there have been instances when they were not aware that an alien sex offender had been removed from the country until the sex offender subsequently returned to the United States, committed another offense, and ended up back in the state criminal justice system. Local law enforcement officials from another state described an instance in which they were not aware that an alien sex offender had been removed from the country until the offender returned to the United States and was subsequently arrested for committing another sex offense against the same child that he had previously victimized. According to the data that ICE-ERO provided to us, of the 4,359 alien sex offenders who were removed from the country between January and August 2012, 220 of them (5 percent) had previously been removed but subsequently returned to the United States and were arrested for another offense. As we reported in February 2013, the FBI is in the process of developing a mechanism by which the U.S. Marshals Service and relevant jurisdiction officials will be notified when a sex offender who has been registered in the United States legally reenters the country.\n18 U.S.C. § 4042(c). way to ensure that they are aware of alien sex offenders whom ICE-ERO has in custody, removed from the country, or released under supervision is for ICE-ERO to tell the officials.",
"ICE-ERO plans to review options to help address notification gaps pertaining to alien sex offenders who are released under order of supervision, but has not established a deadline for when it will complete this review. ICE-ERO, however, does not plan to consider options for notifying jurisdictions when an alien sex offender is removed from the country, which, as discussed previously, could have an impact on a jurisdiction’s ability to monitor these individuals if they return to the United States.\nAs a result of our review, in May 2013, officials from ICE-ERO, the U.S. Marshals Service, and the SMART Office met to discuss notification gaps with regard to registration of alien sex offenders and options for addressing these gaps. However, the agencies were not able to agree to a solution at that time, in part because of ICE-ERO officials’ concerns about their organization’s lack of authority and responsibility regarding sex offender registration. Officials we interviewed from the U.S. Marshals Service and the SMART Office stated that ICE-ERO was in the best position to inform alien sex offenders about potential registration requirements, and to notify relevant jurisdiction officials—either state registry or law enforcement officials—when an alien sex offender is removed from the country or released, because ICE-ERO is the last federal agency that has had contact with these offenders and releases these offenders from custody into the community.\nHowever, in addition to uncertainty regarding ICE-ERO’s authority and responsibility, ICE-ERO officials identified other concerns about providing these notifications. Specifically, officials we interviewed in the five ICE- ERO field offices included in our review said that because they are responsible for supervising such a large number of aliens—anywhere from 750 to 3,000 at any point in time—they would not have the time or resources to notify jurisdiction officials when an alien sex offender is released or removed from the country. However, as noted previously, alien sex offenders make up a relatively small fraction (5 percent) of aliens under ICE supervision, in which case providing these notifications may not pose a significant resource burden on ICE-ERO. Further, ICE- ERO officials as well as one of the five ICE-ERO field offices in our review said that they thought that, to notify jurisdiction officials, they would first have to confirm that the alien does in fact have to register in that state, which could be very time-consuming. However, under SORNA, the state is responsible for determining whether a convicted sex offender is required to register, in which case ICE-ERO would not have to do so prior to providing notice of the offender’s release.\nICE-ERO officials also stated that SORNA also requires individuals convicted of certain crimes against children that are not sex offenses— such as kidnapping—to register as sex offenders. However, these officials explained that it would be difficult for deportation officers to determine whether aliens under their supervision were convicted of a crime that is not a sex offense but may require registration. We acknowledge that this could be a challenge and an issue that the SMART Office may be able to help ICE-ERO resolve. Moreover, officials from all five ICE-ERO field offices in our review said that even if they informed alien sex offenders of their registration requirements, the officials would not be able to take any action to enforce these requirements even when registering as a sex offender is a condition of release for aliens under ICE-ERO supervision. However, ICE-ERO could notify all offenders who are released on supervision, as it does for offenders who are removed from the country, and then state and local law enforcement would be responsible for enforcing registration requirements. Also, if ICE-ERO notifies jurisdiction officials of the offender’s release, these officials would be able to identify those offenders who did not register after their release; ICE-ERO would not have to assume this responsibility. Finally, officials from two ICE-ERO field offices in our review said that they would not know who, specifically, to contact at the state registry to notify it that ICE- ERO is deporting or releasing an alien sex offender. However, the SMART Office maintains points of contact for each state, territory, and tribal sex offender registration agency, which the SMART Office could provide to ICE-ERO.\nIn July 2013, an ICE-ERO official stated that ICE-ERO will begin reviewing options to accomplish the goal of sex offender notification, to include efforts to inform alien sex offenders of their potential registration requirements and to notify jurisdictions of alien sex offenders who are released under order of supervision. However, ICE-ERO did not provide a deadline for when it plans to complete its review of the various options. Standard practices for project management state that managing a project, such as ICE-ERO’s review, involves developing a timeline with milestone dates. Further, Standards for Internal Control in the Federal Government call for agencies to ensure that there are adequate means of communicating with, and obtaining information from, external stakeholders that may have a significant impact on the agency achieving its goals. By developing a deadline for when it will complete its assessment of options for providing notifications to and about alien sex offenders, ICE-ERO will help to ensure that any public safety concerns that may arise as a result of the current notification gaps—such as law enforcement officials being unaware of sex offenders living in their jurisdictions—are mitigated in a timely manner. Finally, communicating the results of its assessment with federal stakeholders will help provide clarity going forward with regard to who has responsibility for notifying alien sex offenders of their potential registration requirements.\nAlthough ICE-ERO plans to address notification gaps regarding alien sex offenders under order of supervision, it does not plan to consider options for notifying relevant jurisdictions when an alien sex offender is removed from the country. ICE-ERO stated that it already updates NCIC—which is routinely accessed by law enforcement officials—when an alien sex offender is removed, including the date of the removal. However, if law enforcement officials were last told that the alien sex offender was in ICE- ERO custody, they may not have a reason to search NCIC to determine the status of the offenders. Given the threat that alien sex offenders who are removed from and return to the United States may pose to public safety, developing an appropriate mechanism for informing relevant jurisdictions when an alien sex offender has been removed from the country will assist jurisdiction officials in ensuring that all alien sex offenders have been registered. This will facilitate the monitoring of these sex offenders in the event that they return to the United States. Such notification would also prevent jurisdictions from spending limited resources trying to locate these offenders because they were not aware that the offenders had been removed from the country. Other federal agencies, including the SMART Office, U.S. Marshals Service, and BOP, may have resources and information that are useful for ICE-ERO in developing a mechanism for notifying relevant jurisdictions when an alien sex offender is removed from the country. For example, SMART maintains contact information for all state, territorial, and tribal registry agencies. Also, internal control standards call for agencies to ensure that there are adequate means of communicating with, and obtaining information from, external stakeholders that may have a significant impact on the agency’s achieving its goals. Therefore, consulting with these agencies could be beneficial for ICE-ERO in developing this notification mechanism.",
"Without mechanisms in place to consistently inform alien sex offenders who are released under ICE-ERO supervision about their registration requirements, and consistently notify jurisdictions when an alien sex offender has been removed from the country or released under supervision, the risk that alien sex offenders will reside in U.S. communities without being registered is increased. ICE-ERO is in the process of a review to determine whether continued use of the Form I- 220B addendum as a means to notify alien sex offenders of their potential registration requirements is warranted; however, ICE-ERO has not set a deadline for timely completion of this review. A deadline will help enhance accountability for completion of this effort, which is important because until this review is completed, there will continue to be uncertainty as to whether and how ICE-ERO should be notifying alien sex offenders who are released under order of supervision of their duty to register. In addition, a time frame for when ICE-ERO will complete its assessment of options for notifying alien sex offenders of their potential registration requirements will help provide accountability for completing this important effort. Also, communicating the results of ICE-ERO’s assessment with federal stakeholders will help provide clarity going forward with regard to who has responsibility for notifying alien sex offenders of their potential registration requirements. Moreover, given the threat that alien sex offenders who are removed from and return to the United States may pose to public safety, developing an appropriate mechanism for informing relevant jurisdictions when an alien sex offender has been removed will assist jurisdiction officials in ensuring that all alien sex offenders are registered. This will facilitate the monitoring of these sex offenders in the event that they return to the United States. Such notification would also prevent jurisdictions from spending limited resources trying to locate these offenders because they were not aware that the offenders had been removed from the country.",
"We recommend that the Director of ICE take the following two actions: direct ICE-ERO to establish a deadline to ensure timely completion of its review of the Form I-220B addendum and direct ICE-ERO to establish a deadline for when it will complete its assessment of options for informing alien sex offenders who are released under order of supervision about their potential responsibility to register and communicate the results of its assessment with federal stakeholders.\nWe recommend that the Secretary of Homeland Security direct ICE-ERO, in consultation with the SMART Office, the U.S. Marshals Service, and BOP, to develop an appropriate mechanism for notifying relevant jurisdictions when an alien sex offender has been removed from the country.",
"We provided a draft of this report for review and comment to DHS and DOJ. We received written comments from DHS, which are reproduced in full in appendix III. DHS agreed with our recommendations in its comments. We also received technical comments from DHS and DOJ, which are incorporated throughout our report as appropriate.\nDHS agreed with our recommendations that ICE-ERO establish deadlines for when it will complete its review of the Form I-220B addendum and its assessment of options for informing alien sex offenders who are released under order of supervision about their potential registration responsibilities. DHS noted that ICE-ERO had taken steps to combine Form I-220A (Order of Release on Recognizance) and Form I-220B (Order of Supervision) into one comprehensive Form I-220 (Order of Release on Recognizance or Order of Supervision). However, ICE-ERO intentionally delayed publication of this new form, and the associated directive, to take into account any recommendations resulting from our review. DHS also stated that ICE-ERO is currently working with the SMART Office to explore ways in which the goals of SORNA may be better addressed through improved coordination between the two agencies. ICE-ERO plans to complete its review and assessment by October 31, 2013. Establishing such a deadline for the completion of these efforts will help ensure that ICE-ERO can be held accountable for identifying and effectuating any actions they deem appropriate to help ensure that alien sex offenders are indeed registered. As part of our process for following up on agencies’ efforts to implement our recommendations, we will continue to monitor ICE-ERO’s progress in completing its assessment and review by the established deadline.\nDHS also concurred with our recommendation that ICE-ERO, in consultation with the SMART Office, the U.S. Marshals Service, and BOP, develop an appropriate mechanism for notifying relevant jurisdictions when an alien sex offender has been removed from the country. DHS noted, however, that as ICE-ERO considers options, it will also determine whether such notification can be accomplished without adversely affecting ICE’s mission, given the potential impact on resources. ICE-ERO also plans to complete its assessment of these options by October 31, 2013. Notifying jurisdictions when an alien sex offender is removed from the country will enable them to register these offenders, in which case law enforcement officials will be able to monitor these offenders if they ever return to the United States.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Homeland Security, the Attorney General of the United States, and other interested parties. In addition, the report is available at no charge on the GAO web-site at http://www.gao.gov.\nIf you or your staff have any questions, please contact me at (202) 512- 8777 or larencee@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix IV.",
"This report addresses the following objectives: (1) To what extent are alien sex offenders under the Enforcement and Removal Operations division of U.S. Immigration and Customs Enforcement (ICE-ERO) order of supervision registered as sex offenders? (2) To what extent are alien sex offenders who are removed from the country or released under an ICE-ERO order of supervision informed of registration requirements, and state sex offender registry and law enforcement officials notified about these offenders?\nTo address our objectives, we requested that ICE-ERO provide the names and dates of birth for all alien sex offenders who were under orders of supervision as of September 2012. We chose this date because we requested this information as part of a separate review and this date provided us with current information at the time. ICE-ERO provided us with the names for 2,837 alien sex offenders under orders of supervision as of September 2012. However, ICE-ERO was able to provide us only with a complete date of birth—which is important for verifying the identity of these individuals—for 1,369 of these alien offenders. We drew a random probability sample of 137 of the 1,369 alien sex offenders with complete dates of birth. We subsequently found that six individuals in our sample should not have been included in the population of alien sex offenders under supervision, resulting in a final sample size of 131 and an estimated total population of 1,309. We determined whether each alien sex offender, as of March 2013, was registered in the state where he or she resides using the steps described below. Percentage estimates derived from this sample have margins of error at the 95 percent confidence level of plus or minus 8.08 percentage points.the reliability of the data ICE provided by questioning knowledgeable agency officials and reviewing the data for errors and anomalies. We determined that the data were sufficiently reliable for our purposes.\nTo determine whether the 131 alien sex offenders in our sample were registered in the states where they reside, we first searched the National Sex Offender Public Website (public website) to determine which of these offenders were included. All persons included on the public website are also registered with their respective states. On the basis of the search results, we divided the alien sex offenders into three categories: (1) definitely included in the public website, meaning there was an exact match on the name and date of birth for the alien sex offender in the public website; (2) possibly included in the public website, meaning there was a partial or similar name, date of birth, or age in the public website (e.g., J. Smith as opposed to John Smith), but not an exact match; and (3) definitely not included in the public website, meaning the public website did not include the offender’s exact name or date of birth or even a partial or similar name, date of birth, or age. We determined that of the 131 alien sex offenders in our sample, 51 (39 percent) were definitely included in the public website, 16 (12 percent) were possibly included, and 64 (49 percent) were definitely not included. We asked ICE-ERO to provide us with the current addresses for the 80 alien sex offenders who were possibly included or definitely not included in the public website; these offenders were located in 27 states. We contacted sex offender registration officials in each of the 27 states to ask whether the officials were aware of these offenders; whether the offenders were registered with the state; and, for any offenders who were not registered, an explanation for why they were not.\nTo address our second objective, we reviewed the Sex Offender Registration and Notification Act of 2006 (SORNA), other applicable laws, and guidelines developed by the Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking (SMART) Office to obtain information on federal sex offender registration requirements. We also met with officials from ICE-ERO Executive Information and Reporting Unit—which is responsible for administering and coordinating ICE-ERO’s policy development, review, clearance, and information disclosure functions—to obtain information on how they determine whether an alien in ICE-ERO custody is a sex offender and any actions they take to help ensure that alien sex offenders who are released under ICE-ERO supervision are registered. In addition, we conducted phone interviews with ICE-ERO supervisory detention officials; U.S. Marshals Service officials; state sex offender registry officials; and local law enforcement officials in Minnesota, Florida, and Maryland to inquire about actions they take to help ensure alien sex offenders are registered and how they become aware of alien sex offenders who live in their jurisdiction. We selected Minnesota and Florida because these are the states where the largest number of alien sex offenders in our sample who were not included in the public website reside. We selected Maryland because local law enforcement officials in this state had raised concerns about registration of alien sex offenders during our prior work, which was completed in February 2013. In addition, we conducted phone interviews with ICE-ERO field office directors and deputy directors in the field offices that either released or currently supervise the alien sex offenders in our sample who were not registered, but potentially should have been. We obtained information from the Administrative Office of the United States Courts and the Federal Bureau of Prisons (BOP) regarding their efforts to inform alien sex offenders about their registration responsibilities and notifying relevant sex offender registry and law enforcement officials about these offenders. In addition, we interviewed officials from the U.S. Marshals Service who are responsible for locating sex offenders who fail to register. We also met with the director and policy advisors for the SMART Office within the Department of Justice (DOJ) to obtain their perspectives on acceptable reasons for why alien sex offenders may not be registered in the state where they reside or included in the public website. The SMART Office is responsible for assessing states’, territories’, and tribes’ progress in implementing SORNA. We compared the sex offender notification requirements in SORNA and other federal statutes with the notifications that state and federal agencies provide to alien sex offenders to determine if there were any gaps. We then obtained perspectives from the federal, state, and local officials we interviewed on how best to address these gaps. We also compared efforts that ICE-ERO has under way regarding notifications to and about alien sex offenders with internal control standards pertaining to communication with stakeholders and program management standards that involve establishing milestone dates and deadlines.\nWe conducted this performance audit from January 2013 to September 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"Appendix II: Sex Offender Notification Requirements in the Sex Offender Registration and Notification Act (SORNA) and Other Federal Statutes Notification requirement 42 USC § 16917—Duty to notify sex offenders of registration requirements and to register (a) In General.\nAn appropriate official shall, shortly before release of the sex offender from custody, or, if the sex offender is not in custody, immediately after the sentencing of the sex offender, for the offense giving rise to the duty to register— (1) inform the sex offender of the duties of a sex offender under this title and explain those duties; (2) require the sex offender to read and sign a form stating that the duty to register has been explained and that the offender understands the registration requirement; and (3) ensure that the sex offender is registered. (b) Notification of Sex Offenders Who Cannot Comply with Subsection (a).\nThe Attorney General shall prescribe rules for the notification of sex offenders who cannot be registered in accordance with subsection (a). 18 USC § 4042(c)(1)-(3)—Duties of Bureau of Prisons (c) Notice of Sex Offender Release— (1) In the case of a person described in paragraph (3), or any other person in a category specified by the Attorney General, who is released from prison or sentenced to probation, notice shall be provided to— (A) the chief law enforcement officer of each State, tribal, and local jurisdiction in which the person will reside; and (B) a State, tribal, or local agency responsible for the receipt or maintenance of sex offender registration information in the State, tribal, or local jurisdiction in which the person will reside. (2) Notice provided under paragraph (1) shall include the information described in subsection (b)(2), the place where the person will reside, and the information that the person shall register as required by the Sex Offender Registration and Notification Act. For a person who is released from the custody of the Bureau of Prisons whose expected place of residence following release is known to the Bureau of Prisons, notice shall be provided at least 5 days prior to release by the Director of the Bureau of Prisons. For a person who is sentenced to probation, notice shall be provided promptly by the probation officer responsible for the supervision of the person, or in a manner specified by the Director of the Administrative Office of the United States Courts. Notice concerning a subsequent change of residence by a person described in paragraph (3) during any period of probation, supervised release, or parole shall also be provided to the agencies and officers specified in paragraph (1) by the probation officer responsible for the supervision of the person, or in a manner specified by the Director of the Administrative Office of the United States Courts. (3) The Director of the Bureau of Prisons shall inform a person who is released from prison and required to register under the Sex Offender Registration and Notification Act of the requirements of that Act as they apply to that person and the same information shall be provided to a person sentenced to probation by the probation officer responsible for supervision of that person.",
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"In addition to the contact named above, Kristy Love, Assistant Director, and Edith Sohna, analyst-in-charge, managed this engagement. Kevin Craw and Frances Cook made significant contributions to the report. Michele Fejfar, Justin Fisher, Mary Catherine Hult, Michael Lenington, Linda Miller, Lara Miklozek, and Julie Spetz also provided valuable assistance."
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{
"question": [
"On what basis did GAO estimate the proportions of registered and unregistered sex offenders?",
"Why were some offenders not required to register?",
"What were the offenders that should have been registered informed of?",
"Why did officials at some field offices not ensure that these offenders were registered?",
"What are alien sex offenders not consistently informed of?",
"What identifies when sex offenders and relevant jurisdiction officials should be notified?",
"Why are they not consistently informed of these things?",
"Why does ICE-ERO not consistently inform alien sex offenders of registration requirements?",
"Why do some state correctional facilities have notification processes in place regarding the removal or release of aliex sex offenders?",
"What is ICE-ERO currently reviewing options for?",
"Why is the lack of a deadline problematic?",
"What types of notifications from ICE-ERO could help jurisdictions ensure public safety?",
"What does ICE-ERO use to release criminal aliens who have been ordered to be removed from the U.S. but cannot be?",
"What does SORNA do?",
"What is the purpose of this report?",
"What sources did GAO use to create this report?"
],
"summary": [
"On the basis of GAO's analysis of a representative sample of 131 alien sex offenders under U.S. Immigration and Customs Enforcement (ICE) supervision, GAO estimates that as of September 2012, 72 percent of alien sex offenders were registered, 22 percent were not required to register, and 5 percent did not register but should have.",
"According to officials, offenders were not required to register for various reasons, such as the offense not requiring registration in some states.",
"Of the 6 offenders in GAO's sample that should have registered, officials from ICE's Enforcement and Removal Operations (ICE-ERO) field offices informed 4 of their registration requirements.",
"However, officials at some of these field offices identified several reasons why they did not ensure that these offenders actually registered. For example, the offender may have moved and no longer resided in the area of responsibility for that particular field office.",
"Alien sex offenders are not consistently informed of potential registration requirements, and relevant jurisdiction officials--that is, state, territorial, and tribal sex offender registry and law enforcement officials--are not consistently notified when an offender is removed from the country or released.",
"The Sex Offender Registration and Notification Act of 2006 (SORNA) and other federal laws identify when sex offenders and relevant jurisdiction officials should be notified.",
"However, the agencies that have these notification responsibilities are limited in their ability to provide information to and about alien sex offenders, in part because they do not know when ICE-ERO will release or remove these offenders.",
"ICE-ERO has a procedure in place to inform alien sex offenders who are being removed about potential registration requirements, but not alien sex offenders who are being released into the community under supervision, primarily because ICE-ERO is uncertain whether it has a responsibility to do so. ICE-ERO also does not consistently notify relevant jurisdiction officials when an alien sex offender is removed or released under supervision, for similar reasons.",
"However, officials from the Department of Justice's Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking (SMART) Office said that state correctional facilities, in the interest of public safety, have notification processes in place, even though sometimes not required to do so.",
"ICE-ERO is reviewing options for informing alien sex offenders under supervision about their potential registration requirements and notifying jurisdictions when alien sex offenders are released under supervision, but has not established a deadline for completing its review, which is inconsistent with project management standards.",
"Without a deadline, it will be difficult to hold ICE-ERO accountable for providing these notifications.",
"Further, ICE-ERO does not plan to notify relevant jurisdictions when an alien sex offender is removed. Providing such notification could help jurisdictions ensure public safety and avoid unnecessarily spending resources trying to locate the offender.",
"ICE-ERO uses orders of supervision to release from custody criminal aliens--including sex offenders--who have been ordered to be removed from the United States, but cannot be removed for various reasons or detained indefinitely under U.S. Supreme Court precedent.",
"In July 2006, SORNA was enacted, which established minimum standards for sex offender registration and notification.",
"This report addresses the extent to which alien sex offenders (1) under ICE-ERO order of supervision are registered and (2) who are removed or released under ICE-ERO order of supervision are informed of registration requirements and relevant jurisdiction officials are notified about these offenders.",
"GAO analyzed a representative sample of 131 of 1,309 alien sex offenders who were under orders of supervision as of September 2012. GAO also interviewed officials from ICE-ERO, the SMART Office, and other relevant federal, state registry and local law enforcement agencies."
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CRS_RL33728
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{
"title": [
"",
"Introduction",
"Background Information on Emergency Contraception",
"FDA Approval of Preven and Plan B",
"Mechanism of Action",
"Contraindications and Adverse Reactions",
"FDA Approval of Over-the-Counter Status for Plan B",
"Legal Issues34",
"State Policies68",
"Justice Department Guidelines for Sexual Assault Victims",
"Federal Legislation",
"Impact of the FDA OTC Decision"
],
"paragraphs": [
"",
"On August 24, 2006, the Food and Drug Administration (FDA) announced the approval of an application to switch Plan B, an emergency contraceptive, from a prescription-only drug to an over-the-counter (OTC) drug for women 18 years of age and older. Plan B will only be sold OTC in pharmacies or healthcare clinics. It will continue to be dispensed as a prescription drug for women 17 years old and younger. Both men and women will be able to purchase Plan B, but all individuals will need to show the pharmacist identification for proof of age before purchasing the OTC version. Anonymous shoppers will be used to test compliance with the age restriction. A booklet will be distributed with Plan B that explains proper use of the drug. The manufacturer, Barr Pharmaceuticals, began shipping the OTC version of the drug to U.S. pharmacies early in November 2006.\nApproval of the switch to OTC for Plan B has been controversial. Critics believe that initial policy decisions made by the Bush Administration regarding Plan B were based on political and ideological considerations rather than on sound science. Conservative religious and pro-life groups believe that readily available Plan B may increase the occurrence of unsafe sexual activity and that such a drug should be used only under the supervision of a healthcare professional. Their primary concern with Plan B, however, is that it might prevent the implantation of the embryo in the uterus, which, for those who believe human life begins at conception, would constitute an abortion. However, the medical community does not consider prevention of implantation to be an abortion, and FDA does not classify Plan B as an abortion drug. Although the precise mechanism of action remains undetermined, scientific evidence suggests that prevention of ovulation or fertilization is the most likely mode of action for Plan B, rather than prevention of implantation of a developing embryo.\nThis report discusses the FDA approval of Plan B as a prescription drug, as well as the more recent and controversial FDA approval of Plan B as an OTC drug. Legal issues regarding the recent FDA decision are also discussed as well as various state policies that affect access to emergency contraceptives. In addition, the report discusses the Department of Justice guidelines for the treatment of sexual assault victims, which have been criticized by numerous organizations because they do not mention offering emergency contraception to female rape victims. The DOJ guidelines were the focus of legislation introduced in the 109 th Congress. Lastly, this report discusses the likely impact of the FDA Plan B OTC decision.",
"Emergency contraception is a therapy that may prevent pregnancy for women who have had unprotected sexual intercourse. There are two methods of emergency contraceptive therapy: insertion of an intrauterine devise, or IUD, within five days of intercourse; or, ingestion of a pill containing the hormones commonly found in the contraceptive pill. Although hormonal emergency contraception is often referred to as the \"morning-after pill,\" it can be given up to 72 hours after unprotected intercourse and can involve taking more than one pill. Reasons for using emergency contraception include problems with a contraceptive (condom breakage, missed pill), sexual assault, or exposure to an agent which may cause a birth defect (e.g., live vaccine, cytotoxic drug, or radiation).\nThe current approach to emergency conception began with the recognition in the 1920s that estrogen prevented pregnancy in mammals. In the mid-1960s, a Dutch physician gave high-dose estrogen to a 13-year-old rape victim in order to prevent pregnancy. During the 1960s and 1970s high-dose estrogen became the standard emergency contraceptive treatment. In the early 1970s, Canadian physician A. Albert Yuzpe began studying emergency contraception and published his first study in 1974. The Yuzpe method used conventional birth control pills, a combination of estrogen and progestin, taken in two doses 12 hours apart. In 1984, the United Kingdom became the first country to approve such a combination pill regimen as an emergency contraceptive.\nIn January 2001, the United Kingdom began allowing pharmacies to dispense emergency contraception without a prescription. In April 2005, an emergency contraceptive (Plan B, a progestin-only pill) was approved by the Canadian government for use by all women without a prescription. Emergency contraceptive pills are used by women in more than 100 countries; in over 40 countries the pills are sold without prescription either by a pharmacist or OTC (see Table 1 , below).",
"Following the 1974 publication by Yuzpe, physicians often instructed patients to take multiple pills from a standard one-cycle oral contraceptive package for emergency contraception; this is referred to as an \"off-label\" use of the drug. On February 25, 1997, a notice in the Federal Register stated that the Commissioner of FDA had concluded that certain oral contraceptives are safe and effective for use as emergency contraception and asked manufacturers to submit a new drug application for this use. In 1998, FDA approved Preven for use as an emergency contraceptive available by prescription. Preven utilized the Yuzpe method; two pills, containing estrogen and progestin, taken 12 hours apart.\nA 1993 study conducted on about 800 women in Hong Kong found that use of progestin alone was somewhat more effective for emergency contraception than the Yuzpe method and had fewer side effects. In 1998, the World Health Organization (WHO) followed up with a larger international trial using almost 2,000 women comparing the Yuzpe method and a progestin-only pill. The WHO trial found that progestin alone was significantly more effective than the Yuzpe method at preventing pregnancy, and caused fewer side effects. Most importantly, for either method, the WHO trial found that the earlier the pill is taken, the better it works.\nIn the WHO trial, the progestin-alone regimen reduced the risk of pregnancy by 85% when taken within 72 hours of intercourse. Progestin prevented 95% of expected pregnancies when taken within 24 hours, 85% when taken between 25 and 48 hours, and 58% when taken between 49 and 72 hours. In contrast, Yuzpe reduced the risk of pregnancy by 57% when taken within 72 hours. Yuzpe prevented 77% of expected pregnancies when taken within 24 hours, 36% for 25 to 48 hours, and 31% for 49 to 72 hours. WHO also found that the Yuzpe method resulted in significantly more side effects than progestin alone. The incidence of nausea was 50% with Yuzpe and 23% with progestin. Vomiting with Yuzpe was 3 times higher than with progestin (19% vs. 6%), which is significant as women who vomit after taking the first combination pill may need to take an extra dose.\nOn July 28, 1999, FDA approved Plan B, a progestin-only emergency contraceptive, for use by prescription. Plan B consists of two pills each containing 0.75 mg of levonorgestrel (a progestin). One pill is taken as soon as possible after unprotected intercourse and the second is taken 12 hours later. The FDA-approved labeling for Plan B states that it is 89% effective if taken within three days (72 hours) after unprotected sex. In other words, 7 of every 8 women who would have become pregnant will not become pregnant. As mentioned earlier, Plan B is even more effective (95%) if taken within 24 hours of unprotected sex.",
"In humans, the fertile days when sexual intercourse can result in pregnancy include the five days before ovulation (release of the egg from the ovary) and the day of ovulation. Although the precise mechanism of action by which Plan B prevents pregnancy remains undetermined, scientific evidence suggests that prevention of ovulation or fertilization is the most likely mode of action for Plan B, rather than prevention of implantation. The active ingredient in Plan B, levonorgestrel, has been used in birth control pills for more than 35 years. Emergency contraception is not as effective as the regular use of oral contraceptives. However, the higher dose of levonorgestrel in Plan B works like a birth control pill to prevent pregnancy, most probably by stopping ovulation. Several studies indicate that hormonal emergency contraception interferes with the events in the ovary that lead up to release of the egg.\nPlan B may also interfere with fertilization by altering the transport of sperm and/or egg within the female reproductive system. In one study, administration of levonorgestrel after sexual intercourse reduced the number of sperm within the uterus, increased the pH of the uterine fluid (which immobilized sperm), and increased the viscosity of cervical mucus (which impeded entry of sperm into the uterus).\nIt is possible that Plan B may inhibit implantation of the fertilized egg within the uterus by altering the endometrium (the uterine lining). Three studies of hormonal emergency contraception in human subjects found alterations in the endometrium, but whether such changes had an impact on implantation was \"open to question.\" Four other studies found either negligible or no alterations in the endometrium. However, in the case of levonorgestrel, \"publications in refereed journals do not support the hypothesis that it alters endometrial receptivity or impedes implantation.\" In addition, studies in the rat and monkey indicate that levonorgestrel does not disrupt post-fertilization events such as implantation.\nPlan B is not effective after the embryo has implanted in the uterus and therefore cannot interfere with an established pregnancy, which is defined as an embryo implanted in a uterus. Plan B is used before a pregnancy can be diagnosed. Plan B does not use the same active ingredient as Mifeprex (also known as the abortion pill, RU-486, or mifepristone). Mifeprex (in combination with misoprostol) is used after a positive pregnancy test to terminate an early pregnancy (up through seven weeks).",
"The fact that there are relatively few side effects for Plan B was a major factor in the approval of OTC status for this drug. The FDA-approved OTC labeling lists known pregnancy and hypersensitivity to any component of the product as contraindications. For Preven or the Yuzpe regimen, the FDA, WHO, and the American College of Obstetricians and Gynecologists (ACOG) list known pregnancy as the only contraindication. (Pregnancy is listed as a contraindication only because these drugs won't work to prevent pregnancy if the patient is already pregnant; no harm will result if a pregnant patient takes either pill.) The FDA, however, lists some relative contraindications based on evidence from combination estrogen-progestin oral contraceptives. These include clotting problems, stroke, and migraine, among others, which are related to the presence of estrogen in the combination pill. A 1997 review found that since the Yuzpe regimen was approved in 1984 in the UK, the product was used more than 4 million times; only six serious stroke or blood clot events were reported, and there was no clear-cut relationship between drug administration and any of these events. In contrast, such events are much more likely during pregnancy (60 cases/100,000 women). Without the presence of estrogen, the incidence of such events for use of Plan B should be even lower than the Yuzpe regimen.\nAdverse reactions to Plan B listed in the FDA-approved label include nausea (23%), abdominal pain (18%), fatigue (17%), and headache (17%). Less common adverse events listed on the label include menstrual changes, dizziness, breast tenderness, vomiting, and diarrhea. There is no medical evidence that Plan B will harm a developing fetus if taken accidentally while pregnant. Several studies have shown that availability of Plan B does not lead to an increase in unprotected sex.",
"In April 2003, Women's Capital Corporation (WCC) submitted an application to the FDA requesting that Plan B be switched from prescription to OTC. Requiring a prescription for emergency contraception may create barriers to access for many women. The woman must: (1) identify a physician who will prescribe Plan B; (2) obtain a prescription via a telephone call or a physician visit and pay the financial cost of the visit; and, (3) find a pharmacy that stocks the product and employs a pharmacist who will dispense the product. Because the effective use of Plan B is time dependent (the earlier it is used, the more effective it is), a switch from \"prescription only\" to \"over-the-counter\" (OTC) would likely benefit women who may need to use this product.\nFDA formalized the process of switching a prescription drug to OTC status in 1975 and has approved over 90 such applications. The requirements for making the switch from prescription-only to OTC include making sure the drug is safe for self-medication and has a low toxicity or other potentiality for harmful effect. The patient must be able to recognize the condition and require minimal health care provider intervention in order to use the drug correctly. The OTC applications are reviewed by FDA's Center for Drug Evaluation and Research (CDER). Because it is considered to be a \"first in class\" drug, the Plan B application was reviewed by two (rather than one) of the six offices within CDER, one office with expertise in reproductive health and a second office that reviews all OTC switch applications.\nCDER also requested a joint meeting of two advisory committees of outside experts in order to obtain scientific advice on the Plan B application. The two committees, the Nonprescription Drugs Advisory Committee and the Advisory Committee for Reproductive Health Drugs, met in December 2003. After reviewing over 15,000 pages of data and 40 scientific studies, the committees voted unanimously that Plan B is safe for use in the nonprescription setting, and voted 23 to 4 that the Plan B switch to OTC status should be approved.\nIn May 2004 the FDA rejected the advice of its scientific committee and issued a \"not-approvable\" letter for the Plan B switch to OTC. The FDA cited \"inadequate sampling\" of women under 16 years of age as the reason for the rejection and concerns about use of the drug without supervision by a physician or other health care provider. However, studies published in 2004 and 2005 do not support an association between wider availability of emergency contraception and an increase in unsafe sexual behavior among teenagers. Counseling against unsafe behavior in this age group is presumably the reason why FDA believed the supervision of a physician was required.\nBarr Labs reapplied in July 2004, requesting that Plan B be available over the counter only to women 17 years and older. The FDA did not issue a decision by its regulatory deadline of January 2005. At his confirmation hearing in March 2005, FDA Commissioner Lester M. Crawford indicated that \"the science part is generally done\" for the Plan B approval process, and \"we're just now down to what the label will look like.\"\nFDA announced on August 26, 2005, that an immediate decision on the OTC switch could not be determined. FDA Commissioner Lester Crawford cited \"novel regulatory issues,\" \"profound\" policy questions, and specific concerns over how the exact same formulation of the drug could be available OTC for an older group of women while remaining prescription only for the younger group. A 60-day \"public comment\" period was opened to help decide these issues. This announcement led to the resignation on August 31 of the director of the FDA's Office of Women's Health, Susan Wood, in protest of the agency's action. FDA Commissioner Crawford resigned abruptly on September 23, 2005, reportedly due to financial improprieties unrelated to the ongoing controversy over Plan B.\nWhen the comment period ended on November 1, 2005, FDA had received approximately 47,000 comments. On that same day Senators Hillary Clinton and Patty Murray delivered a 10,000-name petition urging the agency to \"expeditiously make a decision on the application for OTC status for Plan B based strictly on scientific evidence.\"\nMembers of Congress asked the Government Accountability Office (GAO) to investigate if there was political interference in the FDA decision process. The GAO report, released in November 2005, stated that the process was \"unusual\" and that the decision may have been made months before the scientific reviews were completed. It noted that it was \"not typical of the other 67 proposed prescription-to-OTC switch decisions made from 1994 through 2004\" for two reasons. First, it was the only decision that was not approved after the members of the advisory committees voted to approve the application. Second, the GAO reported that three high-level FDA officials had declined to sign the letter that refused approval. \"This action removed decision-making authority from the directors of the reviewing offices who would normally make the decision,\" stated the GAO. The GAO urged Health and Human Services Secretary Mike Leavitt to assure that an upcoming decision about the pill's status \"is based on the best available science instead of ideology.\"\nIn July 2006, FDA stated that it had evaluated the public comments and decided that it could proceed without creating a new regulation to allow the drug to be offered without a prescription to adults. Barr resubmitted its OTC application to FDA in mid-August 2006 and FDA approved the switch to OTC on August 24, 2006. The manufacturer agreed to the use of anonymous shoppers to test compliance with the age restriction. Barr also agreed that a booklet will be distributed with the drug that explains proper use of the drug. The age restriction was changed from 17 to 18 because it is the \"age of majority\" and sales of nicotine replacement treatments (gum and patch) are allowed at 18 years of age. In approving nicotine replacement treatments for OTC sales, FDA also restricted sales to individuals 18 and over.",
"At least three lawsuits have been filed with regard to the FDA's approval of Plan B, or the approval process itself. In Tummino v. von Eschenbach , representatives of several reproductive health organizations filed a complaint against FDA Commissioner Andrew von Eschenbach, on behalf of women seeking emergency contraception. The suit was filed on January 21, 2005, over a year and a half before the FDA announced its approval of the OTC switch for Plan B for women 18 and older. The case has yet to go to trial. In light of the FDA's bifurcated approval, the plaintiffs amended their filing and asked the court to require the FDA to approve Plan B for all ages, remove the agency's requirement that pharmacists keep Plan B behind the counter, and allow all businesses to sell Plan B.\nThe plaintiffs, some as young as 13, argue that the FDA did not follow proper agency procedures when it mandated age and point-of-sale restrictions for Plan B. Because the drug is used only by women, they contend that the FDA engaged in sex discrimination in violation of the Fifth Amendment right to Equal Protection. The plaintiffs also assert that the agency violated their Fifth Amendment right to privacy \"without serving any compelling, significant, or even legitimate government interest\" by restricting access to certain ages, the location of the drug behind the counter, and sales in certain businesses. Next, the plaintiffs object to alleged violations of the right to informational privacy that will occur because they must disclose their ages and possibly other information, such as names and addresses, to obtain Plan B from behind the counter. The plaintiffs view this as a \"disclosure of information to third parties about [their] personal sexual activity.\" Finally, the plaintiffs contend that the agency ignored certain requirements under the Administrative Procedure Act (APA).\nWith regard to the alleged APA violations, the plaintiffs specifically argue that the agency's imposition of age and point-of-sale restrictions was arbitrary, capricious, and an abuse of agency discretion. The FDA allegedly required greater information for the approval of Plan B than the agency required for past approvals of OTC medications. Additionally, the plaintiffs argue that the FDA had enough data regarding Plan B's safety and effectiveness to make the drug available OTC without further restrictions. The plaintiffs also contend that the agency took improper action when determining age restrictions for Plan B, despite recommendations within the agency that the FDA approve Plan B without age limits. According to the lawsuit, the FDA also violated the APA by overstepping its statutory mandate in two ways. First, the FDA's denial was purportedly influenced by logic other than scientific or medical evidence:\nSworn depositions taken by lawyers from the Center for Reproductive Rights, a legal advocacy organization, show that some of the [FDA]'s staff members were convinced that no amount of scientific evidence would have persuaded the [FDA]'s political appointees to approve the application. Dr. John Jenkins, director of the Office of New Drugs at the agency, said in a deposition that his boss, Dr. Steven Galson, told him \"that he felt he didn't have a choice\" but to reject the application.\nSecond, the plaintiffs assert that \"the FDA lack[ed] the statutory authority to restrict the types of businesses that can sell OTC drugs,\" and the \"authority to control the point of sale of nonprescription drug products.\"\nIn response to the amended complaint, the FDA moved to dismiss the case on the grounds that (1) the court lacks jurisdiction, (2) the plaintiffs do not have standing to bring the case, (3) the complaint's allegations fail to state a claim for which the court may grant relief, (4) the plaintiffs' claims are moot, and (5) the court lacks the authority to grant the requested relief.\nFurthermore, the FDA acknowledged that it has received at least four citizens petitions on Plan B and denied at least one. The FDA also admitted that, for the ten years prior, the agency either approved applications for OTC status after its advisory committee recommended granting the applicant OTC status, or the agency did not reach a final determination on the application. The FDA said that in those ten years, it requested subsequent information on teen use not only for Plan B, but also for OTC nicotine replacement therapies, and noted that several past supplemental new drug applications included information on teen use of prescription drugs when requesting OTC status. In addition, the FDA specifically denied that it created a behind-the-counter \"regime\" for Plan B and that the FDA mandated that it be kept behind-the-counter.\nIn response to the plaintiffs' suggestions that the FDA's Plan B review procedures were politicized and unusual, the agency initially claimed that privilege protected it from discussing its deliberative process, including advice, opinions, and ideas received by the agency and presented by those involved in the process. In an amended answer, the FDA later stated that such allegations were irrelevant and immaterial to the complaint's causes of action, as well as beyond the court's jurisdiction. Notably, scientific data reviewed by the FDA's Center for Drug Evaluation and Research determined that Plan B could be safely used by women age 17 and older.\nAs noted above, the suit was filed before the FDA approved the application to switch Plan B to OTC status for women ages 18 and older, but the plaintiffs are currently pursuing the case with respect to women younger than 18. Most recently, the plaintiffs have asked for summary judgment, a request made because, allegedly, no material issues of fact exist and thus the plaintiffs are entitled to a judgment in their favor.\nIn Judicial Watch, Inc. v. FDA , the conservative non-profit sued the FDA for violating the Freedom of Information Act with regard to the agency's communications with Members of Congress about Plan B. The relevant provision of that Act requires that the agency, upon receiving a request for records, decide whether it will comply with such request within 20 business days after receiving such request. Judicial Watch had requested records of any and all communications between the FDA and Senators Clinton, Murray, and Enzi and their staff members with regard to Plan B. The FDA filed a motion to dismiss, noting that it had \"produced all responsive records,\" which the agency argued renders the case moot because \"it gives the requester the relief sought in the FOIA complaint.\" Alternatively, the FDA moved for summary judgment on the issue of the adequacy of the agency's records of its communications with the Senators and their staff members, asserting that its search was adequate and \"reasonable as a matter of law.\" These motions are pending before the federal district court for D.C.\nIn Association of American Physicians & Surgeons, Inc. v. FDA , a not-for-profit organization representing physicians in typically small or solo practices and three conservative women's and reproductive health groups filed suit seeking to overturn the FDA's approval of Plan B as an OTC drug so that the drug would become available, again, only by prescription. First, the plaintiffs argue that Plan B is unsafe for OTC distribution because the label \"does not adequately warn consumers of Plan B's ineffectiveness for routine contraception\" and because information submitted to the FDA in support of the change to an OTC drug did not \"establish either Plan B's safety or effectiveness.\" Second, the plaintiffs allege that the FDA lacked the authority to approve a drug both OTC and as a prescription because the Federal Food, Drug, and Cosmetic Act (FFDCA) does not authorize approval or distribution of the same drug for sale both OTC and as a prescription. Third, citing the FDA's inability to enforce age restrictions and alleged errors in waiving pediatric research requirements, the complaint asserts that the FDA could not lawfully \"bifurcate a drug product's OTC versus Rx status based on the patient's age,\" under the FFDCA. Fourth, the plaintiffs assert that the FDA does not have the power to create a new, third class of drugs, those \"that require pharmacists to supplement the labeling or that certain subpopulations might misuse with direct access.\" Next, the plaintiffs assert that the FDA did not engage in the necessary rulemaking under the APA when amending its interpretation of a statutory provision to approve Plan B as an OTC drug. In addition, the plaintiffs allege that the FDA did not follow the FFDCA when it removed Plan B from prescription status without a rulemaking. Finally, they argue that the FDA unlawfully approved Plan B as an OTC drug \"under improper pressure from Senators Clinton and Murray.\" As a result, according to the plaintiffs, the FDA's approval of Plan B and the agency's avoidance of the rulemaking process was arbitrary and capricious.\nIn response, the FDA moved to dismiss the suit on five grounds: (1) the plaintiffs lack standing to challenge the FDA's approval decision of Plan B's supplemental new drug application, (2) the court lacks subject matter jurisdiction to review the FDA's approval of the Plan B supplemental new drug application, (3) the plaintiffs failed to state a claim as far as their allegations that the FDA lacked the authority to approve Plan B both OTC and as a prescription drug and that the FDA did not have the power to create a third class of behind-the-counter drugs, (4) the plaintiffs' contentions that the FDA violated the APA and the FFDCA by failing to engage in a rulemaking were incorrect as a matter of law, and (5) FDA Commissioner Von Eschenbach was improperly named as a defendant in his individual capacity because the plaintiffs' claims related to official FDA actions. The case has yet to go to trial.",
"About half the states have adopted policies that affect access to emergency contraceptives. Several states have passed pharmacy access laws that allow women to obtain emergency contraception directly from a pharmacy without first going to a doctor or clinic. With the FDA's decision, these measures will now apply only to minors. Plan B is available from pharmacists, without a physician's prescription, under certain conditions in the following nine states: Alaska, California, Hawaii, Maine, Massachusetts, New Hampshire, New Mexico, Vermont, and Washington. In these states, pharmacists are allowed to sell emergency contraception to women who ask for the product. After speaking with the woman, the pharmacist determines if emergency contraception is appropriate. In order to participate, the pharmacy and the pharmacist must fill out application forms and undergo training. Access is still limited in these states by the number of pharmacies that participate.\nSeveral states have laws that specifically pertain to emergency room practices with respect to emergency contraceptives. For example, in seven states—California, Massachusetts, New Jersey, New Mexico, New York, South Carolina, and Washington—hospital emergency rooms must dispense emergency contraceptives upon request to sexual assault victims; similar policies in Ohio and Oregon do not have an enforcement mechanism. In May 2007, Governor Jodi Rell signed into law a measure that requires all hospitals in Connecticut, including Catholic hospitals, to provide emergency contraception to rape victims; the law takes effect on October 1 2007. Emergency rooms must provide information about emergency contraceptives in 10 states: Arkansas, California, Colorado, Illinois, Massachusetts, New Jersey, New Mexico, New York, Texas, and Washington. A similar policy in Ohio does not have an enforcement mechanism.\nSeveral states have enacted laws regarding pharmacists who refuse to dispense birth control and emergency contraception. These laws vary widely from state to state. Four states (Arkansas, Georgia, Mississippi, and South Dakota) explicitly allow pharmacists to refuse to dispense contraceptives, including emergency contraceptives. In five states (Colorado, Florida, Illinois, Maine, and Tennessee), a broadly worded refusal policy may apply to pharmacists or pharmacies, but does not specifically include them. In Illinois, however, pharmacies that stock contraceptives must also dispense emergency contraceptives. In the state of Washington, a recent rulemaking by the state's Board of Pharmacy requires pharmacy owners to ensure that if one pharmacist refuses to fill a prescription, another pharmacist will deliver the lawfully prescribed drug or device to the patient. If a prescription drug or device is out-of-stock, the new rule provides several options to the patient, including transmitting the patient's prescription to another pharmacy, chosen by the patient, that will fill the prescription. The Washington State regulations are being challenged in federal district court by the parent corporation of two grocery stores, including one that has a pharmacy, and two pharmacists who are the sole pharmacists on duty at pharmacies that allegedly could not hire another pharmacist to dispense drugs such as Plan B.\nOn March 20, 2006, all Wal-Mart pharmacies began stocking and filling prescriptions for Plan B. Prior to that date, the company only stocked and filled prescriptions for the drug at its pharmacies in Massachusetts and Illinois where it was required by law. The company decided to change its policy because Wal-Mart expects more states to require Plan B to be available for sale. \"Because of this, and the fact that [Plan B] is an FDA-approved product, we feel it is difficult to justify being the country's only major pharmacy chain not selling it.\" The company intends to keep its \"conscientious objection\" policy, which allows pharmacists to refuse to fill prescriptions and refer patients to another pharmacy or pharmacist. There are more than 3,700 Wal-Mart pharmacies nationwide.\nConnecticut Attorney General Richard Blumenthal announced on March 4, 2006, that state health plans would not cover prescriptions from pharmacies that do not stock Plan B. Attorney General Blumenthal said that his decision to remove pharmacies from the state's health plan coverage would remain until he is certain \"every pharmacy will dispense [Plan B] wherever it is medically prescribed.\"\nThere is great variation among the states regarding emergency contraception coverage for Medicaid beneficiaries. Following the August 2006 FDA decision, 16 states have implemented written policies to address coverage of emergency contraception as an OTC drug. Most of the remaining states had policies on emergency contraception coverage prior to August 2006, and those policies remain in effect. Because the billing procedures of most state Medicaid programs require the pharmacist to submit a prescription in order to be reimbursed for OTC drugs, low-income women must either obtain a prescription or pay the $40 out-of-pocket cost. In nine states (Alabama, Arizona, Idaho, Indiana, Kentucky, Maryland, Nevada, North Carolina, Rhode Island) prior authorization is required for emergency contraception reimbursement. The dual status of Plan B (OTC for women 18 and over, prescription-only for women under 18) is creating coverage disparities.\nFor example, the Georgia Medicaid program, which allows very limited coverage for OTC drugs, has revised its provider manual to exclude coverage of Plan B for women 18 and older while covering the drug for women 17 and under who have a doctor's prescription. Arkansas will cover two tablets per prescription. In other states, such as North Carolina, Medicaid will cover [emergency contraception] for women only if they have a doctor's prescription for the drug, regardless of their age.\nIn Hawaii, Illinois, Maryland, New Jersey, New York, Oklahoma, Oregon, and Washington, Medicaid will cover Plan B as an OTC drug for women over age 18 without the need for a prescription. Mississippi, however, has decided to exclude emergency contraception from Medicaid coverage.",
"The National Violence Against Women Survey, which was conducted in 1996 and 1997, found that an estimated 300,000 women were raped in a single year. Based on an estimated 333,000 rapes occurring in 1998, as many as 25,000 pregnancies resulted due to rape in that year; potentially 22,000 of such pregnancies could have been prevented if women had been provided with emergency contraceptive treatment.\nThe Office of Violence Against Women within the Department of Justice (DOJ) developed guidelines for the treatment of sexual assault victims pursuant to Section 1405 of the Violence against Women Act of 2000 ( P.L. 106-386 ). The guidelines serve as an informational resource to communities as they develop or revise their own procedures and do not invalidate any jurisdictional protocols, policies or practices. Released in September 2004, the 141 page document, A National Protocol for Sexual Assault Medical Forensic Examination , has been criticized by numerous organizations because it does not mention offering emergency contraception to female rape victims.\nThe DOJ Protocol states on page 111: \"Patients of different ages, social, cultural, and religious/spiritual backgrounds may have varying feelings regarding acceptable treatment options. Examiners and other involved health care personnel must be careful not to influence patients' choices of treatment.\" The DOJ Protocol recommends that health care providers: discuss the probability of pregnancy with female patients; conduct a pregnancy test for all patients with reproductive capability (with their consent); and discuss treatment options with patients. A footnote directs the reader to the National Sexual Violence Resource Center (877-739-3895 or 717-909-0710 or http://www.nsvrc.org .) for more detailed information about sexual assault and pregnancy. An early draft of the document did include mention of emergency contraception. In contrast to the half page of information on pregnancy, the Protocol offers several pages of information on treatment of sexually transmitted diseases.\nThe American College of Obstetricians and Gynecologists and the American Public Health Association recommend that emergency contraception should be offered to female rape victims who are at risk of pregnancy. The American Medical Association, the American Nurses Association, the American College of Emergency Physicians, the American Academy of Pediatrics, and the Society for Adolescent Medicine also support advising rape victims about emergency contraception and providing the drug when appropriate.\nA letter signed by 277 national, state, and local organizations and individuals was sent to the Department of Justice on January 6, 2005, strongly urging that the Protocol be amended to include the routine offering of emergency contraception to sexual assault victims who are at risk of pregnancy. According to the letter, hospitals often do not provide this service: only 6% of hospitals in Louisiana, 8% of hospitals in Idaho and 20% of hospitals in Montana provide emergency contraception on-site to rape victims.\nOn January 13, 2005, a letter signed by 97 Members of Congress was sent to the Director of the Office on Violence Against Women expressing concern over the failure to mention emergency contraception and urging that the Protocol be changed to include such information.",
"S. 21 (Reid), the Prevention First Act, was introduced on January 4, 2007. The bill would expand access to preventive health care services that help reduce unintended pregnancy, reduce abortions, and improve access to women's health care. It directs the Secretary of Health and Human Services (HHS) to develop and disseminate information on emergency contraception to the public and to health care providers. S. 21 would require hospitals, as a condition of receiving federal funds, to offer and to provide, upon request, emergency contraception to victims of sexual assault. S. 21 was referred to the Senate Health, Education, Labor, and Pensions Committee. S. 21 is similar to S. 20 (Reid), which was introduced in the 109 th Congress. A companion bill, H.R. 819 (Slaughter), was introduced in the House on February 5, 2007.\nH.R. 464 (Rothman), the Compassionate Assistance for Rape Emergencies Act of 2007, was introduced on January 12, 2007. H.R. 464 is similar to H.R. 2928 (Rothman), which was introduced in the 109 th Congress. The bill would prohibit any federal funds from being provided to a hospital under Medicare or to a state, with respect to hospital services, under Medicaid, unless certain conditions are met. A woman who is a victim of sexual assault must be provided with (1) accurate and unbiased information about emergency contraception, (2) an offer of emergency contraception, (3) emergency contraception must be provided to the woman upon her request, and (4) such services cannot be denied because of the inability to pay. H.R. 464 was referred to the Committee on Energy and Commerce and the Committee on Ways and Means. S. 1240 (Clinton), introduced on April 26, 2007, has the same language and title as H.R. 464 , but it would also provide a woman with risk assessment, counseling, and treatment for certain sexually transmitted infections. S. 1240 was referred to the Committee on Finance.\nH.R. 2064 (Michaud), the Compassionate Care for Servicewomen Act, was introduced on April 26, 2007. The bill would require emergency contraception to be included on the basic core formulary of the uniform formulary of pharmaceutical agents for the pharmacy benefits program of the Department of Defense. Under the bill, prior authorization would not be required for emergency contraception. H.R. 2064 was referred to the Subcommittee on Military Personnel. A companion bill, S. 1800 (Clinton), was introduced on July 17, 2007. S. 1800 was referred to the Committee on Armed Services.\nH.R. 2503 (DeLauro), the FDA Scientific Fairness for Women Act, was introduced on May 24, 2007. Among other things, the bill would provide for a scientific workshop to review and evaluate current scientific data on the use of emergency contraceptives by women under the age of 18. The bill was referred to the House Committee on Energy and Commerce.\nH.R. 2596 (Maloney)/ S. 1555 (Lautenberg), the Access to Birth Control Act, was introduced on June 6, 2007. The bill would amend Title II of the Public Health Service Act establishing certain duties for pharmacies to ensure the provision of an FDA-approved contraceptive, including an emergency contraceptive, to a customer requesting such a product. The bill would provide a civil penalty for a violation of up to $5,000 per day, not to exceed $500,000 for all violations adjudicated in a single proceeding. H.R. 2596 was referred to the House Committee on Energy and Commerce; S. 1555 was referred to the Committee on Health, Education, Labor, and Pensions.",
"The Plan B OTC application was mired in controversy over the three year period from when it was filed with FDA in April 2003 to its August 2006 approval. Individuals who criticize the delayed FDA decision believe that Bush Administration policy and FDA actions were based on political and ideological considerations rather than on sound science. FDA is required by law to make decisions exclusively on substantial scientific evidence regarding the safety and efficacy of a drug. These critics believe the FDA decision was delayed to appease conservative religious and pro-life groups that are long time supporters of President Bush.\nPresident Bush indicated his support for the then-imminent Plan B decision during a news conference on August 21, 2006. The FDA decision and the President's support of the decision have greatly angered conservative religious and pro-life groups. One such organization, Concerned Women of America, asked that Dr. Andrew von Eschenbach's nomination as FDA commissioner be withdrawn and recommended that consumers stop doing business with drug stores that sell OTC Plan B. The Family Research Council, a Christian conservative non-profit think tank and lobbying organization, states that it is \"pursuing legal and legislative options\" to overturn the FDA's decision. Such groups are unhappy because they believe Plan B should only be used with the supervision of a healthcare professional; they also believe Plan B use may lead to an increase in unsafe sexual activity.\nA recent review of the medical literature, published in April 2007, found that having emergency contraception on hand \"did not lead to increased rates of sexually transmitted infections, increased frequency of unprotected intercourse, nor changes in contraceptive methods.\" A U.S. study also found that easier access to emergency contraception did not decrease the use of condoms or oral contraceptives or lead to an increase in sexually transmitted infections or unprotected sex. A followup study found that adolescents younger than 16 years of age behaved no differently in response to increased access to emergency contraception compared with older age groups. Their behaviors did not become riskier: no increased incidence of unprotected sex, sexually transmitted disease, or pregnancy, nor did they become more vulnerable to unwanted sexual activity, including the very youngest participants in the study. Moreover, \"the adolescents were equally capable as adults in taking EC correctly, with the youngest adolescents, under 16 years, showing the best results. These results are consistent with findings from [a] previous study that specifically examined young adolescents ... there was no reason to restrict access in this age group. The high levels of correct use ... in this study suggest that physician supervision does not improve adherence to the regimen and that young adolescents should not be singled out due to concerns about their inability to follow the regimen correctly.\"\nThe Society for Adolescent Medicine does not place an age limit on access to emergency contraception. The American College of Obstetricians and Gynecologists (ACOG) believes that Plan B can be safely used without supervision by a physician, and that the age restriction imposed by FDA is medically unnecessary. In a statement released on the same day as the FDA approval of OTC status for Plan B, ACOG stated:\nBy restricting its OTC availability to women age 18 and older, the FDA has missed an unparalleled opportunity to prevent teenage pregnancies. Each year there are more than 800,000 teen pregnancies in the US, with many ending in abortion. Pregnancy itself is not without risk, especially for a young woman. There is no scientific or medical reason to impose an age restriction and to withhold emergency contraception from this population. Emergency contraception is safe for over-the-counter use by women of all ages.\nAs stated above, studies of Plan B have shown that women, even young adolescents, can follow the directions on the package and use the product correctly without an increase in high risk behaviors. One member of the FDA advisory panel, a pharmacist, noted that for even the youngest women, the morning-after pill poses less of a health risk than pregnancy: \"In terms of age, I'm not an OB-GYN, but I can't imagine that I would prefer a ten or 11 year old to be pregnant over some hypothetical risk that there might be with a ten or 11 year old taking this product. So I guess I would feel pretty strongly about not having any age restrictions.\" The side effects of Plan B would probably influence most women to find another method of regular birth control. For rape victims who don't immediately seek medical care, OTC availability would be expected to be beneficial. Under the FDA approval agreement with Barr, the drug will only be sold in pharmacies or health clinics where consumers can obtain advice from a pharmacist or other health care professional. Plan B will not be available at gas stations, convenience stores, online pharmacies, or other places where other nonprescription drugs are sold.\nThe primary concern of conservative religious and pro-life groups with Plan B, however, is that it may prevent the implantation of the embryo in the uterus. Pro-life groups believe that prevention of embryo implantation in the uterus is an abortion. According to the Catholic pro-life group Human Life International, \"President Bush's implied support for the abortion-causing drug Plan B is completely inconsistent with his recent veto of the embryonic stem cell research (ESCR) funding bill. What the president apparently fails to realize is that Plan B kills the same innocent unborn children that the ESCR process does.\" The medical community, however, does not consider prevention of implantation to be an abortion. \"Pregnancy begins with implantation, not fertilization. Medical organizations and the federal government concur on this point. Fertilization is a necessary but insufficient step toward pregnancy.... Any method of regulation of fertility that acts before implantation is not an abortifacient.\" FDA does not classify Plan B as an abortion drug.\nResearch has found that the use of emergency contraception rises when it is made available without a prescription. In France, sales of a nonprescription emergency contraceptive, introduced in 1999, rose 72% over five years. In British Columbia, use of emergency contraception increased 102% after a new policy allowed pharmacists to dispense without a prescription. Some experts have estimated that use of emergency contraception in the United States could prevent 1 million abortions and more than 2 million unintended pregnancies that result in childbirth each year. However, a report in the January 2007 issue of Obstetrics & Gynecology , which looked at 23 studies of emergency contraception use, found that \"increased access to emergency contraceptive pills enhances use but has not been shown to reduce unintended pregnancy rates.\" This same conclusion was reached in a separate review of the medical literature published in April 2007. The authors of this second study found that \"advance provision of emergency contraception did not reduce pregnancy rates when compared to conventional provision.... The interventions tested thus far have not reduced overall pregnancy rates in the populations studied.\"\nPro-choice groups believe OTC status for Plan B will reduce the number of unintended pregnancies and reduce the number of abortions performed in the United States. Although pro-choice groups believe the FDA decision is a step in the right direction, they would have preferred that OTC status for Plan B would have been approved for all women, not just those 18 and older. They believe that the age restriction might keep the drug from women who need it the most. An estimated 3.5 million unwanted pregnancies occur annually, one third of which involve teenagers. In the United States, four in ten girls become pregnant at least once before turning 20.\nPrescriptions of Plan B have been covered by most state Medicaid programs and many private health insurers. Drugs that are switched to OTC typically lose insurance coverage and therefore the OTC switch for Plan B may result in increased cost to insured consumers who buy the drug without a prescription. Prior to the change to OTC status, Plan B was prescribed about 1.5 million times per year in the United States; about half are filled in clinics such as Planned Parenthood or on college campuses. During its first month as an OTC drug, Plan B was available in in one state, Pennsylvania for $20 through Planned Parenthood clinics and for $39.99 to $44.99 at various retail pharmacies. According to Barr Pharmaceuticals, sales of Plan B in the United States have doubled since August 2006, \"rising from about $40 million a year to what will probably be close to $80 million for 2007.\""
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"Why has the three-year delay in deciding to switch to OTC been criticized?",
"Why do some groups believe Plan B should not be available OTC?",
"What is their biggest concern with Plan B?",
"Why doesn't the FDA classify Plan B as an abortion drug?",
"How have sales of Plan B changed since August 2006?",
"Why do women's health advocates support OTC access to Plan B?",
"How did an April 2007 medical literature review conflict with this argument?"
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"Individuals who criticize the three-year delay in deciding to switch to OTC believe that Bush Administration policy and FDA actions were based on political and ideological considerations rather than on sound science.",
"Conservative religious and pro-life groups believe Plan B may increase unsafe sexual activity and should be used only under the supervision of a healthcare professional and, therefore, should not be available OTC.",
"Their major concern with Plan B, however, is that it might prevent the implantation of an embryo in the uterus, which to pro-life groups constitutes abortion.",
"However, the medical community does not consider prevention of implantation to be an abortion, and FDA does not classify Plan B as an abortion drug.",
"According to Barr Pharmaceuticals, sales of Plan B in the United States have doubled since August 2006, \"rising from about $40 million a year to what will probably be close to $80 million for 2007.\"",
"Women's health advocates claim that OTC status will improve access to the drug, thereby reducing the number of unintended pregnancies and reducing the number of abortions.",
"However, a medical literature review, published in April 2007, found that \"advance provision of emergency contraception did not reduce pregnancy rates when compared to conventional provision.... The interventions tested thus far have not reduced overall pregnancy rates in the populations studied.\""
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"title": [
"",
"Introduction",
"A Growing Gas Pipeline Network",
"FERC Pipeline Certification Process",
"Application Pre-filing",
"Certificate Application and FERC Review",
"Environmental Review Under NEPA",
"Certificate Authorities",
"Post-Certificate Proceedings",
"Gas Pipeline Siting Challenges",
"Identifying Indirect Environmental Impacts",
"Evaluating Project Need",
"Timing and Relations with Other Agencies",
"Changes in the Natural Gas Industry Structure",
"Pipeline Infrastructure for Export",
"Recent Executive Orders",
"Executive Order 13212",
"Executive Order 13604",
"Executive Order 13766",
"Executive Order 13807",
"Recent Legislative Proposals",
"FERC's Policy Review",
"Policy Issues for Congress"
],
"paragraphs": [
"",
"On April 19, 2018, the Federal Energy Regulatory Commission (FERC, or the commission) initiated a proceeding to review its policies and procedures for the certification (permitting) of interstate natural gas pipelines. Rapid expansion of the U.S. natural gas pipeline network to accommodate new supplies of domestic shale gas has been a focus of Congress, prompting hearings and legislative proposals over the last decade regarding the federal role in pipeline siting. Nine related bills have been introduced in the 115 th Congress, including the Promoting Interagency Coordination for Review of Natural Gas Pipelines Act ( H.R. 2910 ), which passed in the House in July 2017, and provisions in the Energy and Natural Resources Act of 2017 ( S. 1460 ).\nFERC's review of its permitting policies is the most recent development in an ongoing series of legislative proposals, executive orders, court rulings, and commission orders which address the federal role in gas pipeline permitting. FERC's review provides both advocates and opponents of gas pipeline development a new opportunity to express their views about how the commission considers such projects. It may also identify issues of focus for future congressional oversight and legislation. Given that the United States is the world's largest producer of natural gas, policy changes by FERC affecting natural gas infrastructure could have significant implications for U.S. natural gas resource development, prices, and associated environmental impacts. Therefore, they would likely be subject to scrutiny within Congress and among a wide range of stakeholders.\nThis report provides an overview of the federal certification process for interstate natural gas pipelines and current policy challenges which have been the subject of debate and litigation. It reviews recent executive orders intended to facilitate or expedite federal approval of natural gas pipeline projects. The report summarizes legislation proposed since the 111 th Congress intended to change the federal review of interstate natural gas pipeline certificate applications. It also summarizes FERC's examination of its policy statement for natural gas pipeline certification, which serves as the basis of its review of pipeline certificate applications. The report concludes with a discussion of policy issues for Congress.",
"The United States' supply of natural gas is growing due to technological improvements, such as horizontal drilling and hydraulic fracturing, which have increased producers' ability to extract natural gas from shale formations. Shale gas is projected to become the dominant source of the U.S. natural gas supply by 2030. The growth in U.S. shale gas production is driving the expansion of natural gas pipeline infrastructure at the local level (to gather and process the gas) and at the national level to transport natural gas from producing regions to consuming markets, typically in other states. Over 300,000 miles of high-capacity transmission pipeline already transport natural gas across the United States ( Figure 1 ). However, if the growth in U.S. shale gas continues as projected, the need for new pipelines could be substantial. One recent analysis by the INGAA Foundation, a pipeline industry research organization, projected the need for approximately 26,000 miles (1,400 miles annually) of new natural gas transmission pipeline between 2018 and 2035; total capital expenditure for these projects could range from $154 billion to $190 billion.\nFigure 2 shows annual additions to natural gas transmission pipeline mileage in the United States since 2004. As the figure indicates, federal and state agencies have approved significant additions to the pipeline system over the last 15 years, especially after the onset of the shale gas expansion in 2006-2008. Pipeline construction slowed for a five-year period through 2016 as newly added capacity absorbed new shale gas supplies, but construction has since increased. Altogether, over 24,000 miles of gas transmission pipeline have been constructed since 2004 or are anticipated for construction. Additional gas pipeline capacity has also become available through conversion of pipelines carrying other commodities or flow reversal of existing natural gas pipelines.",
"Under Section 7(c) of the Natural Gas Act of 1938 (NGA), FERC is authorized to issue certificates of \"public convenience and necessity\" for \"the construction or extension of any facilities ... for the transportation in interstate commerce of natural gas\" (15 U.S.C. §717f(c)). Therefore, companies seeking to build interstate natural gas pipelines must first obtain certificates of public convenience and necessity from FERC. The commission's regulatory process for the review of certificate applications consists of several principal steps, explained below, which may vary somewhat depending upon whether or not a pipeline developer opts to enter into a voluntary pre-filing process before formally applying for a pipeline certificate.",
"Prior to applying to FERC for a pipeline certificate, developers may file a request to use the commission's pre-filing procedures (18 C.F.R. §157.21). The commission established the pre-filing process to encourage the industry to engage early in project development with the relevant public and government agencies. The expectation is that the pre-filing will improve a developer's proposal and avoid problems during the review of a subsequent FERC certificate application. However, while FERC encourages pre-filing, it is not required to apply for a pipeline certificate.\nThe pre-filing process involves a set of specific activities by the developer—typically studying potential project sites, identifying stakeholders, and holding an open house to discuss the project. Through this process, a developer notifies all stakeholders—including tribal, state, local, and other federal agencies, and potentially affected property owners—about a proposed project so that the developer and commission staff can provide public forums to hear stakeholder concerns. The pipeline developer may then incorporate proposed environmental mitigation measures into the project design, taking into account stakeholder input. Concurrent with the developer's activities, FERC staff participate in public forums and take steps necessary to ensure FERC compliance with the National Environmental Policy Act (NEPA, discussed below). For example, FERC consults with interested stakeholders, including relevant government agencies, and also holds public scoping meetings and site visits in the proposed project area. At the conclusion of pre-filing, the developer prepares a final application and submits it to FERC.",
"Whether pre-filing or not, a pipeline developer must formally apply to FERC for a certificate of public convenience and necessity. Among other requirements, the application must contain a description of the proposed pipeline, route maps, construction plans, schedules, and a list of other statutory and regulatory requirements, such as permits needed from other agencies. The application must also include environmental reports analyzing route alternatives—to avoid or minimize environmental damage—and studies of potential environmental impacts (on water, plants, and wildlife), cultural resources, socioeconomics, soils, geology, aesthetic resources, and land use. Upon receiving an application, the commission issues a public Notice of Application in the Federal Register and begins the application review process.\nAny person seeking to become a party to FERC's proceeding must file a motion to intervene pursuant to the commission's rules (18 C.F.R. §385.214). Intervenors receive the certificate applicant's filings and other FERC documents related to the case, as well as materials filed by other interested parties. Only intervenors have the right to file briefs, attend hearings, and appeal the commission's decision regarding the certificate. They may also challenge final commission actions in the U.S. Circuit Courts of Appeal.\nFERC currently exercises its NGA Section 7(c) pipeline certification authority in accordance with its own regulations and the guidance of its 1999 Policy Statement on Certification of New Interstate Natural Gas Pipeline Facilities . The statement lays out FERC's \"policy for determining whether there is a need for a specific project and whether, on balance, the project will serve the public interest.\" It also outlines a \"flexible balancing process\" within which the commission considers market support; economic, operational, and competitive benefits; and environmental impact, among other considerations. Economic factors FERC examines include a project's potential impact on pipeline competition, the possibility of overbuilding, subsidization by existing customers, acquiring rights-of-way (including the use of eminent domain), and other considerations. FERC may also take into account safety issues, but generally defers to the Department of Transportation, which regulates pipeline safety. Of the factors above, environmental review typically comprises the bulk of FERC's certificate application review.",
"Before FERC can issue a final decision on an application, the agency must identify and consider the environmental impacts of the proposed project in accordance with NEPA (42 U.S.C. §4321 et seq.). NEPA requires federal agencies to consider the potential environmental impacts of actions it may approve (e.g., granting a certificate) and to inform the public about them before making a final decision. NEPA requires federal agencies to provide an environmental impact statement (EIS) for federal actions \"significantly affecting the quality of the human environment.\"\nThe Council on Environmental Quality (CEQ) promulgated regulations implementing NEPA that are broadly applicable to all federal agencies. In those regulations, CEQ directed each federal agency to adopt and supplement the CEQ regulations as necessary to include procedures relevant to that agency's authority and ensure that the procedures implementing NEPA are integrated into the agency's broader decisionmaking process. FERC subsequently did so when it promulgated its own regulations implementing NEPA (18 C.F.R. §380).\nThe CEQ regulations focus primarily on requirements applicable to the preparation of an EIS, but recognize that documenting compliance with NEPA may involve other procedures. If an agency is uncertain whether a proposal would have significant impacts, it may prepare an environmental assessment (EA) to determine if an EIS is necessary or a finding of no significant impact (FONSI) may be issued. Also, each federal agency is required to identify categories of actions they are authorized to undertake that have been found to have no significant effect on the environment. Such actions are categorically excluded from the need to prepare an EIS or EA and are, hence, broadly referred to as \"categorical exclusions\" (CEs or CATEXs).\nCEQ requires agencies to determine whether a proposal has significant impacts by identifying and analyzing its direct, indirect, and cumulative effects, defined as follows:\nDirect effects— caused by the project that occur at the same time and place; Indirect effects— caused by the action that are later in time or farther removed in distance but still reasonably foreseeable; and Cumulative effects— those that result from the incremental impacts of the action when added to other past, present, or reasonably foreseeable future actions regardless of what agency (federal or nonfederal) or person undertakes that other action.\nThe Energy Policy Act of 2005 ( P.L. 109-58 , EPAct) designates FERC as the \"lead agency\" for coordinating NEPA compliance and \"all applicable Federal authorizations\" in reviewing pipeline certificate applications (§313(b)). As the lead agency, FERC is required to obtain input from other \"cooperating\" agencies with statutory jurisdiction or special expertise regarding any environmental impact associated with the project (40 C.F.R. §1508.5). Cooperating agencies for a pipeline project often include the Environmental Protection Agency; the Department of Transportation's Pipeline and Hazardous Materials Safety Administration; the Department of the Interior's Bureau of Land Management (BLM), Fish and Wildlife Service, and National Park Service; and the U.S. Army Corps of Engineers (the Corps), among others.\nAfter FERC staff complete their environmental analysis and cooperating agency consultations, the commission issues a draft EIS with initial recommendations for approval or denial of the certificate. Issuance of the draft EIS also begins a public comment period of at least 45 days, during which FERC is to hold public meetings in the proposed project area. After the conclusion of the comment period, FERC reviews the comments and revises its draft EIS in response. FERC then issues a final EIS with final recommendations for approval or denial of the certificate. Under NEPA, a record of decision—in this context a FERC order—cannot be issued until at least 30 days after FERC publishes a notice of availability of the final EIS (40 C.F.R. §1506.10(b)(2)). However, there is no additional opportunity for public comment. When the 30-day period is over, the commission may issue an order approving or denying the certificate.",
"If FERC grants a pipeline certificate, the commission's order is to state the terms and conditions of the approval, including the authorized pipeline route and any construction or environmental mitigation measures required for the project. For example, a construction condition might require that the pipeline be buried at a specific depth under a particular river crossing, or that construction be limited during a certain time of year to avoid impacts on wildlife. A FERC certificate confers on the developer the authority to exercise the government's eminent domain authority if certain conditions are met (15 U.S.C. §717f(h)). Also, federal law preempts any state or local law that duplicates or obstructs that federal law (e.g., siting or zoning) relevant to the project. In this way, a FERC certificate provides a developer with the authority to secure the necessary rights-of-way to lay the pipeline if the developer cannot secure them from landowners through negotiation.\nAlthough a FERC certificate authorizes a pipeline under the Natural Gas Act, it does not preempt other federal laws that also may apply—such as the Endangered Species Act or the National Historic Preservation Act. Any requirements under other federal statutes must still be met. These requirements may include, for example, securing federal authorizations for water crossings from the Corps, permission to cross federal lands from the BLM, and other federal approvals. Pipeline developers also may need to secure approvals from state agencies under delegated federal authorities, such as Section 401 water quality certifications under the Clean Water Act (33 C.F.R. §330.4). A developer must secure all these approvals before proceeding with construction.",
"Once FERC issues an order granting or denying a pipeline certificate, parties to the proceeding (e.g., the developer or intervenors) who object to the order for any reason may formally request a rehearing so that the commission can reconsider its decision. A party to the proceeding must file a request for rehearing within 30 days after issuance of the final order—a statutory deadline which the commission cannot waive or extend (15 U.S.C. §717(r)). There is no time limit for FERC to consider or conclude a rehearing. If a pipeline certificate is approved after rehearing, the pipeline project may proceed even if additional challenges have been filed in federal court. Once the developer has provided FERC with any outstanding information or taken other actions to satisfy the terms and conditions of the certificate order, including an implementation plan, FERC can issue a Notice to Proceed with Construction Activities and construction can begin. The pipeline developer must then file weekly status reports with the commission documenting project inspection and certificate compliance until construction is completed.",
"Over the last decade, proposals for new interstate natural gas pipelines have become increasingly controversial. Many certificate applications have been subjected to heavy public scrutiny, and some have faced significant delays in review, as well as protracted litigation. A May 2018 report by the Department of Energy Inspector General stated that \"nothing came to our attention to indicate that FERC had not generally performed the natural gas certification process in accordance with applicable laws, regulations, policies, and procedures.\" Nonetheless, aspects of FERC's current practices remain a focus of attention among policymakers because they have been the subject of FERC dissent, debate in Congress, or litigation in federal court.",
"As noted above, FERC is obligated under NEPA to consider the direct and indirect environmental impacts of certificate proposals. Direct effects often are relatively easy to identify. In the context of a pipeline project, a direct effect would be associated with the pipeline itself, such as forest impacts from clearing rights-of-way or water quality impacts from construction across waterways and wetlands. However, identifying the indirect effects of a proposed gas pipeline has presented challenges and, in some cases, has been controversial. Some stakeholders assert that the indirect \"upstream\" impacts of a proposed pipeline should include impacts associated with the production of natural gas, such as fugitive methane emissions from gas wells and gas gathering pipelines. They also assert that the indirect \"downstream\" impacts should include the environmental effects of using natural gas, such as carbon dioxide emissions from natural gas combustion.\nTo date, FERC has limited its review of certain upstream or downstream impacts, claiming that they are not reasonably foreseeable. However, in February 2017, a FERC commissioner argued that FERC should analyze the upstream environmental effects of increased natural gas production and should be \"open to analyzing the downstream impacts of the use of natural gas.\" Likewise, in a recent legal challenge to a pipeline (Sabal Trail) in Florida for which the effects of natural gas use could be identified, the court ruled that FERC must \"either quantify and consider the project's downstream carbon emissions or explain in more detail why it cannot do so.\"\nIn FERC's order responding to the Sabal Trail ruling, the majority of commissioners concluded that, although its supplemental EIS quantified downstream greenhouse gas emissions associated with the pipeline, there was \"no way to determine the significance\" of those emissions. However, two commissioners raised objections to the majority's conclusion, arguing that the significance of the downstream greenhouse gas emissions could—and should—be quantified. In an unrelated FERC order involving a pipeline in New York, the majority stated that they were \"unable to find based on the record that the potential increase in greenhouse gas emissions associated with production, non-project transport, and non-project combustion are causally related\" to the commission's certification of the project, and that \"providing a broad analysis based on generalized assumptions rather than reasonably specific information does not meaningfully inform the Commission's project-specific review.\" The two commissioners dissented from this conclusion as well, one arguing that \"the mere fact that the record does not contain specific information regarding the greenhouse gas emissions associated with increased production or consumption from a particular natural gas pipeline cannot excuse the Commission from considering those effects under NEPA.\"",
"FERC's review of a certificate application requires the commission to evaluate the public benefit from the proposed project. Benefits the commission may consider include meeting unserved demand, eliminating pipeline bottlenecks, accessing new gas supplies, lowering consumer costs, providing greater reliability, and increasing competition, among others. A principal component of this evaluation is demonstrated market need for the pipeline in the form of contracts with future customers for its capacity. As FERC's current policy states,\na new pipeline project must show market support through contractual commitments for at least 25 percent of the capacity for the application to be processed by the Commission. An applicant showing 10-year firm commitments for all of its capacity, and/or that revenues will exceed costs is eligible to receive a traditional certificate of public convenience and necessity.\nSome stakeholders have questioned FERC's reliance on contracts from future customers (known as \"precedent agreements\") to prove market need, particularly when those contracts involve companies affiliated with the pipeline developer. The commission considered this concern in 1999 but established no special provisions for developer affiliates. FERC \"gives equal weight to contracts between an applicant and its affiliates and an applicant and unrelated third parties and does not look behind the contracts to determine whether the customer commitments represent genuine growth in market demand.\" However, in January 2018 one FERC commissioner dissented from the approval of a certificate because over three-quarters of the pipeline's capacity under precedent agreements was associated with affiliates, and was therefore \"insufficient to carry the developer's burden to show that the pipeline is needed.\" In remarks at a February 13, 2018, meeting of state utility regulators, the FERC chairman stated that the commission would \"have to take a look at\" whether recent precedent agreements, and particularly affiliate agreements, represent \"valid, arm's length\" demonstrations of pipeline capacity demand.\nAlso related to the issue of market need, some stakeholders have objected to FERC's project-by-project approach to evaluating applications—especially for multiple pipelines proposed in one region. Some in Congress reportedly have called on FERC to adopt a more overarching approach to pipeline development, collectively considering multiple projects together rather evaluating them independently. However, FERC maintains that it \"does not engage in regional planning exercises that would result in the selection of one project over another.\" Nonetheless, in October 2017 one FERC commissioner dissented from the approval of two pipelines through Virginia on the grounds that both projects might not be needed due to geographic proximity.",
"There are no statutory time limits within which FERC must complete its own certificate review process, issue an order, or complete a rehearing. However, EPAct authorizes FERC to establish a schedule for all federal authorizations and creates a cause of action \"if a Federal or State administrative agency\" fails to comply with that schedule (§313(b)). As discussed above, natural gas pipelines typically require permits from federal and state agencies in addition to FERC. Since 2002, FERC and nine other federal agencies have operated under an interagency agreement on early coordination required for review of interstate natural gas pipeline certificate applications. Under this agreement, when FERC receives a certificate application, the agencies commit to early involvement, proactive participation, sharing of data, informal communication, and resolving disputes. FERC has promulgated regulations under the EPAct authority requiring certificate-related final decisions from federal agencies or state agencies (acting under delegated federal authority) no later than 90 days after the commission issues its final environmental document, unless another schedule is established by federal law (18 C.F.R §157.22).\nCongress included the schedule provisions in EPAct to address concerns that some interstate gas pipeline approvals were being unduly delayed by a lack of coordination or insufficient action among agencies involved in the certification process. Notwithstanding the directives above, pipeline developers have asserted that cooperating federal agencies have not always coordinated effectively with FERC in its review of certificate applications and have not always complied with FERC's deadlines. For example, a 2012 study by the INGAA Foundation concluded that, despite the schedule provisions in EPAct intended to expedite the review of FERC certificate applications for gas pipelines, \"the time required to secure regulatory approvals for such projects is increasing.\" Likewise, some in Congress have argued that gas pipeline reviews still \"are being delayed unnecessarily due to a lack of coordination or insufficient action among agencies involved.\" Recent debate in congressional hearings about the timing of FERC's certificate reviews indicates both criticism of and support for FERC's process.\nFERC staff state that the commission seeks to complete its review of certificate applications within 18 to 24 months of filing. A review of certificate approvals for larger pipeline projects over the last several years indicates that FERC has generally, but not always, met a 24-month review deadline. Figure 3 shows the time from a developer's filing of a pipeline certificate application to its certification by the commission for new pipeline construction projects exceeding 20 miles in length. As the figure shows, of the 43 pipeline projects included, 4 projects were approved more than 24 months after filing. In addition, FERC's docket records show two pending applications (for 20+ mile pipelines) filed late in 2016 and two more filed in 2015. The figure does not include the time elapsed during pre-filing, which may vary for different projects and also may take months. For example, the Mountain Valley Pipeline project applied for FERC's approval to pre-file approximately 12 months before filing a certificate application.\nWhether FERC's record of certificate application review demonstrates process efficiency is open to debate because major pipeline projects are complex and unique. The review periods in Figure 3 are highly varied and do not necessarily show any clear trend. Attempting to quantify or evaluate FERC's recent certificate review timing is complicated by the lack of a quorum of FERC commissioners (required for certificate decisions) for six months in 2017. Furthermore, application review time may also include time taken by developers responding to questions or providing supplemental information or analysis requested by regulators, which may be outside the control of the commission.\nFERC also has faced challenges in its relations with state agencies exercising delegated federal permitting authority, particularly under the Clean Water Act. For example, FERC has been involved in litigation for issuing a pipeline's water quality permits—which were initially denied by a New York state agency—on the grounds of excessive delay by the state. However, FERC declined to challenge New York's denial of water quality permits for a different pipeline project because the state made its decision within its one-year statutory deadline. Both projects had been granted FERC certificates but still needed the state permits before beginning construction.",
"Over the last 20 years, there have been fundamental changes in the structure of the U.S. natural gas sector. Most significant among these are widespread use of hydraulic fracturing, new gas production regions (e.g., the Marcellus formation underlying parts of Pennsylvania and other states), increasingly interconnected natural gas infrastructure, and greater dependence on natural gas to fuel power plants. These changes, in turn, have introduced new considerations in pipeline permit review, including new concerns about greenhouse gas emissions, potential groundwater and seismic risks, pipeline safety, energy infrastructure security, and changing contractual relationships with pipeline customers. For example, with the shift away from coal to natural gas for power generation, regulators and operators have expressed new concerns about the potential linkage between the availability of natural gas and the reliability of electricity supply in markets with constrained infrastructure. Some stakeholders have asserted that FERC should change or expand the nature of its certificate reviews to better account for these new considerations.",
"The rapid growth in U.S. natural gas production has led to increased exports of pipeline gas to Canada and Mexico and of liquefied natural gas to overseas buyers. Some communities affected by pipeline development have questioned whether FERC appropriately applies the \"public convenience and necessity\" standard under the Natural Gas Act to pipeline projects which would serve overseas markets. FERC has asserted that considerations regarding the domestic versus foreign destination of natural gas are solely under the jurisdiction of the Department of Energy, which has statutory authority to approve the export of the natural gas commodity. Nonetheless, some analysts have questioned whether FERC may evaluate pipelines proposed primarily to facilitate natural gas exports differently from those proposed to supply domestic markets.",
"The development of pipelines has been a focus of the last three presidents. The Bush, Obama, and Trump Administrations issued a series of executive orders intended to facilitate or expedite the federal permitting of infrastructure projects, specifically including energy infrastructure. Exactly how all of these orders have affected, or may affect, federal review of interstate natural gas pipeline siting under FERC's jurisdiction is not entirely clear, however, due to the complexity of the certification process and permit obligations under related statutory requirements (e.g., NEPA).",
"President George W. Bush issued E.O. 13212 on May 18, 2001. Focusing specifically on \"energy-related projects,\" the order directs federal agencies to \"expedite their review of permits or take other actions as necessary to accelerate the completion of such projects, while maintaining safety, public health, and environmental protections.\" In the context of natural gas pipelines, the principal outcome of this order was the 2002 interagency agreement on early coordination of pipeline certificate review, which remains in force. In 2005, FERC also signed a memorandum of understanding with the Corps expanding upon this agreement \"to further streamline respective regulatory processes\" consistent with the executive order.",
"President Obama issued E.O. 13604 on March 22, 2012, \"to significantly reduce the aggregate time required to make decisions in the permitting and review of infrastructure projects by the Federal Government, while improving environmental and community outcomes.\" Among other requirements, the order called for federal agencies to select \"infrastructure projects of national or regional significance\" to track on the online Federal Infrastructure Projects Dashboard (§2(c)).\nIn the context of this executive order, the Administration cited as a best practice for \"pre-application/application improvements\" FERC's certificate pre-filing process, which was already in place at the time. A May 17, 2013, Presidential Memorandum expanded upon the order, directing the Steering Committee on Federal Infrastructure Permitting and Review Process Improvement established by E.O. 13604 \"to modernize Federal infrastructure review and permitting regulations, policies, and procedures to significantly reduce the aggregate time required by the Federal Government to make decisions in the review and permitting of infrastructure projects,\" including pipelines. However, it is not clear to what extent, if any, the executive order and memorandum may have led to changes to aspects of FERC certification for pipelines. None of the three pipelines from this period presumably identified as being \"of national or regional significance\" (because they are listed on the federal permitting dashboard) were natural gas pipelines.",
"Issued by President Trump on January 24, 2017, the order is intended \"to streamline and expedite, in a manner consistent with law, environmental reviews and approvals for all infrastructure projects, especially projects that are a high priority for the Nation, such as ... pipelines.\" Among other provisions, the order permits governors, federal department and agency heads, or the FERC chairman to request \"high priority\" status for a project with respect to \"expedited procedures and deadlines for completion of environmental reviews and approvals\" (§3). According to FERC staff, no interstate natural gas pipelines have been classified as high priority under this order.",
"Issued by President Trump on August 15, 2017, the order is intended \"to ensure that the Federal environmental review and permitting process for infrastructure projects is coordinated, predictable, and transparent.\" The explicit goal of the order is to complete federal environmental reviews and permitting decisions for major projects within two years of application (§2(h)). A key component of E.O. 13807 is a \"One Federal Decision\" framework, whereby each \"major\" infrastructure project has one lead federal agency responsible for the overall permit process and issuing one Record of Decision, incorporating individual decisions from cooperating or participating agencies (§5(b)).\nOn April 9, 2018, the FERC chairman signed a memorandum of understanding (MOU) with other federal agencies to implement E.O. 13807. Under the MOU, the agencies agree to \"undertake to meet the goal set forth in E.O. 13807 of reducing the time to two years for each agency to complete all environmental reviews and authorization decisions for major infrastructure projects\" through implementation of One Federal Decision, communication, concurrent reviews, adherence to a review timetable, and commitment to agency-specific and collective review process enhancements (§V). FERC already is the lead agency for pipeline certificate environmental review and has statutory authority to set a review timetable under EPAct, so it appears the impact of the executive order may be primarily from cooperating agency coordination and setting the two-year goal. However, because this MOU has only recently been agreed to, it remains to be seen how it will affect FERC's ongoing review of pipeline certificate applications. Nonetheless, FERC has stated that it \"is committed to carrying out the goals of Executive Order 13807 to improve the efficiency, timing, and overall predictability of the certification process.\"",
"Over the last 20 years, Congress has acted frequently to oversee FERC's certification of interstate natural gas pipelines through hearings and correspondence with the commission. Members of Congress also have proposed legislation to change FERC's review of gas pipeline certificate applications, specifically, or as one category among a broader range of infrastructure projects.\nTable 1 summarizes the key provisions of legislative proposals affecting FERC's pipeline certification in the 111 th -114 th Congresses. As the table shows, bills which were not enacted sought to increase FERC public hearings, limit eminent domain authority, require regional review of multiple projects, or impose specific deadlines on FERC and cooperating agencies. Title 41 of the Fixing America's Surface Transportation Act ( P.L. 114-94 ; FAST-41), which became law on December 4, 2015, revises the process for federal approval of a range of major infrastructure projects by establishing best practices, requiring coordination of federal agency review of projects, and shortening the period for challenges to final decisions for issuing project permits. Infrastructure projects covered by the act are those requiring environmental review under NEPA and requiring investment exceeding $200 million (§41001). As of June 2018, the permitting dashboard listed four natural gas pipeline projects (one completed) covered under FAST-41 with FERC as the lead agency.\nSome Members of Congress have introduced legislative proposals in the 115 th Congress to change FERC's certification authority or review process. Table 2 summarizes the key provisions in these bills related to natural gas pipeline certification. As the table shows, the proposals which remain under committee consideration variously would require FERC to collectively review multiple pipelines proposed in the same region, prepare supplemental EISs, hold more public meetings, and more broadly consider greenhouse gas emissions. Some would impose deadlines for permit review and mandate greater cooperation and transparency of permit review by federal agencies.\nThe Promoting Interagency Coordination for Review of Natural Gas Pipelines Act ( H.R. 2910 ), which passed in the House on July 19, 2017, would require federal, state, and local agencies involved in environmental review for a proposed pipeline to defer to FERC's approved scope for NEPA review. H.R. 2910 would also require FERC to make a decision on a natural gas pipeline certificate application within 90 days of completing NEPA review and would require concurrent review by cooperating federal agencies.",
"As discussed earlier, FERC's review of pipeline certificate applications is guided by its Policy Statement on Certification of New Interstate Natural Gas Pipeline Facilities issued in 1999. On December 21, 2017, the newly appointed FERC chairman announced that the commission would undertake a review of its permitting policies and procedures for interstate natural gas pipelines. Accordingly, on April 19, 2018, the commission issued a Notice of Inquiry (NOI) \"to examine its policies in light of changes in the natural gas industry and increased stakeholder interest in how it reviews natural gas pipeline proposals.\" More specifically, the commission's notice \"poses a range of questions that reflect concerns raised in numerous public comments, court proceedings and other forums,\" and seeks input on \"potential changes to both the existing Policy Statement and the structure and scope of the Commission's environmental analysis\" as well as \"feedback on the transparency, timing, and predictability of its certification process.\"\nAccording to its notice, FERC's inquiry focuses on four general aspects of its certificate application review, with specific questions posed under each aspect\nrelying on precedent agreements to demonstrate project need, eminent domain and landowner interests, evaluating project alternatives and environmental effects, and the efficiency and effectiveness of FERC's certificate processes.\nFERC's inquiry was opened for public comments through July 25, 2018. However, according to the NOI, the commission will ma ke no decisions on possible further action related to its inquiry until it has reviewed the comments filed; the commission has not stated any timetable for completing this review. (FERC issued its 1999 policy statement over 13 months after publishing a Notice of Inquiry for that proceeding, but the duration of its current review could be different. ) Any FERC pipeline certification activities or decisions in the meantime are to be made in accordance with the 1999 policy statement. Because FERC's policy statement is only a guidance document, not a regulation or statute, the commission has considerable discretion regarding if, when, and how it will apply any policy changes to pending certificate applications.",
"Congress has been interested in the development of natural gas pipelines for decades, with a particular focus on siting and environmental impacts in recent years. Some in Congress generally see such pipeline development as positive, primarily due to its perceived economic benefits in terms of construction employment, lower natural gas prices, and environmental benefits relative to burning more carbon-intensive fossil fuels (i.e., coal). Others generally view gas pipeline development more critically, primarily due to environmental concerns from greenhouse gas emissions and possible risks to groundwater. Still others are focused primarily on the local effects of gas pipeline development related to public safety, the impacts on lands, and the acquisition of private property through eminent domain. Pipeline proponents would rather see more and faster pipeline development, whereas opponents would rather see less—preferring instead a greater policy emphasis on energy alternatives, such as renewable electricity generation, they view as more environmentally or socially benign.\nBecause FERC has the statutory authority to approve or deny certificates for interstate natural gas pipelines, the policy views above have led to persistent congressional scrutiny of FERC's pipeline certification process and decisions. Concerns about gas pipelines have motivated repeated attempts at congressional intervention. In total, at least 18 bills have been introduced since the 111 th Congress (9 in the current Congress alone) which would affect various aspects of FERC's review of pipeline certificate applications. Of these, only the FAST Act became law, and it seems to have applied to only a few of FERC's gas pipeline reviews. Therefore, absent any other statutory changes, Congress must rely on FERC to address policy concerns on its own volition in response to congressional oversight, federal court decisions, and public input.\nFERC's recent Notice of Inquiry covers a number of the key congressional concerns raised either in oversight hearings or bill provisions in the 115 th Congress. Examples include broader examination of greenhouse gas impacts ( H.R. 3241 ), efficiency of application review ( S. 1460 ), and determining market need ( S. 1314 ). Therefore, while FERC's policy review does not guarantee any changes to the gas pipeline certification status quo, it may provide valuable information and context for congressional oversight. If Congress disagrees with FERC's future policy choices based on the findings of its NOI, those findings presumably would provide an informed basis and clear policy context for subsequent legislative proposals.\nAlthough recent executive and agency actions, including FERC's agreement with other agencies and its NOI, may lead to changes in FERC policies or process, they are limited to those aspects of gas pipeline regulation which fall directly within the commission's statutory authority under the Natural Gas Act or within its discretion under other federal statutes. This is a significant limitation because much of FERC's pipeline certificate review is environmental review in compliance with NEPA. While the bills identified in this report, and FERC's policy review, could change how FERC interprets or fulfills its obligations under NEPA, they would not amend NEPA itself. Likewise, they would not amend other federal statutes, such as the Clean Water Act or the Clean Air Act, which also may have a bearing on gas pipeline siting approval."
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"question": [
"What must companies seeking to build interstate natural gas pipelines obtain under the Natural Gas Act?",
"What does the FERC review process for certificate applications consist of?",
"Why have several aspects of this process been a focus of attention for policymakers?",
"What are the key challenges to FERC certification?",
"Why did the Bush, Obama, and Trump Administrations issue a series of executive orders?",
"What effect have these orders had on federal review of natural gas pipeline siting?",
"Why did FERC sign a memorandum of understanding with other federal agencies?",
"Why did FERC issue a NOI in April 2018?",
"What did the inquiry focus on?",
"What has the inquiry been opened for?"
],
"summary": [
"Under the Natural Gas Act, companies seeking to build interstate natural gas pipelines must first obtain certificates of public convenience and necessity from the Federal Energy Regulatory Commission (FERC).",
"The commission's regulatory process for the review of certificate applications consists of application pre-filing, certificate application, application review (including environmental and other agency review), authorization, and post-certificate proceedings.",
"Several aspects of FERC's certificate review practices have been the focus of attention among policymakers because they have been the subject of FERC dissent, debate in Congress, or litigation in federal court.",
"Key challenges to FERC certification involve the assessment of environmental impacts, evaluating project need, review timing, relations with other agencies, changes in industry structure, and issues related to export.",
"The Bush, Obama, and Trump Administrations issued a series of executive orders intended to facilitate the federal permitting of infrastructure, specifically including energy infrastructure.",
"Exactly how all of these orders have affected, or may affect, federal review of natural gas pipeline siting is not clear.",
"However, on April 9, 2018, FERC signed a memorandum of understanding with other federal agencies to meet the goals in President Trump's E.O. 13807 \"of reducing the time to two years for each agency to complete all environmental reviews and authorization decisions for major infrastructure projects.\"",
"On April 19, 2018, FERC issued a Notice of Inquiry (NOI) \"to examine its policies ... in how it reviews natural gas pipeline proposals.\"",
"The commission's inquiry focuses on four general aspects of its certificate application review: relying on contracts from future customers to demonstrate project need, eminent domain and landowner interests, evaluating project alternatives and environmental effects, and the efficiency and effectiveness of FERC's certificate processes.",
"FERC's inquiry was opened for public comments through July 25, 2018."
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GAO_GAO-14-239
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{
"title": [
"Background",
"Budget Scorekeeping",
"GSA’s Role",
"Case Study Agency Officials Experienced Challenges Receiving Full Upfront Funding for Federal Real Property Projects",
"Alternative Funding Mechanisms Helped Agencies Meet Their Real Property Needs, but Also Posed Challenges",
"Agencies Use a Variety of Funding Mechanisms to Meet Their Real Property Needs",
"Risk Sharing, Managing Stakeholder Relationships, and Other Factors Affect Project Outcomes",
"Alternative Budgetary Structures Have Potential to Help Congress and Agencies Recognize the Costs and Returns of Real Property Projects Upfront and Over Time",
"Budgeting and Capital Planning Principles Offer a Framework for Considering Alternative Budgetary Structures",
"Discretionary Budget Authority Options Could Provide a Straightforward Means of Dedicating Funding to Real Property Projects",
"Mandatory Budget Authority Options Could Increase Agency Flexibility and Improve Cost-Benefit Recognition But Would Require a Different Means of Assuring Fiscal Control",
"Concluding Observations",
"Appendix I: Comments from the General Services Administration",
"Appendix II: Comments from the Department of Veterans Affairs",
"Appendix III: Selected Related GAO Work",
"Alternative Funding Mechanisms",
"Partnering",
"Federal Real Property Reports",
"Appendix IV: GAO Contacts and Staff Acknowledgements",
"GAO Contact",
"Staff Acknowledgements"
],
"paragraphs": [
"Since 2003, we have identified managing federal real property, including effectively managing excess and underused property and an overreliance on leasing, as a high risk issue facing the federal government. In June 2010, the President directed agencies to achieve real property cost savings through a number of measures, including disposal of excess real property and reducing leasing through consolidations and increased space utilization. In 2011, the administration proposed legislation, known as the Civilian Property Realignment Act (commonly referred to as CPRA), and accompanying bills were introduced in both legislative chambers, which would identify opportunities to consolidate, reduce, and realign the federal footprint as well as expedite the disposal of properties by building off the military base realignment and closure (commonly referred to as BRAC) processes. In May 2012, OMB issued a memorandum directing agencies to not increase the size of their civilian real estate inventory, stating that increases in an agency’s total square footage of civilization property must be offset through consolidation, co- location, or disposal of space from the inventory of that agency, a policy that became known as “freeze the footprint.” As a result, acquisition has become more about consolidation and identifying opportunities to share space rather than acquiring new space.\nPursuant to the Government Performance and Results Modernization Act, OMB identified real property as a Federal Government priority goal. Agencies are currently working on 3-year Revised Real Property Cost Savings and Innovation Plans to maintain the fiscal year 2012 square footage baseline for federal office and warehouse inventory. Agencies have been encouraged to work collaboratively with other agencies and GSA to find opportunities for smarter space usage through co-locations and consolidations. We have previously reported that real property decisions draw considerable attention during congressional deliberations over federal appropriations. Stakeholders such as Congress, OMB, and the real property-holding agencies have an interest in how the federal government carries out its real property acquisition, management, and disposal practices.\nIdeally, when an agency has a real property need, such as repairing or altering its headquarters building, it determines how to meet that need through internal prioritization and the capital planning process. As part of the capital funding process, shown in Figure 1, an agency prepares a business case analysis and considers how to fund the project, including whether to request upfront funding. If an agency chooses to request upfront funding from Congress, it submits a business case to Congress through the annual appropriations process. If Congress approves the project, it may authorize spending for the project by appropriating full upfront funding to the agency. Once an agency has obtained upfront funding, it can obligate funds to complete “useful assets” of the project. During implementation as well as at completion of the project, an agency may realize returns, such as proceeds from disposal. The completion of the project informs agency prioritization and ongoing planning for future real property projects.",
"Budget scorekeeping rules are meant to recognize costs as funding decisions are being made. These rules were established to ensure that the scorekeepers—that is, the House and Senate Budget Committees, the CBO, and OMB—can measure the effects of legislation consistently and conclude that they meet specific legal requirements. These rules are also used by OMB for determining amounts to be recognized in the budget when an agency signs a contract or enters into a lease.\nScorekeeping in the Federal Budget What is scorekeeping?\nScorekeeping is the process of estimating the budgetary effects of pending legislation and comparing them to a baseline. The process allows Congress to compare the cost of proposed budgetary policy changes to existing law and to enforce spending and revenue levels agreed upon in the budget resolution.\nWho are the scorekeepers?\nGuidelines are established by the OMB, the CBO, and the Senate and House Budget Committees. Scorekeepers have an ongoing dialogue and may revise rules as required. Budget Committees and CBO apply the rules to estimate the costs associated with proposed legislation. OMB uses the rules to determine amounts to be recognized in the budget when an agency signs a contract or enters into a lease. The House and Senate Budget Committees make available monthly summary scorekeeping reports.\nWe have previously found that upfront funding is the best way to ensure recognition of commitments embodied in budgeting decisions and maintain government-wide fiscal control. As shown below, under scorekeeping rules, for a purchase or a capital lease the full cost of the project must be recorded in the budget in the year in which the budget authority is to be made available. In contrast, operating leases are intended for short-term needs, and under the scorekeeping rules, only the amount needed to cover the first year’s lease payments plus cancellation costs need to be recorded in the budget in that year.\nSummary of Scorekeeping Guidelines for Purchases and Leases When an agency is granted the authority to enter into a contract for the purchase, lease- purchase, capital lease, or operating lease of an asset, budget authority and outlays may be scored as follows: Lease-purchases and Capital Leases: budget authority will be scored against the legislation in the year in which the budget authority is first made available in the amount of the estimated net present value of the government’s total estimated legal obligations over the life of the contract, except for imputed interest and identifiable operating expenses.\nOperating leases: budget authority will be scored against the legislation in the year in which the budget authority is first made available in the amount necessary to cover the government’s legal obligation. The amount scored will include the estimated total payments expected to arise under the full term of the lease contract, or, if a cancellation clause is included in the lease, for the first fiscal year and the amount of cancellation costs.\nPurchases: no special rules apply to scoring purchases of assets (whether the asset is existing or is to be manufactured or constructed). Budget authority is scored in the year in which the authority to purchase is first made available in the amount of the government's estimated legal obligations.\nTo distinguish lease purchases and capital leases from operating leases, the following criteria will be used for defining an operating lease:\nOwnership of the asset remains with the lessor during the term of the lease and is not transferred to the government at or shortly after the end of the lease period.\nThe lease does not contain a bargain-price purchase option.\nThe lease term does not exceed 75 percent of the estimated economic lifetime of the asset.\nThe present value of the minimum lease payments over the life of the lease does not exceed 90 percent of the fair market value of the asset at the inception of the lease.\nThe asset is a general purpose asset rather than being for a special purpose of the government and is not built to unique specification for the government as lessee.\nThere is a private-sector market for the asset.\nUsing an operating lease—or successive operating leases—for a long- term space need may result in resource allocation decisions for which the budgeting process may not have considered the full financial commitment over the full length of time the space need exists. Consequently, costly operating leases may appear on paper to be preferable to less-costly alternatives such as major construction or renovation projects that must compete for full funding.",
"Within the vast portfolio of government owned and leased assets, GSA plays the role of broker and property manager to many federal civilian agencies, although some agencies—including USDA, VA, and Interior— have independent authority related to real property. GSA has a large portfolio of federally-owned and leased properties that it rents to its federal agency customers. As of fiscal year 2011, GSA had a total of 374.6 million rentable square feet in its inventory, of which 192.7 million— slightly more than half—were leased.\nThe Federal Buildings Fund (FBF), administered by GSA, is a fund established by the Public Buildings Act Amendments of 1972. The FBF is the primary source of funds for operating and capital costs associated with federal space. The FBF is funded primarily by income from rental charges assessed to tenant agencies occupying federally owned and GSA-managed and -leased space that approximate commercial rates for comparable space and services. Congress exercises control over the FBF through the appropriations process that sets annual limits on how much of the fund can be obligated for various activities. In addition, it periodically provides supplemental appropriations for the Fund. For example, the Fund received $5.6 billion as part of the American Recovery and Reinvestment Act of 2009. GSA may incur obligations and make expenditures from the FBF in five categories of activities: (1) rental of space, (2) repairs and alterations, (3) construction and acquisition of facilities, (4) building operations and maintenance, and (5) installment acquisition payments (funds debt incurred as the result of building acquisition and lease purchase arrangements). Revenue from the federally-owned facility inventory managed by GSA is the main source of the FBF’s operating income used to fund repair and alteration, new construction activities, and operations and maintenance. By statute, GSA is required to provide a prospectus for each proposed lease with a net annual rent above the prospectus threshold—$2.79 million in fiscal year 2013, which GSA’s Administrator is authorized to adjust annually—or capital project over that threshold, including acquisition, new construction, and repair and alteration projects. As shown in Figure 2, each prospectus is reviewed and approved by both OMB and Congressional authorizing committees.\nGSA has not conducted 30-year present value analyses as part of its prospectus process since the mid-1990s, as advised by OMB. Such analyses help weigh the cost over time of leasing versus owning an asset to promote efficient resource allocation for the civilian agencies within GSA’s real property portfolio. In September 2013 we reported that the decision to halt this type of formal analysis for high-value leases has limited the transparency of the prospectus process. We recommended that lease prospectuses include a description of the length of time an agency estimates a need for a space, how long the agency has leased that particular space, and major investments necessary. For spaces for which an agency has a long-term projected need, we recommended that GSA include an appropriate form of cost-to-lease versus cost-to-own analysis. GSA concurred with this recommendation. Although at times leasing versus owning analyses found leasing to be a more cost effective option, it often concluded that ownership would be cheaper than leasing; however, in many cases where ownership was found to be the better option, GSA ultimately recommended leasing due to funding constraints.",
"Officials at four selected agencies—GSA, USDA, VA, and Interior— experienced challenges receiving full upfront funding for federal real property projects through the annual appropriations process. For example, GSA officials told us that obtaining upfront funding through appropriations is difficult and thus presents a barrier to ownership, resulting in a reliance on leased space. USDA officials said that, given current fiscal pressures, they do not routinely request acquisition funds. Interior officials told us that the Department has had a moratorium on new construction since 2010 and that any upfront funding received through the annual appropriations process goes towards necessary renovations to existing property. Although VA requests and receives appropriations for some real property construction projects, it has a significant backlog of incomplete major construction projects that have not received funding. The Veteran’s Health Administration (VHA) requested $215 million for major construction funding in fiscal year 2014 and estimates that it would require $5.8 billion to address its current backlog.\nBudget constraints have resulted in limited acquisitions at GSA, Interior, and USDA. For example, GSA’s sole acquisition between 2008 and 2012 resulted from exercising a purchase option on a preexisting lease. GSA renewed its lease at Columbia Plaza in Washington, D.C. for the Department of State (State) in 1992. As part of an agreement to invest $30.6 million in renovations to the building at that time, GSA was directed by congressional resolution to “attempt to include a purchase option in the lease contract.” GSA did not have the option to purchase the building in 1992 but it negotiated a purchase option as part of the terms of the 20- year lease. As the expiration of the lease neared, GSA concluded that a mission need for the building remained and that acquiring the building would be financially advantageous. Under the original contract, GSA could purchase the building for $100 million though the 2009 appraised value was $150 million. A 30-year present value analysis concluded that acquiring the building would result in an annual cost advantage of $12 million over continuing to lease and, in 2012, GSA exercised its purchase option. Because State was already occupying Columbia Plaza, GSA officials said that they mitigated a portion of the acquisition cost by avoiding certain costs typical to the construction process including acquiring land, phased funding for construction, paying for interim office space, and final relocation to the new space. However, purchase options may cost more over the life of a lease than buying a building upfront. Figure 3 shows that although the contract purchase price was $100 million, adding in the initial renovation costs and lease payments made over the 20-year term, in total the acquisition cost to the government was $258 million.\nLimitations on obligations constrain funding for real property, especially for repairs, alterations, and new construction. The difference between receipts collected in the FBF and the amount authorized for annual obligations affected one of our case study agencies that rents property through GSA. Interior officials said that GSA has been unable to obtain FBF funding through the annual appropriations process to complete renovations in Interior’s federally-owned and GSA-managed headquarters building. As a result, Interior officials said that they have not been able to realize the savings they anticipated for a full renovation, such as energy savings. The FBF’s balance has increased significantly in recent years, growing from $56 million at the beginning of fiscal year 2007 to $4.7 billion at the end of fiscal year 2013. As we previously reported, the increased balance has primarily resulted from the growing difference between the resources deposited into the FBF and the level of funds GSA is authorized to spend. GSA officials noted that when Congress provides less obligational authority than requested, repairs, alterations, and new construction projects for GSA-managed buildings are most affected because available funds are first used to pay leasing, operations and maintenance, and debt costs. As a result, GSA’s obligations authority for repairs and alterations projects decreased from $855 million in 2005 to $280 million in 2012. GSA officials noted that when prioritizing requests for repair and alteration projects, they consider asset condition and performance; life safety and compliance with laws and regulations; customer considerations, including consolidation and reduction in space; financial viability, including lease cost avoidance; and improvements to utilization rates and recapturing vacant space.\nWith regard to the disposal of federal property, officials at USDA, which has authority to retain proceeds from sales and disposals, cited financial obstacles to these initiatives, such as little market demand. For example, USDA’s Forest Service was given authority in 2005 to retain proceeds from disposals; it typically uses these funds for critical maintenance work on its properties or to prepare other buildings for sale. Forest Service officials said that except for a few administrative buildings in affluent areas sold for a high return, the return on investment for disposals, often for structures on land Forest Service would like to retain, is minimal. In 2011, the Forest Service reported that it would cost $120 million to dispose of property with a salvage value of $5 million.\nNon-financial barriers to disposal also exist, resulting in underused agency property. These obstacles include remote locations, necessary environmental cleanup, or limitations on the use of property. Historically significant properties are also challenges. For example, VA officials said that VA’s historical buildings often require significant cleanup and preparation prior to disposal, and the agency must often address significant stakeholder interests. In addition, VHA’s buildings are often on campuses or are medical facilities, limiting potential buyers or lessees to those with missions similar to VA. VHA currently has about 250 vacant buildings with no defined need, totaling more than 4 million square feet. Interior officials stated that the land Interior owns is primarily stewardship land for preservation, and thus Interior has few buildings or land to sell. Instead, excess buildings on stewardship lands are typically demolished. To facilitate the disposal of excess property, Interior includes funding for disposals as part of its planning process—it requires each bureau to set aside 3 percent of its property budget for disposals of excess property.\nOfficials at GSA and USDA noted that the authority to retain proceeds provides a key incentive to initiate disposal transactions. For example, officials at GSA, which provides disposal services across the federal government, stated that the vast majority of current disposal transactions are by agencies or components that have the authority to retain the proceeds from sales or disposals. They also said that agencies without this authority may have less incentive to dispose of underused property as they must take money from competing budget priorities to invest in readying a property for sale. USDA officials said that because resulting proceeds are remitted to the general fund of the U.S. Treasury as miscellaneous receipts, components without authority to retain proceeds have little incentive to request full upfront funding for disposal costs such as site cleanup, resource surveys, title and legal preparation, and auction fees.",
"",
"Selected agencies have been authorized to use a variety of funding mechanisms as an alternative to full upfront funding to meet their real property needs. Funding mechanisms leverage both monetary resources, such as retained fees, and non-monetary resources, such as property exchanged in a land swap or space offered in an enhanced use lease (EUL). In some cases, the funding mechanism may function as a public- private partnership intended to further an agency’s mission by working with a partner to leverage resources. Some of these mechanisms allow the private sector to provide the project’s capital—at their cost of borrowing. The U.S. federal government’s cost of borrowing is lower than in the private sector. When the private sector provides the project capital, the federal government later repays these higher private sector borrowing costs (e.g., in the form of lease payments). In some cases, factors such as lower labor costs or fewer requirements could potentially help balance the higher cost of borrowing, making partner financing less expensive. Table 1 outlines selected funding mechanisms, considerations for each mechanism based on our past work, and examples of mechanisms used by the selected agencies. Appendix III identifies prior reports where we provide more information on alternative funding mechanisms.\nAlternative funding mechanisms are not universally available to all agencies. Moreover, even within an agency, legal authorities may differ across agency components. For example, the Forest Service and ARS— both components of USDA—have different legal authorities to use alternative funding mechanisms. For example, the Forest Service has the authority to retain fees and ARS has the authority to enter into land swaps.\nInstead of upfront funding, NPS uses retained recreation fees to fund high-priority projects linked to visitor need. NPS’s recreation fees, which are authorized by the Federal Land Recreation Enhancement Act, require that not less than 80 percent of retained recreation fees be spent at the site at which fees are collected while the remaining 20 percent is pooled to fund projects that are national priorities. This 20 percent of the retained recreation fees provides NPS additional flexibility. In 2011 Interior determined that it would request line item construction funds in fiscal year 2014, but later identified fiscal year 2012 funds from an alternative funding mechanism, retained recreation fees, for the Herring Cove and Nauset Light Beach facilities renovations in Massachusetts, negating the need to seek additional funding. Interior has internal processes for prioritizing projects for line item budget requests and for allocating the retained recreation fees to high-priority projects, which NPS officials reported allowed Interior to complete the renovations more quickly than would have otherwise been possible with full upfront funding.\nIn 1991, Congress authorized VA to enter into EULs. VA’s available legal authorities also framed its 2008 decision to enter into an EUL with a nonprofit organization in Dayton, Ohio. VHA’s partner in the EUL leveraged nonfederal funds to renovate a building and provide housing and services to homeless veterans. The Dayton, Ohio Veterans Affairs Medical Center had underused historic buildings. Officials reported that the buildings’ historic status made it difficult to dispose of or demolish the buildings. The Volunteers of America of Greater Ohio approached VA about entering into an EUL; they agreed to provide 50 beds of transitional housing and related services to homeless veterans in the property that VA wanted to take off its inventory in exchange for financial and nonfinancial considerations. VA determined that renovating the building with appropriated funds would result in the highest upfront costs to VA and would forgo the benefit of any private-sector funding or participation. VA accepted the Volunteers of America’s proposal and the Volunteers of America paid VA rent for the space and were responsible for renovating, operating, and maintaining the building as well as for providing housing and services to homeless veterans. By partnering with the Volunteers of America on this EUL, VA estimated that it has cumulatively achieved almost $2.8 million in cost avoidance and that the project has provided services valued at more than $2 million while costing the VA less than $500,000. Without the authority to enter into EULs or other alternative funding mechanisms, VA officials said that VA would not have been able to move forward with this project. VA’s EUL authority was amended in 2012. VA may no longer accept in-kind consideration for EULs and may only enter into an EUL for the provision of supportive housing.",
"Projects with alternative funding mechanisms involve multiple forms of risk—both implicit and explicit—that must be shared between the agency and any partner or stakeholder. We have previously reported that project decisions should reflect both the likely risk and the organization’s tolerance for risk. Incorporating risk assessment and risk management practices into decisions can help ensure that the organization recognizes and is prepared to manage explicit risks (e.g., financial and physical) and implicit risks (e.g., reputational). For example, clearly defined lease terms helped VA manage financial risk associated with the Dayton, Ohio EUL when its partner sought to share costs for unexpected building repairs for the building leased. During renovation, asbestos was discovered in the building and VA’s partner sought a financial contribution from VA to help offset some of the cost of the cleanup. Because the contract clearly held the partner financially responsible for unexpected expenses, VA was not liable for the cleanup costs.\nWe have also previously reported that when working with a partner, it is important to actively manage the relationship. Formalizing collaborations between the partners, including documenting dispute resolution processes, can enable productive partner interactions. For example, VA stepped in to more actively engage its partner, the city of New Orleans, in a land swap to build a hospital after Hurricane Katrina. To monitor project timelines and goals, officials representing all partners—including VA’s Chief of Staff, the logistics manager and city counterparts—participated in a steering group. When it became apparent that the city of New Orleans was unable to meet its initial goal of having the property in construction- ready condition within 1 year as outlined in a memorandum of understanding (MOU), the group began to meet weekly. VA and the city of New Orleans amended the MOU to permit phased delivery of the construction ready site. Additionally, New Orleans VA Medical Center continued to have quarterly meetings with the community. Officials reported that early coordination contributed to increased efficiency and improved outcomes and helped the project overcome challenges such as managing to meet different federal and state fiscal years and funding cycles, as well as different federal, state, and local policies.\nIn addition to an agency’s ability to share risk and manage stakeholder relationships, the availability of an appropriate partner and the geographic location of the property may affect the use and success of an alternative funding mechanism. We have previously reported that partners should bring complementary resources, skills, and financial capacities to the relationship. Agency officials reported that the geographic location and the condition of a property can make it difficult to locate a willing buyer and expensive to dispose of the property. For example, according to Forest Service officials, many of the structures that may be disposed of are of little value and are on land Forest Service will retain, such as a cabin in the woods. Additionally, these facilities may be located in remote areas that are difficult and costly to access with the construction equipment necessary for demolition. As part of the auction process, Forest Service typically asks for bids at salvage value and requires that the structure be removed from the property at the buyer’s expense. However, because of the expense to the buyer of the building removal and any necessary environmental remediation, properties are usually sold for low prices. The Forest Service benefits from selling the property— even for a low value— because it is no longer financially responsible for costs such as maintenance, demolition, property removal, and environmental remediation. For example, ARS needed to acquire land or build an incinerator to dispose of excess manure. ARS does not have the legal authority to purchase land valued at more than $100 and the incinerator would have been significantly more expensive than this limit, prompting ARS to consider a land swap. Because of these legal, cost, and anticipated stakeholder challenges, ARS officials said that ARS held onto the land for about 10 years while seeking an appropriate partner with whom to exchange land. When ARS identified an appropriate partner, it completed a land swap with the city of Ames, Iowa. ARS officials reported that this outcome was more efficient and environmentally friendly than the alternative of building an expensive incinerator.",
"While different funding mechanisms have been used as an alternative to obtaining upfront funding for federal real property projects, changes to the budgetary structure itself—within the bounds of the unified budget that encompasses the full scope of federal programs and transactions—may also help agencies meet their real property needs. Alternative budgetary structures may be established to change budgetary incentives for agencies and therefore help Congress and agencies make more prudent long-term fiscal decisions. Such alternatives may include changing existing or introducing new account structures to fund real property projects. These alternatives could promote more complete consideration of the full costs of projects and associated returns over time as well as provide agencies with greater flexibility to manage their real property needs. This could be aided by agencies completing comprehensive business case analyses detailing project costs and returns in a process similar to GSA’s prospectus process. A business case analysis might include details about how the project aligns with an agency’s strategic plan, a needs assessment and gap identification, an alternatives evaluation, a life-cycle cost analysis, a schedule of project milestones and deliverables, and a cost-benefit analysis.\nWe explored options for changes within the current discretionary budget structure and options on the mandatory side of the budget by reviewing our past reports and discussing possible options with federal budget specialists and industry experts. We make no recommendations with respect to adopting these options. However, understanding the tradeoffs associated with different aspects of alternative budgetary structures can provide decision makers with more information and support decisions about funding federal real property projects.",
"To assist congressional and agency-level decision makers in considering alternative budgetary structures, we identified two key budgeting and capital planning principles. An alternative budgetary structure should do two things: promote transparency and fiscal control with regard to the funding of federal real property projects; and provide agencies the flexibility to facilitate the acquisition, repair and alteration, and disposal of federal real property in support of federal missions.\nThe two principles are each further supported by elements that may help frame the consideration of alternative budgetary structures. As decision makers consider these budgetary structures, they must balance tradeoffs between the two principles to understand whether the options would allow for full upfront cost recognition, establish accountability mechanisms to track cost recovery and return on investment, and provide timely funding to promote an appropriately sized federal real property inventory. The principles may interact and conflict with each other and each alternative budgetary structure has benefits and challenges. Moreover, the weight that different decision makers might place on the principles will vary, depending on the desired level of involvement. Table 2 provides an overview of the principles.",
"Changes to the current discretionary structure for funding federal real property projects may provide a relatively straightforward means of dedicating funding to federal real property while creating room for additional agency flexibility. However, tradeoffs are inherent in budgeting and these changes may affect spending for other discretionary programs competing for mission critical resources.\nModify the FBF: The FBF is a discretionary fund that receives revenue through rental payments from agencies that lease buildings that GSA manages. GSA’s authority to access these funds is determined through the annual appropriations process. As previously described, resources deposited into the FBF have exceeded the amount that Congress has appropriated to GSA in recent years, resulting in a $4.7 billion difference between the full balance of the FBF and amounts made available for spending in fiscal year 2013. Congress provides authority to GSA to incur obligations and make expenditures from the FBF in five categories of activities, such as repairing and altering GSA-managed buildings and constructing new buildings. However, GSA officials said that because available funds must first be used to pay costs associated with other authorized activities, such as leasing privately owned space, operations and maintenance of GSA-managed buildings, and debt incurred from building acquisitions and lease purchase arrangements, repairs and alterations and new construction are the most affected. For example, GSA’s obligational authority for repairs and alterations projects decreased from $855 million in 2005 to $280 million in 2012. As a result, customer agencies are being charged for services that the GSA may be limited in its ability to provide in a timely manner. To meet agencies’ real property needs, the FBF could be modified in the following ways:\nMake the full balance of the FBF available: Congress could make the full balance of the FBF available to GSA. GSA would then have resources to provide the full array of services for which it charges agencies, including repairs and alterations. In 2011, we reported that GSA’s overall obligational authority has trended downward in recent years, resulting in GSA reducing spending on repairs and alternations and new construction. GSA officials and OMB staff noted that such repairs have the potential to be more expensive if delayed. Making the full balance of the FBF available to GSA would increase funding for GSA to complete projects for agencies, but it would mean less congressional fiscal control and less funding for other mission critical needs. OMB staff noted that with access to all of its receipts, the FBF would be able to meet necessary recapitalization needs, such as major repairs and alterations.\nAdjust the FBF pricing structure to exclude certain major renovations: To ensure that the GSA charges cover all services provided under agreements with tenant agencies, GSA could choose to exclude certain major renovations from agreed upon services. GSA could then reduce rents to cover only operations and ongoing maintenance costs of federally-owned buildings. Appropriations decisions to fund capital repairs with rent savings would be made by the agencies’ appropriations subcommittees. In effect, this would shift the locus of decision making from GSA’s appropriations subcommittee to the appropriations subcommittees of affected agencies. With the change in pricing structure, agencies would have the ability to decide whether to complete funded repairs and alterations in house or use contractors or shared service providers. However, because this option addresses GSA-managed buildings, there may not be an incentive for agencies to carry out this devolution of responsibility amid other priorities and it may be difficult for multi-agency tenant buildings to obtain funding for necessary renovations from their respective appropriations subcommittees. Nevertheless, an agency that uses a GSA-managed building as its headquarters, such as Interior, which has been unable to complete renovations through GSA, would gain some flexibility in completing repairs and alterations by requesting funding directly from its subcommittee. GSA officials noted that separating capital investment funding decisions from operations and maintenance funding decisions could make it difficult to manage the portfolio of government-owned and -leased assets in a strategic manner. They and OMB staff agreed that, without the shared funding aspect of the FBF, it was unlikely that agencies would have sufficient funds available to complete repairs and alterations, even if they were able to maintain the same level of appropriations.\nDelay recognition of receipts until projects are ready for funding: To better match FBF receipts with expenses, the recording of receipts from agencies could be held in a temporary account until transferred to the FBF, temporarily recorded as a mandatory receipt until transferred to the FBF as a discretionary offsetting collection. The receipts would be recorded in the FBF account when funds are appropriated for each “useful asset” of a project. Receipts from agencies to the FBF would then be recorded as discretionary offsets in the fiscal year in which they are appropriated to GSA.\nCarve out spending from the discretionary allocations: One approach to further invest in federal real property projects and meet governmentwide priorities could be to allocate resources at the full appropriations committee level, outside the competing priorities of the appropriations subcommittees. The appropriations subcommittees have jurisdiction over different agencies and are responsible for appropriating resources among their relevant agencies. Congress could agree to carve out of the full appropriations committee’s 302(a) allocation—the level of spending that the full appropriations committee is authorized to distribute—the amount for federal real property, effectively decreasing the cap for the subcommittees’ 302(b) allocations—the level of spending that the subcommittees are authorized to distribute to their respective agencies. This would free up funds for acquiring, disposing of, or repairing and altering space and provide a guaranteed funding level to real property; it would also protect it from competition with other programs that are more focused on spending for consumption activities. In the past, Congress has similarly chosen to allocate resources at the full committee level for certain programs. For example, in 1999 there were five discretionary categories with a separate spending limit “carved out”— violent crime reduction, defense, non-defense, highway, and mass transit. As a result of these carve outs, total spending determinations were made at the full committee level rather than at the subcommittee level.\nCarving out of the full committee’s allocation spending for federal real property would also “crowd out” spending for all other discretionary programs that might represent a higher priority for the nation. For example, we have previously reported that if a guaranteed minimum funding level for a certain program is carved out of the full committee allocation, and total spending is not increased commensurately, then the remaining activities must compete for the reduced amount that is left. Alternatively, the total cap for the subcommittees’ allocation could be increased to dedicate funding to real property projects. The adjustment of the cap could be triggered by the approval of project proposals accompanied by business case analyses.\nRelated Questions on the Implementation of Discretionary Options: 1. If individual agencies and their respective appropriators and authorizers are responsible for making decisions regarding real property projects, would they have the real property expertise to initiate, implement, fund, authorize, and oversee real property acquisition, repairs/alteration and disposal? 2. If an appropriations carve out for federal real property is made at the full appropriations committee level:\nHow narrowly would those funds be defined? (Deferred maintenance, costs related to preparing properties for disposal)\nHow would a business case analysis be incorporated into obtaining access to carved-out funds?\nHow would the carve out be divided amongst appropriations subcommittees?\nMight the creation of a Reserve Fund achieve the same purpose?",
"Mandatory budget authority options, such as creating a revolving fund with borrowing authority (e.g., a capital acquisition fund) or a dedicated fund with permanent, indefinite budget authority, could enable the recognition of costs and returns associated with complex real property projects upfront and over time. However, these options would require establishing new account structures and may present different challenges compared to discretionary budget authority options. Existing account structures, such as the Tennessee Valley Authority fund, may provide some insight for policymakers in considering the structure of the revolving fund with borrowing authority or permanent, indefinite budget authority.\nBorrowing authority and permanent, indefinite budget authority could be provided outside of the annual budget and appropriations cycle, allowing for a greater degree of agency flexibility when planning for and carrying out real property projects. Controls on access to funds in both scenarios could be based on comprehensive project proposals with a business case analysis completed by agencies and submitted to the fund manager, OMB and the Congress to ensure their agreement that the project warrants access to this type of funding. This analysis would describe, among other aspects, the nature of the project and potential savings or costs avoided. If the proposal was accepted, funding could be provided for each useful asset. For each useful asset, agencies might provide updated business case analyses, which could include reestimates of both costs and returns.\nMandatory budget authority options may also present opportunities to promote collaboration among agencies with different appropriators and authorizers as well as allow for better alignment of upfront costs with longer-term returns. These options could result in a centralized funding source available to all agencies, which could facilitate consolidation, sharing space, and partnering among agencies for other real property needs. Mandatory options could also be established to receive returns, such as proceeds from disposals, or enforce the recognition of non- monetary returns, such as cost avoidance or cost savings, through revised business case analyses provided by agencies as they complete useful assets of projects. Despite these benefits, mandatory budget authority options could result in a shift of the locus of decision making from appropriators to authorizers, and would create new management and oversight responsibilities for federal entities. In addition, under the pay-as-you-go (PAYGO) budgetary enforcement mechanism, mandatory budget authority options would require costs to be offset by an increase in mandatory receipts or a decrease in mandatory spending for other programs. Nonetheless, these options could result in cost savings and cost avoidance over the long term.\nCreate a capital acquisition fund (CAF): Congress could provide budget authority in the form of borrowing authority to a governmentwide capital acquisition fund (CAF) managed by a single agency, such as GSA.\nIn contrast to a department-level CAF, which we have previously reported on, a centralized governmentwide CAF could provide funding for real property projects for all agencies. The fund could complement the FBF by providing upfront funding for complex, multi-prospectus level projects or projects estimated to exceed a certain total cost threshold while the FBF could be used for relatively straightforward rental and maintenance expenses. The governmentwide CAF could be subject to a borrowing limit and provide upfront funding for the full cost of projects (or useful assets of projects). As depicted in Figure 4, a governmentwide CAF could be established to: 1. Use its authority to borrow from the Federal Financing Bank (FFB) to fund real property projects agreed upon by Congress, OMB and the CAF manager on a project-by-project basis for all agencies. 2. Use annual payments made by agencies to the CAF to repay the loan from the FFB. The annual payments—provided by agencies’ subcommittee appropriators—would be principal and interest amortized over the useful life of the asset, allowing the agency to spread the project cost over time. 3. Automatically receive other monetary returns associated with real property projects to be used for future real property projects or deficit reduction. During implementation as well as at completion of projects, agencies would inform the CAF (along with Congress and OMB) about all returns, including nonmonetary returns, such as cost avoidance or cost savings, via revised business case analyses.\nEstablish a dedicated fund with permanent, indefinite budget authority: Congress could pass legislation to establish a governmentwide, dedicated fund with permanent, indefinite budget authority instead of borrowing authority. Similar to the CAF, this fund could be managed by a single agency, such as GSA. As depicted in Figure 5, it could automatically receive sums as needed, eliminating the need for annual appropriation to acquire, dispose of, or repair and alter federal real property. The dedicated fund could be at least partially replenished as agencies return net proceeds, such as proceeds from the sale of a building. The fund could complement the FBF by providing upfront funding for complex, multi-prospectus level projects or projects estimated to exceed a certain total cost threshold while the FBF could be used for relatively straightforward rental and maintenance expenses. One concern with providing permanent, indefinite budget authority is that it could reduce agency incentives to provide credible cost estimates in their business case analyses; initial estimates might be artificially low if agencies are held harmless for additional costs that result from price changes.\nRelated Questions on the Implementation of Mandatory Options: 1. What would be the budget enforcement implications for providing permanent, indefinite budget authority and borrowing authority in the mandatory options? Given that federal budgeting rules require that increases in mandatory spending be offset by decreases in other mandatory spending (or an increase in mandatory receipts), where would the offset come from to meet this condition? 2. How narrowly would the use of the mandatory options be defined?\nFor example, would it be meant only for civilian federal real property needs? 3. Would the congressional locus of decision making regarding proposed projects reside with appropriators or authorizers? 4. How would the business case analysis process work? What criteria would be used to consider proposed projects for approval? 5. How would appropriators be involved in the business case analysis process? 6. What mechanisms could be used to ensure that returns are realized in future years? 7. What budget process changes would be needed to ensure that subcommittee appropriators would provide funding to agencies to make annual payments to the CAF to repay the FFB in future years?",
"A central goal of the budget process is to assist the Congress in allocating governmentwide resources efficiently. In the context of federal real property, recognizing costs up front when resource allocation decisions are made is one way to achieve this goal. Given that full upfront funding is an effective way to ensure recognition of commitments embodied in budgeting decisions, an examination of budgetary changes that could improve cost-benefit recognition provides an opportunity to help Congress achieve this goal. Our selected agencies have experienced challenges receiving full upfront funding for federal real property projects through the annual appropriations process and instead have used alternative funding mechanisms, such as public-private partnerships and operating leases to meet long-term needs.\nIn times of fiscal pressure, employing alternative funding mechanisms to carry out real property projects can appear attractive to agencies because it does not first require obtaining full upfront funding. However, there are inherent risks in using an alternative funding mechanism and many factors affect the outcome. For example, employing alternative funding mechanisms may result in funding federal real property investments without recognizing their true, full costs. This could mean that assets financed through alternative mechanisms may be selected over other equally worthy projects that are competing for full upfront funding. Moreover, with the administration’s emphasis on “freezing the footprint,” investment decisions that do not recognize costs upfront and returns over time may not result in an appropriate assessment of the size and cost of the federal real property inventory.\nWe have presented options for alternative budgetary structures that congressional decision makers may wish to consider. Alternative budgetary structures, such as modifying the Federal Buildings Fund (FBF) or establishing a mandatory dedicated fund, could help them recognize a project’s full upfront costs and returns over time. While these options could increase flexibility for agencies in addressing their real property needs, they could also result in less fiscal control for Congress. However, if accompanied by appropriate congressional oversight and rigorous financial management, these options may be useful in facilitating prudent real property investment within the current unified budget structure.\nThere is no single best option, and all options we explored would have considerable challenges that would need to be weighed against potential benefits. In addition, there are broader considerations associated with funding real property projects beyond the scope of this report. Both Congress and agencies have a role in effectively managing real property projects. The authorization or use of an alternative funding mechanism or an alternative budgetary structure requires consideration of tradeoffs to arrive at a deliberate choice that neither creates disincentives for agencies to seek upfront funding nor minimizes fiscal control required by Congress.\nWe provided a draft of this report for review and comment to the Secretaries of the Departments of Agriculture (USDA), Interior, and Veterans Affairs (VA), and to the Administrator of the General Services Administration (GSA). All agencies generally concurred with our findings. In his written response, the VA Chief of Staff discussed challenges with several of the potential alternative budgetary structures outlined in the report. As we say in our report, while we explored alternative budgetary structure options, each option has both benefits and challenges and we make no recommendations with respect to adopting any of these options. Further, our report states that any potential mandatory alternative budgetary structure to fund large projects would be used by agencies voluntarily, complementing upfront funding through the appropriations process and the Federal Buildings Fund. We further clarified this point in our report. In his written statement, GSA’s Administrator expanded upon the challenges that we report agencies experience in funding upfront costs that could lead to long-term savings. He also stated that some of the described alternative budgetary structures would be more effective than others. USDA, Interior, and VA provided technical comments, which we incorporated as appropriate. We also provided a copy of the report to the Office of Management and Budget, which provided technical comments that we incorporated as appropriate.\nWe are sending copies of this report to the Secretaries of Agriculture, Interior, and Veterans Affairs and to the Administrator of the General Services Administration. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report please contact me at (202) 512-6806 or irvings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.",
"",
"",
"",
"GAO, Capital Financing: Partnerships and Energy Savings Performance Contracts Raise Budgeting and Monitoring Concerns, GAO-05-55 (Washington, D.C.: Dec. 16, 2004).\nGAO, Budget Issues: Alternative Approaches to Finance Federal Capital, GAO-03-1011 (Washington, D.C.: Aug. 21, 2003).\nGAO, Federal Buildings: Funding Repairs and Alterations Has Been a Challenge—Expanded Financing Tools Needed, GAO-01-452 (Washington, D.C.: Apr. 12, 2001).\nGAO, Federal Real Property: GSA Should Clarify Savings Goals for the National Broker Program, GAO-14-14 (Washington, D.C.: Oct. 31, 2013).\nGAO, Federal Real Property: Greater Transparency and Strategic Focus Needed for High-Value GSA Leases, GAO-13-744 (Washington, D.C.: Sept. 19, 2013).\nGAO, Federal Real Property: Overreliance on Leasing Contributed to High-Risk Designation, GAO-11-879T (Washington, D.C.: Aug. 4, 2011).\nGAO, Department of Energy: Status of Loan Programs, GAO-13-331R (Washington, D.C.: Mar. 15, 2013).\nGAO, Military Bases: Opportunities Exist to Improve Future Base Realignment and Closure Rounds, GAO-13-149 (Washington, D.C.: Mar. 7, 2013).\nGAO, Federal Real Property: Improved Cost Reporting Would Help Decision Makers Weigh the Benefits of Enhanced Use Leasing, GAO-13-14 (Washington, D.C.: Dec. 19, 2012).\nGAO, Renewable Energy Project Financing: Improved Guidance and Information Sharing Needed for DOD Project-Level Officials, GAO-12-401 (Washington, D.C.: Apr. 4, 2012).\nGAO, Excess Facilities: DOD Needs More Complete Information and a Strategy to Guide Its Future Disposal Efforts, GAO-11-814 (Washington, D.C.: Sept. 19, 2011).\nGAO, Defense Infrastructure: The Enhanced Use Lease Program Requires Management Attention, GAO-11-574 (Washington, D.C.: June 30, 2011).\nGAO, Military Housing: Installations Need to Share Information on Their Section 801 On-Base Housing Contracts, GAO-11-60 (Washington, D.C.: Oct. 28, 2010).\nGAO, Defense Infrastructure: Army's Privatized Lodging Program Could Benefit from More Effective Planning, GAO-10-771 (Washington, D.C.: July 30, 2010).\nGAO, Military Housing Privatization: DOD Faces New Challenges Due to Significant Growth at Some Installations and Recent Turmoil in the Financial Markets, GAO-09-352 (Washington, D.C.: May 15, 2009).\nGAO, Federal Real Property: Progress Made in Reducing Unneeded Property, but VA Needs Better Information to Make Further Reductions, GAO-08-939 (Washington, D.C.: Sep. 10, 2008).",
"GAO, Congressionally Chartered Organizations: Key Principles for Leveraging Nonfederal Resources, GAO-13-549 (Washington, D.C.: June 7, 2013).\nGAO, Federal Real Property: Strategic Partnerships and Local Coordination Could Help Agencies Better Utilize Space, GAO-12-779 (Washington, D.C.: July 25, 2012 ).",
"GAO, Federal Real Property: Improved Standards Needed to Ensure That Agencies’ Reported Cost Savings Are Reliable and Transparent, GAO-14-12 (Washington, D.C.: Oct. 29, 2013).\nGAO, Federal Real Property: National Strategy and Better Data Needed to Improve Management of Excess and Underutilized Property, GAO-12-645 (Washington, D.C.: June 20, 2012).\nGAO, Streamlining Government: Questions to Consider When Evaluating Proposals to Consolidate Physical Infrastructure and Management Functions, GAO-12-542 (Washington, D.C.: May 23, 2012).\nGAO, Federal Real Property: Progress Made Toward Addressing Problems, but Underlying Obstacles Continue to Hamper Reform, GAO-07-349 (Washington, D.C.: Apr. 13, 2007).\nGAO, Federal Real Property: Actions Needed to Address Long- standing and Complex Problems, GAO-04-119T (Washington, D.C.: Oct. 1, 2003).",
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"In addition to the contact name above, Carol M. Henn, Assistant Director, Alexandra Edwards, Vida Awumey and Melissa King made major contributions to this report. Also contributing to this report were Virginia Chanley, Deirdre Duffy, Felicia Lopez, and Donna Miller. In addition, the following individuals provided programmatic expertise: Michael Armes, Keith Cunningham, Brian Lepore, David Sausville, and David J. Wise."
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"question": [
"How have some agencies met their funding needs?",
"What are some of the limitations with alternative funding mechanisms?",
"What issue did the ARS come across when utilizing an alternative funding mechanism?",
"What are some of the challenges associated with alternative funding mechanisms that involve a partner?",
"What two things must an alternative budgetary structure balance?",
"What does GAO provide to Congress?",
"How would making the full balance of the FBF available for funding real property projects help agencies with their financial needs?",
"What approach would increase transparency of cost and benefits?",
"Why may changes to the budgetary structure be necessary, at times?",
"Under what circumstances are federal real property projects considered fully funded?",
"What does the GAO report cover?",
"How did the GAO choose which agency case studies to include in their report?",
"How did GAO identity alternative budgetary structures?",
"Why are agencies moving away from full upfront funding?"
],
"summary": [
"Instead of full upfront funding, selected agencies sometimes used a variety of alternative funding mechanisms to meet their real property needs by leveraging authorized monetary resources, such as retained fees, and non-monetary resources, such as property exchanged in a swap or space offered in an enhanced use lease.",
"Alternative funding mechanisms are not universally available to all agencies; even within an agency, legal authorities may differ across agency components.",
"For example, because of legal, cost, and other challenges, officials from USDA's Agricultural Research Service (ARS) said that ARS held onto land for about 10 years while seeking an appropriate partner to successfully complete the land swap.",
"For alternative funding mechanisms that involve working with a partner, such as in a land swap, the agency's ability to find an appropriate partner, manage that partnering relationship, and share risk—both explicit and implicit—with the partner affected project outcomes.",
"Alternative budgetary structures should balance tradeoffs across two key GAO-identified budgeting and capital planning principles: (1) promoting transparency and fiscal control with regard to the funding of federal real property; and (2) providing agencies the flexibility to facilitate the acquisition, repair and alteration, and disposal of federal real property in support of federal missions.",
"GAO provides alternative budgetary structure options for Congress to consider.",
"For example, in one option Congress would make the full balance of the FBF available for funding real property projects, which could create room for additional agency flexibility but may reduce fiscal control.",
"Another option would establish a government-wide capital acquisition fund with authority to borrow from the Federal Financing Bank for approved projects, which could improve transparency of both costs and benefits upfront and over time while business case analyses could provide a means of assuring fiscal control.",
"Changes to the budgetary structure itself—within the bounds of the unified budget—might provide a more consistent way to meet real property needs while helping Congress and agencies make more prudent long-term fiscal decisions.",
"Federal real property projects are fully funded when Congress provides budget authority and appropriations for the estimated full cost of the projects up front—at the time they are undertaken.",
"This report examines (1) agency experiences funding federal real property projects, (2) some of the alternative funding mechanisms selected agencies use, as well as agency experiences using selected mechanisms, and (3) alternative budgetary structures within the current unified budget that may potentially help Congress and agencies better recognize the cost of real property projects and associated returns, promoting both transparency and fiscal control.",
"GAO reviewed case study projects from 4 agencies among the top 10 in federal real property holdings and chosen based on their use of alternative funding mechanisms, as identified in our past and ongoing work.",
"Finally, GAO identified alternative budgetary structures that may support real property projects and principles for considering them by reviewing published reports and interviewing federal budget staff and experts.",
"However, as agencies work to balance limited resources with mission demands, many have turned to approaches other than full upfront funding to acquire, renovate, or dispose of federal real property, such as buildings, structures, and land."
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{
"title": [
"",
"Introduction",
"Background on State Department's Budget and Diplomatic/Embassy Security Funding",
"Diplomatic/Embassy Security Funding Data",
"Administration Requests, House-Proposed, Senate-Proposed, and Enacted Diplomatic/Embassy Security Funding",
"Security Funding for the Benghazi Facility",
"Appendix. State Department Funds for Diplomatic/Embassy Security, FY2008-FY2015"
],
"paragraphs": [
"",
"As Congress investigates the issues surrounding the September 11, 2012, attacks on U.S. facilities in Benghazi, Libya, some Members have questioned whether security funding was adequate or was a factor that may have contributed to inadequate security at that facility.\nThe State Department Basic Authorities Act of 1956 authorizes the Department of State to \"use appropriated and other funds to provide the maximum security of U.S. government-owned or leased properties and vehicles abroad.\" After several attacks occurred on U.S. facilities and other American interests in Beirut, Lebanon and Kuwait in the early 1980s, Congress passed the Diplomatic Security Act of 1986, further emphasizing the role the Secretary of State plays in providing funding for the security of U.S. diplomatic facilities and personnel worldwide (hereinafter referred to in this report as diplomatic/embassy security).\nFollowing the August 1998 bombings of U.S. Embassies in Kenya and Tanzania, an independent panel, chaired by Admiral William Crowe, reported that it was \"most disturbed by two inter-connected issues: First, the inadequacy of resources to provide protective measures against terrorist attacks; and second, the relative low priority accorded security concerns throughout the US Government by the Congress, the Department, other agencies in general, and the part of many employees—both in Washington and in the field.\"\nResponding to that panel, Congress, within the Secure Embassy Construction and Counterterrorism Act of 1999 (SECCA), established more stringent security requirements and mandated additional training, authorized $900 million to be spent annually for Embassy Security, Construction, and Maintenance (ESCM) for the next five years (FY2000-FY2004), and mandated the Secretary of State to convene an Accountability Review Board (ARB) whenever serious injury, loss of life, or significant destruction of property occurs. It required co-location of virtually all agency personnel in a country and 100-foot perimeters around diplomatic facilities, but also provided waiver authority for those measures.\nAfter the September 11, 2012, attacks on the U.S. facilities in Benghazi, a new ARB was convened. Its report, referring to the State Department's need for risk mitigation at U.S. facilities around the world, states:\nFor many years the State Department has been engaged in a struggle to obtain the resources necessary to carry out its work, with varying degrees of success. This has brought about a deep sense of the importance of husbanding resources to meet the highest priorities, laudable in the extreme in any government department. But it has also had the effect of conditioning a few State Department managers to favor restricting the use of resources as a general orientation. Experienced leadership, close coordination and agility, timely informed decision making, and adequate funding and personnel resources are essential.... One overall conclusion in this [ARB] report is that Congress must do its part to meet this challenge and provide necessary resources to the State Department to address security risks and meet mission imperatives.",
"Congress annually appropriates funds for the security of diplomatic personnel and facilities within the Department of State, Foreign Operations and Related Programs appropriation, which is about 1% of the total federal budget. Security funding amounts to about 9% of that appropriation. (See Figure 1 below.)\nCongress has not enacted a stand-alone State Department appropriation prior to the start of the fiscal year since 1995 and has not passed a stand-alone Foreign Relations Authorization law since 2002. Both could have been legislative vehicles for debate regarding Administration of Foreign Affairs, including diplomatic/embassy security funding and priorities. Instead, Congress has provided ongoing security funding within Continuing Resolutions (CRs) that have delayed by several months the full-year appropriation eventually provided. Funding within a CR is usually based on the previous year's funding levels. Furthermore, if spending was not in the previous-year's appropriation (as was the case with Benghazi in 2012), it would not be funded by a CR. Only after the final appropriation is passed by Congress and signed into law by the President would State Department officials know what level of funding they can allocate on a daily/weekly/monthly basis over the 275 worldwide diplomatic posts (or 1,600 work facilities) and over the remainder of the fiscal year.",
"Congress provides funding for diplomatic/embassy security within the Department of State, Foreign Operations, and Related Programs appropriations. The bulk (typically more than 90%) of the funding is provided by two subaccounts: Worldwide Security Protection (WSP), within the Diplomatic and Consular Programs (D&CP) account, and Worldwide Security Upgrades (WSU) within the Embassy Security, Construction, and Maintenance (ESCM) account. Funds within both of these accounts are typically available until expended. Other appropriations are within the subaccounts Diplomatic Security (DS) and Counterterrorism (both within D&CP), and Diplomatic Security (DS) within the Border Security Program (BSP). A brief description of each follows:\nWSP, the largest component of security-related funding within Department of State appropriations, supports numerous security programs addressing the security of life, property, and information, including a worldwide guard force protecting overseas diplomatic missions and residences, as well as domestic facilities. In FY2015, for the first time, many DS-related salaries and related costs from DS and other bureaus have been requested under WSP rather than in Diplomatic and Consular Programs as part of what the Department calls a Security Realignment Initiative. WSU, within ESCM, provides funding for bricks and mortar-type of security. It funds the Department of State's portion of the Capital Security Cost Sharing program that combines with funds from other agencies represented overseas for planning, design and construction of secure new embassy compounds. It also funds ongoing security activities and security-related maintenance. The Bureau of Diplomatic Security (DS), funded under D&CP, is the law enforcement and security arm of the Department of State. DS protects people, property, and information. It conducts international investigations, provides threat analysis, and focuses on cyber security, counterterrorism, personnel security, and security technology. The Bureau manages much of the WSP funding. The Bureau of Counterterrorism (CT), funded within D&CP, leads the U.S. government in counterterrorism diplomacy and provides an on-call capability to respond to terrorist incidents worldwide. Funding within the Border Security Program (BSP) is allocated to DS to fund the protection of consular affairs facilities in the United States. The subaccount also funds the coordination and investigation of security issues related to U.S. visas and passports.\nThe Appendix presents annual diplomatic/embassy security requests and actual funding levels from FY2008 to the FY2015 request. Base funding (also referred to as regular or enduring appropriations) is available to U.S. facilities worldwide. Total security funding includes the base funding plus supplemental and/or Overseas Contingency Operations (OCO) funding for diplomatic/embassy security that has been available primarily for Iraq, but also for Afghanistan and Pakistan. Supplemental security funds (excluding those available only for Iraq) were requested and enacted for FY2008 and FY2009. OCO funds were requested and enacted for FY2012, FY2013, FY2014, and have been requested for FY2015.\nFollowing are some observations derived from the data shown in the Appendix and in the related Figures 2-5 :\nThe peak years since FY2008 for requests for security funding and funds that Congress made available were in FY2013-FY2015 request, the fiscal years following the Benghazi attacks. (See Figure 2 .) The FY2015 request represents the largest request for total security funding at $4.7 billion, following recent-year increases in base funding. OCO had been nearly half of the request in FY2013, but in FY2015, requests for OCO are about one-third of the total. (See Figure 3 .) FY2013 and FY2014 were peak years for total security funding made available by Congress. In FY2013, of the total $4.5 billion, nearly 50% was OCO funding, largely because Congress provided transfer authority of OCO funds previously identified for Iraq to be used for broader security needs following the Benghazi attacks. In FY2014, of the total $4.68 billion, 19% was OCO. (See Figure 3 .) For total security funding, Congress provided less than was requested every year except FY2009 and FY2014. The FY2013 total security request was $4.6 billion, including the request for transfer authority of OCO funds. That year, Congress provided a total of $4.5 billion, including transfer authority. (See Figure 4 .) Total security funding as a portion of Administration of Foreign Affairs expenditures was highest (40%) in FY2014 and also was the highest (32%) as a portion of total State Department funding that same year. (See Figure 5 .)\nFigure 2 illustrates the trend line for State Department total diplomatic/embassy security expenditures using data from the Appendix . After trending upward between FY2008 and FY2009, the funding declined to the recent-year low in FY2011and was virtually flat in FY2012.\nIn 2009, the United States was transitioning control of the \"green zone\" to the Iraqi government. Also that year, President Obama announced his intention of ending military operations in 2010. With the diminishing role of the U.S. military in Iraq and increasing security needs in Iraq, Afghanistan, and Pakistan, Congress supported more funds for DS, WSP, and WSU than were sought.\nCongress provided increased security funding in FY2013, the fiscal year following the Benghazi attacks and the first full fiscal year after the troops left Iraq in December 2011, when security efforts became the responsibility of the Department of State.\nFigure 3 illustrates diplomatic/embassy security funding data from the Appendix broken out by base and supplemental/OCO funding. FY2010 and FY2011 were the only years without broadly available security supplemental or OCO funds. (There may have been some, not shown below, that were exclusively for Iraq, however.)\nThe FY2012 budget provided OCO funds for WSP, but not WSU. FY2013, starting about three weeks after the Benghazi attacks, was the peak year for supplemental/OCO and total security funding.\nThe FY2014 estimates show an increase in enduring funds while OCO declines. The FY2015 request includes more OCO funds than were available in the FY2014 estimate, while the total funding is slightly more. Some observers question the increased use of OCO, in the absence of newly identified needs, as possibly a way to avoid exceeding the International Affairs spending caps established by the Budget Control Act of 2011.\nFigure 4 shows Administration requests for diplomatic/embassy security were greater than actual funding levels (including OCO and transfer authority) every year except FY2009 and FY2014. For the other years, the smallest funding gap compared with the request was $11.0 million in FY2008. The largest gaps between the request and actual funding occurred in FY2011 ($185.4 million) and FY2012 ($236.9 million). While Congress appropriated other OCO funds for security in Iraq, they were not broadly available for security in other facilities.\nIn FY2013, the Administration sought transfer authority to use $1.419 billion of Iraq OCO funds for WSP and WSU expenses as part of what it termed an Increased Security Proposal.\nIn FY2014, the funds made available that exceeded those requested were mostly WSP OCO funds for \"extraordinary costs of operations in Afghanistan, Pakistan, Iraq, and other areas of unrest.\"\nFigure 5 illustrates the trends regarding the proportion of expenditures that were allocated toward diplomatic/embassy security out of the Administration of Foreign Affairs (State operations) budget and the State Department total budget. These trends mirror those of actual dollars spent over the same years, with the proportions decreasing in FY2011and FY2012, but expanding in FY2009 with the transition in Iraq, and FY2013-FY2014, the years following the Benghazi attack.",
"Some budget analysts regard enacted rather than actual funding as more closely reflecting the intent of Congress, since actual funding levels include transfers that occurred at the agency. Worldwide Security Protection (WSP) and Worldwide Security Upgrades (WSU) make up the bulk of the diplomatic/embassy security budget and are the only diplomatic/embassy security line-items that appear in the Administration's budget request, the Department of State, Foreign Operations and Related Programs House and Senate appropriations legislation, and the enacted appropriations laws. Table 1 provides the Administration's requests, as well as House-proposed, Senate-proposed, and enacted levels for WSP and WSU from FY2008-FY2014, in reverse order.\nIn contrast to actuals in the Appendix , FY2014 was the only year that WSP and WSU enacted funding levels were greater than those requested.\nFor FY2013 which began October 1, 2012, less than a month after the Benghazi attacks, Secretary of State Hillary Clinton requested transfer authority from Congress for $1.4 billion of OCO funds previously appropriated for Iraq as part of what was termed an Increased Security Proposal. Congress agreed to much of that increase, but sequestration mandated by the Budget Control Act of 2011 was applied to the funds, which caused the enacted levels to be about 3% below what would have been appropriated.\nThe grand total of WSP and WSU funds requested from FY2008-FY2014 is $220.4 million more than what Congress enacted. Congress appropriated 6% less funding than was requested in the years leading up to Benghazi, but appropriated 6% more in the years following the attacks.\nThe Senate-proposed security funds exceeded House-proposed levels every year except FY2008. The Senate levels, however, were not always as much as was requested by the Administration, nor as much as appropriated, in some years. FY2008 was the only year that the House-proposed diplomatic/embassy security funding levels were greater than the Administration request, the Senate-proposed, or enacted levels. (In FY2014, the House-proposed levels matched the Administration request.)\nAlso noteworthy is the delay in the passage of every appropriation from FY2008-FY2014. When a new fiscal year starts and appropriations have not been passed and signed into law, Congress typically passes continuing resolutions (CRs) to keep the government funded until a budget is passed. Typically, CRs base funding levels for budget accounts on the past-year spending levels, perhaps increasing or decreasing by a certain percentage. Congress has consistently enacted international affairs appropriations long after the start of the fiscal year. Delayed appropriations, some have argued, make planning to meet security and other needs challenging. In recent years, for example, Congress approved and sent its final FY2011 and FY2013 budgets to the President in April and March, respectively, six to seven months into the fiscal year.\nAnother concern expressed by foreign affairs budget experts is the combining of several or all appropriations into an omnibus, consolidated, or full-year continuing resolution that occurred every year from FY2008-FY2014. Passage of stand-alone State-Foreign Operations appropriations legislation, analysts suggest, provides a greater opportunity for congressional oversight and deliberation on sensitive issues, such as security spending. (See Table 1 below.)",
"Complexities surrounding the security funds available for Benghazi include whether the facility was designated as temporary, the date its lease would be up, and the timing of available funding, among other things. Officials at the Department of State may disagree as to what qualifies as a temporary facility and what funds are available to those facilities. For example, Overseas Building Operations (OBO) uses temporary to mean those facilities that can be moved, such as trailers and modular structures. Other State Department officials may use temporary to mean short-term.\nA Senate committee report on the Benghazi attack found that because the Benghazi facility was designated as temporary, no security standards applied to it. Furthermore, additional physical barriers to enter the facility were not in place due to time and money constraints. The lack of dedicated security resources for Benghazi contributed to those constraints, according to the report.\nCompounding the definitional issue is that the State Department lacks a process to re-evaluate security at temporary facilities that are being used longer than first anticipated. The Benghazi facility was first opened in 2011 and was to close later that year. In December 2011, the State Department decided to extend the Benghazi mission until December 2012. The Department did make note of needed corrective security measures for the mission and made a number of security enhancements [using WSP funds]. (See Table 2 below.)\nAccording to the Benghazi ARB report, \"OBO does not fund security upgrades [ESCM/WSU] for 'temporary' facilities.\" Appearing to support that statement, the Senate Select Committee on Intelligence said in its January 15, 2014 report: \"... the uncertain future of the [Benghazi] Mission facility, due to its one-year expiration in December 2012, contributed to a lack of continuity for security staff, and constrained decision-makers in Washington regarding the allocation of security enhancements to that facility.\"\nDiffering views on the definition of \"temporary\" and the related eligibility for security funding has led to confusion about whether or not the Benghazi facility qualified for WSU funding. According to State Department officials, the facilities in Benghazi would have been eligible for the Compound Security Program under WSU funding. Although ESCM/WSU does not fund security upgrades for temporary facilities, it does fund security upgrades for permanent facilities. For the purposes of funding, the Department defines temporary facilities as those that are not permanent structures, such as modular units or structures that can be relocated. The facilities in Benghazi were permanent structures. Based on that definition, lease terms or length of mission would not determine the qualification to use WSU funding. According to State Department officials, OBO received no requests to execute or fund a compound security upgrade in Benghazi with WSU funding.\nWith regard to the available funding in FY2012, according to the Department of State, the Benghazi facilities were short-term leased residential villas that were used for housing and office space. The leases for the three villas in Benghazi ($336,000/year, $168,000/year, and $336,000/year) were funded from FY2012 ESCM appropriations. WSP funds were available and were used for security enhancements prior to the attack.\nDelayed enactment of appropriations also may have had consequences for the implementation of security upgrades. According to one Senate Committee report, a State Department Regional Security Officer (RSO) stated that\nContinuing Resolutions had two detrimental effects on efforts to improve security in Benghazi. First, the Department of State would only allow funds to be expended at a rate of 80 percent of the previous year's appropriations level, so as not to risk a violation of the Anti-Deficiency Act [not obligating more than may eventually be appropriated by Congress]. Second, in the absence of a supplemental appropriation or reprogramming request, security funds for Benghazi had to be taken 'out of hide' from funding levels for Libya because Benghazi was not included in the previous budget.",
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"question": [
"What does this report focus on?",
"What have Congressional investigations into the September 11, 2012 attacks focused on?",
"How can one find more information on the Benghazi attacks?",
"What is security funding dependent on?",
"Within what entity may the definition of those designations vary?",
"Why is there an inability to get more funds to improve security?",
"What can happen when officers struggle to get funds to improve security?",
"What processes did funding data have to go through?",
"Why are the Worldwide Security Protection and Worldwide Security Upgrades significant?",
"What is the focus of this report?"
],
"summary": [
"While several factors may have been involved in the Benghazi situation, this report focuses only on funding for security of U.S. diplomatic personnel and facilities abroad, hereinafter referred to in this report as diplomatic/embassy security.",
"Congressional investigations into the September 11, 2012, attacks on U.S. facilities in Benghazi, Libya, have focused on a number of issues, including the extent to which overall funding levels may have played a role in the security measures in place at that U.S. facility.",
"(For other CRS reports on the Benghazi attacks and a list of CRS experts, go to CRS.gov and search \"Benghazi.\")",
"Other post-Benghazi reports have pointed out how security funding for overseas staff and posts depends on the designation of the facility as office space, warehouse, or residence, and whether a facility is considered by State Department officials as permanent, temporary, or interim.",
"Even the definition of each of those designations may differ within the Department of State.",
"Further, some reports suggest that the inability to get more funds to improve security—whether because Congress does not appropriate enough, delays passing budgets, or because the Department of State is unwilling or unable to fully fund resource requests from its overseas posts—may contribute to an attitude by officials in the field that a combination of elevated threat and restricted resources to meet that threat should not be questioned.",
"In that case, security officers requesting more funds simply may give up.",
"It also provides funding data that was requested by the Administration, passed by the House of Representatives, passed by the Senate, and enacted by Congress for the two accounts that provide the bulk of the funding: the Worldwide Security Protection (WSP) and Worldwide Security Upgrades (WSU).",
"Combined, these two subaccounts in most years comprise more than 90% of the funding available for diplomatic/embassy security.",
"This report presents a history and analysis of the requested and actual funding for diplomatic/embassy security since FY2008—what actually became available for the Department of State to spend after rescissions, sequestration, and transfers."
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GAO_GAO-17-594T
|
{
"title": [
"Background",
"SBA and Participating Agencies Have Implemented About One-Third of Our Prior Recommendations",
"HHS Implemented Recommendation on Spending Requirements, and SBA Implemented Half of Recommendations Related to Those Requirements",
"SBA Implemented One of Five Recommendations to Improve Compliance with Other Reporting Requirements",
"SBA Has Implemented One of Two Recommendations Relating to the Administrative Pilot Program",
"SBA and DOD Plan to Implement April 2017 Recommendations on Fraud, Waste, and Abuse Prevention Requirements",
"GAO Contact and Staff Acknowledgments",
"Appendix I: GAO’s Prior Recommendations on Small Business Research Programs",
"Related GAO Products"
],
"paragraphs": [
"The SBIR program was initiated in 1982 and has four purposes: (1) to use small businesses to meet federal R&D needs, (2) to stimulate technological innovation, (3) to increase commercialization of innovations derived from federal R&D efforts, and (4) to encourage participation in technological innovation by small businesses owned by disadvantaged individuals and women. The purpose of the STTR program—initiated in 1992—is to stimulate a partnership of ideas and technologies between innovative small businesses and research institutions through federally funded R&D. The SBIR and STTR programs are similar in that participating agencies identify topics for R&D projects and support small businesses, but the STTR program requires the small business to partner with a research institution—such as a nonprofit college or university or federally funded R&D center. The programs are currently authorized through fiscal year 2022.\nThe SBIR and STTR policy directives require participating agencies to submit data to SBA each year on the amount of their extramural R&D obligations and the amount obligated for awards, among other information. The Small Business Act also establishes certain reporting requirements for participating agencies and SBA. Among other things, agencies must, within 4 months of the enactment of their annual appropriations, report to SBA on their methodologies for calculating their extramural R&D obligations. Furthermore, SBA must annually report to Congress on the participating agencies’ SBIR and STTR programs. Additionally, the reauthorization act directed SBA to allow agencies to participate in a pilot program, known as the administrative pilot program, which permitted the funding of administrative and certain other costs in fiscal years 2013 through 2015. Under this administrative pilot program, agencies are allowed to use not more than 3 percent of the funding allocated to the SBIR program for new activities, including program administration; outreach; commercialization; standardization and simplification of program procedures; prevention of waste, fraud, and abuse; and congressional reporting. The SBIR and STTR policy directives specifically note that funding under the pilot program may not replace current agency administrative funding for SBIR or STTR activities. Instead, the administrative pilot program is intended to supplement existing administrative efforts. In November 2015, the National Defense Authorization Act for Fiscal Year 2016 extended the pilot program through September 30, 2017. In December 2016, the National Defense Authorization Act for Fiscal Year 2017 extended the SBIR and STTR programs through fiscal year 2022, but did not extend the pilot program.\nThe reauthorization act required SBA to add fraud, waste, and abuse prevention requirements to the policy directives for agencies to implement. In 2012, SBA issued revised policy directives for the SBIR and STTR programs that included new requirements designed to help agencies prevent potential fraud, waste, and abuse in the programs. In addition to the requirements for the participating agencies, the reauthorization act included requirements for those agencies’ Offices of the Inspectors General (OIG).",
"SBA has implemented 5 of the 17 recommendations we have made on the SBIR and STTR programs and the participating agencies to which we have made recommendations—the Departments of Health and Human Services (HHS) and Defense (DOD)—have implemented 1 of the 3 recommendations we made. From September 2013 through April 2017, we made recommendations to SBA and participating agencies to improve oversight and implementation of the programs in four areas: (1) spending requirements; (2) other reporting requirements; (3) the administrative pilot program; and (4) fraud, waste, and abuse prevention requirements. The complete list of recommendations and the status of agencies’ implementation of the recommendations is included in appendix I.",
"From September 2013 through April 2017, we made six recommendations to SBA and one to HHS to improve oversight and implementation of the SBIR and STTR spending requirements. SBA has fully implemented three of these recommendations and HHS has implemented its recommendation in this area (see app. I). Some actions that SBA and HHS have taken to address our recommendations include the following: In certain circumstances, amounts that the agencies spend for items other than awards count as part of the agencies’ spending for the programs. In our June 2014 report, we found that SBA did not request that agencies submit data on such spending and recommended that the agency clarify how to submit such data. In response to our recommendation, SBA revised its annual report templates for data reported since fiscal year 2013 to identify obligations for the programs outside of awards, such as funds spent on discretionary technical assistance to small businesses. This change has improved the accuracy of participating agencies’ obligations data that they report to SBA and that SBA, in turn, reports to Congress.\nIn our September 2013 report, we found that SBA did not request that agencies include information in their annual reports that would enable SBA to conduct better oversight, including information on (1) whether agencies met the mandated spending requirements, (2) the reasons for any noncompliance with these requirements, and (3) the agencies’ plans for attaining compliance in future years. We recommended that SBA direct participating agencies to include this information in their annual reports to SBA. In response, SBA updated the annual report template to request this information starting in fiscal year 2015, which should help SBA more fully oversee the programs and provide more complete information to Congress.\nIn our June 2014 report, we found that HHS used different extramural R&D budget data to calculate its SBIR and STTR spending requirements. We recommended that HHS include all of its extramural R&D budget in the calculation of STTR spending requirements and in the data submitted to SBA to help ensure that the agency spends the required amount for the STTR program. According to program documents and agency officials, HHS included all of its extramural R&D in its budget data for the STTR program beginning with its annual report for fiscal year 2014, which was submitted in March 2015.\nSBA has not yet fully implemented three of our recommendations related to the spending requirements. For example, in our May 2016 report, we found that USDA’s extramural R&D obligations exceeded the threshold for participating in the STTR program, but USDA did not start an STTR program. For that report, USDA officials told us that they did not establish an STTR program because they did not expect their extramural R&D obligations to exceed $1 billion in fiscal year 2014 and that they believed the agency’s obligations were an anomaly. Further, because the spending requirement is based on actual obligations, which cannot be known until after the end of the fiscal year, USDA was unaware of its actual obligations until it was too late to retroactively begin an STTR program. Although the Small Business Act is clear about the dollar threshold for starting an SBIR or STTR program, neither the law nor SBA’s guidance specifies when an agency should establish a program— for example, at the beginning of the year, partway through the year, or at the end of the year. We recommended that SBA review its guidance regarding when an agency is required to start up an SBIR or STTR program, and if necessary, update the guidance to provide greater clarity to agencies. SBA agreed with our recommendation and, as of April 2017, SBA officials said they were working to develop language to update SBA’s policy directives to provide guidance on when an agency must start an SBIR or STTR program. We continue to believe that fully implementing this recommendation is important because such information may help ensure that agencies will establish programs when required and ensure that the required amount of money is available for small businesses participating in the programs.",
"The Small Business Act requires SBA to report annually to Congress on the programs and requires participating agencies to report to SBA within 4 months of the enactment of appropriations on their methodologies for determining their extramural R&D budgets. We have made five recommendations to SBA to improve compliance with these reporting requirements. SBA has fully implemented one recommendation (see app. I), but four remain open. For example: In each of our four reports on agencies’ compliance with spending and other reporting requirements, we found that SBA had not submitted timely reports to Congress on the SBIR and STTR programs. The Small Business Act requires SBA to report to certain congressional committees on the SBIR and STTR programs not less than annually. SBA issued its most recent required report to Congress on the SBIR and STTR programs for fiscal year 2013 in March 2016. In our September 2013 report, we concluded that without more rigorous oversight by SBA and more timely and detailed reporting on the part of both SBA and participating agencies, it would be difficult for SBA to ensure that intended benefits of the SBIR and STTR programs were being attained and that Congress was receiving critical information to oversee these programs. In that report, we recommended that SBA provide Congress with a timely annual report that includes a comprehensive analysis of the methodology each agency used for calculating the SBIR and STTR spending requirements. SBA agreed and stated at the time that it planned to implement the recommendation. SBA officials told us that they have taken some steps to help them develop the required reports to Congress, but have not submitted SBA’s reports for fiscal years 2014, 2015, or 2016. We continue to believe that it is important for SBA to provide a timely annual report to Congress to further improve oversight of the programs.\nIn our September 2013 report, we found that agencies submitted different levels of detail on their methodologies in their required reports to SBA. In that report, we recommended that SBA provide agencies with additional guidance on the format to use for methodology reports. Further, we found in our April 2015 report that, as a result of the varying detail that agencies provide in their methodology reports, it was difficult for SBA to complete its required analysis of the methodology reports. We recommended that SBA assess and update, if needed, the methodology reporting requirement to ensure it generates adequate information. In response to that recommendation, SBA proposed expanded guidance to agencies. However, the proposed guidance has not yet been finalized. According to SBA officials, SBA withdrew the draft policy directive from Office of Management and Budget consideration in January 2017 and it is under further internal consideration in light of a recent executive order. Without finalizing the proposed guidance, participating agencies are likely to continue to provide SBA with broad, incomplete, or inconsistent information on their methodologies for calculating their extramural R&D and SBA cannot ensure that it is able to provide Congress with an accurate analysis of how agencies calculate their extramural R&D. Additionally, in our September 2013 report—and others—we found that SBA had not consistently provided feedback to agencies on the content of their methodology reports, and recommended that SBA provide timely annual feedback to agencies on whether their methods for calculating their extramural R&D budgets complies with program requirements. We concluded that, without such review and feedback, agencies may be calculating their extramural R&D incorrectly, which could lead to their spending less than the required amounts on the programs. We continue to believe that updating its guidance on information to include in the methodology reports and providing feedback to agencies on their methodologies could help SBA ensure that agencies are spending the required amounts on the SBIR and STTR programs.",
"Since fiscal year 2013, agencies have been allowed to spend some of their SBIR funding for certain administrative costs related to the programs. We have made two recommendations to SBA to improve its oversight of the administrative pilot programs. SBA has implemented one of the two recommendations.\nIn our April 2015 report, we found that for fiscal year 2013, SBA had requested that agencies submit information on the total amounts spent on the administrative pilot program, but it did not request agencies to submit information on how they used the funds. Fiscal year 2013 was the first year of the pilot program, and, as we found in that report, SBA officials were still determining the information they needed to report to Congress. We recommended that SBA require participating agencies to provide data on the use of the funds, rather than a total cost for all of the activities under the pilot. In response, SBA updated the annual report template used to collect program data from the agencies for fiscal year 2014, which was submitted in the spring of 2015, to collect this information. This improved the information available to SBA on the amounts spent on activities through the administrative pilot program.\nIn our May 2016 report, we found that participation in the administrative pilot program had increased in fiscal year 2014 compared with prior years, but agency officials identified potential constraints that limited their participation, including the temporary nature of the program and the requirement to expend funds only on new activities. SBA is required to collect data and report on the use of funds to achieve the objectives of the administrative pilot program, but had not yet submitted a report. We recommended that SBA complete its required evaluation of the administrative pilot program, which could include an evaluation of the constraints that have hindered agencies’ participation in the administrative pilot program and steps to address these constraints. SBA has not submitted a report to Congress on the administrative pilot program for fiscal year 2014. We continue to believe that having SBA include an evaluation of potential constraints to participating in the administrative pilot program, whether as part of the annual report or in a separate report, could be useful if Congress decides to continue the program in the future. We concluded that, without such information, SBA and Congress will not have the information they need to address the constraints and help ensure agencies are implementing the administrative pilot program to the fullest extent if Congress chooses to extend the pilot program beyond fiscal year 2017.",
"In our April 2017 report on the SBIR and STTR programs, we reviewed the implementation of fraud, waste, and abuse prevention measures by SBA and the participating agencies and their OIGs. SBA amended the SBIR and STTR policy directives in 2012, as required by the reauthorization act, to include 10 minimum requirements to help agencies prevent potential fraud, waste, and abuse in the programs. In that report, we found that the extent to which the participating agencies have fully implemented each of the 10 minimum requirements varies. We made four recommendations to SBA and recommendations to HHS and DOD to improve implementation of the requirements (see app. I). HHS disagreed with our recommendation, but we continue to believe the recommendation is valid and should be implemented. SBA and DOD plan to implement all of their recommendations. For example:\nWe found that SBA had taken few actions to oversee agencies’ implementation of the policy directives’ minimum requirements to address fraud, waste, and abuse in the SBIR and STTR programs. SBA officials said they checked on the implementation of one of the requirements but did not know whether the participating agencies were implementing the other requirements because they had not confirmed this information. We concluded that, without confirming that each participating agency is implementing the fraud, waste, and abuse prevention requirements in the policy directives, SBA did not have reasonable assurance that each agency has a system in place to reduce its’ vulnerability to fraud, waste, and abuse. SBA agreed with the recommendation and stated that it will request that each participating agency confirm its implementation of the minimum fraud, waste, and abuse prevention requirements.\nAlthough SBA updated the SBIR and STTR policy directives in 2012 to include the fraud, waste, and abuse prevention requirements, SBA officials said they have not taken action since 2012 to review them to determine whether they are effective or whether any revisions are needed. We identified requirements that some agency officials said were not clear or may be unnecessary, and we recommended that SBA review all of the SBIR and STTR fraud, waste, and abuse prevention requirements and clarify any that are unclear. SBA stated it will contact all agencies to inquire if additional clarity is needed regarding any of the fraud, waste, and abuse requirements, and will provide additional guidance, if necessary.\nWe found that SBA had not evaluated the outcomes of the agencies’ implementation of the fraud, waste, and abuse prevention requirements and therefore did not have reasonable assurance that the requirements are necessary, appropriate, and meet the intended purpose of preventing fraud, waste, and abuse in the SBIR and STTR programs. We recommended that SBA ensure that the requirements are appropriate and meeting their intended purposes. In response to that recommendation, SBA stated that it would survey the participating agencies regarding whether the requirements are necessary and meeting their intended purposes; are placing undue burdens on the agencies; or need to be revised, updated, or eliminated.\nWe look forward to reviewing the agencies’ progress in implementing these important recommendations.\nChairman Knight, Chairwoman Comstock, Ranking Members Murphy and Lipinksi, and Members of the Subcommittees, this completes my prepared statement. I would be pleased to respond to any questions that you have.",
"If you or your staff have any questions about this testimony, please contact John Neumann, Director, Natural Resources and Environment at (202) 512-3841 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement included Hilary Benedict (Assistant Director), Antoinette Capaccio, Rebecca Makar, and Kiki Theodoropoulos.",
"Table 2 lists our prior recommendations to the Small Business Administration (SBA) and the agencies participating in the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, and the status of those recommendations, in four areas: (1) spending requirements, (2) other reporting requirements, (3) the administrative pilot program, and (4) fraud, waste, and abuse prevention requirements.",
"Small Business Research Programs: Additional Actions Needed to Implement Fraud, Waste, and Abuse Prevention Requirements. GAO-17-337. Washington, D.C.: April 25, 2017.\nSmall Business Research Programs: Agencies Have Improved Compliance with Spending and Reporting Requirements, but Challenges Remain. GAO-16-492. Washington, D.C.: May 26, 2016.\nSmall Business Research Programs: Challenges Remain in Meeting Spending and Reporting Requirements. GAO-15-358. Washington, D.C.: April 15, 2015.\nSmall Business Innovation Research: Change in Program Eligibility Has Had Little Impact. GAO-15-68. Washington, D.C.: November 20, 2014.\nSmall Business Research Programs: More Guidance and Oversight Needed to Comply with Spending and Reporting Requirements. GAO-14-431. Washington, D.C.: June 6, 2014.\nSmall Business Research Programs: Agencies Did Not Consistently Comply with Spending and Reporting Requirements. GAO-14-567T. Washington, D.C.: April 24, 2014.\nSmall Business Research Programs: Actions Needed to Improve Compliance with Spending and Reporting Requirements. GAO-13-421. Washington, D.C.: September 9, 2013.\nSmall Business Research Programs: Agencies Are Implementing New Fraud, Waste, and Abuse Requirements. GAO-13-70R. Washington, D.C.: November 15, 2012.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately."
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"What is the status of recommendations made by the GAO to the SBA?",
"What does the SBA oversee?",
"How have SBA and participating agencies responded to GAO’s recommendations?",
"What did GAO recommend to SBA in 2014?",
"How did the SBA implement the GAO's recommendation regarding data submissions on allowable spending?",
"How has this change impacted the SBA?",
"What effects does the untimely reporting by the SBA have?",
"What did the GAO recommend to improve on this?",
"What benefits are associated with the implementation of this recommendation, among others?",
"How is the GAO connected to the SBIR/STTR Reauthorization Act of 2011?",
"How are federal agencies helping small businesses?",
"What was the makeup of the SBIR program as of the time of publication of this report?",
"What does this statement address?",
"What did GAO's reports examine?",
"Why were these reports made?",
"How did the GAO determine the SBA's level of compliance with spending and other reporting requirements?"
],
"summary": [
"From September 2013 through April 2017, GAO made 17 recommendations to SBA and 3 to participating agencies to improve the oversight and implementation of spending requirements; reporting requirements; the administrative pilot program; and fraud, waste, and abuse prevention requirements.",
"SBA has implemented 5 recommendations, and participating agencies have implemented 1 (see figure), although GAO made 4 of these recommendations to SBA and 2 to participating agencies in April 2017.",
"The Small Business Administration (SBA), which oversees the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, and agencies participating in the programs have implemented about one-third of GAO's 20 prior recommendations regarding the programs.",
"SBA and participating agencies have taken some actions to address GAO's recommendations.",
"For example, in June 2014, GAO recommended that SBA clarify how agencies are to submit data on allowable spending.",
"In response, SBA revised its annual report template, requesting that agencies identify obligations for the programs outside of awards.",
"This change has improved the accuracy of the data that agencies report to SBA.",
"In a September 2013 report, GAO concluded that without more rigorous oversight by SBA and more timely and detailed reporting, it would be difficult for SBA to ensure that intended benefits of the programs were being attained and that Congress was receiving critical information to oversee these programs.",
"GAO recommended that SBA provide Congress with a timely annual report, as required by the act.",
"However, SBA and the participating agencies have not fully implemented 14 recommendations that, if implemented, could improve the oversight and implementation of the programs. GAO continues to believe that it is important for SBA to provide a timely annual report to Congress to further improve oversight of the programs.",
"The SBIR/STTR Reauthorization Act of 2011 included provisions for GAO to review aspects of the programs.",
"For about 35 years, federal agencies have made awards to small businesses for technology research and development through the SBIR program and, for the last 25 years, through the STTR program, totaling more than $40 billion.",
"Currently, 11 agencies participate in the SBIR program, and 5 of these agencies also participate in the STTR program.",
"This statement addresses GAO's key findings and recommendations related to the SBIR and STTR programs since 2012.",
"Those reports examined SBA's and agencies' compliance with spending and other reporting requirements for the programs and their implementation of fraud, waste, and abuse prevention measures.",
"This statement is based on GAO reports issued in response to the act's provisions from November 2012 through April 2017.",
"For those reports, GAO compared documentation from SBA and participating agencies with the respective requirements."
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GAO_GAO-16-680
|
{
"title": [
"Background",
"Earthquake Shaking Hazards",
"Earthquake Risks",
"Standards for Mitigation of Seismic Risks to Federally-Owned Buildings",
"Earthquake Early Warning",
"Selected Cities Are Taking Actions to Assess and Mitigate Seismic Risks of Their Buildings",
"Methods to Assess Seismic Risks",
"Methods to Mitigate Seismic Risk",
"Funding Seismic Risk Mitigation Efforts",
"Federal Buildings Are Located in Areas of Varying Seismic Hazard, and DOD and GSA Could Do More to Identify and Mitigate Seismic Risk",
"Almost 40 Percent of Federally Owned and Leased Buildings Are Located in Very Strong to Extreme Earthquake Hazard Areas",
"DOD and GSA Have Not Fully Identified Their Exceptionally High Risk Buildings or Developed Comprehensive Seismic Safety Measures",
"Defining and Identifying Exceptionally High Risk Buildings",
"Comprehensive Seismic Safety Measures",
"ShakeAlert Is Capable of Delivering Earthquake Early Warnings, but Cannot Be Fully Implemented until Challenges are Addressed",
"ShakeAlert System Is Capable of Issuing Early Earthquake Warnings to Enhance Public Safety and Benefit Private Users",
"Public Safety",
"Commercial and Private Sector Use",
"ShakeAlert Stakeholders Identified Implementation Challenges That Have Not Been Addressed",
"Technical Challenges",
"Program Management Challenges",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Objectives, Scope, and Methodology",
"Appendix II: Modified Mercalli Shaking Intensity Maps",
"Appendix III: Summary of Seismic Hazard, History, Future Damage Estimates, and Examples of Efforts to Assess and Mitigate Seismic Hazards for Seattle, Memphis, San Francisco, and Los Angeles",
"Seattle",
"Memphis",
"San Francisco",
"Los Angeles",
"Appendix IV: Annualized Earthquake Loss Estimates for Metropolitan Areas in the United States",
"Appendix V: Examples of Structural and Nonstructural Enhancements to New and Existing Buildings",
"Appendix VI: Potential Intensity of Earthquake Shaking on Leased and Owned Federal Buildings by Agency",
"Appendix VII: Federal Buildings in Four High Earthquake Shaking Intensity Zones of the United States (Corresponds to Fig. 5)",
"Appendix VIII: FEMA Publications Which Provide Guidance to Mitigate Earthquake Risks",
"Appendix IX: Comments from the Department of Defense",
"Appendix X: Comments from the General Services Administration",
"Appendix XI: GAO Contacts and Staff Acknowledgments",
"GAO Contacts",
"Staff Acknowledgments"
],
"paragraphs": [
"",
"According to the USGS, a large portion of the United States’ population lives in areas vulnerable to earthquake shaking hazards that are sources of potential harm or loss during earthquakes. The effect of an earthquake can be described by its intensity. The intensity scale used in the United States is the Modified Mercalli Intensity (MMI) Scale composed of increasing levels of intensity that range from unnoticeable shaking to buildings being destroyed (see fig. 1).\nMaps showing the probability of earthquake shaking exceeding certain MMI levels over a specified time period can be used to better understand the extent to which earthquake shaking can affect people and buildings. Figure 2 shows a USGS-developed map of the United States which depicts MMI levels based on a 2 percent probability of an earthquake exceeding the MMI level in 50 years. The 2 percent in 50 years probability is the same probability level that the International Code Council uses to establish seismic provisions within building codes. Figure 2 also shows the four cities located in high MMI areas we visited as part of our review. These cities have experienced strong earthquakes in the past and could potentially sustain substantial damage and casualties in the future as a result of earthquakes. According to USGS, over 240 million people in the 48 contiguous states are located in areas exposed to moderate or greater earthquake shaking. For additional information on the shaking intensities projected with higher probabilities of occurring see appendix II.",
"Risks to the population located in areas vulnerable to earthquake shaking hazards include the harm or losses that are likely to result from an earthquake. These risks are usually measured in terms of expected casualties (fatalities and injuries), direct economic losses (repair and replacement costs), and indirect economic losses (income lost during downtime resulting from damage to private property or public infrastructure). In any geographic area, three main factors determine earthquake risks: (1) the level of earthquake hazard, (2) the number of people and amount of property that are exposed to earthquake hazards, and (3) how vulnerable these people and property are to the hazards.\nThe vulnerability of buildings to earthquake hazards is determined by the prevalence of earthquake-resistant construction, which may vary significantly from building to building. Buildings that have been constructed in compliance with the latest seismic building codes and standards should be more resistant to earthquake damage. Older structures that were built under earlier, less-effective codes and have not been retrofitted to meet later standards are likely to sustain more damage from an earthquake. The extent to which the contents of the buildings are braced, anchored, or otherwise restrained from falling or moving in an earthquake can also affect the extent of damages and casualties, thereby impacting the level of risk.",
"Federal law generally requires that all federal buildings newly constructed or altered with funds appropriated for a fiscal year after September 30, 1989, be constructed—to the maximum extent feasible as determined by the agency administrator or head—in compliance with the latest edition of a nationally recognized model building code. Nationally recognized codes such as the International Building Code include provisions to ensure that buildings can adequately resist seismic forces during earthquakes.\nIn addition, Executive Order 13717 Establishing a Federal Earthquake Risk Management Standard (February 2016) requires each agency that owns or leases an existing federal building to adopt the Standards of Seismic Safety for Existing Federally Owned and Leased Buildings, which are developed, issued, and maintained by the Interagency Committee on Seismic Safety in Construction (ICSSC), as the minimum level acceptable for managing the earthquake risks in that building. The ICSSC standards identify the common minimum evaluation and mitigation measures for all federal departments and agencies to ensure that all federal entities have a balanced agency-conceived and -controlled seismic safety program for their existing owned or leased buildings. The current version of these standards was issued as ICSSC Recommended Practice 8 (RP 8) in December 2011. In particular, these standards establish building design and construction performance objectives for the seismic safety of federal buildings, including (1) Life Safety, (2) Occupancy, and (3) Mission Critical designations as described in table 1. Executive Order 13717 also provides that new federal buildings must be constructed using the 2015 edition of the International Building Code (IBC). It further states that new and existing federal buildings may need to exceed the minimum life safety codes and standards to ensure that the buildings can continue to perform their essential functions following earthquakes and encourages federal agencies to consider going beyond the codes and standards set out in the order.\nRP 8 also identifies FEMA E-74, Reducing the Risks of Nonstructural Earthquake Damage, as an additional reference that may be useful for scoping and prioritizing the protection of nonstructural components and contents because the guidance provides information on the relative risks posed by nonstructural elements, as well as appropriate mitigation techniques. In addition, RP 8 cites several FEMA guidance documents for incrementally retrofitting buildings including FEMA 397, Incremental Seismic Rehabilitation of Office Buildings. FEMA 397 provides office building owners who have budgetary constraints and cannot afford expensive and disruptive seismic rehabilitation projects an affordable strategy for responsible mitigation measures that can be integrated into ongoing facility maintenance and capital improvement operations. RP 8 also references FEMA 547, Techniques for the Seismic Rehabilitation of Existing Buildings as additional guidance on strategies for retrofitting which are practical and effective.",
"The technology exists today to detect earthquakes so quickly that an alert can reach some areas before strong shaking—generated from the earthquake—arrives. The purpose of an EEW system is to identify and characterize an earthquake a few seconds after it begins, calculate the likely intensity of ground shaking that will result, and deliver warnings to people and infrastructure in harm’s way. USGS is the lead federal agency responsible for developing and implementing ShakeAlert—the United States’ EEW system. USGS has been working with western state governments, academic institutions, and various seismic networks to leverage existing infrastructure while developing the ShakeAlert system. USGS’s fiscal year 2017 budget requested $8.2 million, which according to USGS, will be used to, in part, expand the system. Multiple sources— from academia, a philanthropy foundation, and federal, state, and local governments—have contributed funding or resources to the development of ShakeAlert through the purchase and installation of seismometers, research and development of detection algorithms, and the storage and maintenance of servers needed to host the system. ShakeAlert is currently in the beta testing stages in the western United States. Figure 3 illustrates how EEW systems provide advanced warnings.",
"",
"Local governments have taken actions to protect the health, safety, and welfare of their citizens against potentially damaging earthquakes. Proactive efforts to assess and understand seismic risks can help reduce these risks and create safer, more disaster resilient communities. The risk assessment process focuses attention on areas most at risk by evaluating where populations, infrastructure, and critical facilities are vulnerable to hazards, and to what extent injuries or damage may occur, according to FEMA. In the four cities we studied—Los Angeles, California; Memphis, Tennessee; San Francisco, California; and Seattle, Washington—officials told us about efforts to assess and understand seismic risks. These efforts fell into several categories including: hazard mitigation planning, seismic hazard mapping, loss estimating, and identifying vulnerable and mission critical buildings.\nHazard Mitigation Planning: According to FEMA, mitigation is most effective when it is based on a comprehensive, long-term plan that is developed before a disaster occurs. The purpose of mitigation planning is to identify local policies and actions that can be implemented over the long term to reduce risk and future losses from hazards. These policies and actions are identified based on an assessment of hazards, vulnerabilities, and risks and the participation of a wide range of stakeholders in the planning process. The assessment can include gathering information on the types, locations, and potential extent of natural or man-made hazards and the types and numbers of buildings, infrastructure, and critical facilities located in hazard areas. The cities that we studied have conducted hazard mitigation planning and identified policies and actions to mitigate risk of damage and losses likely to occur as a result of an earthquake. For example, Memphis is located within Shelby County and participated in the development of Shelby County’s 2010 multi-jurisdictional hazard mitigation plan, which found that Memphis is greatly vulnerable to earthquake threats because of the city’s large clusters of dilapidated buildings and infrastructure. In addition, Seattle, using a grant funded through FEMA’s Pre-Disaster Mitigation Grant Program, recently completed a seismic risk assessment for a representative set of city-owned buildings as a demonstration project. This study helped the city develop a methodology to evaluate seismic risks, prioritize mitigation actions, and reduce seismic risk over time.\nSeismic Hazard Mapping: Seismic hazard maps show the distribution of earthquake shaking levels that have a certain probability of occurring. Applications of seismic hazard maps include helping to determine seismic risks and inform policies and actions intended to mitigate those risks. These policies and actions may relate to areas such as building code development, land-use planning, establishing retrofit priorities, and planning allocation of assistance funds for education and preparedness. In the cities we studied, we examined how seismic hazard mapping is being used to support development of policies and actions to mitigate seismic risks. For example, Seattle has used seismic hazard maps developed by the USGS that provide the probability of the maximum ground motion Seattle neighborhoods could face in the next 50 years to inform its mitigation policy and actions. In addition, Los Angeles and San Francisco are bound by the State of California’s Alquist-Priolo Earthquake Fault Zoning Act of 1972 and the Seismic Hazards Mapping Act of 1990 which requires California’s State Geologist (California’s chief of the Division of Mines and Geology) to map areas subject to ground shaking, liquefaction, and landslide hazards.,, Local California jurisdictions are required to conduct additional studies and take appropriate mitigation measures for certain development projects in areas identified as potentially hazardous by the maps.\nSeismic Loss Estimation: To aid seismic hazard mitigation planning, loss estimating tools such as FEMA’s HAZUS program can be used to determine areas of vulnerability and to help prioritize mitigations that address these vulnerabilities. HAZUS estimates losses from potential hazards, including earthquakes, and quantifies these losses in terms of potential fatalities, injuries, direct property loss and damage, and indirect economic loss for a certain event scenario or over time (annualized loss). For example, a 2008 FEMA study based on HAZUS indicates that the Annualized Earthquake Loss (AEL) to the national building stock is $5.3 billion per year. The majority (77 percent) of average annual loss is located on the West Coast (California, Oregon, and Washington) with 66 percent ($3.5 billion per year) concentrated in the state of California (see app. IV for additional information). The cities we studied used HAZUS to support their seismic hazard mitigation planning efforts, according to local planning documents we reviewed. For example, San Francisco used HAZUS in a risk assessment of high-priority city-owned buildings to help identify those buildings expected to perform “better” or “worse” than average, and determine the relative earthquake risk within the city’s portfolio. San Francisco used this analysis to prioritize buildings for mitigation action or more detailed engineering evaluations.\nBuilding Inventory: As indicated in the preceding example describing HAZUS, building stock data can be used to assess buildings’ exposure to seismic risks and estimate losses likely to result from an earthquake. In addition, information on the type of buildings in the inventory can be used to develop estimates of costs to mitigate risks, such as structural retrofit projects. Together, information on estimated losses and mitigation costs can be used to prioritize efforts to address unacceptable risks. Having an inventory of buildings that includes information such as their location, type of occupancy and building construction, age, and mitigation needs is important to determining their exposure to seismic risks and prioritizing mitigations. In the communities we studied, we found some had developed building inventories and were using information in the inventories to prioritize mitigation projects. For example the Los Angeles Unified School District (LAUSD) conducted a risk assessment of its facilities and developed a list of 667 potentially at risk K-12 school buildings, according to LAUSD officials. In addition, Shelby County, Tennessee, as part of its multi-jurisdiction hazard mitigation plan, identified mission critical government buildings, including fire and police service facilities, hospitals, water pumping stations, waste treatment plants, and electrical power plants.",
"Officials from Los Angeles, Memphis, San Francisco, and Seattle told us they have employed a variety of methods that can reduce the risk of losses from earthquake hazards. As discussed below, these actions include conducting earthquake drills that provide building occupants the opportunity to practice how to be safer during earthquakes, utilizing land use planning to determine how best to develop hazard-prone areas, requiring compliance with building codes to make new structures more resistant to earthquakes, and mandating structural and non-structural retrofits for existing vulnerable structures.\nEarthquake Drills: Earthquake drills are actions to inform and educate building occupants about earthquake risks and potential ways to mitigate them. For example, according to the State of California’s Governor’s Office of Emergency Services, most injuries in California earthquakes occur when building occupants attempt to exit buildings or move to a different location in the building. Earthquake drills can improve preparedness and minimize risk of injury during earthquakes. For example, the Great ShakeOut is a national program which annually encourages people in homes, schools, businesses, and other buildings to practice what to do during earthquakes, which is to “drop, cover, and hold on.” Among the communities we studied, all have participated in a Great ShakeOut drill.\nLand Use Planning: State or local land-use programs can help guide more prudent development in seismic hazard areas. Land-use planning may include limiting growth in hazard-prone areas. At the state level, for example, California law requires the State Geologist to delineate seismic hazard areas. Cities, counties, or other permitting authorities in the state are required to regulate certain development projects according to the hazard level determined for the development site. Regulatory action might include, for example, withholding development permits for a site until the geologic conditions are investigated and appropriate mitigation measures, if required, are incorporated into the development plans. Concerning local programs, we observed land-use planning regulations or guidance being used in the cities we studied. For example, the Los Angeles Department of Building & Safety (LADBS) has established three new “Preliminary Fault Rupture Study Areas” for several fault lines within the city that have not yet been mapped by the California Geological Survey. If a proposed development is found to be in a Preliminary Fault Rupture Study Area, geologic investigations to determine the presence or absence of an active fault will be required before building permits are issued by LADBS.\nBuilding Code Enforcement: According to FEMA, many states and local jurisdictions have adopted the model building codes maintained by the International Code Council (ICC). ICC maintains the International Building Code (IBC). These codes incorporate seismic design standards aimed at preventing loss of life caused by building collapse. Authorities often use these codes to regulate the design and construction of buildings, which helps ensure the structures provide the level of protection for which they were designed. The four cities we studied have adopted these model building codes and have departments responsible for ensuring compliance with the building codes. In addition, some of the jurisdictions we studied have modified or were considering modifying their building codes to reflect local earthquake risks and require more rigorous actions to address these risks.\nStructural Retrofits: Retrofitting existing structures is an action that can improve their ability to withstand earthquakes. The vast majority of seismic-related fatalities have been caused by failure of structural building components, according to FEMA. Some communities in the United States have taken steps to retrofit their public buildings and have adopted ordinances that require seismic upgrades to privately-owned buildings. While retrofitting may not bring a structure up to code standards for new buildings, it will help existing structures better withstand seismic activity. Among the cities we studied, we identified several examples of retrofitting (see app. III for additional information). For example, since the 1989 Loma Prieta earthquake, San Francisco has completed more than 190 structural retrofit projects to its public buildings, including City Hall, the Main Library, the historic Ferry Building, library and park facilities, and various critical facilities, such as police and fire stations.\nNonstructural Retrofits: According to FEMA, most of the damage caused by several recent U.S. earthquakes has been due to nonstructural failures. Falling nonstructural building components are responsible for far more injuries than structural components are for fatalities according to FEMA officials. Simple mitigation measures can vastly reduce the potential for non-structural failures, according to FEMA. These mitigation measures include low-cost efforts such as relocating and bracing furniture, relocating heavy items to lower shelves, or securing hazardous chemicals in such a way that they remain in place during an earthquake. Nonstructural retrofits are particularly important in facilities such as hospitals where people may be exposed to risk of injury from furniture or medical equipment being displaced during an earthquake. The State of California has recognized this risk and requires hospitals to address hazards from non-structural building components. For example, in all California hospitals, non-structural components such as medical equipment and piping must be secured to the structure (see app. V for examples). In addition, following the 1994 Northridge Earthquake, LAUSD completed non-structural mitigation projects, including seismic anchoring and bracing of conduits and mechanical ducts, and securing overhead lights to prevent them from swinging and falling during future earthquakes. We toured a high school where LAUSD completed non- structural retrofits, including anchoring or bracing of mechanical ducts, as shown in figure 4.",
"Many mitigation measures, such as structural retrofits, can be expensive. Local municipalities can seek financial assistance for making mitigation measures through various means, including federal grants, municipal bonds, and capital improvement program funding. Limited federal assistance is available to states through several FEMA programs, including the Hazard Mitigation Grant Program, Pre-Disaster Mitigation Grant Program, and the NEHRP Earthquake State Assistance Program. Some cities we studied used resources from a combination of sources to fund seismic mitigation measures. For example, since 2008, voters have approved seven General Obligation bonds totaling $2.8 billion that have funded improvements to the San Francisco’s hospitals, fire and police stations, and other facilities. These projects were selected, in part, from a HAZUS analysis used to prioritize projects in a 10-year capital plan. For instance, HAZUS identified fire stations that were not previously identified as having seismic hazards, and San Francisco is prioritizing projects to address these hazards.",
"",
"As of September 2014, the federal government owned and leased almost 100,000 buildings (about 40 percent of the total approximate 252,000 federal buildings) within the United States that were located in earthquake hazard areas which could experience very strong (MMI VII) to extreme (MMI X) shaking (see table 2). Almost 405,000 federal civilian personnel are assigned to work in buildings located in these earthquake hazard areas (see table 3). Very strong to severe shaking from earthquakes (MMI VII and VIII) could cause varying levels of damage to buildings depending on how well they were designed and constructed. In addition, earthquakes at this intensity can cause heavy furniture to be overturned and building components such as chimneys and walls to collapse. Violent to extreme shaking (MMI IX and X) could cause considerable damage in most buildings, including the collapse of wood and masonry structures. Actual damage sustained by a building depends on both the intensity of shaking and factors such as soil conditions and the building’s structural design and proximity to an earthquake’s epicenter. For additional information on the potential exposure of federally-owned and -leased buildings to earthquake shaking and the total number and size of federally-owned and -leased buildings by agency see appendix VI.\nFigure 5 shows federally-owned and -leased building locations relative to areas of potential earthquake shaking intensity around the cities we visited and discussed above—Los Angeles, Memphis, San Francisco, and Seattle. See appendix VII for additional information on figure 5.\nClick on regional maps to see a more detailed view. Click on the to close. For a noninteractive version see appendix VII.\nModified Mercalli Intensity (MMI) level MMI earthquake shaking intensity level is based on United States Geological Survey mapping with a 2 percent probability of exceeding that level in 50 years.\nX executive branch agencies which voluntarily report. The data does not include those buildings held by the legislative branch agencies, judicial branch agencies, or other non-executive branch agencies such as the United States Postal Service. Modified Mercalli Intensity (MMI) earthquake shaking intensity level is based on 2014 United States Geological Survey mapping with a 2 percent probability of exceeding that level in 50 years. Approximately 2.0 percent of the total number of active and inactive buildings (1.8 percent of the square feet of buildings) in the FRPP data were not included in the analysis because they either did not have location information included in the FRPP or the location information in the FRPP had inconsistencies in the data which did not allow the building to be accurately located.",
"",
"DOD components and GSA have made varied efforts to define what constitutes an “exceptionally high risk” building—those that are most susceptible to earthquake damage—and identify these buildings within their portfolios. More specifically, GSA recently defined what constitutes an exceptionally high risk (EHR) building and began evaluating and rating its buildings in high seismic areas to identify EHR buildings within its owned-building portfolio. As for DOD components, the Air Force and Army have defined what constitutes an EHR building, but have not identified these buildings in their portfolios while the Navy does not have a current definition of EHR. Executive Order 13717 states that agencies are to adopt the Standards of Seismic Safety for Existing Federally Owned and Leased Buildings (ICSSC Standards). The latest version of the ICSSC Standards is Recommended Practice 8 (RP 8), which requires agencies to designate buildings that are of exceptionally high seismic risk and develop a plan to reduce the risks. To do so, agencies must first define what constitutes an exceptionally high risk building and identify those buildings. According to RP 8, exceptionally high risk buildings can be identified by agencies based on factors such as a building’s age, structure type, location, number of occupants, and importance to mission. Table 4 provides details on the extent to which DOD components and GSA have defined and identified exceptionally high risk buildings.\nA government-wide effort in the 1990s led by FEMA identified about 2,900 exceptionally high risk federal buildings and proposed a plan for mitigating the seismic risk of those buildings. However, FEMA’s report— which estimated about $22.9 billion (Fiscal Year 1999 dollars) was needed to retrofit these and other seismically at risk federal buildings— was never issued to the Congress, as was required by the Order. In addition, DOD officials told us that they believe the costs of retrofitting the exceptionally high risk buildings—the estimated $22.9 billion—was too expensive to pursue. According to Air Force, Army, and Navy installation officials and GSA regional officials, costs are still a challenge to identifying and retrofitting seismically at-risk buildings. Navy and GSA officials said, for example, that the cost to fully evaluate a building for seismic risk can be very high, ranging from $5,000 to more than $100,000 depending on the level of evaluation required. However, we found that the U.S. Fish and Wildlife Service uses FEMA’s Rapid Visual Screening tool as a less-costly alternative to quickly screen buildings and identify those which may need additional evaluation. According to U.S. Fish and Wildlife Service officials, the cost to complete a rapid visual screening is about $300 to $625 per building.\nDOD officials and GSA officials we interviewed support the creation of a uniform definition of exceptionally high risk, but one official noted that agencies might prefer flexibility in the definition and how it is applied. To take steps toward establishing a common definition of exceptionally high risk, GSA officials said they presented a proposal this year to the ICSSC for developing a process to create such a definition that would apply to all federal agencies and are planning to work with ICSSC to pursue this effort in fiscal year 2017. However, it is unclear at this time whether this proposal will be adopted and implemented. The proposal, if implemented, to define what constitutes an exceptionally high risk building could help DOD and GSA to more fully and consistently identify such buildings and evaluate whether there may be unacceptable risks posed by their buildings. In accordance with RP 8, once EHR buildings are identified, agencies should develop a plan to mitigate the associated risks. As such, defining and identifying EHR buildings could afford DOD and GSA opportunities to develop a plan to mitigate potential earthquake damages to their building portfolios and protect building occupants.",
"DOD components and GSA have taken steps to mitigate risk through disposing of buildings and making seismic retrofits when completing major building renovations at some buildings, as required in RP 8. However, DOD and GSA have not developed and implemented comprehensive seismic safety measures to mitigate the impacts of earthquakes across their building portfolios. Seismic safety measures can be employed across agencies’ buildings through various mitigation efforts, including seismically retrofitting and disposing of buildings, as well as lower cost mitigation measures like non-structural retrofits, earthquake drills, and seismic safety inspections.\nSeismic Retrofits: According to DOD installation officials and GSA regional officials, due to limited budgets and the lack of dedicated funding for seismic retrofits, they generally do not undertake many projects specifically for the purpose of retrofitting a building to improve seismic safety. Moreover, according to GSA officials, limiting projects to only seismic work is not cost effective when considering other building improvements that are needed and the invasive nature of seismic upgrades. However, in some cases agencies are required to include seismic retrofits when renovations are being made for other reasons. According to the recommended practices in RP 8 that agencies are required to follow, when agencies reconstruct a building and the reconstruction cost reaches a specific threshold, agencies are generally required to include any needed seismic retrofits as part of the reconstruction. For example, as part of a renovation project, GSA also seismically retrofitted the historic James R. Browning U.S. Court of Appeals Building, in San Francisco, California. A GSA agency official told us that the combined renovation and seismic retrofit cost was about $91 million in 1991. Figure 6 below shows a system installed below the building that is intended to reduce the amount shaking experienced by the building during an earthquake.\nIn another example, we visited a Navy installation in a seismically hazardous section of Tennessee which had renovated a building because it was converting its use from a child development center to a Navy band unit. The project, which was completed in 2010, included seismic retrofits to comply with ICSSC Standards. Installation officials told us that they have not been able to secure funding to address seismic deficiencies at the Security and Fire Department building, which is constructed of unreinforced masonry (see fig. 7). In addition, these officials told us that they have limited funding to replace or retrofit buildings and a large number of unreinforced masonry structures–such as the mission-critical Security and Fire Department Building–remain exposed to risk of damage and casualties from earthquakes.\nDisposals: In addition to retrofitting buildings, DOD and GSA officials stated that they have mitigated the seismic risk of their building portfolios by disposing of some buildings. For example, GSA officials identified four seismically at-risk buildings in Seattle, Olympia, and Everett, Washington, totaling almost 500,000 square feet that they have disposed of. In addition, GSA is considering for disposal another 11 seismically at-risk buildings in the Seattle area totaling over 2.5 million square feet. Our analysis of all federal buildings in the U.S. indicated that in fiscal year 2014, agencies disposed of about 1 percent or 991 of federally-owned buildings (9.6 million square feet) located in very strong (MMI VII) to extreme (MMI X) shaking intensity zones; however, not all of those 991 buildings may have been at seismic risk because they could have been constructed to meet seismic building codes. DOD and GSA officials stated that they do not track that information.\nNon-structural Retrofits: According to FEMA, nonstructural failures have accounted for the majority of earthquake damage in several recent U.S. earthquakes, and it is critical to raise awareness of potential nonstructural risks and strategies to mitigate these risks. Further, RP 8 references FEMA guidance that can be used to obtain information on the relative risks and appropriate mitigation techniques posed by nonstructural building components. For example, according to FEMA guidance, for areas with moderate or high seismicity, the risks associated with many of these components can be reduced by efforts such as securing tall furniture, heavy objects, falling hazards, or hanging objects so that they cannot fall onto a person or block an exit; anchoring pipes, ducts, and equipment to a structural floor, ceiling, or wall; and bracing or anchoring non-structural building components such as chimneys or signs. Based on our interviews with agency officials and observations during site visits, we identified gaps in the extent to which agencies in our review have implemented these non-structural retrofits. For example:\nAir Force: At a new fire station on an Air Force installation in California, we observed that while the building’s mechanical equipment had been fastened to the structure, furniture such as a tall glass trophy case, bookcases, and wardrobe cabinets were not secured to the wall or floor. As a result, the wardrobe cabinets which were located in the sleeping rooms are at risk of overturning during an earthquake and preventing fire station personnel from exiting the rooms (see fig. 8). Air Force officials stated that the mechanical equipment, such as the tanks and pipes, were secured because they were installed as a part of the building construction contract, which required compliance with seismic provisions in the building code. However, these officials said that the furniture, such as the wardrobe cabinets, was installed by others after completion of construction, and that there are no requirements or contract provisions to ensure that furniture is properly secured to keep it from being moved during earthquakes.\nGSA: In a multi-tenant federal building we visited in California, we found filing cabinets and tall furniture were securely fastened in space occupied by GSA staff; however, these types of items were not always adequately secured in offices occupied by staff of tenant agencies in adjacent spaces in the same building. In addition, in a federal building we visited in Tennessee, GSA’s building manager was not aware of the results of a seismic assessment prepared for GSA by an engineering firm, which had identified deficiencies in how some mechanical equipment was secured. Upon learning of this assessment at the time of our visit the building manager stated that work to address these deficiencies could likely be done at a low cost and could be addressed within the existing maintenance budget.\nEarthquake Drills and Seismic Safety Inspections: Earthquake drills and seismic safety inspections could be beneficial for buildings in all earthquake intensity areas, according to FEMA, because even the newest buildings could suffer damage from a large earthquake such as broken windows, fallen ceilings, and displaced furniture that could cause injury to those who are not taking protective measures. According to FEMA, implementing earthquake drills into emergency management programs is important because knowing what to do and where to go during an earthquake can be critical to life safety. In addition, FEMA guidance states that seismic safety inspections, such as those which could be part of routine housekeeping or maintenance practices, could reduce or eliminate risks from earthquake damage to equipment, furnishings, and unsecured objects in buildings. However, based on our interviews with DOD and GSA officials and observations during site visits, we identified gaps in the extent to which agencies have implemented earthquake drills and seismic safety inspections as part of a comprehensive approach to seismic safety. For example:\nAir Force: Officials stated that Air Force instructions provide installations the authority to develop seismic safety measures such as earthquake drills and building content inspections; however, those instructions do not contain specific guidelines concerning measures installations must take. For example, officials stated the instructions do not require furniture to be secured. As a result, personnel in some buildings may be exposed to injuries from furniture overturning during an earthquake. According to these officials, the extent to which seismic safety measures have been developed, if any, varies across installations based on the installations’ assessments of their needs. Moreover, these officials also told us that they do not know how many installations have determined that seismic risk is a threat and have included earthquake preparedness in their Installation Emergency Management Plan because they do not collect and summarize that information.\nArmy: Officials told us that earthquake drills are conducted at facilities related to the U.S. Army Corps of Engineers (Corps) Civil Works program but did not know which installations, if any, were conducting earthquake drills at facilities associated with the Army’s military operations.\nNavy: According to Navy officials, most Navy regions exercise their readiness to respond to an earthquake by holding annual drills— called “Citadel Rumble”—to assess emergency operations staff, training team members, and other emergency response personnel reacting to a strong earthquake. Some of these exercises included “drop, cover, and hold on” drills. Officials also indicated that their safety programs serve to identify housekeeping measures that can mitigate seismic risks. For example, according to these officials, annual “zone inspections” include checking items—such as shelves being attached to walls, heavy objects being placed low on shelves, and overhead lights being braced—associated with mitigating seismic risks. However, information provided by Navy officials from several installations across the United States stated that their “zone inspections” did not include any earthquake related preparedness or earthquake response requirements.\nGSA: While GSA conducts earthquake drills and has taken steps to implement non-structural retrofits and housekeeping tasks to mitigate seismic risks in some of its building spaces, it does not have a policy requiring its own agency to conduct routine seismic drills or advise its tenant agencies’ of the mitigation measures they could take to reduce seismic risks. For example, we visited the John E. Moss Federal Building and found unsecured bookcases stored near an exit door within tenant office space, but found that GSA had taken steps to secure office furniture within the GSA office space (see fig. 9).\nIncorporating seismic safety measures—especially lower-cost mitigations such as non-structural retrofits, earthquake drills, and seismic safety inspections—as part of a comprehensive approach could reduce future earthquake damages. The benefits of implementing comprehensive seismic safety measures such as non-structural retrofits, earthquake drills, and seismic safety inspections is documented in ICSSC Recommended Practice 8 and various FEMA guidance, as discussed above. In addition, DOD and GSA officials agreed that use of lower-cost mitigation measures such as non-structural retrofits to secure building furnishings and mechanical equipment could be incorporated to mitigate risk at relatively low cost. However, DOD and GSA have not consistently implemented comprehensive seismic safety measures throughout their entire building portfolios because, in part, it is not required by DOD and GSA policies. As such, these agencies could benefit by prioritizing and implementing comprehensive seismic safety measures that address the gaps we identified and better enable their facilities to withstand earthquakes and enhance their capacity to save lives, reduce injuries and property damages, and reduce operational impacts when an earthquake does occur.",
"",
"",
"According to Shake Alert stakeholders we spoke with, the implementation of an Earthquake Early Warning (EEW) system could have numerous benefits, including providing warnings to the general public prior to shaking and giving more time for individuals to take protective measures such as to “drop, cover, and hold on.” For example, in the western United States where the system is initially being implemented, EEW is capable of providing up to a 90 second warning in California and up to a 5 minute warning in the Pacific Northwest. Stakeholders’ expectations of public benefits are based in part on the experience Japan has realized in the operation of its EEW, which has been in place since 2007. For example, Japanese officials told us that during the 2011 Tohoku-oki magnitude 9 earthquake, several million people near the epicenter received a warning approximately 15 to 20 seconds prior to shaking. According to the Japanese Meteorological Agency (JMA), a study intended to assess Japan’s EEW system’s performance indicated that the vast majority of these people were able to take advance actions prior to shaking arriving. ShakeAlert stakeholders in the United States told us that similar public safety benefits can be achieved through early warnings provided to transportation providers, school systems, hospitals and first responders, among others.\nTransportation - According to ShakeAlert stakeholders, the EEW system is capable of providing warnings to the transportation sector, which could enhance safety of various transportation modes. For example, according to Bay Area Rapid Transit (BART) officials, the agency has been operationally testing the system since August 2012 as part of ShakeAlert’s beta testing phase. BART officials told us that they use the system to slow down trains when shaking is expected to surpass a certain threshold within a specific area. Slowing the trains down, or stopping them completely, could help prevent additional damages and potentially save lives during an earthquake. In reference to rail transportation, the United States is in position to learn from Japan’s experiences. For example, according to officials in Japan, in 2004 a high speed “bullet” train was derailed during an earthquake in Japan, and since that time, the railroad company that operates these trains has implemented an early earthquake warning system, distinct from Japan’s national system, to help reduce seismic risks and improve safety. The system is designed to automatically shut off power to the train tracks when shaking exceeds a certain magnitude which causes the trains to slow down and stop. According to Japanese railroad company officials we spoke with, the system has operated successfully in slowing trains during earthquakes and preventing derailments.\nSchools - ShakeAlert stakeholders said that the EEW system could be used to provide warnings to school systems, allowing students to take protective measures prior to shaking occurring. In reference to Japan’s experience, for example, its national government instituted a nationwide educational program to inform students how to react during an earthquake warning. According to the government officials involved with this program we spoke with, key implementation actions included creating and disseminating leaflets to all public kindergartens, primary schools, and high schools.\nHospitals and First Responders - According to ShakeAlert stakeholders, hospitals and first responders could use the technology to help ensure the safety of patients and enable effective response in the aftermath of a disaster. More specifically, surgeons about to perform elective surgery could halt or delay a surgery if they were aware that shaking from an earthquake was about to occur. In addition, early warnings to first responders would allow them to take steps such as opening firehouse doors so fire trucks are not stuck inside when needed for response efforts. Moreover, pre-notice events would allow additional time for first responders to begin taking steps to identify where their assistance may be most needed.",
"In addition to public safety benefits, according to ShakeAlert stakeholders, private companies’ use of ShakeAlert could help prevent economic losses. For example, a Boeing company official from Seattle told us that if the federal government commits to funding and implementing the ShakeAlert system, Boeing plans to consider integrating an automated capability into its operations that will help mitigate employee safety concerns and protect against potential losses. In Japan, we observed how a private company—OKI Engineering—has used earthquake early warning information to automatically shut down plant operations, thereby limiting damage from shaking and reducing the time to recover from the earthquakes. Prior to implementing its automated shut-down process in 2003, the company experienced two earthquakes (magnitudes 7.0 and 6.2) that caused $15 million in losses. In addition to losses suffered from fire and equipment damage, OKI Engineering experienced approximately 17 days and 13 days lost productivity following the earthquakes. After it implemented its automated shut-down process, OKI experienced fewer losses and recovered more rapidly from earthquakes. For example, according to company officials, two earthquakes (magnitudes 7.2 and 6.8) in 2008 resulted in the company experiencing approximately $200,000 in damages and 8 total days of lost productivity.",
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"Blind Zones: According to stakeholders, people and facilities near the epicenter of an earthquake will not always receive an early warning because the S-waves (i.e., shaking) will arrive at a given point prior to the system having ample time to relay the warning to those in harm’s way. More specifically, in “blind zones,” shaking will arrive prior to the P-waves reaching distant seismometers, which in turn provide data to ShakeAlert, allowing the system to issue an alert. According to a USGS official, increasing the density of seismometers will allow ShakeAlert to more quickly detect the earthquake and distribute the warning more rapidly, thereby decreasing the size of potential blind zones. USGS has outlined a plan to address this issue in its Technical Implementation Plan for ShakeAlert, which identifies the need for about 440 new and upgraded seismic stations in California and about 280 new and upgraded stations in Washington and Oregon. In addition, the plan anticipates that the life cycle of the stations is approximately 10 years, which means roughly 10 percent of the stations would need to be replaced annually. According to ShakeAlert’s Technical Implementation Plan, the goal is to build and operate a network of seismic stations that are no more than 20 kilometers apart and within 5 kilometers of all mapped fault traces. In addition, according to the plan, more densely placed stations—about 10 kilometers apart—would be needed to minimize blind zones in more densely populated areas. For reference, see figure 10 below, which shows the 2007 (when it became operational) seismic station density of Japan’s EEW system and the 2016 seismic station density in the western United States.\nFalse Positives: False positives—or false alarms—are possible. According to the USGS Earthquake Early Warning Coordinator, the EEW technology has steadily improved its earthquake detection algorithms, mitigating the likelihood of false positives. However, false positives can still occur and their impacts vary across users. For example, a BART official who has been involved in ShakeAlert’s beta testing told us they are not overly concerned about false positives disrupting the train schedule. These officials said that false positives happen occasionally and result in the slowing of a train for a few seconds, which is a relatively minor inconvenience. Officials noted that they are tolerant of such inconveniences because missing an event could result in catastrophic damage. However, other potential users may not be as tolerant of false positives. For example, a gas utility company that initiates an emergency shutdown of service to mitigate the chance of fires occurring during an earthquake would likely be less tolerant of a false positive that resulted in a massive shutdown of gas lines.\nUser Sensitivity: Beta testers currently receiving earthquake early warnings can set their notification thresholds at different levels. For example, some beta testers may want to know every time a small earthquake hits, regardless of whether they will feel shaking or not. Others may only want to know when strong shaking will occur that could potentially result in damage. Understanding that users may desire different notification thresholds and have different tolerances for false positives, the USGS EEW Coordinator told us that, when the system is implemented, they expect that each user will be able to establish its own specific protocols, including at what level of predicted shaking and at what level of certainty (i.e., predicted accuracy of the warning) it will receive the notification and choose to take action. This flexibility, along with the continued scientific research dedicated to improving the accuracy of the detection algorithms to reduce false positives, could help mitigate potential disruptions.",
"Stakeholder Coordination and Governance: USGS and stakeholders are expanding an existing governance structure to help manage the development and implementation of ShakeAlert. Currently, the development and implementation of ShakeAlert is a shared responsibility between and amongst the federal government, state governments, academic research institutions, and regional seismic networks. This could result in disparate work streams, difficulty in identifying dedicated annual funding, and limit planning efforts that could, for example, help determine how the public will receive warnings and educate them on how to react to such warnings. The development of EEW has been underway for many years within the California Integrated Seismic Network (CISN), which is the California region of the Advanced National Seismic System (ANSS). CISN is a collaborative effort among USGS; the California Institute of Technology; University of California, Berkeley; the California Geological Survey; and the California Office of Emergency Services (CAL OES). More specifically, since 2006, the USGS has supported the EEW system development through partnerships with universities and the State of California, which have leveraged existing expertise and essential equipment to develop and implement system requirements, such as the development of detection algorithms and integration of existing seismometers owned by different entities. Figure 11 shows the multiple stakeholders that participate in ANSS, CISN, and the Pacific Northwest Seismic Network, some of which have already contributed to the development of the ShakeAlert system.\nUSGS officials are currently involved in efforts to refine and formalize these organizational relationships to support implementation of ShakeAlert. According to USGS, the agency recognizes the need for improving coordination with the states as a priority going forward. Specifically, in March 2016, USGS officials told us that they plan to propose a governance structure for ShakeAlert similar to the existing ANSS network, which was originally established to coordinate and establish standards for reporting on earthquake monitoring. USGS officials believe this existing structure, which has been used for 16 years, could be expanded to serve as a starting point in developing the governance structure needed to implement ShakeAlert on a broader scale. In addition, USGS officials told us that the existing ANSS governance structure is already being leveraged to help manage the development of the ShakeAlert system.\nUSGS’s proposed expansion of the governance structure would include a management group as well as two working groups. According to USGS officials, one working group would be constructed to work on technical challenges, such as minimizing false positives and reducing blind zones while the other working group would be focused on program management challenges, such as educating the public on how to react to potential warnings and establishing a certification process for system users (see below). Officials from the States of Oregon and California agreed that the proposed governance structure could be effective in managing the implementation of the ShakeAlert program. In addition to expanding the existing ANSS governance structure, other groups have already been working on select issues to address the known challenges. For example, officials from CAL OES told us that they are currently working with a steering committee, which includes State of California officials and USGS, among others, to determine how they will approach public outreach and education in the State of California, which might lead it to take a different approach than other states. Given that USGS is just beginning to reach out to stakeholders to discuss its proposed governance structure, it is reasonable to expect that stakeholders will need time to work together to assign responsibilities and coordinate on key implementation issues and address associated challenges.\nSince USGS is now beginning to expand the existing governance structure for the purpose of managing ShakeAlert, they have not yet developed a program management plan to identify dedicated funding streams in the amounts necessary to develop, implement, and maintain the system; resolved how the public will be alerted to earthquake early warnings or educated the public as to how they should react during a warning; or determined how they will certify users of the system to receive the warning to make sure they are using it in a responsible manner.\nFunding: Stakeholders have not been able to identity a dedicated annual funding stream for the purpose of developing, implementing, and maintaining ShakeAlert. Initial USGS estimates indicated that implementation of an earthquake early warning system for the west coast would require a capital investment of $38.3 million in addition to recurring annual outlays of $16.1 million for maintenance and operations. According to the USGS EEW Coordinator, the agency is now requesting recurring annual outlays to fund system development, implementation, and maintenance. However, according to USGS officials, USGS estimates for system implementation have not considered some program management costs, such as the cost associated with a public outreach and education campaign, user certification, or other related costs. To help support the estimated implementation costs, the President’s fiscal year 2017 budget identifies $8.2 million for USGS’s earthquake early warning implementation efforts. In addition, CAL OES officials told us that the State of California is considering the approval of $23 million in a one-time allocation from the general fund to help, in part, educate California citizens about the ShakeAlert system and how to react when receiving an earthquake early warning.\nPublic Alerting and Education: Stakeholders have not developed a plan as to how ShakeAlert will alert the public to an earthquake early warning or begun to educate the public on how to react to such warnings. According to officials involved with the development and implementation of the ShakeAlert system, a public outreach and education campaign is critical to the success of the program. Officials explained that the public needs to know how to react when provided a ShakeAlert warning; however, ShakeAlert officials have yet to determine how they will begin educating the public and when that process will begin. In discussing their approach to public education, officials from JMA told us that while they had a limited budget, they successfully conducted a public outreach and education campaign in 2007. Among their efforts was creating and distributing many kinds of public relations materials, such as leaflets, posters, and movies. According to JMA, television programs and commercials were the most effective. However, JMA officials noted that the level of education needed in the United States may be different than what was needed in Japan. In addition, the communication methods for distributing ShakeAlert warnings to the public still need to be defined. For example, USGS is considering using FEMA’s Integrated Public Alert and Warnings System (IPAWS), which is used to provide public safety officials a way to alert and warn the public about serious emergencies using the Emergency Alert System and Wireless Emergency Alerts, among others. However, according to the EEW Coordinator, there are concerns about using IPAWS because the system does not immediately announce a warning and the resulting delays could render ShakeAlert useless during “short-notice” events where the warning only precedes shaking by a few seconds.\nUser Certification: According to the USGS EEW Coordinator, they plan to implement a certification process to ensure that users who receive ShakeAlert warnings act responsibly when issuing those warnings; however, stakeholders have not developed a plan for doing so. For example, a radio station receiving the warning for the purpose of broadcasting to its listeners should know how to relay the message accurately and in a manner that prepares people to take appropriate action, but does not incite panic. However, currently, according to USGS officials, USGS and other stakeholders have not defined what the requirements for certification will be, how this process should be executed, and how costs will be covered. USGS has begun identifying potential stakeholders that would form a working group to help determine how this process could be implemented and managed. In addition, as related to costs, ShakeAlert officials had considered the possibility of subscription services to potentially help fund and offset some of the anticipated costs of the program, such as for certification. In Japan, for example, the national agency responsible for distributing EEW system warnings assesses a fee to cover its costs to distribute EEW. In March 2016, a USGS official told us that USGS is not considering the use of subscription fees.\nAccording to the Project Management Institute (PMI), an effective governance structure ensures that strategic alignment is optimized and that the program’s targeted value and benefits are delivered as expected. Further, according to PMI, establishing a single program governance board that is accountable for all critical elements of program oversight within an organization is considered to be the most efficient means for providing effective and agile governance oversight. PMI also notes that under certain circumstances, some programs may need to report to multiple governance boards. These may include, for example, programs that are sponsored and overseen jointly by private and governmental organizations, that are managed as collaborations between two private but otherwise competitive organizations, or that exist in exceedingly complex environments whose subject matter experts cannot be effectively assembled into a single program governance board. Under these circumstances, it is critical that the systems and methods for program governance and the authority for program decision making be clearly established.\nUSGS’s plan to extend the existing governance structure to include officials from the States of Washington, Oregon, and California could help provide an effective first step towards overcoming the program management challenges that were identified by ShakeAlert stakeholders. More specifically, once the governance structure is expanded, it could allow USGS and other ShakeAlert stakeholders to begin developing plans to address the program management challenges identified above. However, currently, ShakeAlert stakeholders have not established a program management plan to help manage the development, implementation, and maintenance of the program, in part, because the governance structure has yet to be expanded to include many of the key stakeholders that are needed to help coordinate such issues. USGS has developed a technical implementation plan that identifies and prioritizes the technical needs of the system. However, the technical implementation plan is largely limited to the hardware and software needed to develop and implement the ShakeAlert system and does not address program management issues, such as funding, public alerting and education, and user certification. According to the Project Management Institute, a program management plan, in part, establishes management controls for integrating and managing the program’s individual components. Such a plan could include subsidiary plans, such as how the program would manage a public outreach and education campaign and the certification of ShakeAlert users. USGS officials and ShakeAlert stakeholders agreed that stakeholder participation in the development of these plans will be beneficial to development and implementation of ShakeAlert. Further, USGS officials agreed that more detailed plans are needed prior to fully implementing ShakeAlert in the western United States. Without a program management plan that addresses the various challenges identified by stakeholders, ShakeAlert program management officials may not be able to identify and implement solutions to the challenges that have already been identified.",
"Nearly half of all Americans are exposed to potentially damaging ground shaking from earthquakes, according to USGS, with communities such as Los Angeles, Memphis, San Francisco, and Seattle being particularly vulnerable because of their locations in areas where extreme shaking could occur. These cities have taken actions to assess and mitigate earthquake risks, including mandating structural retrofits of buildings to enable them to better withstand shaking and requiring that building furnishings, equipment, and other nonstructural components be secured to prevent their displacement and causing damage when shaking occurs.\nBecause many federally-owned and -leased buildings are located in earthquake hazard areas where moderate to extreme shaking is expected, it is important that the federal agencies responsible for these buildings take steps to assess and mitigate earthquake risks to their buildings. These steps can include identifying exceptionally high risk buildings that are most susceptible to damage from earthquakes and developing a plan to address those risks. Further, for all buildings, making risk-informed mitigation decisions ranging from structural retrofits to implementation of lower-cost mitigations such as non-structural retrofits, seismic safety inspections, and earthquake drills as part of a comprehensive seismic safety program could better enable agencies to protect their assets from earthquake damage and reduce injuries to building occupants. Moreover, while DOD components and GSA have implemented mitigation measures to varying degrees intended to reduce earthquake risks, including making structural and non-structural retrofits to some buildings, these efforts are generally not part of a comprehensive approach, which results in buildings, or spaces within buildings, having dissimilar levels of protection against earthquake risks. Until they fully identify their exceptionally high risk buildings, DOD and GSA will be unable to fully understand the most significant earthquake risks affecting buildings for which they are responsible and develop a plan to reduce those risks—in accordance with RP 8—which could inform prioritizing funding requests for mitigations such as retrofits. In addition, as a result of not employing comprehensive seismic safety measures—which include non-structural retrofits, seismic safety inspections, and earthquake drills— to mitigate earthquake risks where applicable, DOD and GSA are also missing low cost opportunities to reduce potential damages, injuries, and casualties from future earthquakes. Limited funding available for earthquake mitigation efforts makes it critical for agencies to effectively prioritize high-cost retrofits and to know and understand where low cost seismic safety measures could be the most effective across their building portfolios.\nEarthquake Early Warning (EEW) technology has the potential to enhance public safety and benefit users by providing time for protective measures to be taken before shaking occurs. USGS is currently working with ShakeAlert stakeholders to expand an existing governance structure that could help better define these roles and responsibilities and create the plans needed to fully implement ShakeAlert. To do so, as ShakeAlert’s governance structure takes shape, stakeholders will need to coordinate on key program management challenges and make decisions on issues such as (1) identifying sources of funding to further develop and implement ShakeAlert; (2) educating and alerting the public; and (3) determining the extent to which entities need to be certified to use the system and how to provide such certifications. Developing a program management plan that establishes management controls for integrating and managing the program’s individual components could help address these challenges. Such a plan could include subsidiary plans, such as how ShakeAlert would manage public outreach, conduct educational campaigns, and potentially identify dedicated funding streams from ShakeAlert stakeholders.",
"To strengthen efforts to mitigate earthquake risks to federal buildings, we recommend that the Secretary of Defense and the Administrator of GSA take the following actions: 1. Define what constitutes an exceptionally high risk building, identify such buildings, and develop plans to mitigate those risks, including prioritizing associated funding requests as needed. 2. To the extent practicable, prioritize and implement comprehensive seismic safety measures which could include earthquake drills, seismic safety inspections, and non-structural retrofits to decrease risks and reduce damage in federally-owned and -leased buildings in earthquake hazard areas.\nFollowing the expansion of the ShakeAlert governance structure to include key stakeholders, we recommend that the Secretary of the Department of the Interior direct the U.S. Geological Survey, working through the ShakeAlert governance structure, to take the following action: 3. Establish a program management plan that addresses, among other things, the known implementation challenges.",
"We provided a draft of this report to the Departments of Commerce (NIST), Defense, the Interior (USGS), and Homeland Security (FEMA); GSA; and NSF for review and comment. DOD, GSA, and USGS agreed with our recommendations, as applicable to each agency.\nIn written comments (see app. IX), DOD said that it is participating in the ICSSC effort described in this report to develop a common definition for EHR buildings and will proceed to assess its inventory once a standard definition is adopted as funding is available. If implemented effectively, this action should begin to address the recommendation. In addition, DOD said that it has implemented comprehensive seismic safety measures on a limited basis and indicated that more comprehensive implementation would need to compete with other departmental priorities. More information will be needed over time about DOD’s efforts to implement comprehensive seismic safety measures to determine whether its efforts address the intent of the recommendation.\nGSA officials said in their written comments that they agreed with the overall nature of our findings but noted they were concerned about the extent to which we discussed progress GSA had made to identify its EHR buildings and prioritize building seismic risk. We modified the text of the report to provide additional context and information related to the steps GSA has taken to 1) define what constitutes an exceptionally high risk building and 2) begin identifying its exceptionally high risk buildings. This information can be found in Table 4 of the report and in related text. However, we communicated to the agency our belief that it needed to continue taking actions to fully meet the intent of our recommendations. More specifically, GSA will need to continue identifying its EHR buildings and then develop plans to mitigate the risks that are identified, as well as implement comprehensive seismic safety measures. GSA officials subsequently said that they agreed with our recommendations. GSA’s letter, along with our responses to specific points, is reprinted in app. X.\nFEMA provided technical comments, which we included, as appropriate. USGS, NIST, and NSF did not provide written comments.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretaries of Commerce, Defense, the Interior, and Homeland Security, the Administrator of GSA, and the Director of the National Science Foundation, as well as appropriate congressional committees and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact Chris P. Currie at (404) 679-1875 or curriec@gao.gov, or David J. Wise at (202) 512-5731 or wised@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix XI.",
"This report examines (1) What actions have select city governments taken to assess and mitigate seismic risks that could affect buildings in their jurisdictions? (2) What is the distribution of federal buildings with regard to seismic hazard areas, and to what extent have select federal agencies identified and mitigated seismic risks to their buildings? (3) What are the potential benefits of ShakeAlert and to what extent are United States Geological Survey (USGS) and stakeholders addressing technical and implementation challenges, if any, to implementing the system?\nTo address the first objective, we conducted site visits to four U.S. cities—Seattle, Washington; Memphis, Tennessee; San Francisco, California; and Los Angeles, California – selected from among those with the highest earthquake loss estimates to buildings and seismic hazard level (probabilities of ground shaking), as identified by Federal Emergency Management Agency (FEMA), and to reflect geographic diversity. For each of these cities, we met with officials from FEMA regional offices, state and local government, and regional nonprofit consortia with familiarity of the four cities to discuss mitigation activities that had been undertaken or are planned. We also toured new and existing buildings in San Francisco and Los Angeles selected by local officials to observe examples of the physical mitigation measures implemented to avoid or reduce damage to structures and related injuries resulting from earthquake disasters. In addition, for each of the four cities we reviewed the relevant state and local policies, hazard mitigation plans, practices, and other process activities used to reduce risk. Additionally, we reviewed FEMA’s guidelines about seismic building practices, efforts to support earthquake mitigation implementation activities at the state and local level, and education and outreach and promotion of earthquake preparedness; prior GAO reports; and numerous other reports, summaries, and studies on earthquake hazard mitigation activities to provide background and context. The findings, while providing important perspectives that could be beneficial to federal, state, and local government efforts to mitigate earthquake risks to buildings, are not generalizable to all U.S. cities.\nTo address the second objective, we performed a geographic analysis of the number of leased and owned federal buildings in use or which will be needed in the future, total building square footage of both leased and owned federal buildings in use or which will be needed in the future, and the number of federal employees assigned to work in each area of earthquake shaking intensity based on the Modified Mercalli Intensity (MMI) scale. To perform this analysis, we obtained Fiscal Year 2014 Federal Real Property Profile (FRPP) building data including building size, location, ownership, legal status (which indicates if the building is owned or leased), status of use (which indicates if the building is currently being used, will be needed in the future, or has been or is in the process of being disposed of, or is considered as excess or surplus), and the date of disposal for buildings that have been disposed of. We also obtained Office of Personnel Management’s Enterprise Human Resources Integration (EHRI) database federal employee official worksite data as of September 2014 and 2014 earthquake shaking intensity maps from USGS. To assess the reliability of the FRPP data we reviewed previous GAO and General Services Administration (GSA) Office of Inspector General work on FRPP data reliability and limitations, reviewed FRPP system controls in place, interviewed GSA and Department of Defense (DOD) officials regarding data checks, and conducted electronic testing to determine completeness and that data element values are consistent with expected values. To assess the reliability of the EHRI data, we examined existing information about the data’s overall reliability and system controls; and conducted manual and electronic testing. We found that the FRPP and EHRI data elements of interest to this engagement were sufficiently reliable for the purpose of our reporting objectives.\nTo conduct our geospatial mapping analysis, we used USGS earthquake shaking mapping with a 2 percent probability of exceeding a given MMI level in 50 years. We used mapping with this probability of exceedance because the International Code Council uses 2 percent in 50 year percent ground acceleration mapping with some adjustments to determine the Maximum Considered Earthquake (MCER) for the International Building Code. This report only includes the effects from natural earthquakes. The effects of induced earthquakes are not incorporated in the MMI maps we used and are not considered for the purposes of this report. To determine the MMI level for each of the buildings we used a SAS analytics software procedure to geocode each building’s location from the FRPP data. During our analysis we found that approximately 2 percent or 5,036 of the 252,407 owned and leased federal buildings identified as active or inactive (1.8 percent or 48.6 million square feet of the 2,661 million square feet of buildings) in the FRPP building data either did not have location information included in the FRPP or the location information in the FRPP had inconsistencies in the data which did not allow the building to be accurately located. As a result, the MMI could not be determined for those buildings and they were excluded from the MMI results. We determined that this small percentage of missing data did not materially affect the results of our work and that the data were sufficiently reliable for the purposes of our reporting objectives.\nTo determine the extent to which selected federal agencies assessed and mitigated the seismic risks of their buildings in objective two, we selected DOD and GSA to review because as of September 2014 they owned and leased about 53 percent of all federal buildings by number, about 72 percent of the federal owned and leased buildings in square feet, and as of 2013 accounted for about 68 percent of the annual operating costs for owned and leased federal buildings. We interviewed DOD (Air Force, Army, and Navy) and GSA headquarters officials and solicited written responses to questions regarding the extent to which they identify and mitigate seismic risks to their federal buildings agency wide. We also selected three DOD installations–one for each service Air Force, Army, and Navy–which had a large number of buildings and were located near the above cities selected because of their high seismic hazard levels. We visited these installations, one in the State of California, one in the State of Tennessee, and one in the State of Washington. At these installations we interviewed facility officials and visited buildings which had been constructed to modern seismic building codes, seismically retrofitted, or have not been retrofitted to observe DOD’s seismic risk mitigation efforts. Furthermore, we interviewed GSA facility officials and seismic engineers in the three GSA regions—Regions 4, 9, and 10—that cover the above selected cities and visited GSA buildings which had been seismically retrofitted and buildings which have not been retrofitted to observe GSA’s seismic risk mitigation efforts. We also reviewed executive orders, federal law, and federal standards regarding the requirements for federal agencies to mitigate seismic risk. Additionally, we interviewed officials and reviewed seismic mitigation documents from FEMA and USGS who play roles in federal earthquake risk mitigation efforts and earthquake hazard identification. During our document reviews and interviews, we identified and interviewed other federal agencies including the United States Fish and Wildlife Service, associations including the American Society of Civil Engineers, and a private industry representative to provide background and additional information on earthquake mitigation practices. We limited our selection to those that have experience relative to earthquake science and its potential impacts on buildings. Based on our review of the Standards of Seismic Safety for Existing Federally Owned and Leased Buildings: ICSSC Recommended Practice 8 (RP 8) and FEMA guidance on earthquake risk mitigation, we developed questions to determine the extent to which each DOD component and GSA had implemented key mitigation strategies identified in those documents. Specifically we asked questions regarding their compliance with the RP 8 requirement for seismically retrofitting buildings, including when buildings are being rehabilitated or when a building is considered exceptionally high risk. We also asked questions to determine the extent to which they implement less expensive mitigation strategies identified by FEMA, such as non-structural retrofits, building contents mitigation, and earthquake drills. We then summarized their responses in this report.\nTo address the third objective, we reviewed relevant ShakeAlert documentation, including policies, plans, and legislation. Specifically, we reviewed USGS documentation, including the Technical Implementation Plan for the ShakeAlert Production System – An Earthquake Early Warning System for the West Coast of the United States and other documents to gather information on the potential benefits and limitations of the earthquake early warning system, ShakeAlert. We also visited Japan, which has an operational earthquake early warning system, to interview officials from the private sector, transportation sector, and Japanese government to discuss the implementation challenges they overcame to deploy a national earthquake early warning system. We also conducted interviews with USGS officials and other stakeholders of the ShakeAlert system using a standard set of questions to discuss what, if any, potential benefits, limitations, and implementation challenges exist. To do so, we interviewed USGS officials; stakeholders from the California Integrated Seismic Network, and Pacific Northwest Seismic Network, and academia.\nWe then identified ShakeAlert beta testers by requesting information from the three seismology lab coordinators, in partnership with USGS on the companies, government entities, and others that were participating in ShakeAlert’s beta testing effort. We then selected beta testers from this list to interview to collect their perspectives on the benefits, limitations, and potential challenges to developing and implementing ShakeAlert. In doing so, we ensured that we selected representatives from each of the three western states—California, Oregon, and Washington—that have entities involved in the beta testing effort. To help ensure balance, we chose officials from utility companies, emergency management offices, and the private sector from throughout the geographic region. Following interviews with the selected beta testers, we performed a content analysis to identify common themes related to the limitations and implementation challenges, of the ShakeAlert system. More specifically, two analysts identified and coded recurring themes and engaged two additional analysts to help resolve any questions or potential discrepancies in determining how the challenges were grouped. We assessed the results of this analysis against the Project Management Institute’s The Standard For Program Management – Third Edition to determine the extent to which a program management plan should be established to address key elements, such as those identified by ShakeAlert stakeholders.\nWe conducted this performance audit from January 2015 to August 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.",
"In addition to figure 2 shown above in the report, USGS has also mapped the Modified Mercalli Intensity (MMI) of earthquakes based on a higher probability of exceedance. For example, figure 12 depicts a map showing areas where there is a 10 percent chance of an earthquake exceeding the MMI level in 50 years. A 10 percent in 50 years probability equates to an earthquake recurring and exceeding a given MMI level about every 475 years. Based on this map and probability, USGS staff estimate over 97 million people in the 48 contiguous states are located in areas exposed to moderate (MMI = V) or greater earthquake shaking.\nIn figure 13, the mapping shows a 50 percent chance of an earthquake exceeding the MMI level in 50 years, and while the shaking intensities are even less than the 10 percent in 50 year map, this probability equates to an earthquake recurring and exceeding a given MMI level every 72 years. Based on this map and probability, USGS staff estimate about 43 million people in the 48 contiguous states are located in areas exposed to moderate (MMI = V) or greater earthquake shaking.",
"",
"Seismic hazard. Washington State is vulnerable to a variety of earthquakes because of its location near the collision boundary of two major tectonic plates, according to the Washington State hazard mitigation plan. Washington State ranks second (behind California) among states most susceptible to damaging earthquakes in terms of economic loss, according to FEMA. Seattle is at risk for earthquakes from three sources: (1) deep earthquakes like those that damaged the city in 1949, 1965 and 2001; (2) shallow earthquakes along the Seattle Fault; and (3) huge megathrust earthquakes that could reach magnitude 9.0 but would be centered outside Seattle.\nDeep earthquakes with a magnitude of 6.0 or greater occur in Seattle about every 30 to 50 years. Deep earthquakes occur at depths of 30-70 km in oceanic crust as it dives under lighter continental crust. Because of the depth, even buildings located right above them are far enough away that ground motions are weakened, according to the City of Seattle Office of Emergency Management (Seattle OEM). The 2001 Nisqually Earthquake was a deep earthquake, according to Seattle OEM. Shallow earthquakes with a magnitude of 6.0 or greater occur about every 500 years. Shallow earthquakes occur in the North American plate at a depth of 0-30 km near the crust’s surface along faults. Intense shaking occurs near the epicenter but usually diminishes quickly with distance relative to the other earthquake types. Shallow earthquakes are the type expected on the Seattle Fault zone, which is the primary but not only source for shallow earthquakes in Seattle, according to Seattle OEM. Megathrust earthquakes occur every 200 to 1,100 years, or average every 500 years. Megathrust earthquakes occur on the interface between the North American plate and the San Juan de Fuca plate, a small plate extending from northern California to British Columbia. These are the largest type of earthquakes in the world, according to Seattle OEM. Recently, geologists found evidence of massive earthquakes off the Washington coast (referred to as the Cascadia Subduction Zone) and along the Seattle Fault. The northernmost strand of the Seattle Fault Zone had long been thought to lie south of the downtown area. Recent research and a compilation of existing geophysical and geologic data, however, suggest that the fault tip may lie directly beneath the downtown area. If the fault lies directly beneath the downtown area, ground motions there during a Seattle Fault earthquake may be significantly larger, according to the 2009 Seattle hazard mitigation plan.\nSeismic history. Three major earthquakes have struck Seattle since the beginning of the 20th century (in 1949, 1965 and 2001). The February 28, 2001 magnitude 6.8 Nisqually Earthquake was the last major earthquake that hit the Puget Sound Region. This was a deep earthquake that was centered about 10 miles northeast of Olympia and at a depth of about 30 miles. One person died of a stress induced heart attack, 407 people were injured of which four were considered serious, and estimates place damage at $2 billion.\nProbability of seismic occurrence / estimated damages. Downtown Seattle has a 5 percent chance of experiencing violent shaking within the next 50 years, according to the U.S. Geological Survey (USGS). The Seattle Fault is Seattle’s most dangerous source, according to Seattle OEM. The Seattle Fault ruptured around 900AD causing a 7.2 magnitude earthquake, massive landslides and a tsunami. The major consequences from a future earthquake include building collapse, landslides, fires, liquefaction (where the ground turns liquid under buildings) and potentially a tsunami. Casualties could exceed 1,000 people and economic damage could easily run into billions of dollars, according to Seattle OEM. Deep earthquakes are the most common large earthquakes that occur in the Puget Sound region, according to Seattle OEM. Earthquakes larger than magnitude 6.0 occurred in 1909, 1939, 1946, 1949, 1965 and 2001. Megathrust earthquakes are the greatest risk to the region as a whole, according to Seattle OEM. A megathrust earthquake could reach magnitude 9.0 or greater and affect an area from Canada to northern California. Shaking in Seattle would be strong to very strong and prolonged, but not as intense as a Seattle Fault earthquake. This area has a megathrust earthquake about every 500 years.\nA magnitude 7.2 Seattle Fault earthquake scenario might result in structural collapses, landslides, fires, and a tsunami causing 1,200 deaths and 15,000 severe to critical injuries, according to Seattle OEM. The earthquake might cause an estimated $20 billion in damage and indirect losses, including destroying 6,000 buildings, and leaving 21,000 buildings severely damaged and unsafe to occupy, according to Seattle OEM. A large Seattle Fault earthquake, similar to the 900AD earthquake, could trigger a 16 foot tsunami that would strike the Seattle shoreline within seconds of the earthquake and flood it within 5 minutes. Although megathrust and deep earthquakes will not directly cause tsunamis in Seattle these sources could initiate landslides that result in local tsunamis, according to the City of Seattle. New modeling suggests small tsunamis in Puget Sound and Hood Canal but strong currents are predicted to be a big problem from megathrust tsunamis, according to the USGS. A magnitude 7 Seattle Fault earthquake could cause dozens of fires. Suppressing the fires would be more difficult because damage to the water system would reduce water pressure in many parts of the city, according to the City of Seattle.\nExamples of efforts to assess and mitigate seismic risks. Seattle has a hazard mitigation plan that identifies earthquake risks and the capabilities needed to mitigate those risks. In addition, Seattle is implementing a program to retrofit or replace existing fire stations, police precincts, and community centers to provide seismic upgrades. This effort is being funded by a levy and a capital improvement program intended to make these critical facilities more resilient and better able to support emergency operations in crisis situations.\nSeattle obtained funding to upgrade, renovate, or replace 32 neighborhood fire stations using funds from a levy program. Seattle has approximately 1,160 unreinforced masonry (URM) buildings scattered around the city and concentrated in historic districts. Seattle has been working on developing a program whereby URM buildings would be required to be seismically upgraded, or demonstrate they meet a proposed standard for seismic resistance. At the time of our study, Seattle was considering implementing a seismic retrofit policy that would require URM building owners to apply a “Bolts Plus” standard to reinforce URMs. The “Bolts-Plus” standard essentially involves the installation of shear and tension anchors at the roof and floors, and, when required, the bracing of the unreinforced masonry bearing walls. By anchoring these components together, building walls are much less likely to collapse, according to a study prepared for the Seattle Department of Planning and Development.",
"Seismic hazard. Memphis is located within the New Madrid Seismic Zone (NMSZ) which includes eight states (Illinois, Indiana, Kentucky, Tennessee, Alabama, Mississippi, Arkansas and Missouri). The NMSZ is responsible for three of the largest earthquakes in U.S. history, during 1811-1812. These earthquakes were felt strongly over 50,000 square miles and moderately across 1 million square miles, according to USGS. The affected area was therefore more than twice that of the 1964 Great Alaskan Earthquake, the largest earthquake in U.S. history, and approximately 10 times that of the 1906 San Francisco Earthquake. Earthquakes in the central and eastern United States affect much larger areas than earthquakes of similar magnitude in the western United States. For example, the San Francisco, California earthquake of 1906 (magnitude 7.8) was felt 350 miles away in the middle of Nevada, whereas the New Madrid earthquake of December, 1811 (magnitude ~7.5) was felt in Boston, Massachusetts, 1000 miles away, and caused minor damage in Charleston, South Carolina, and Washington D.C., about 700 miles away, according to USGS.\nDifferences in geology east and west of the Rocky Mountains cause this strong contrast. At the time of the three earthquakes, the Central United States was sparsely populated, with very few structures. Currently, however, the Central United States is densely populated, with major population centers in the metropolitan areas of Memphis and St. Louis. Both of these regions are likely to sustain damage from a NMSZ event, and Memphis, in particular, could see severe damage, according to a 2014 study. Memphis and the surrounding metropolitan area of more than one million people would be severely impacted. Memphis has an aging infrastructure, and many of its large buildings, including unreinforced masonry schools and fire and police stations, would be particularly vulnerable when subjected to severe ground shaking, according to USGS.\nRelatively few buildings were built using building codes that have provisions for seismic-resistant design. Soil liquefaction and related ground failures are likely to occur in downtown Memphis along the Mississippi River and along the Wolf River that passes through Memphis.\nA major earthquake is expected to result in several thousand of fatalities in Memphis, according to the Tennessee Emergency Management Agency. The risk for loss of human life due to earthquake hazard in the region is high according to a 2013 National Earthquake Hazards Reduction Program (NEHRP) study. Based on risk to life-safety, the hazard is very similar to coastal California, but there have been essentially no damaging earthquakes to remind the populace of the hazard, according to the 2013 NEHRP study.\nSeismic history. The western part of Tennessee was shaken strongly by the New Madrid, Missouri, earthquake of 1811-1812 and by earthquakes in 1843 and 1895. During 1811-1812, a series of three earthquakes with magnitudes of approximately 7.5 occurred, according to USGS. On January 4, 1843, a severe earthquake (intensity VIII) affected Memphis/Shelby County and other places in western Tennessee. Walls were cracked, chimneys fell, and windows were broken. Memphis suffered a magnitude 5.0 earthquake in1865, in which chimneys collapsed. The city experienced similar damage from a July 19, 1895, earthquake.\nProbability of seismic occurrence / estimated damages. According to the USGS, the chance that Memphis will experience a magnitude 6.0 or greater earthquake within a 50-year window is between 25 percent and 40 percent. For a repeat of an 1811-1812 type event, with a magnitude 7 or greater, there is a 7 percent to 10 percent chance. According to a 2009 Mid-America Earthquake Center study, the number of damaged buildings resulting from a potential 7.7 earthquake in western Tennessee is far greater than all other states located in the NMSZ. An estimated 264,000 buildings would be moderately or more severely damaged and nearly 107,000 of those buildings would be completely damaged, according to the Mid-America Earthquake Center study. Furthermore, Shelby County, Tennessee, which includes Memphis, comprises half of all estimated building damage in the state primarily due to the major metropolitan area in and around Memphis, according to the Mid-America Earthquake Center study. In addition, Shelby County experiences the greatest number of total estimated casualties, nearly 21,500.\nExamples of efforts to assess and mitigate seismic risks. Memphis participated in the development of Shelby County’s 2010 multi- jurisdictional hazard mitigation plan, which identified actions that can be taken to reduce vulnerabilities against seismic events, including five seismic related projects for the Memphis. Four of the five seismic projects focus on highway bridge and road construction and the fifth project calls for the development of a multi-jurisdictional comprehensive earthquake hazard mitigation plan specifically benefiting Memphis.",
"Seismic hazard. According to the San Francisco Capital Plan, a number of factors contribute to San Francisco’s vulnerability to earthquakes. In addition to being situated between two major earthquake faults (San Andreas to the west and Hayward to the east), San Francisco has some of the most dense wood-structured neighborhoods in the country; the city’s windy conditions could contribute to the spread of fire following earthquakes in these neighborhoods. San Francisco is also surrounded by water on three sides which makes it very susceptible to the seismic impacts of sea level rise. Furthermore, some low-lying areas that were filled around1900 are particularly at risk for liquefaction, according to USGS.\nSeismic history. The San Andreas and other regional faults, including the Hayward Fault, have generated 69 recorded magnitude 5.0 or greater earthquakes since 1800. Of these recorded earthquakes, three (1838, 1906, and the 1989 Loma Prieta earthquake) registered at a magnitude of 6.8 or greater. Historically, the San Andreas Fault system is the most active fault system in Northern California. This fault system is capable of generating very strong earthquakes of magnitude 7.0 or greater, according to the San Francisco hazard mitigation plan. The last major earthquake on the northern portion of the fault occurred in 1906, according to the San Francisco hazard mitigation plan. Known as the Great San Francisco earthquake, this event lasted 45 to 60 seconds and is estimated at magnitude 7.7. It is believed to have caused intensities as high as XI on the MMI Scale, according to the San Francisco hazard mitigation plan. The Great San Francisco earthquake and the subsequent fire resulted in approximately 3,000 deaths and damage estimated over $500 million, according to USGS. Shaking damage was extensive throughout San Francisco, but the 3-day fire that followed the earthquake destroyed the entire downtown area and many of the surrounding residential neighborhoods, according to USGS.\nProbability of seismic occurrence / estimated damages. There is a strong likelihood that San Francisco will experience a significant earthquake from one of the known major faults in the next 30 years, according to the San Francisco hazard mitigation plan. In 2015, the Working Group on California Earthquake Probabilities (WGCEP) forecasted that the probability a magnitude 6.7 or greater would strike the San Francisco region was 72 percent over the next 30 years. In addition, a 2010 Applied Technology Council study of four scenario earthquakes found depending on the magnitude, location and time of day of an earthquake, deaths could range from 70 to nearly 1,000, and injuries requiring medical care could number from 1,900 to more than 14,000. Casualties could be much higher than these estimates if even one large, densely occupied office or apartment building collapses. In addition, multistory concrete buildings in the city built before 1980 have the potential to collapse and kill many people.\nExamples of efforts to assess and mitigate seismic risks. The City and County of San Francisco (San Francisco) Hazard Mitigation Plan provides seismic hazard profiles for ground shaking and ground failure (including landslide and liquefaction) that could occur during an earthquake. The plan includes a list of essential facilities and infrastructure within San Francisco. In addition, the plan describes current, ongoing, and completed large-scale seismic mitigation projects and programs implemented by San Francisco. For example, the plan includes a project to seismically retrofit fire stations to ensure they are fully functional after a major earthquake. San Francisco has implemented or planned mitigation activities, including structural retrofits, at fire and police stations, animal shelters, courts, and prisons. In addition, pursuant to the California Seismic Hazards Mapping Act, the San Francisco Department of Building Inspection (DBI) requires geotechnical reports prepared by a licensed geologist and geotechnical engineer for projects in areas with susceptibility to ground failure, including liquefaction and landslides. DBI requires that foundations and structural systems be designed to survive these hazards. DBI also has procedures for requesting additional review of proposed projects which the Department believes present difficult or unusual issues in areas with the potential for ground failure. San Francisco policy also requires that equipment such as book shelves and filing cabinets are bolted or adhered to the wall in municipal buildings.",
"Seismic hazard. Los Angeles faces one of the greatest risks of catastrophic loss from earthquakes of any city in the world, eclipsed only by Tokyo, Jakarta, and Manila according to a 2013 ranking by Swiss Re, a reinsurance company. There are numerous active and potentially active faults in southern California that have the potential for generating strong ground motions in Los Angeles according to the Los Angeles hazard mitigation plan. The seismic hazards of most concern to Los Angeles include ground shaking, fault rupture and liquefaction. Recent studies have identified various vulnerabilities. For example, pre-1980 soft story (wood frame buildings where the first floor has large openings, such as tuck-under parking, garage doors, and retail display windows) and non- ductile concrete buildings (parts of the building such as columns and frame connectors are too brittle and break in strong shaking) pose a significant risk to life in strong earthquake shaking.\nSeismic history. Some 20 earthquakes of magnitude 6.0 or higher have occurred in Southern California since 1912. The most recent of these was the magnitude 6.7, 1994 Northridge Earthquake which was centered in the northwest part of Los Angeles. The earthquake resulted in 57 deaths, 8,000 injuries, and 92,000 plus buildings damaged. The Northridge Earthquake is the most costly seismic event in the United States since the 1906 San Francisco Earthquake. The infrastructure of the metropolitan area was severely disrupted. Freeways collapsed, the power systems for Los Angeles and linked communities as far away as Oregon were temporarily “blacked out,” and communications were disrupted. In addition, the earthquake resulted in non-structural damage that was extensive, and as dangerous as and far more expensive than structural damage, according to the Los Angeles hazard mitigation plan.\nProbability of seismic occurrence / estimated damages. According to the WGCEP, within the next 30 years the probability is 60 percent that an earthquake measuring 6.7 or greater will occur in the Los Angeles region. In Southern California, one of the most damaging USGS scenarios is a magnitude 7.1 earthquake on the Puente Hills Fault, with building percent loss of 30% in some census tracts and total predicted building loss of $79 billion ($82.8 billion in total economic loss). It would kill 500 to 2,000 people and displace an estimated 58,000 households. It would cause at least moderate damage to 569 highway bridges, 2 airports, and over 470,000 buildings.\nExamples of efforts to assess and mitigate seismic risks. In 1981, Los Angeles passed an ordinance requiring the retrofit of unreinforced masonry buildings given their vulnerability to earthquake damage. This was the first-ever mandatory retrofit ordinance in the State of California. Since the ordinance was passed, more than 99 percent of the city’s unreinforced masonry buildings have been retrofitted or demolished, according to a 2014 Los Angeles study. More recently, in October 2015, Los Angeles passed an ordinance requiring retrofits to strengthen two additional types of buildings that are vulnerable to earthquake damage: brittle concrete buildings and buildings with large first floor openings, such as garages or tuck-under parking. In addition, the Los Angeles Department of Building & Safety (LADBS) has established three new “Preliminary Fault Rupture Study Areas” for several fault lines within the city that have not yet been mapped by the California Geological Survey (CGS). LADBS’s Preliminary Fault Rupture Study Areas are areas where active faults may exist and present a potential for ground rupture to occur during a local earthquake. If a proposed development is found to be in a Preliminary Fault Rupture Study Area, geologic investigations to determine the presence or absence of an active fault will be required before building permits are issued by LADBS.\nThe Los Angeles Unified School District (LAUSD) is actively prioritizing mitigation measures to lower the risks that have been identified and has taken actions to implement mitigation measures at school buildings. According to the 2014 LAUSD Strategic Execution Plan, LAUSD had 26 completed projects. In addition, an evaluation found that 673 sites, which included 4,500 out of 13,500 total school buildings, had possible non- structural hazards – such as hangers and seismic bracing deficiencies, according to LAUSD officials. LAUSD is using the evaluation to prioritize future mitigation projects, according to LAUSD officials. For fiscal years 2011 through 2015, LAUSD received about $5 million from FEMA’s Pre- Disaster Mitigation grant program and the Hazard Mitigation Grant Program for LAUSD’s seismic-related mitigation measures, according to LAUSD. However, the majority of LAUSD’s seismic mitigation funding has come from various state programs, according to LAUSD officials.",
"The Federal Emergency Management Agency (FEMA) estimates seismic risk in all regions of the United States by using two interrelated risk indicators:\nThe Annualized Earthquake Loss (AEL), which is the estimated long- term value of earthquake losses to the general building stock in any single year in a specified geographic area (e.g., state, county, metropolitan area); and\nThe Annualized Earthquake Loss Ratio (AELR), which expresses estimated annualized loss as a fraction of the building inventory replacement value.\nThe AEL addresses two key components of seismic risk: the probability of ground motion occurring in a given study area and the consequences of the ground motion in terms of physical damage and economic loss. It takes into account the regional variations in risk. For example, the level of earthquake risk in the New Madrid Seismic Zone is measurably different from the risk in the Los Angeles Basin with respect to: a) the probability of damaging ground motions, and b) the consequences of the ground motions, which are largely a function of building construction type and quality, as well as ground shaking and failure during earthquakes. Consequences vary regionally, as well. For example, the earthquake hazard is higher in Los Angeles than in Memphis, but the general building stock in Los Angeles is more resistant to the effects of earthquakes.\nThe AELR is the AEL as a fraction of the replacement value of the building inventory and is useful for comparing the relative risk of events. For example, $10 million in earthquake damages in Evansville, Indiana represents a greater loss than a comparable dollar loss in San Francisco, a much larger city. The annualized loss ratio allows gauging of the relationship between AEL and building replacement value. This ratio can be used as a measure of relative risk between regions and, since it is normalized by replacement value, it can be directly compared across metropolitan areas, counties, or states.\nA 2008 FEMA study indicates that the Annualized Earthquake Loss (AEL) to the national building stock is $5.3 billion per year. The majority (77 percent) of average annual loss is located on the West Coast (California, Oregon, Washington) with 66 percent ($3.5 billion per year) concentrated in the state of California. The high concentration of loss in California is consistent with the state’s high seismic hazard and large structural exposure. The remaining 23 percent (1.1 billion per year) of annual loss is distributed throughout the rest of the United States (including Alaska and Hawaii). While the majority of economic loss is concentrated along the West Coast, the distribution of relative earthquake risk, as measured by the AELR, is much broader and reinforces the fact that earthquakes are a national problem. There are relatively high earthquake loss ratios throughout the western and central United States (states within the New Madrid Seismic Zone) and in the Charleston, South Carolina area.\nAs shown in table 5, forty-three metropolitan areas, led by the Los Angeles and San Francisco Bay areas, account for 82 percent of the total AEL. Los Angeles County alone has about 25 percent of the total AEL, and the Los Angeles and San Francisco Bay areas together account for nearly 40 percent of the total AEL.",
"We examined examples of seismic retrofit and non-structural seismic upgrade mitigation projects. For example, the Los Angeles City Hall was built in 1928 and retrofitted in 2001 for $300 million dollars, according to Los Angeles officials. The retrofit included renovation of terra cotta tiles on the dome roof, using concrete to replace unreinforced masonry, and replacing the cracked floor outside the main hallway (see figure 14). In addition, the pedestrian bridge connecting City Hall to an adjacent building was renovated from 1998 to 2001 to include a separation (or sliding) joint. In the case of an earthquake, the two buildings may not sway from side-to-side at the same rate or in the same direction. As such, the separation joint connecting the bridge with City Hall can fall away in the event of an earthquake, allowing for up to 6 inches of separation. This is built to ensure that the two buildings will not collide in an earthquake up to an 8.1 magnitude event. The building is also fitted with base isolators and dampers (see figure 14). The base isolators are designed to move as much as 24 inches. See figure 15 for examples of nonstructural earthquake mitigation enhancements to hospital and school buildings in California.\nSee figure 15 for examples of nonstructural earthquake mitigation enhancements to hospital and school buildings in California.",
"The following tables provide a detailed overview of the potential MMI shaking intensity for federal leased and owned buildings by agency.\nThe following table provides a detailed overview of the number and square footage of federally leased and owned buildings by agency.",
"Appendix VII: Federal Buildings in Four High Earthquake Shaking Intensity Zones of the United States (Corresponds to Fig. 5)\nFigures 16 through 19 include the rollover information in figure 5.",
"FEMA has issued several publications to assist building owners in identifying seismic risk and developing mitigation plans. For example, FEMA E-74, Reducing the Risks of Nonstructural Earthquake Damage, may be useful as a reference for scoping and prioritizing the protection of nonstructural components and contents and it also provides information on the relative risks posed by nonstructural elements, as well as appropriate mitigation techniques.\nIn addition, FEMA’s Incremental Seismic Rehabilitation series, including FEMA 397 Incremental Seismic Rehabilitation of Office Buildings, provides office building owners who have budgetary constraints and cannot afford expensive and disruptive seismic rehabilitation projects, an affordable strategy for responsible mitigation action which can be integrated efficiently into ongoing facility maintenance and capital improvement operations. The manual was developed based on the management practices of office building owners of varying sizes located in various seismic zones in different parts of the United States. It includes guidance for building owners to address building contents mitigation and earthquake drills as part of a comprehensive seismic safety program.\nFinally, FEMA has also developed additional publications on how structural and nonstructural earthquake risks can be mitigated for many building use types. In particular they have issued FEMA P-811 QuakeSmart: Earthquake Publications for Businesses. While the guidance is directed towards the private sector, it includes actionable and scalable basic guidance and tools regarding the importance of earthquake mitigation and simple things that can be done to reduce the potential of earthquake damages, injuries, and financial losses. See table 11 for a list of publications produced by FEMA which provide guidance to mitigate earthquake risks for many building use types.",
"",
"of the report (e.g., see Table 4) to include information about the Seismic Rating report. 7. We do not dispute GSA’s comment. Our reference to FEMA guidance in the report is to illustrate low-cost opportunities that agencies can use, as applicable, as part of comprehensive seismic safety programs to reduce potential damages, injuries, and casualties from future earthquakes.",
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"In addition to the contacts named above, Mike Armes (Assistant Director), R. Denton Herring (Analyst-in-Charge), Jeffrey Fiore, Edward George, Les Locke, Gary M. Malavenda, Kristiana Moore, Samuel Woo, Aaron Safer-Lichtenstein, Eric Hauswirth, Tracey King, Dominick M. Dale, Michele Fejfar, Melinda Cordero, Amber H. Sinclair, John Mingus, Katrina E. Pekar-Carpenter, and Grant Mallie made key contributions to this report."
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"question": [
"How has the DOD and the GSA reduced the risks of EHR buildings?",
"In what ways are the efforts of the DOD and GSA lacking?",
"What are some of the consequences of the DOD and GSA's lack of effort to identify EHR buildings?",
"Why are the DOD and GSA significant in relation to the federally-owned and -leased buildings in the United States?",
"What is limiting the expansion of ShakeAlert?",
"What can be done to address these problems?",
"What is the purpose of ShakeAlert?",
"What was the GAO asked to do?",
"What does the GAO's report address?",
"What kind of information did the GAO collect for this report?"
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"summary": [
"In addition, while DOD and GSA have taken some steps to reduce the seismic risk of their buildings through seismic retrofits, disposals, and low-cost mitigation alternatives, GAO observed gaps in the extent to which these agencies have comprehensively implemented these mitigation measures, such as securing furniture.",
"The Department of Defense (DOD) and General Services Administration (GSA), which are responsible for the majority of these buildings, have not fully identified their exceptionally high risk (EHR) buildings or prioritized and implemented comprehensive seismic safety measures.",
"Until they fully identify their EHR buildings and prioritize and implement comprehensive safety measures, DOD and GSA will be unable to fully understand and address the vulnerabilities of their buildings.",
"About 40 percent of federally-owned and -leased buildings in the United States are located in areas where very strong to extreme shaking from earthquakes could occur.",
"However, implementation challenges exist that could inhibit efforts to expand the system throughout the western United States. For example, decisions on funding, public education, and user certification are needed to enable implementation of an integrated system across jurisdictions.",
"Developing a program management plan, which helps establish management controls, could help address ShakeAlert implementation challenges.",
"U.S. Geological Survey's (USGS) early warning system—ShakeAlert—is capable of broadcasting early warnings, and stakeholders, including state agencies and universities, have identified multiple benefits, such as enhanced public safety.",
"GAO was asked to review efforts to mitigate against earthquakes impacts in the United States.",
"Specifically, this report address (1) actions select cities have taken to mitigate seismic risks, (2) the distribution of federal buildings relative to earthquake prone areas and actions to identify and mitigate seismic risks to these buildings, and (3) what is known about the benefits of USGS's earthquake early warning system, ShakeAlert, and the extent to which implementation challenges are being addressed.",
"GAO reviewed key documents and federal authorities; collected federal building inventory information; conducted site visits to selected cities—Seattle, San Francisco, Los Angeles, Memphis; and interviewed, among others, federal, state, and local officials."
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GAO_GAO-14-57
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{
"title": [
"Background",
"CHS Program Organization",
"CHS Program Funding and Service Eligibility Requirements",
"CHS Payment Process",
"IHS Referrals",
"Health Care Coverage Options in PPACA Affecting American Indians and Alaska Natives",
"More than Two-Thirds of CHS Claims Were Paid within 6 Months but Some Took Much Longer to Pay",
"IHS Has Three Timeliness Measures for Processing Provider Payments, but the Two Involving Purchase Order Issuance Do Not Provide a Clear Picture of Timeliness",
"Complexity of the CHS Program, CHS Staffing and Funding Availability, and Variations in Program Practices Can Affect the Timeliness of Payments to Providers",
"Complex Processes for Determining Whether a Service Is Eligible for CHS Funding Can Affect the Timeliness of Provider Payments",
"Complexities Associated with the CHS Processes for Paying Providers Also Can Affect Timeliness",
"CHS Staffing and Funding Availability Also Can Affect Timeliness of Payments to Providers",
"Local CHS Program Practices for Implementing CHS Eligibility Regulations Vary, which May Contribute to Variations in Timeliness for Aspects of the Provider Payment Process",
"New Coverage Options in PPACA May Provide IHS an Opportunity to Simplify CHS Eligibility Rules",
"Conclusions",
"Recommendations for Executive Action",
"Agency Comments and Our Evaluation",
"Appendix I: Comments from the Department of Health and Human Services",
"Appendix II: GAO Contact and Staff Acknowledgments",
"GAO Contact",
"Staff Acknowledgments",
"Related GAO Products"
],
"paragraphs": [
"",
"IHS facilities and their associated CHS programs are located in 12 geographic areas, each overseen by an IHS area office led by an Area Director. Ten of the 12 areas include at least some IHS-operated facilities; these 10 areas oversee local CHS programs in 33 states. IHS headquarters sets CHS program policies and oversees the areas. Each IHS area contains multiple local CHS programs. The areas distribute funds to the local CHS programs in their areas, monitor the programs, and establish procedures and provide guidance and technical assistance to the programs.",
"The CHS program is funded through annual appropriations and must Based on the operate within the limits of available appropriated funds.regulations that IHS has established for the CHS program, a number of requirements must be met in order for a service to be eligible for CHS payment.payment, local CHS programs must consider the following: Based on the requirements, before approving a service for Is the patient a member or descendent of a federally recognized tribe or someone with close ties to the tribe? To be eligible for CHS payment, the service must be for a patient who is a member or descendent of a federally recognized tribe or someone who maintains close economic and social ties with the tribe.\nDoes the patient reside within the Tribal Contract Health Service Delivery Area (CHSDA)? For a service to be paid for with CHS funds, it must be for a patient who resides in the Tribal CHSDA. Unless otherwise established, the CHSDA encompasses the reservation, the counties that border the reservation, and other specified lands. Exceptions exist for students who are temporarily absent from their CHSDA during full-time study and individuals who are temporarily absent from the CHSDA for less than 180 days due to travel or employment.\nAre alternate health care resources available to the patient? Many users of IHS services are also eligible for other sources of payment for care, including Medicaid, Medicare, and private insurance. The CHS program is typically the payer of last resort. Therefore, before a service is approved for CHS payment, the patient must apply for and use all alternate resources that are available and accessible. Services from an IHS facility are also considered a resource, so CHS funds cannot be used for services reasonably accessible and available at IHS facilities.\nDid the CHS program receive timely notification of services provided from a non-IHS facility? In non-emergency cases, the local CHS program should be notified and the service approved for payment prior to the patient receiving care. In cases where the patient was not referred for care by an IHS provider, such as with emergency room services, the CHS program must be notified within 72 hours of when the service was delivered. Notification may be made by the individual, provider, hospital, or someone on behalf of the individual in order for the service to be eligible for CHS payment. The notification time is extended to 30 days for the elderly and disabled.\nAre the services considered medically necessary and listed as one of the established area medical or dental priorities? To be eligible for payment under the CHS program, the service must be considered medically necessary and listed as one of the established IHS area’s medical or dental priorities. A program committee that is part of the local CHS program evaluates the medical necessity of the service, for example, at a weekly meeting. IHS has established four broad medical priority levels of health care services eligible for payment and a fifth for excluded services that cannot be paid for with CHS program funds. Each area is required to establish priorities that are consistent with IHS’s medical priority levels and are adapted to the specific needs of the CHS programs in its area. CHS programs that are affiliated with IHS-operated facilities must assign a priority level to services based on the priority system established by their area offices. Funds permitting, these CHS programs first pay for the highest priority services and then for all or some of the lower priority services they fund. Our prior work has found that available CHS program funds have not been sufficient to pay for all eligible services. At some IHS facilities, the amount of CHS funding available was only sufficient to cover cases with the highest medical priority—Priority 1—emergent or acutely urgent care services that are necessary to prevent immediate death or serious impairment of health. (See table 1 for a description of the medical priority levels and related services.)\nAfter considering these questions, local CHS programs review each case based on the availability of funding and may defer or deny requests to pay for services when program funds are not available. If the CHS program determines that a service can be funded, it issues a purchase order for the service.",
"In general, three entities are involved in the CHS payment process: (1) the local CHS program, (2) the provider, and (3) IHS’s fiscal intermediary (FI). The timing of the CHS program’s and the provider’s involvement depends on whether the service was prompted by a referral from an IHS provider prior to the date of service—called IHS referrals, or prompted by the patient seeking care without first obtaining a referral from an IHS provider—these are typically emergency services and called self- referrals.",
"IHS referrals are cases in which an IHS-funded provider refers a patient for care to an external provider. The local CHS program receives the referral and evaluates it against the eligibility requirements. Once the CHS program receives the needed information to make its determination, it will: approve the service for payment and issue a purchase order to obligate the funds and send copies of the purchase order to the provider and to the FI; defer funding if it meets all the eligibility criteria, but funds are not deny the service.\nIf the service is approved, the local CHS program typically works with an external provider to set up an appointment for the patient to receive the service and issues the purchase order to the provider—either before the service is provided or shortly after the service is provided. After performing the service, the external provider submits the purchase order along with the claim for payment to the FI. Once the FI receives the claim and purchase order from the external provider, it verifies the purchase order and patient data, evaluates whether alternate resources are available, and, if appropriate, makes the required payment. If there are any issues with the claim, such as missing information from the CHS program or provider, the FI will put the claim in a hold status until the issues are resolved.\nSelf-referrals are typically emergency situations where the patient receives services from external providers without first obtaining a referral from an IHS-funded provider. After the services are delivered, the provider seeks approval from the CHS program for payment for the services. With self-referrals, the steps taken by the CHS program to evaluate the referral against the program’s eligibility requirements to determine whether the service is eligible for CHS payment do not begin until after the service is provided. In these cases, the local CHS program may have to communicate with the external provider, for example, requesting information about the services provided. Similar to IHS referrals, once the CHS program receives the needed information to make an eligibility determination, it will approve the service for payment and issue a purchase order to obligate the funds; defer funding the service; or deny the service. For approved self-referral services, once the FI receives the claim and purchase order from the external provider, it follows the same procedures for processing the payment as for IHS referrals. (See fig. 1 for an overview of the approval and payment processes for IHS referrals and self-referrals.)\nFor services that are ultimately paid for under the CHS program, whether they are IHS or self-referrals, the CHS payment process consists of three main steps that encompass the time from the date a service is delivered to the date the provider is paid. 1. Local CHS program issues the purchase order. The time for this step can be measured by the length of time between when a service is provided and when the local CHS program issues the purchase order. (Sometimes the purchase order is issued before the service is provided, such as for some IHS referrals; in these cases this step has no effect on the time it takes to pay the provider.) 2. External provider submits a claim to IHS’s FI. The time for this step can be measured by the length of time between when the CHS program issues the purchase order and when the FI receives the claim. 3. The FI pays the claim. The time for this step can be measured by the length of time between when the FI receives a claim from an external provider and when the payment is made.",
"PPACA made significant changes to the Medicaid program and included new health care coverage options that may benefit American Indians and Alaska Natives. In 2014, Medicaid eligibility will expand in states opting to participate, such that all individuals with incomes at or below 138 percent of the federal poverty level will be eligible for the program, including previously ineligible categories of individuals, such as childless adults. Also in 2014, health insurance exchanges will be available—health insurance marketplaces in which individuals and small businesses can compare, select, and purchase health coverage from participating carriers. For individuals obtaining insurance through the exchanges, PPACA provides premium tax credits for those meeting certain income requirements and cost-sharing exemptions for qualifying American Indians and Alaska Natives. Finally, in 2015, states may implement the new Basic Health Program option, under which the federal government will give states 95 percent of the premium tax credits and cost-sharing subsidies that would have been provided if the individuals had enrolled in the exchanges, to allow states to provide coverage for individuals with incomes between 138 and 200 percent of the federal poverty level.\nIn previous work, we found that, after these changes are implemented many American Indians and Alaska Natives may gain new health care coverage options. For example, we estimated that more than half of American Indians and Alaska Natives may be eligible either for cost- sharing exemptions and premium tax credits for insurance obtained through the exchanges, or eligible for health care coverage through the new Basic Health Program or Medicaid, including those who are currently eligible for Medicaid but not enrolled, and those who will be newly eligible under 2014 eligibility rules. A significant proportion of American Indians and Alaska Natives reflected in this potential new enrollment live in IHS service areas.",
"For CHS services delivered in fiscal year 2011, a majority of providers’ claims were paid within 6 months of the service delivery date, but some took much longer. More than one-third (38 percent) of claims processed by IHS-operated CHS programs were paid within 3 months after services were delivered. Another 35 percent were paid between 3 and 6 months of service delivery. The percentage of claims paid more than 6 months after service delivery was much smaller, with 19 percent of claims being paid between 6 months and 1 year after services were delivered, and about 8 percent paid more than 1 year after services were delivered. (See fig. 2.)\nThe amount of time it took to pay providers was not the same across all IHS areas. The areas varied in the amount of time between the date a service was provided and the date the claim was paid, particularly with respect to the percentage of claims that were paid within 3 months and within 6 months of service delivery. For example, although more than one-third of claims IHS-wide were paid within 3 months or less of service delivery, across IHS areas this percentage ranged from 18 percent in Albuquerque to 48 percent in Billings. Similarly, the percentage of claims paid within 6 months or less of service delivery ranged from 59 percent to 80 percent, also in Albuquerque and Billings, respectively. There was less variation among IHS areas in the percentage of claims paid within 1 year or less of service delivery, ranging from 87 percent in Albuquerque to 94 percent in Nashville. For 8 of the10 IHS areas we reviewed, 90 percent or more of their claims were paid within 1 year of service delivery. (See fig. 3.)\nAmong the three main steps in the payment process, the step that most often took the longest in the payment process was the first step—the time from date of service to the issuance of the purchase order. For services delivered in fiscal year 2011, purchase orders were issued in 1 month or less after services were delivered for 41 percent of claims. For another 40 percent of claims, purchase orders were issued more than 2 months after services were delivered; and in about half of these cases, the purchase order was issued more than 4 months after the service was delivered. In comparison, the second step—the time from the date the purchase order was issued to the date the FI received the claim from the provider—took 1 month or less for 61 percent of the services, and the third step—the time from the date the FI received the claim to the date payment was made—took 1 month or less for 83 percent of the claims. (See fig. 4.)",
"IHS uses three measures to assess how long it takes to approve and then process payments to CHS providers. Two of these measures concern the first step in the payment process—the time it takes local CHS programs to approve payments to providers and issue purchase orders to them— but neither of these measures provides a clear or complete picture of the timeliness of these activities, which constitute the most time-consuming period within the provider payment process, according to our analyses. IHS also has a timeliness measure for the final step in the provider payment process—the time it takes IHS’s FI to make payment to providers once it receives claims from them. Descriptions of the three timeliness measures follow.\nGovernment Performance Results Act (GPRA) measure. The first of two measures that IHS uses to assess the timeliness of the first step in the provider payment process is the average time it takes for IHS to issue a purchase order after a service has been provided. IHS established this measure in fiscal year 2009 in response to GPRA, and has set annual targets for the measure since then. GPRA requires federal agencies to develop performance plans with annual goals and measures. (Hereafter, we refer to this as the GPRA measure.)\nFor fiscal years 2009 and 2010, IHS set the target for the GPRA measure at 82 days and 78 days, respectively. IHS missed the target by 28 days in 2009 and by 4 days in 2010. IHS kept the target at 78 days in fiscal year 2011, then lowered it to 74 days in 2012 and met these targets in both years. For fiscal year 2013, IHS kept the target at 74 days, and an IHS official said it would remain there for fiscal year 2014. According to IHS officials, the basis for the GPRA measure’s target was a health care industry consultant’s report showing average times that other health insurers, including private insurers and Medicaid, took to pay claims.\nAlthough clear targets have been established for the GPRA measure, the way the measure is calculated does not result in a clear picture of whether the goal of the measure is being achieved. In our previous work, we found that successful performance metrics should demonstrate the degree to which desired results are achieved.goal of the GPRA measure is to decrease the average number of days from the provision of services to purchase order issuance. However, the GPRA measure does not provide a clear picture of the timeliness of purchase order issuance because it combines self-referrals with some IHS referrals when calculating the average time it takes for IHS to issue a purchase order, even though the timing of when purchase orders are issued relative to service delivery can be very different for the two referral types. The GPRA measure calculates the average time it takes to issue purchase orders for services for which the purchase order was issued after the service was provided. This includes all self-referrals, where none of the work to determine whether the service is eligible for CHS payment can be started before the service is delivered because IHS does not know about it until after the service has been delivered. However, it also includes some IHS referrals—referrals for which all of the work to determine whether the service is eligible for CHS payment generally is completed before the service is delivered. Some local CHS programs said they wait to issue purchase orders for IHS referrals until shortly after they confirm that the services were actually delivered. Officials from one local CHS program told us that for these referrals, it may take only one day from the date of service to issue the purchase order. Including these IHS referrals in the calculation of the GPRA measure gives an unclear picture of performance because the inclusion of IHS referrals lowers the overall GPRA average. IHS officials agreed that the calculation of the GPRA measure mixes IHS referrals with self-referrals, and CHS officials at one area office said the measure would be more useful if IHS and self- referrals were analyzed separately. However, IHS officials told us that because the agency’s claims data system does not include a data field that tracks referral type, it does not have a way to separate the two different types of referrals that would allow the agency to systematically determine the average time it takes to issue purchase orders by referral type.\nAccording to IHS, the IHS officials expressed varying opinions about the utility and quality of the GPRA measure. Some officials noted that before the measure was established, there was no timeliness performance measure for the CHS program. These officials told us that the measure has helped to identify local CHS programs that have implemented practices that help improve timeliness of payments. But officials also criticized the GPRA measure, noting that many of the factors that help to determine whether an area or local CHS program meets the target are not within the area’s or the program’s control, such as how quickly a program receives information from providers.\nThe time it takes to make a decision about a claim. The other measure that IHS uses to assess the timeliness of the first step in the provider payment process is how long it takes from the time IHS is notified of a claim to when the agency makes a decision about it. Under a statutory provision, IHS must approve or deny the claim within 5 days of receiving “notification” of a provider’s claim for a service or accept the claim as valid. (Hereafter, we refer to this provision as the 5-day rule.) According to IHS officials, the agency has interpreted the rule’s clock as beginning once a claim is “clean,” or “completed,” meaning that all information necessary to determine whether the claim should be approved, deferred, or denied has been obtained. IHS officials told us, however, that it is in obtaining this information—including medical records to determine medical priority and the availability of alternate resources—that delays most typically occur. Thus, the 5-day rule’s clock does not begin until after completion of the part of the process in which IHS officials believe delays most typically occur. Although IHS officials said the agency’s interpretation of the 5-day rule currently is not included in any official written guidance, they said the agency plans to include an explanation of its interpretation of the rule in revisions to the CHS chapter of the Indian Health Manual, which officials said is expected to be completed by early 2014.\nThe time it takes the FI to pay the claim. The third measure that IHS uses to assess the timeliness of the payment process focuses on the last step in the process—the length of time that the FI should take to process payments to providers once it receives claims from them. IHS’s contract with its FI specifies that at least 97 percent of clean claims are to be paid within 30 days of receiving the claim from the provider. Similar to the 5-day rule, the FI defines clean claims as those containing all required information, including the purchase order; passing all IHS and FI agreed- upon internal checks; and not requiring additional investigation by the FI. The FI issues monthly reports to IHS documenting its compliance with this provision. According to these reports, this target was met every month from January 2012 through July 2013.",
"The complex processes for determining whether a service is eligible for CHS funding can affect the timeliness of provider payments and result in delays. Even after a local CHS program determines that a service is eligible for CHS funding, complexities in the payment process managed by IHS’s FI can result in delays. In addition, CHS officials reported that staffing shortages and limited funding contribute to delays in processing payments to providers. Local CHS programs also reported varying practices for assessing eligibility and approving CHS funding, which may contribute to variations in timeliness for provider payments.",
"IHS’s process for determining whether services are eligible for CHS program funds is complex and different from processes used by other payers, which can affect the timeliness of provider payments. Unlike other payers that offer a defined set of benefits—including Medicare, Medicaid, and private insurers—the CHS program makes decisions about what care will be funded on a case-by-case basis, so that each time a referral for care is received by a local CHS program, it is evaluated against a number of eligibility requirements as well as against available funding. Evaluating a service against each of the service eligibility requirements involves multiple steps, some of which depend on the CHS program receiving information from providers, patients, and others, and delays can occur during the evaluation of some of these eligibility requirements, according to CHS officials. In some cases, making these eligibility determinations can be fairly involved, and can ultimately affect the amount of time it takes for a provider to receive payment after the service is delivered. The effects of this process on payment times is greater for self-referrals— situations in which the service was provided before it was approved for payment—because the entire process for determining whether the service was eligible for CHS payment does not begin until after the service was delivered. According to IHS officials, the agency developed the CHS program eligibility regulations in order to carefully manage and stretch limited CHS funding to provide the most critical services to the most patients.\nTwo aspects of the process for determining eligibility for CHS program funding were frequently reported as resulting in payment delays: (1) determining whether a service meets the area’s medical priorities and (2) identifying all available alternate resources. Officials from 8 of 12 local CHS programs we interviewed reported payment delays related to determining whether a service met the area’s medical priorities, and officials from 8 of 12 local CHS programs reported payment delays related to identifying all available alternate resources.\nDetermining medical priority can result in delays because local CHS programs must obtain from the provider medical records with sufficient detail to assess whether a service is medically necessary and falls within the established medical priorities. Officials reported that, while in some cases the necessary records have been provided relatively quickly (e.g., within a week) in other cases it has taken much longer. For example, some local CHS programs reported situations when it has taken weeks or months to obtain necessary medical documentation, and one program reported situations when it has taken as long as 1 to 2 years to receive this documentation. Program officials noted different reasons for these delays. For example, officials reported situations where providers have sent documentation to the wrong CHS program when the providers were unaware in which CHSDAs the patients resided. Another reason cited by local CHS program officials for delays in receipt of medical documentation included situations in which incomplete documentation was provided and the program needed to follow up with the provider.\nOfficials reported a number of situations in which determining whether the patient has alternate resources to pay for the service, has resulted in delays. For example, some local CHS program officials told us that when they believe a patient is eligible for alternate resources—such as Medicaid—they have the patient apply for those resources, and will hold off on approving a service for CHS funding until the determination is made on the application. Officials from one local CHS program said that Medicaid determinations in their state can sometimes take months. In another example, officials from one local CHS program stated that for situations involving car accidents or a fall on private property, determining liability can take a long time, and availability of alternate resources cannot be determined until decisions on liability have been determined. In another example, officials from one CHS program said delays can occur when patients do not inform the CHS program of the alternate resources available to them, necessitating the CHS program doing the research itself.\nProgram officials also reported some delays related to the other three aspects of the process for determining eligibility for CHS payment. For example, officials from one CHS program said determining whether a patient is a member of a federally recognized tribe can result in a delay if they have never seen the patient before, and must obtain documentation of that patient’s tribal affiliation. Similarly, officials from one CHS program said determining whether a patient resides in its CHSDA can result in a delay when the program needs to wait on documentation from patients confirming their addresses. Finally, one local CHS program reported that determining whether the program has been notified within required timeframes can result in a delay when an incorrect decision is made to deny the service, which is later overturned.\nThe complexity of determining whether services delivered to American Indians and Alaska Natives are eligible for CHS funding can also result in misunderstandings in which providers think payments have been delayed, when in fact the services provided were not eligible for payment. For example, IHS officials told us that sometimes patients do not understand CHS rules and seek emergency care from external providers, expecting the CHS program to cover it, when they are in fact not eligible for CHS. The officials also said that providers will send claims to the CHS program, assuming the patient and service are eligible, and expect to be paid. IHS does not issue eligibility cards to beneficiaries that would indicate to external providers their eligibility for CHS services or information about which local CHS program is responsible for payment. In a previous GAO review of the CHS program, several providers noted that, in the absence of a process they can use prior to providing service to determine patient eligibility for the CHS program, they submit claims for payment to the CHS program for all patients who self-identify as American Indian or Alaska Native or as eligible for the CHS program. IHS officials said that they believe situations such as these—in which the provider will never be paid because the patient or service was not eligible, as opposed to situations in which the service is eligible but the payment process is prolonged—accounted for the majority of provider complaints about the timeliness of CHS payments.\nLocal CHS program officials noted that providers’ lack of understanding of the complex CHS approval process was due in part to provider staff turnover or was exacerbated when the provider’s billing functions were located out of state, which could result in delays in providing information needed to determine eligibility. These officials noted that education of provider staff was an ongoing necessity for CHS programs. Some IHS officials also noted that providing such training took staff time away from processing referrals. Officials from a number of CHS programs noted that they meet regularly with some of their high-volume providers to reconcile specific outstanding cases, and that over time these meetings have helped improve providers’ understanding of the unique rules and procedures of the CHS program. However, officials also mentioned that turnover among provider staff often necessitated starting the process of educating providers again.",
"Even after a service has been approved for CHS funding and a purchase order has been issued, delays can occur because of complexities in the last step in the payment process, which is managed by IHS’s FI. Officials said this can occur because the providers do not understand the CHS process used by the FI. For example, officials said some providers do not understand that after receiving a purchase order, they also need to submit the claim to the FI to be paid.\nOfficials from local CHS programs and from the FI also reported examples where delays occurred because claims submitted by providers to the FI could not be matched to a corresponding purchase order in the FI’s system. According to FI officials, it will issue only one payment for each purchase order. However, some purchase orders are intended to cover multiple services, such as for a series of physical therapy treatments. FI officials reported that providers sometimes submit claims for services that pertain to only a portion of the services authorized on the purchase order. In these cases, the FI pays for those services and closes out the purchase order. When providers submit subsequent claims related to other services that were authorized on the original purchase order, the FI is unable to pay the provider because the purchase order was closed. The provider then must go back to the CHS program to request a new purchase order and payment to the provider is delayed until the new purchase order is issued and submitted to the FI.\nIn addition to delays in payments to providers from issues matching claims and purchase orders, claims may be put on hold by the FI for other payment processing issues. One of the most common causes for claims being put on hold by the FI is when alternate resources have been confirmed, but the FI is waiting for information from the provider showing the amount paid by the other resources and the remaining amount that the provider is claiming from IHS.",
"Local CHS program officials said insufficient CHS program staffing levels have affected their ability to issue timely purchase orders. IHS’s staffing standards model established a staffing ratio based on the annual number of purchase orders authorized for health care services by a facility. Some CHS program officials noted that their number of staff was below these standards. Further, local CHS program officials in programs that had a very small number of CHS staff (e.g., two or three) said that a vacancy or extended leave for even one staff person could affect the timeliness of issuing purchase orders—and one of these programs reported that related delays could be significant. Furthermore, IHS officials noted that, pursuant to agency practice, CHS funding has been used only to pay for services and not to increase staffing levels. As a result, recent increases in CHS funds have resulted in increased workloads, but staffing levels to manage the workloads have not increased. Staffing levels can affect the timeliness of payment for services, particularly for self-referrals where the entire process for determining eligibility for CHS payment does not begin until after the service is provided.\nOfficials from a few CHS programs also noted that funding issues could result in delays issuing a purchase order authorizing CHS funding, which would delay payments. In our prior work, some providers told us that delays in receiving payment from CHS of several months, or in some cases years, tended to occur when the CHS program’s funding for the fiscal year had been depleted.noted, funding shortages affect the amount of time it takes to pay providers for self-referrals more than IHS referrals because the self- referral service is already provided before the program determines if funds are available while for an IHS referral, the service can be postponed until funds become available.",
"We found variation in local CHS program practices for implementing CHS eligibility rules, which may contribute to the variation in timeliness of the provider payment process across IHS areas. IHS officials said they allow flexibility in local CHS program practices because each has a different set of circumstances to consider. These circumstances include challenges regarding CHS funding levels among areas, state Medicaid program procedures for verifying eligibility, providers’ familiarity with the CHS program, and the number of staff available to determine CHS eligibility for services.\nDuring our interviews, IHS area and local CHS program officials reported differences in practices that could contribute to variation in the amount of time overall it takes to pay providers. Examples of these differences include: Consideration of alternate resources. Local CHS programs varied in the actions they took while they were determining the extent of patients’ alternate resources. One practice IHS area office officials said some local CHS program staff used, in certain circumstances, was to issue purchase orders to providers before patients’ alternate resources were confirmed. In these cases, if the FI paid the claim before alternate resources were confirmed, the FI would seek to recover from the provider any overpayments for services covered by these alternate resources.\nIn contrast, some IHS area and local CHS program officials told us they do not issue purchase orders authorizing CHS payment for services until the availability of all possible alternate resources has been determined. Officials in one IHS area noted that they do this to preserve their limited CHS funds and provide access to care to as many patients as possible. Officials in this area reported that they were not able to fund all Priority 1 cases and that issuing purchase orders and obligating CHS funds before alternate resources were confirmed could cause them to exhaust their CHS funds even earlier.\nRequests for information from providers. Officials from some local CHS programs reported that they set time limits for providers to submit medical documents and deny CHS funding if providers do not submit the documents within that time. These limits ranged from a week to 45 days, and some of these programs automatically issued a denial if the medical documentation was not provided either at the same time the program was notified that services had been provided or by the specified time limit. CHS officials said these denials could be reconsidered if sufficient medical documentation were subsequently provided. In contrast, officials from another CHS program reported that it does not have established time limits within which providers must submit medical documentation.",
"New health care coverage options available to many IHS beneficiaries as a result of provisions in PPACA could provide IHS with an opportunity to simplify the complex eligibility rules of the CHS program. IHS has stated that its overall service goal is to elevate the health status of American Indians and Alaska Natives to the highest possible level. However, as we and others have reported, limits on available resources have affected the services available to American Indians and Alaska Natives through the CHS program. For example, although funding for the CHS program significantly increased in recent years, IHS has reported that at current funding levels, most programs are approving only medically emergent referrals (Priority 1) and less urgent, routine or preventive care is deferred or denied pending additional appropriations. According to IHS, limits on available funding for the CHS program have caused the agency to establish its complex requirements for determining eligibility for CHS funds—including reliance on a medical priority rating system and limiting eligibility to individuals who reside in CHSDAs. These mechanisms are intended to enhance IHS’s ability to stretch limited CHS dollars and extend services to more American Indians and Alaska Natives. As we previously reported, however, many American Indians and Alaska Natives may gain new health care coverage beginning in 2014 as a result of PPACA, which could alleviate some constraints on CHS program funds.\nIf a better match is achieved between available funding and overall CHS program demand, IHS could have the opportunity to streamline eligibility requirements for the CHS program and to expand the services it pays for with CHS funds, assuming appropriation levels for the CHS program are maintained. Because the CHS program is generally the payer of last resort, if more American Indians and Alaska Natives gain new coverage, services that would have previously been paid for by the CHS program will be paid for by other payers. In addition, because some American Indians and Alaska Natives will have access to benefits packages through these other coverage options—benefits packages that may be more comprehensive than the IHS benefits available to them now—more may choose to obtain care outside of the IHS system entirely. This could help free up some CHS program funds, potentially creating a better match between available funding and overall program demand.\nSome uncertainty remains, however, about the extent to which American Indians and Alaska Natives will obtain new health care coverage when PPACA is fully implemented. For example, not all states may choose to expand their Medicaid programs. In addition, we have reported previously on the challenges American Indians and Alaska Natives may face enrolling in Medicaid and other public insurance programs. Some barriers are unique to the American Indian and Alaska Native population—such as individuals believing they should not have to apply for other public insurance programs because the federal government has a duty to provide them with health care as a result of treaties with Indian tribes. In our prior work, we recommended that IHS increase its direct outreach to American Indians and Alaska Natives who may be eligible for new coverage options to help ensure significant new enrollment in these options.",
"The current CHS program’s eligibility requirements reflect the method that IHS has chosen to stretch its funding to ensure that the most critical health services can be provided to the maximum number of beneficiaries. However, determining eligibility for CHS funding—including the need to ascertain each time a referral is received whether the patient met residency requirements and the service met medical priorities—is inherently complex. As currently structured, it is highly unlikely that the CHS program will be as quick a payer as some other payers because of the cumbersome steps involved in determining eligibility for each service.\nPPACA will expand existing sources of health coverage and create new ones for American Indians and Alaska Natives, and this could affect the CHS program in a number of ways. In particular, if these changes significantly reduce the demand placed on CHS program funds, IHS may have the opportunity to not only pay for a greater range of services but also restructure the CHS program to include less stringent eligibility requirements. For example, increased availability of CHS funding due to increased access among American Indians and Alaska Natives to other sources of health care coverage options under PPACA could give IHS the opportunity to establish a set of defined benefits for IHS beneficiaries, which would alleviate the need for CHS programs and providers to carry out time-consuming medical priority determinations. The opportunity also may arise for IHS to make other changes, such as issuing a form of eligibility card to CHS-eligible patients to help providers understand when to send claims to IHS, and to which local CHS program a claim should be sent, helping improve the timeliness of provider payments.\nIn the interim, while the changes from PPACA are taking effect, IHS has the opportunity to continue to make improvements to the CHS program, including how it assesses the timeliness of provider payments and how it aligns CHS program staffing levels with workloads, and to proactively consider ways to streamline CHS eligibility requirements.",
"In an effort to ensure that IHS has meaningful information on the timeliness with which it issues purchase orders authorizing payment under the CHS program and to improve the timeliness of payments to providers, we recommend that the Secretary of HHS direct the Director of IHS to: modify IHS’s claims data system to separately track IHS referrals and self-referrals, revise the GPRA measure for the CHS program so that it distinguishes between these two types of referrals, and establish separate timeframe targets for these referral types; and improve the alignment between CHS staffing levels and workloads by revising its current practices, where appropriate, to allow available funds to be used to pay for CHS program staff.\nIn addition, as HHS and IHS monitor the effect that new coverage options available to IHS beneficiaries through PPACA have on CHS program funds, we recommend that the Secretary of HHS direct the Director of IHS to proactively develop potential options to streamline program eligibility requirements.",
"We provided a draft of this report to HHS for review and received written comments, which are reprinted in appendix I. In its comments, HHS concurred with two of our recommendations and did not concur with one recommendation.\nHHS concurred with our recommendation that IHS modify its claims data system to separately track IHS referrals and self-referrals, revise the GPRA measure for the CHS program so that it distinguishes between these two types of referrals, and establish separate timeframe targets for these referral types. HHS also concurred with our recommendation that as HHS and IHS monitor the effect that new coverage options available to IHS beneficiaries through PPACA have on CHS program funds, IHS proactively develop potential options to streamline program eligibility requirements. HHS agreed with the premise that Medicaid eligibility expansion and private insurance for more American Indians and Alaska Natives will reduce the demand for CHS services and noted that IHS will monitor the effects of new coverage on program funds and develop options to improve and streamline the CHS program processes.\nHHS did not concur with our recommendation that IHS improve the alignment between CHS staffing levels and workloads by revising its current practices, where appropriate, to allow available funds to be used to pay for CHS program staff. In its response, HHS stated its intent to continue to only use CHS appropriations to purchase health care services and not to fund program staff, noting that available CHS program funds have not been sufficient to pay for all services and that at some facilities, funding was only sufficient to cover cases with the highest medical priority. We acknowledge the difficult challenges and choices faced by CHS programs when program funds are not sufficient to pay for all needed services. However, IHS has noted the importance of the agency maintaining an adequate workforce and has established staffing standards for the CHS program. As we reported, some IHS officials noted that their number of staff was below the staffing ratio established in IHS’s staffing standards model, and local CHS program officials told us that insufficient CHS program staffing levels have affected their ability to issue timely purchase orders. Further, recent increases in CHS funding for services have resulted in increased workloads, while staffing levels to manage the workloads have not increased. For these reasons, we continue to believe that IHS should improve the alignment between CHS staffing levels and workloads, making use of all available funding, including CHS program funds, when appropriate, to do so.\nWe are sending copies of this report to the Secretary of Health and Human Services, the Director of the Indian Health Service, appropriate congressional committees, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of the report. GAO staff who made major contributions to this report are listed in appendix II.",
"",
"",
"",
"In addition to the contact name above, Gerardine Brennan, Assistant Director; George Bogart; Julianne Flowers; Natalie Herzog; Linda McIver; Laurie Pachter; and Michael Rose made key contributions to this report.",
"Indian Health Service: Most American Indians and Alaska Natives Potentially Eligible for Expanded Health Coverage, but Action Needed to Increase Enrollment. GAO-13-553. Washington, D.C.: September 5, 2013.\nIndian Health Service: Capping Payment Rates for Nonhospital Services Could Save Millions of Dollars for Contract Health Services. GAO-13-272. Washington, D.C.: April 11, 2013.\nMedicaid Expansion: States’ Implementation of the Patient Protection and Affordable Care Act. GAO-12-821. Washington, D.C.: August 1, 2012.\nIndian Health Service: Action Needed to Ensure Equitable Allocation of Resources for the Contract Health Service Program. GAO-12-446. Washington, D.C.: June 15, 2012.\nIndian Health Service: Increased Oversight Needed to Ensure Accuracy of Data Used for Estimating Contract Health Service Need. GAO-11-767. Washington, D.C.: September 23, 2011.\nIndian Health Service: Updated Policies and Procedures and Increased Oversight Needed for Billings and Collections from Private Insurers. GAO-10-42R. Washington, D.C.: October 22, 2009.\nMedicare and Medicaid: CMS and State Efforts to Interact with the Indian Health Service and Indian Tribes. GAO-08-724. Washington, D.C.: July 11, 2008.\nIndian Health Service: Health Care Services Are Not Always Available to Native Americans. GAO-05-789. Washington, D.C.: August 31, 2005."
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"question": [
"What is the CHS payment process?",
"What did the GAO find in regards to these three steps?",
"How efficient was the IHS in regards to paying claims in a timely manner?",
"How does IHS assess the timeliness of the first step?",
"What is one of the drawbacks associated with this measure?",
"How does including the time associated with the eligibility prior to service affect the measure for timeliness?",
"What is the breakdown of the IHS's three assessment measures?",
"How do IHS program officials handle payments?",
"How does this method affect the timeliness of payments?",
"What else delays payments?",
"What did PPACA do that may benefit many American Indians and Alaska Natives?",
"In what way do these changes benefit American Indians and Alaska Natives?",
"What enabled some of the constraints on CHS program funds to be alleviated?",
"What did the PPACA do to manage program funding constraints?",
"To what groups does IHS provide health care?",
"What can these groups do when IHS is unable to provide services?",
"What aspect of CHS has GAO reported on in the past?",
"What is the subject of this report?",
"How did the GAO collect information for this report?",
"What did the GAO recommend to the IHS?",
"How did the IHS respond to these recommendations?",
"What was the GAO's take on the matter following the response of the IHS?"
],
"summary": [
"The CHS payment process consists of three main steps: (1) the local CHS program issues a purchase order to the provider authorizing payment (either before service delivery, or after, such as in emergency situations), (2) the provider submits a claim for payment, and (3) IHS pays the provider.",
"GAO found that the first step took the longest--often taking more than 2 months.",
"For Indian Health Service (IHS) contract health services (CHS) delivered in fiscal year 2011, a majority of claims were paid within 6 months of the service delivery date, but some took much longer. Specifically, about 73 percent of claims were paid within 6 months of service delivery, while about 8 percent took more than 1 year.",
"One of the measures IHS uses to assess the timeliness of the first step is the average time it takes to issue a purchase order after a service has been delivered; IHS's current target for this measure is 74 days.",
"However, the measure does not provide a clear picture of timeliness for this activity as it combines data for two different types of CHS services--those for which payment eligibility was determined prior to service delivery and those for which eligibility was determined after service delivery.",
"IHS officials told GAO that when eligibility is determined prior to service delivery, it may take only one day from the date of service to issue the purchase order. Including this type of service in the calculation, therefore, lowers the overall average.",
"IHS uses three measures to assess the time it takes to approve and then process payments to CHS providers. Two of the measures concern the first step in the payment process (purchase order issuance) and the third concerns the final step (making the payment).",
"IHS program officials make decisions on what care will be funded on a case-by-case basis, evaluating each case against a number of eligibility requirements involving multiple steps.",
"This process can lead to payment delays.",
"Officials noted that delays also can occur when processing payments and that staffing shortages can affect the timeliness of payments. Some program officials noted that their staffing levels were below standards established by IHS.",
"PPACA made significant changes to the Medicaid program and included new health care coverage options that may benefit many American Indians and Alaska Natives beginning in 2014.",
"New coverage options in the Patient Protection and Affordable Care Act (PPACA) may provide an opportunity to simplify CHS eligibility requirements.",
"With the availability of new coverage options under PPACA, some constraints on CHS program funds could be alleviated, providing IHS an opportunity to streamline service eligibility requirements and expand the range of services it pays for with CHS funds.",
"IHS officials reported the agency developed the current CHS program eligibility requirements to manage CHS program funding constraints. In particular, some of the complexities of the program were designed to allow the program to operate within the constrained levels of program funding.",
"IHS provides health care to American Indians and Alaska Natives.",
"When services are unavailable from IHS, IHS's CHS program may pay for care from external providers.",
"GAO previously reported on challenges regarding the timeliness of CHS payments and the number of American Indians and Alaska Natives who may gain new health care coverage as a result of PPACA.",
"This report examines (1) the length of time it takes external providers to receive payment from IHS after delivering CHS services; (2) the performance measures IHS has established for processing CHS provider payments; (3) the factors that affect the length of time it takes IHS to pay CHS providers; and (4) how new PPACA health care coverage options could affect the program.",
"To conduct this work, GAO analyzed fiscal year 2011 CHS claims data, interviewed IHS officials, including officials in four IHS areas, and reviewed agency documents and statutes.",
"GAO recommends that IHS revise an agency measure of the timeliness with which purchase orders are issued, use available funds as appropriate to improve the alignment between CHS staffing levels and workloads, and proactively develop potential options to streamline CHS eligibility requirements.",
"The agency concurred with two recommendations, but did not concur with the recommendation to use available funds to improve CHS staffing levels.",
"GAO believes the recommendation is valid as discussed in the report."
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CRS_R45110
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{
"title": [
"",
"What Is Defense Science and Technology?",
"Perspectives on the Roles and Value of Defense S&T",
"Historical Defense S&T Funding and Recent Trends",
"DOD Basic Research Funding",
"DOD Basic Research Funding by Organizational Component",
"Basic Research of DOD Components by Performing Sector",
"Program Elements in DOD Basic Research",
"Defense Research Sciences",
"University Research Initiatives",
"In-House Laboratory Independent Research",
"University and Industry Research Centers",
"Other DOD Basic Research PEs",
"Issues in Defense S&T",
"What Is the Appropriate Funding Level for Defense S&T?",
"Approach: Defense S&T as a Share of Total DOD Funding",
"Data and Analysis",
"Approach: DOD Science and Technology as a Share of DOD RDT&E",
"Data and Analysis",
"What Is the Appropriate Funding Level for DOD Basic Research?",
"Approach: DOD Basic Research as a Share of Defense S&T",
"Data and Analysis",
"Concluding Observations"
],
"paragraphs": [
"T his report provides an overview of the portion of Department of Defense (DOD) research, development, testing, and evaluation (RDT&E) funding referred to as Defense Science and Technology (Defense S&T). It provides perspectives on the role of Defense S&T in supporting U.S. defense capabilities, historical funding levels, recent funding trends, and approaches to determining how much the federal government should invest in Defense S&T, particularly in basic research.",
"Congress provides appropriations to DOD for RDT&E activities conducted in support of its mission requirements. DOD's Financial Management Regulation (DOD 7000.14-R) provides a taxonomy for requesting, tracking, and accounting for federal investments in RDT&E based on the character of work performed. DOD budget justifications and congressional appropriations reports and explanatory statements typically employ this taxonomy, which consists of seven budget activity codes (6.1 through 6.7) and a description (as shown in Table 1 ).\nDefense Science and Technology is a subset of DOD RDT&E appropriations that includes funding for basic research (6.1), applied research (6.2), and advanced technology development (6.3)—the earliest stages of the RDT&E process.\nDOD defines these budget activities in the following manner:\nBasic research [Budget Activity Code 6.1] is systematic study directed toward greater knowledge or understanding of the fundamental aspects of phenomena and of observable facts without specific applications towards processes or products in mind. It includes all scientific study and experimentation directed toward increasing fundamental knowledge and understanding in those fields of the physical, engineering, environmental, and life sciences related to long-term national security needs. It is farsighted high payoff research that provides the basis for technological progress. Basic research may lead to: (a) subsequent applied research and advanced technology developments in Defense-related technologies, and (b) new and improved military functional capabilities in areas such as communications, detection, tracking, surveillance, propulsion, mobility, guidance and control, navigation, energy conversion, materials and structures, and personnel support.\nApplied research [Budget Activity Code 6.2] is systematic study to understand the means to meet a recognized and specific need. It is a systematic expansion and application of knowledge to develop useful materials, devices, an d systems or methods. It may be oriented, ultimately, toward the design, development, and improvement of prototypes and new processes to meet general mission area requirements. Applied research may translate promising basic research into solutions for broadly defined military needs, short of system development. This type of effort may vary from systematic mission-directed research beyond that in Budget Activity 1 [basic research] to sophisticated breadboard hardware, study, programming and planning efforts that establish the initial feasibility and practicality of proposed solutions to technological challenges. It includes studies, investigations, and non-system specific technology efforts. The dominant characteristic is that applied research is directed toward general military needs with a view toward developing and evaluating the feasibility and practicality of proposed solutions and determining their parameters. Applied research precedes system specific technology investigations or development.\nAdvanced Technology Development, [Budget Activity Code 6.3] includes development of subsystems and components and efforts to integrate subsystems and components into system prototypes for field experiments and/or tests in a simulated environment. Budget Activity 3 includes concept and technology demonstrations of components and subsystems or system models. The models may be form, fit, and function prototypes or scaled models that serve the same demonstration purpose. The results of this type of effort are proof of technological feasibility and assessment of subsystem and component operability and producibility rather than the development of hardware for service use. Projects in this category have a direct relevance to identified military needs. Advanced Technology Development demonstrates the general military utility or cost reduction potential of technology when applied to different types of military equipment or techniques….Projects in this category do not necessarily lead to subsequent development or procurement phases, but should have the goal of moving out of Science and Technology (S&T) and into the acquisition process within the Future Years Defense Program (FYDP). Upon successful completion of projects that have military utility, the technology should be available for transition.",
"Defense S&T is of particular interest and importance to Congress due to its perceived value in supporting military competitive advantage. Defense S&T is also of interest to key stakeholders in the private sector and academia. For example, advocates of strong and sustained Defense S&T funding assert that this funding plays important and unique roles in the DOD innovation system. The scientific and technological insights that emerge from Defense S&T funding—often referred to as the nation's \"seed corn\"—are seen by many as the critical body of knowledge available to DOD and the industrial base for future defense technology development. Defense S&T supports both\nmedium -term, evolutionary technologies and incremental innovation s to help improve existing products and systems; and longer-term, revolutionary technologies to support U.S. technological dominance, deter conflict, and defeat adversaries.\nThese technologies—both evolutionary and revolutionary—are seen by most warfighters and policymakers as central to U.S. national security as well as to the lives of those serving in uniform in the medium and long term.\nIn contrast, most of the balance of DOD RDT&E is focused on near-term applications. Budget activity 6.4, Advanced Component Development and Prototypes, efforts are directed toward the evaluation of integrated technologies and prototype systems in realistic operating environments, not just in controlled laboratory environments. Funding in this budget activity seeks to expedite technology transition from the laboratory to operational use. Budget activity 6.5, System Development and Demonstration, is engineering and manufacturing development tasks aimed at meeting validated requirements prior to full-rate production. At this stage, prototype performance is near or at planned operational system levels. Budget activity 6.7, Operational Systems Development, is focused on development efforts to upgrade systems that have been fielded or have received approval for full rate production and anticipate production funding in the current or subsequent fiscal year. Budget activity 6.6, RDT&E Management Support, includes management support for RDT&E efforts and funds to sustain and/or modernize the installations required for general research. Accordingly, BA 6.6 funding supports RDT&E activities in each of the other budget activities.\nFrom FY2007 to FY2017, Defense S&T averaged 17.1%, approximately one-sixth, of total Defense RDT&E (ranging from 15% to 19% during these years). Historical funding levels and recent trends are discussed in more detail in the following section of this report.\nAccording to the National Academies' 2007 report Rising Above the Gathering Storm :\nKeeping a technological edge over adversaries of the United States has long been a key component of our national security strategy. US preeminence in science and technology is considered essential to achieving that goal.\nThe report further emphasizes the importance of DOD basic research, asserting that\nThe importance of DOD basic research is illustrated by its products—in defense areas these include night vision; stealth technology; near-real-time delivery of battlefield information; navigation, communication, and weather satellites; and precision munitions.\nDOD investments in basic research are also considered vital to maintaining university research, the education of scientists and engineers, and the preservation of teaching capacity in key scientific and engineering fields. Proponents of these investments assert that it is essential to ensure steady funding to these fields to ensure stability for professors, researchers, and academic programs. Uneven funding patterns, some assert, can create uncertainty (in positions, salary, equipment, and programs, for example) that may drive out some of the best scientists and engineers and discourage the most capable students from pursuing degrees and research in these disciplines, resulting in adverse impacts on future innovation in fields key to national security.\nSome analysts express concern that, in times of tightly constrained budgets, Defense S&T may be an easy target for budget cuts. Cuts to Defense S&T might produce few short-term consequences to national defense, as the benefits of these investments tend to be realized in the medium to long term. However, the neglect of these earlier-stage research and development activities could have serious medium- and long-term consequences, depriving the U.S. defense sector of the critical underpinnings necessary for maintaining technological superiority and global dominance in the future.\nFormer Under Secretary of Defense for Acquisition, Technology and Logistics Frank Kendall noted the following:\nR&D is not a variable cost. R&D drives our rate of modernization. It has nothing to do with the size of the force structure. So, when you cut R&D, you are cutting your ability to modernize on a certain time scale, period—no matter how big your force structure is ... [T]he investments we're making now in technology are going to give us the forces that we're going to have in the future. The forces we have now came out of investments that were made, to some extent, in the 80s and 90s…if you give up the time it takes for lead time to get…a capability, you are not going to get that back.\nAlan R. Shaffer, Principal Deputy, Assistant Secretary of Defense for Defense Research and Engineering, underscored this point, stating the following:\nIf we don't do the research and development for a new system then the number of systems of that type we will have is zero. It is not variable.\nSuch cuts may also result in lasting damage to important segments of the U.S. R&D infrastructure—researchers, professors, academic programs, student interest, equipment, infrastructure, etc.—in defense-critical fields, even if funding were to be later restored. Such effects could not only diminish U.S. innovative capacity, but result in the transfer of knowledge and loss of people, capabilities, and leadership to other nations. According to a 2012 Defense Science Board report on DOD basic research\nThe DOD basic research program has supported a large fraction of revolutionary research in the physical sciences. Without DOD support, these U.S.-based research communities would find it more difficult to expand knowledge, collaborate, publish, and meet. Without adequate U.S. support, these centers of knowledge will drift to other countries.\nWhile there is little direct opposition to Defense S&T spending in its own right, there is intense competition for available dollars in the appropriations process. This competition has been made more acute under congressionally enacted budget control provisions. Congressional acts establish and provide enforcement mechanisms for separate spending caps for defense and nondefense spending. These independent budget caps essentially fence off certain funds from being used for defense purposes by those who would prioritize such defense spending over certain nondefense activities. Increases in the defense and nondefense budget caps for FY2018 and FY2019 included in the Bipartisan Budget Act of 2018 ( P.L. 115-123 ) may ease the resource competition in these fiscal years, but not eliminate it. With the spending caps has come greater competition for available dollars within the defense portion of the budget (for example, between RDT&E and procurement), and among the various RDT&E budget activities and program elements (for example, between Defense S&T and the rest of the defense RDT&E budget activities). With members of the U.S. Armed Forces currently engaged in combat and others facing potentially imminent threats in other locations around the world, some may believe it is appropriate to prioritize defense spending to support immediate operational needs and contingency preparations of the military over activities whose payoff is likely to be realized only in the longer term.\nIn addition, some have questioned the effectiveness of defense investments in R&D. For example, a 2012 article published by the Center for American Progress (CAP), a public policy research and advocacy organization, notes that the technological superiority of the United States did not initially provide an effective defense for U.S. troops against low-tech improvised explosive devices (IEDs) in Iraq and Afghanistan. The article also asserts that many high-priced major weapons systems—such as President Reagan's missile defense program—have failed to deliver on their promised capabilities due to scientific and engineering shortcomings. Further, the article notes that commercial technology development is now outstripping defense technology due to the \"strength of capitalism\"—including large markets, consumer demand, and competitive challenges—suggesting the potential benefits of pursuing a technology acquisition strategy based more heavily on off-the-shelf technologies or the repurposing of those technologies to meet defense needs. The article treats basic research less harshly than other Defense RDT&E activities, which CAP describes as \"the kind of boondoggle R&D spending the Pentagon engages in at the applied and developmental level.\"",
"Defense S&T has grown substantially in current dollars (unadjusted for changes in buying power) over the past four decades, from $2.3 billion in FY1978 to $13.4 billion in FY2017. This growth is illustrated in Figure 1 , which shows this growth by its component budget activities. During the FY1978-FY2017 period, Defense S&T grew at a compound annual growth rate (CAGR) of 4.6%. Most of this growth occurred between FY1978 and FY2006 (6.4% CAGR); from FY2006 to FY2017 Defense S&T grew at a pace of 0.1% CAGR, though the period was punctuated by periods of growth and contraction. The funding trends for each of the component budget activities (6.1-6.3) during the FY1978-FY2017 period were different.\nB asic research (6.1) funding grew at 4.4% CAGR from FY1978 to FY2017, approximately the same pace as overall Defense S&T funding (4.7% CAGR), but the growth was steadier, with fewer periods of substantial decrease. Applied research (6.2) funding grew steadily from FY1978 to FY2017, in general, but at a slightly slower rate (3.5% CAGR) than overall Defense S&T and basic research funding. Similar to overall Defense S&T, most of the growth in applied research occurred between FY1978 and FY2006 (4.8% CAGR); from FY2006 to FY2017 applied research grew at a slower pace of 0.3% CAGR. Advanced t echnology d evelopment (6.3) funding experienced periods of growth and decline from FY1978 to FY2017. From FY1978 to FY1993, advanced technology development grew at a rate of 14.4% CAGR. From FY1993 to FY1999, funding declined at a rate of 3.0% CAGR. Funding grew at a rate of 10.3% CAGR from FY1999 to FY2006, and then fell again from FY2006 to FY2013 at a rate of 4.9% CAGR. Most recently, funding for advanced technology development has grown at a rate of 5.9% CAGR from FY2013 to FY2017.\nFigure 2 illustrates Defense S&T by budget activity in constant FY2017 dollars. This figure provides an illustration of Defense S&T funding levels from FY1978 to FY2017 in terms of the purchasing power of these funds.\nDefense S&T grew by nearly 90% in constant dollars between FY1978 and FY2017. Despite the increase, there were periods of decline. Between FY1993 and FY1999, funding decreased at a rate of 4.0% CAGR. Funding rebounded between FY1999 and FY2005 (when Defense S&T funding reached its peak in constant dollars for the FY1978-FY2017 period), growing by 7.1% CAGR. This growth period was followed by another period of decline through FY2013 (4.0% CAGR). From FY2013 to FY2017, Defense S&T grew at a rate of 3.5% CAGR.\nBasic research funding grew, with some ups and downs, at a rate of 1.4% CAGR, during the FY1978-FY2017 period. From FY1993 to FY1998, funding fell by nearly 30%, then recovered, surpassing its FY1993 level in FY2012. Funding then rose an additional 1.4% between FY2012 and FY2017. Applied research funding was essentially flat through FY1998, then grew steadily through FY2005 (5.1% CAGR) and remained flat again through FY2007. Funding fell by 24% from FY2007 to FY2013, declining at a rate of 4.5% CAGR. Funding recovered between FY2013 and FY2017, rising by 13.4%, at a rate of 3.2% CAGR. The largest swings in Defense S&T resulted from changes in the advanced t echnology d evelopment funding component. Advanced technology development funding nearly quadrupled in constant dollars from FY1978 to FY1993. From FY1993 through FY1999, it fell by 25%, before rising again to its constant dollar peak in FY2005. Between FY2005 and FY2013, advanced technology development fell by 39%, and then recovered somewhat between FY2013 and FY2017 (up 19%).",
"In FY2016, DOD spent an estimated $2.3 billion on basic research. The following sections describe the composition of DOD basic research funding by organizational component and the composition of performers of the research by organizational component.",
"The Department of Defense funds basic research activities through the Army, Navy, Air Force, and Defense-Wide (D-W) agencies. Figure 3 illustrates the composition of that funding based on FY2016 obligations. Funding was broadly distributed, with each of the services and Defense-Wide agencies accounting for 20%-30% of total DOD basic research funding. The Navy accounted for the largest share (29.2%) of DOD basic research, followed by the Defense-Wide agencies (27.3%), the Air Force (23.4%), and the Army (20.1%). The Defense Advanced Research Projects Agency (DARPA) is the largest funder of basic research among the D-W agencies, accounting for 17.9% of total DOD RDT&E.",
"Figure 4 illustrates the share of total DOD basic research by performing sector. Universities and colleges performed nearly half ($1.1 billion, 48.8%) of DOD basic research in FY2016. Nearly another quarter of DOD basic research was performed by intramural performers ($533 million, 22.9%). Industry performed 18.2% ($423 million) of DOD basic research; other nonprofits 7.5% ($174 million); and all other performers 1.7% ($61 million).\nFigure 5 illustrates the composition of DOD components' basic research by performing sector. As the charts show, the components' degree of reliance on performing sectors varies. In FY2016\nAll components relied heavily on universities and colleges, especially the other defense agencies (59.2%). Reliance on industry varied widely, from 40.6% (DARPA) to 5.0% (Navy). The components' reliance on intramural performers also varied, from 5.2% (DARPA) to 32.7% (Navy). Other nonprofits are significant performers for the Air Force (14.3%) and DARPA (13.2%), but barely used by the Army (0.1%) and other defense agencies (1.3%).",
"According to DOD,\nThe program element is the primary data element in the Future Years Defense Program (FYDP) and normally the smallest aggregation of resources used by the Office of the Secretary of Defense [OSD] for analysis. It generally represents a collection of functional or organizational entities and their related resources. PEs are designed and quantified to be comprehensive and mutually exclusive. As the building blocks of the programming and budgeting system, PEs are continually reviewed to maintain proper visibility into the multitude of defense programs.\nDOD RDT&E is generally requested and funded under specified program elements (PEs). Each program element is associated with a seven character number and an alphanumeric suffix which, in part, indicate the budget activity code and the DOD department or agency receiving the funds. Table 2 identifies each of the basic research PEs for the services and Defense-Wide agencies, their FY2017 enacted funding levels, and their share of each component's basic research funding.\nDOD basic research has some program elements that are continuing efforts (that is, they continue across multiple fiscal years). In addition, some of the PEs are common to one or more of the services or Defense-Wide agencies.\nThe following section provides descriptions of these PEs, as well as the other basic research PEs. The descriptions are drawn largely from the FY2018 budget justifications of the services and Defense-Wide agencies.",
"The Defense Research Sciences programs conducted by the Army, Navy, Air Force, and DARPA comprise the largest component and the core of the DOD basic research program.\nArmy. The Army Defense Research Sciences PE supports the development of fundamental scientific knowledge intended to contribute to the sustainment of Army scientific and technological superiority in land warfighting capability and to solving military problems related to long-term national security needs, supports investigation of new concepts and technologies for the Army's future force, and seeks to provide the means to exploit scientific breakthroughs and avoid technological surprises. This PE fosters innovation in Army niche areas (e.g., lightweight armor, energetic materials, and night vision capability) and areas where there is no commercial investment due to limited markets (e.g., vaccines for tropical diseases). It also focuses university single investigator research on areas of high interest to the Army (e.g., high-density compact power and novel sensors). The in-house portion of the program relies on the Army's scientific talent and specialized facilities to transition knowledge and technology into appropriate developmental activities. The extramural program leverages the research efforts of other government agencies, academia, and industry.\nNavy. The Navy Defense Research Sciences PE supports development of new technological concepts for the maintenance of naval power and national security, and to prevent scientific surprise. The program seeks to exploit scientific breakthroughs and to provide options for new future naval capabilities and innovative naval prototypes. The basic research efforts include scientific study and experimentation directed toward increasing knowledge and understanding in national security-related aspects of physical, engineering, environmental, and life sciences. The program's investments include National Naval Responsibilities (NNRs) and the Basic Research Challenge Program.\nAir Force. The Air Force Defense Research Sciences PE funds extramural research activities in academia and industry along with in-house investigations performed in the Air Force Research Laboratory (AFRL). Funding supports fundamental broad-based scientific and engineering research in areas critical to Air Force weapon, sensor, and support systems.\nDARPA . The DARPA Defense Research Sciences PE seeks to provide the technical foundation for long-term national security enhancement through the discovery of new phenomena and the exploration of the potential of such phenomena for defense applications. It supports scientific study and experimentation that serves as the basis for more advanced knowledge and understanding in information, electronic, mathematical, computer, biological, and materials sciences.",
"Army. The Army's University Research Initiatives (URI) PE supports several activities, including the Multidisciplinary University Research Initiative (MURI), the Defense University Research Instrumentation Program (DURIP), the Presidential Early Career Awards for Scientists and Engineers (PECASE) program, and the Army's contribution to the Minerva Research Initiative (MRI). The MURI program supports university-based basic research across a wide range of scientific and engineering disciplines pertinent to maintaining land combat technology superiority. Army MURI efforts involve teams of researchers investigating high-priority, transformational topics that intersect more than one traditional technical discipline. The MURI multidisciplinary approach seeks to accelerate research progress and to expedite the transition of research results into application. The DURIP program provides funds to acquire major research equipment to augment current research capabilities, or to devise new research capabilities, in support of Army transformational research. The PECASE program funds single-investigator research efforts performed by academic scientists and engineers early in their research careers. The Minerva Research Initiative is a university-based social science research program that seeks to improve DOD's basic understanding of the social, cultural, behavioral, and political forces that shape regions of the world of strategic importance to the United States. The program has three primary components: (1) a university-based social science basic research grant program; (2) the Research for Defense Education Faculty program for the professional military education institutions; and (3) a collaboration with the U.S. Institute of Peace to award research support to advanced graduate students and early career scholars working on security and peace. According to DOD\nThe Minerva Research Initiative has a unique relationship between research and policy within DOD. As such, leadership across the department collaborate to identify and support basic social science research issues in need of attention and to integrate those research insights into the policy-making environment. In doing this, the leadership team closely works with the program managers within the Military Service Branches.\nNavy. The Navy's URI PE includes support for multidisciplinary basic research in a wide range of scientific and engineering disciplines to enable the U.S. Navy to maintain technological superiority, and for the acquisition of research instrumentation needed to maintain and improve the quality of university research important to the Navy. Navy MURI efforts are focused on high-priority topics and opportunities that intersect more than one traditional technical discipline. This program is intended to stimulate innovation, accelerate research progress, and expedite transition of research results into naval applications. The Navy DURIP program supports university research infrastructure deemed essential to high-quality, Navy-relevant research. The program complements other Navy research programs by supporting the purchase of high-cost research instrumentation that is necessary for the conduct of cutting-edge research. Navy URI funding also supports PECASE efforts focused on providing the knowledge base, scientific concepts, and technological advances needed for the maintenance of naval power and national security.\nAir Force. The Air Force's URI PE supports defense-related basic research across a wide range of scientific and engineering disciplines deemed relevant to maintaining U.S. military technological superiority. Research topics include transformational and high-priority technologies such as nanotechnology, sensor networks, intelligence information fusion, smart materials and structures, efficient energy and power conversion, and high-energy materials for propulsion and control. The program also seeks to enhance and promote the education of U.S. scientists and engineers in disciplines critical to maintaining, advancing, and enabling future U.S. defense technologies. The program also assists universities in acquiring the instrumentation capabilities needed to improve the quality of defense-related research and education. The Air Force asserts that a fundamental component of this program is recognition that future technologies and technology exploitations require highly coordinated and concerted multi- and interdisciplinary efforts.",
"The In-House Laboratory Independent Research (ILIR) PEs support basic research at Army and Navy laboratories, including\nsix Army Materiel Command Research, Development, and Engineering Centers; six U.S. Army Medical Research and Materiel Command Laboratories; seven Corps of Engineers U.S. Army Engineer Research and Development Centers; the U.S. Space and Missile Defense Command Technical Center; and participating Naval Warfare Centers and Laboratories.\nArmy. Army ILIR efforts seek to catalyze major technology breakthroughs by providing laboratory directors flexibility in implementing novel research ideas, by nurturing promising young scientists and engineers, and by attracting and retaining top scientists and engineers. The ILIR program also provides a source of competitive funds for peer reviewed efforts at Army laboratories to stimulate high-quality, innovative research with significant opportunity for payoff to Army warfighting capability.\nNavy. Navy ILIR efforts are selected by Naval Warfare Centers/Laboratories' commanding officers and technical directors near the start of each fiscal year through internal competition. Efforts typically last three years, and are generally designed to assess the promise of new lines of research. Successful efforts typically attract external, competitively awarded funding.",
"The Army University and Industry Research Centers PE seeks to foster university- and industry-based research to provide a scientific foundation for enabling technologies for future force capabilities. The work falls broadly into three categories:\nCollaborative Technology Alliances/Collaborative Research Alliances (CTAs/CRAs). CTAs seek to leverage large investments by the commercial sector in basic research areas that are of interest to the Army. CTAs are industry-led partnerships between industry, academia, and the Army Research Laboratory (ARL) that seek \"to incorporate the practicality of industry, the expansion of the boundaries of knowledge from universities, and Army scientists to shape, mature, and transition technology relevant to the Army mission.\" CRAs are academia-led partnerships, which seek to leverage cutting-edge academic research.\nUniversity Centers of Excellence (COEs). University COEs seek to expand the frontiers of knowledge in research areas where the Army has enduring needs. COEs couple state-of-the-art research programs at academic institutions with broad-based graduate education programs to help increase the supply of scientists and engineers in automotive and rotary wing technology.\nThe Army University and Industry Research Centers program element also supports the Historically Black Colleges and Universities and Minority Institution (HBCU/MI) Centers of Excellence.\nUniversity Affiliated Research Centers (UARCs) . UARCs were established to advance new capabilities through sustained multidisciplinary efforts. The Institute for Soldier Nanotechnologies focuses on soldier protection by emphasizing revolutionary materials research for advanced soldier protection and survivability. The Institute for Collaborative Biotechnologies focuses on enabling network-centric technologies, and broadening the Army's use of biotechnology for the development of bio-inspired materials, sensors, and information processing. The Institute for Creative Technologies is a partnership with academia and the entertainment and gaming industries to leverage innovative research and concepts for training and simulation, in areas such as realistic immersion in synthetic environments, networked simulation, standards for interoperability, and tools for creating simulated environments.",
"In addition to the program elements discussed above, there are seven other DOD basic research program elements (sponsoring agency noted after program name/abbreviation):\nHigh Energy Laser (HEL) Research Initiatives (Air Force) : This PE supports basic research aimed at developing fundamental scientific knowledge to support future DOD HEL systems. This program funds multidisciplinary research institutes to conduct research on laser and beam control technologies. In addition, this program supports educational grants to stimulate student interest in HELs. National Defense Education Program (NDEP, Defense-Wide : Office of the Secretary of Defense) : The NDEP supports a number of specific workforce development programs, including the Science, Mathematics, and Research for Transformation program, and the Military Child Pilot Program, that seek to improve the DOD workforce by increasing STEM proficiency in the nation's talent pool; shaping DOD as a STEM workplace of choice for scientists and engineers through public communications and outreach; leading the DOD STEM strategic efforts and coordinating STEM efforts in alignment with DOD workforce and mission requirements; and identifying approaches for innovative solutions in support of U.S. current and future defense challenges. Basic Research Initiatives ( D-W : OSD ) : The Basic Research Initiatives PE supports defense basic research through several activities. Strategic Support for Basic Research (SSBR) initiatives drive the direction of DOD basic research investments; coordinate and conduct oversight of DOD basic research programs; improve science and engineering workforce and public outreach; enhance university-industry collaboration; and engage with academic research community and international partners. The PE also supports the Minerva Research Initiative (discussed above) and the Vannevar Bush Faculty Fellowship Program, which supports research across a broad set of emerging scientific areas with transformative potential. Basic Operational Medical Research Science ( D-W : DARPA) : This PE supports basic research in medical-related information and technology leading to fundamental discoveries, tools, and applications critical to solving defense-related challenges. Efforts focus on identified medical gaps in warfighter care related to health monitoring and preventing the spread of infectious disease. The program uses information, computational modeling, and physical sciences to discover properties of biological systems that cross multiple scales of biological architecture and function, from the molecular and genetic level through cellular, tissue, organ, and whole organism levels. To enable in-theater, continuous analysis and treatment of warfighters, this project seeks to explore diagnostic and therapeutic approaches, including the use of bacterial predators as therapeutics against infections caused by antibiotic-resistant pathogens; developing techniques to enable rapid transient immunity for emerging pathogens; and identifying fundamental biological mechanisms that enable certain species to survive in harsh environments. Chemical a nd Biological Defense Program ( D-W : Nuclear, Chemical, and Biological Defense Program) : The Chemical and Biological Defense Program (CBDP) includes PEs in all seven RDT&E budget activities. The basic research-focused Chemical and Biological Defense Program PE supports theoretical and experimental research in life sciences—focused on understanding living systems' response to biological or chemical agents, to support detection, diagnostics, protection, and medical treatment—and physical sciences—focused on investigation of physical and chemical properties and interactions to improve detection, diagnostics, protection, and decontamination. Defense Threat Reduction Agency (DTRA) University Strategic Partnership Basic Research ( D-W : DTRA) : The DTRA Basic Research PE funds research across physical, material, engineering, computational, and life sciences directed toward greater knowledge and understanding of the fundamental aspects of observable phenomena associated with weapons of mass destruction. This PE provides support for the discovery and development of basic knowledge by researchers in academia and research institutions in government and industry. Historically Black Colleges and Universities and Minority-Serving Institutions ( HBCU/MI, D-W : OSD) : The HBCU/MI PE provides support for Historically Black Colleges and Universities and Minority-Serving Institutions (HBCU/MI) programs in the fields of science and engineering deemed important to national defense. This PE provides support through grants, cooperative agreements, or contracts for research, education assistance, and instrumentation.",
"Through the authorization and appropriations processes, Congress grapples with a wide variety of issues related to the magnitude, allocation, and strategic direction of DOD RDT&E, Defense S&T (a subset of RDT&E), and basic research (a subset of Defense S&T). These decisions play an important role in U.S. national security and economic strength, in the near term and longer term.\nIn practice, appropriations decisions are generally made about specific programs within the context of the available funding. The levels of RDT&E, S&T, and basic research funding are the result of many decisions made during DOD budget formulation and congressional appropriations, and in the end, are calculated on a post-facto basis. Nevertheless, an analysis of the kind that follows may be useful in assessing the big picture and in seeing funding trends in the context of a historical arc that may provide strategic insight and guidance.\nAmong the ongoing questions lawmakers and policy analysts grapple with are the following:\nWhat is the appropriate funding level for Defense S&T? What is the appropriate funding level for DOD basic research?\nSeveral approaches to addressing these questions are identified below, each with related data and analysis.",
"Congress and others have expressed concerns about the adequacy of funding for Defense S&T. As discussed earlier, the scientific and technological insights that emerge from this funding are seen by many as the pool of knowledge available to DOD and the industrial base for future defense technology development. For this reason, Defense S&T funding has sometimes been singled out for attention by Congress.",
"A 1998 Defense Science Board (DSB) report suggested two conceptual frameworks for Defense S&T funding. The first approach, using industrial practice as a guide, proposed setting Defense S&T funding at 3.4% of total DOD funding:\nThe DOD S&T budget corresponds most closely to the research component of industrial R&D. Using 3.4% of revenue (typical of high-tech industries shown [elsewhere in the report]), the DOD S&T funding should be about $8.4 billion, which is a billion dollars greater than the FY98 S&T funding.\nOther organizations have proposed using the same metric, with 3% of total DOD funding as the level for S&T funding. A 2001 report based on the Quadrennial Defense Review (QDR), a legislatively mandated review by DOD of its strategies and priorities, called for \"a significant increase in funding for S&T programs to a level of three percent of DOD spending per year.\" In 2004, the Council on Competitiveness, a leadership organization of corporate chief executive officers, university presidents, labor leaders, and national laboratory directors, reiterated the 3% recommendation of the QDR.\nOver the years, Congress has sought to address this perceived shortcoming in funding. The FY1999 defense authorization bill ( P.L. 105-261 ) expressed the sense of Congress that Defense S&T funding should be increased by 2% or more above the inflation rate each year from FY2000 to FY2008. Subsequently, the FY2000 defense authorization bill expressed the sense of Congress that\nthe Secretary of Defense has failed to comply with the funding objective for the Defense Science and Technology Program, especially the Air Force Science and Technology Program, as stated [P.L. 105-261], thus jeopardizing the stability of the defense technology base and increasing the risk of failure to maintain technological superiority in future weapon systems.\nThe act further expressed the sense of Congress that the Secretary of Defense should increase Defense S&T, including the 6.1-6.3 programs within each military department, by 2% or more above the inflation rate each year from FY2001 to FY2009.\nIn 2002, Congress embraced the DSB's recommendation and underlying rationale in the conference report accompanying the National Defense Authorization Act for Fiscal Year 2003:\nThe conferees commend the Department of Defense commitment to a goal of three percent of the budget request for the defense science and technology program and progress toward this goal. The conferees also note the finding in the Defense Science Board report that successful high technology industries invest about 3.5 percent of sales in research (equivalent to the DOD S&T program) and the recommendation that S&T funding should be increased to ensure the continued long-term technical superiority of U.S. military forces in the 21 st Century. The conferees believe that the Department must continue to provide the necessary investments in research and technologies that ensure a strong, stable, and robust science and technology program for our Armed Forces.\nIn 2009, the Senate-passed version of the National Defense Authorization Act for Fiscal Year 2010 ( S. 1390 ) included a provision (§217) stating it was the sense of Congress that the Secretary of Defense should increase Defense S&T by a percentage at least equal to inflation.",
"Following a period of strong growth in the early 2000s, Defense S&T funding reached $13.3 billion in FY2006, then declined to $11.0 billion in FY2013 before climbing to a peak of $14.0 billion in FY2017. (See Figure 6 .) Growth in the amount of S&T funding that was sought in P.L. 105-261 (red line, Figure 6 ) was largely achieved, though appropriations fell somewhat short in FY2007 and FY2008. Viewed as a share of DOD total obligational authority (TOA), S&T declined from about 3.0% in the late 1990s to about 1.7% in 2011, then rebounded to about 2.3% in FY2017. (See Figure 7 .)",
"The DSB's second proposed framework, also based on industrial practice, was to use the metric of Defense S&T as a share of DOD RDT&E:\nAnother approach to this question is to note that the ratio of research funding to total R&D funding in high-technology industries, such as pharmaceuticals, is about 24%. When this percentage ratio is applied to the FY98 R&D funding of about $36 billion, the result is about $8.6 billion, well above the actual S&T funding.\nIn 2015, the Coalition for National Security Research, a coalition of industry, universities, and associations, asserted that Defense S&T funding should be 20% of DOD RDT&E.",
"Figure 8 illustrates Defense S&T's share of DOD RDT&E for FY1996-FY2016. At the time of the DSB report (1998), S&T's share of DOD RDT&E was approximately 20.7%. After rising to 21.5% in FY2000, the share fell to 15.2% in FY2011, and then recovered to 17.9% in FY2017.",
"Within the Defense S&T program, basic research is often singled out for additional attention, due in part to its perceived value in advancing breakthrough technologies and in part to the substantial role it plays in supporting university-based research in certain physical sciences and engineering disciplines. DOD describes basic research as \"farsighted high payoff research that provides the basis for technological progress.\" Basic research funding is seen by some as particularly vulnerable to budget cuts or reallocation to other priorities because of the generally long time it takes for basic research investments to result in tangible products and other outcomes (i.e., reductions in funding can be made with minimal short-term consequences) and to the uncertainty of the benefits that will be derived from the results of basic research.",
"In 2004, the Council on Competitiveness asserted that DOD basic research should be at least 20% of Defense S&T. In 2015, the Coalition for National Security Research also recommended basic research account for 20% of Defense S&T.",
"DOD basic research funding grew steadily from FY1998 through FY2017, more than doubling in current dollars. (See Figure 9 .) As a share of Defense S&T, basic research declined from 14.6% in FY1996 to 11.0% in FY2006, then began a steady rise to 18.4% in FY2015, its highest level in two decades. Basic research's share of Defense S&T fell in 2016 to 17.4% and in 2017 to 16.2%. (See Figure 10 .)",
"Defense S&T investments are highly complex and can be parsed in many ways. Some of these are highlighted in this report. Other ways of parsing RDT&E funding—such as allocation by size of industrial performers—may also be important for assessing the balance in allocation of DOD RDT&E resources to meet DOD objectives.\nAmong the many other factors that may affect the effectiveness of the performance of Defense S&T are organizational structures and relationships; management; workforce recruitment, training, and retention; and policies related to cooperative research and technology transfer. Defense S&T stakeholders have also asserted the importance of stability in funding streams.\nAs Congress undertakes defense annual authorization and appropriations, it may wish to consider the issues raised in this report related to the magnitude and composition of funding for Defense S&T in the overall context of DOD RDT&E, as well as the other issues such as those identified above."
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"question": [
"What is Defense science and technology?",
"How is the budget determined for Defense S&T?",
"Why is Defense S&T important to Congress?",
"How did the Defense S&T change between 1978 and 2017?",
"When were these changes most dramatic?",
"Why was this the case?",
"What happened in regards to Defense S&T between FY2005 and FY2017?",
"What did a 1998 Defense Science Board report recommend?",
"How does the recommendation of the Quadrennial Defense Review differ?",
"What was the alternative approach set by the DSB in 1998?",
"What did the Coalition for National Security Research recommend?",
"How has basic research fluctuated between 1996 and 2016?",
"What did the DSB recommend in their 1998 report?",
"What is the role of the Defense Advanced Research Projects Agency?",
"What did the Council on Competitiveness and the CNSR recommend?"
],
"summary": [
"Defense science and technology (Defense S&T) is a term that describes a subset of Department of Defense (DOD) research, development, testing, and evaluation (RDT&E) activities.",
"The Defense S&T budget is the aggregate of funding provided for the three earliest stages of DOD RDT&E: basic research, applied research, and advanced technology development.",
"Defense S&T is of particular interest to Congress due to its perceived value in supporting technological advantage and its importance to key private sector and academic stakeholders.",
"In FY2017, Defense S&T was $13.4 billion, nearly six times the FY1978 level of $2.3 billion.",
"Most growth occurred from FY1978 to FY2006, at a compound annual growth rate (CAGR) of 6.4%.",
"Most of the growth and volatility was in advanced technology development.",
"In FY2017 constant dollars, Defense S&T funding peaked at $16.2 billion in FY2005 and declined by $2.8 billion through FY2017.",
"A 1998 Defense Science Board (DSB) report recommended setting Defense S&T at 3.4% of total DOD funding.",
"In 2001, the Quadrennial Defense Review recommended that 3.0% of total DOD funding be directed toward Defense S&T.",
"An alternative approach recommended by the DSB in 1998 was to set Defense S&T at a percentage of DOD RDT&E, similar to the industry ratio of research funding to total R&D funding (which it calculated for the pharmaceutical industry as 24%).",
"In 2015, the Coalition for National Security Research (CNSR), a coalition of industry, universities, and associations, recommended a target of 20%.",
"As a share of Defense S&T, basic research declined from 14.6% in FY1996 to 11.0% in FY2006, then began a steady rise to 18.4% in FY2015. In FY2016, basic research's share of Defense S&T was 17.4%.",
"In its 1998 report, the DSB recommended that one-third of Defense S&T be devoted to research targeted toward revolutionary technological advancements.",
"The Defense Advanced Research Projects Agency (DARPA) has been the lead DOD agency focused on revolutionary R&D.",
"With respect to DOD basic research, the Council on Competitiveness (2004) and the CNSR (2015) recommended a target of at least 20% of Defense S&T."
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"title": [
"",
"Introduction",
"Federally Mandated High School Indicators",
"Graduation Rate",
"Adequate Yearly Progress",
"Title I Impact Assessment",
"Dropout Rate",
"Dropout Prevention Program",
"NCES Event Dropout Rate",
"CPS Completion Rate",
"Education Sciences Reform Act",
"Average Freshman Graduation Rate",
"Published Indicators of High School Outcomes",
"Historic Rise in Educational Attainment",
"Rates of High School Completion",
"NCES Event Dropout Rates",
"National Dropout Rate",
"Dropout Rates by State",
"Estimating the High School Graduation Rate",
"Average Freshman Graduation Rate",
"Federal High School Dropout Prevention Programs",
"Primary Purpose Programs",
"Dropout Prevention Program",
"Neglected and Delinquent Program",
"Migrant High School Equivalency Program",
"Multiple Purpose Programs",
"Talent Search",
"Upward Bound",
"GEAR UP",
"Adult Education and Literacy State Grants",
"Youth Activities",
"Job Corps",
"Migrant Seasonal Farmworker Program",
"YouthBuild",
"Broad Purpose Programs",
"Title I-A LEA Grants",
"Migrant Education Program",
"21st Century Community Learning Centers",
"Safe and Drug-Free Schools and Communities",
"Developing Hispanic-Serving Institutions",
"Temporary Assistance for Needy Families",
"Reauthorization Issues",
"Program Coordination",
"Program Effectiveness",
"Data Quality and Reporting",
"Program Targeting",
"At-Risk Versus Out-of-School Youth",
"Unintended Consequences of Testing"
],
"paragraphs": [
"",
"The United States has made great strides in secondary school participation during the last century. Yet more than one-quarter of first-year high school students do not receive their diploma in four years. By age 24, more than one in 10 still do not have a high school degree or its equivalent. During the 2003-2004 school year alone, nearly 5% of students dropped out of high school. In addition, rates of graduation, completion, and dropping out vary significantly by race/ethnicity and immigration status with very high rates among Hispanics and new immigrants.\nThe Elementary and Secondary Education Act of 1965 (ESEA), as amended by the No Child Left Behind Act of 2001 (NCLBA, P.L. 107-110 ), contains several provisions pertaining to the issue of high school graduation, completion, and dropping out. The law authorizes several programs and activities intended to prevent students from dropping out or to encourage non-completers to reenter school or enroll in a high school equivalency program. The law also contains requirements for state and local education agencies that stipulate how graduation, completion, and dropout rates are to be calculated and to whom they must be reported.\nTwo of the three federal programs whose purpose is primarily intended to prevent students from dropping out of high school are authorized in ESEA, Title I, Parts D and H. Both Part D, the Neglected and Delinquent program (N&D), and Part H, the Dropout Prevention Program (DPP) have dropout prevention as their primary purpose. The third federal program with dropout prevention as its primary purpose is the Migrant High School Equivalency Program, authorized in Title IV, Part A of the Higher Education Act of 1965 (HEA), as amended by the Higher Education Amendments of 1998 ( P.L. 105-244 ).\nThe federal government supports additional programs that have dropout prevention as one of several purposes. These include some of the Trio programs and the GEAR UP program (authorized in Title IV of the HEA) as well as several programs authorized in the Workforce Investment Act of 1998 ( P.L. 105-220 ). Support for dropout prevention is also part of the broad array of programmatic purposes covered by large federal programs such as the ESEA, Title I-A, Program of Education for the Disadvantaged.\nEach of the act's authorizing the major federal dropout prevention programs is likely to be considered for reauthorization in the 110 th Congress. Passage of the NCLBA authorized the ESEA programs through FY2007. A one-year automatic extension, through FY2008, is provided under the General Education Provisions Act (Title IV of P.L. 90-247, as amended). Authorization for the HEA programs is extended through June 30, 2007, under the Third Higher Education Extension Act of 2006 ( P.L. 109-292 ). Authorization for WIA programs expired on September 30, 2003, although annual appropriations have continued funding for WIA through FY2007.\nIt is likely that the 110 th Congress will consider reauthorizing some, and perhaps all, of the federal programs and provisions pertaining to high school graduation, completion, and dropouts. This report will provide background on high school graduation, completion, and dropout rates in the United States. First, it will discuss the NCLBA provisions related to the calculation and reporting of these indicators. Second, the report will present the latest data on high school outcomes. The third section of the report will describe the federal programs designed to improve these outcomes. And finally, the report will discuss and analyze issues that may arise as Congress considers the reauthorization of these programs and provisions.",
"The NCLBA contains a handful of provisions that require the calculation and reporting of high school outcomes. Graduation rates are among the indicators states must report under the NCLBA Adequate Yearly Progress (AYP) provisions. Dropout rates must be reported by states as a condition of their participation in the N&D and DPP programs. In addition to these ESEA provisions, the Education Sciences Reform Act of 2002 ( P.L. 107-279 ) charged the National Center for Education Statistics (NCES) with compiling rates of high school completion. A fourth measure of high school outcomes discussed in this section (although not statutorily mandated) is what NCES calls the \"average freshman graduation rate.\"",
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"Through passage of the NCLBA, high school graduation rates were added to existing Title I, Part A, requirements for state-developed standards of AYP. That is, in addition to assessments of academic achievement in mathematics and reading, state AYP standards must also include at least one additional academic indicator. Public schools and local educational agencies (LEAs) must meet state-specified levels on this indicator in order to make AYP. In the case of high schools, this additional indicator must be the graduation rate.\nThe NCLBA defines the graduation rate as \"the percentage of students who graduate from secondary school with a regular diploma in the standard number of years\" (ESEA, Section 1111(b)(2)(C)(vi)). The standard number of years is determined by each state and is generally based on the structure of schools, usually three or four years. The NCLBA does not require a minimum graduation rate or that states increase their rate over time. The law also does not require states to report graduation rates to the Education Department (ED); it simply requires each state to place the statewide graduation rate on its report card to the general public.",
"The NCLBA also charged the Secretary of ED with assessing the impact of Title I on states, districts, schools, and students (ESEA, Title I-E). A portion of this research is to be \"an independent study of assessments used for State accountability purposes and for making decisions about the promotion and graduation of students\" (ESEA, Section 1503(a)). The statute goes on to specify that the research should address the effect of assessment and accountability systems on, among other things, changes in the graduation rate. The Secretary was given authority to award a contract to an independent research entity and not more than five years to complete the study.",
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"The NCLBA authorized the DPP (ESEA, Title I-H) and stipulated the method to be used in calculating the high school dropout rate. The provision states that,\nFor purposes of calculating an annual school dropout rate under this subpart, a school shall use the annual event school dropout rate for students leaving a school in a single year determined in accordance with the National Center for Education Statistics' Common Core of Data [CCD]. (ESEA, Section 1829)\nThe NCES defines an event dropout rate as the percentage of students who were enrolled in grades 9 through 12 during a given school year, were not enrolled in school during the following school year, and had not earned a high school diploma or completed a state- or district-approved education program.",
"The NCES calculates an event dropout rate in the following manner:\nThe denominator of the rate is the October 1 membership count for the grades for which the dropout rate is being calculated. For example, the dropout rate for grades 9 through 12 would use a denominator that equals the October 1 enrollment count for grades 9 through 12.\nThe numerator (dropouts) is all individuals who:\n- were enrolled in school at some time during the previous school year;\n- were not enrolled on October 1 of the current school year;\n- have not graduated from high school or completed a state- or district-approved education program; and\n- do not meet any of the following exclusionary conditions: transferred to another public school district, private school, or state- or district-approved education program; temporary absence due to suspension or school-approved education program; or death.\nIt is important to note that this method does not include individuals outside of the public school system nor individuals who may have dropped out during a preceding school year. For the 2001-2002 school year, NCES was able to calculate rates for 45 states and the District of Columbia (this is the most recent school year for which data have been made available). Five states did not follow the NCES reporting rules that year; consequently, NCES could not calculate a national event dropout rate using the CCD.",
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"The Education Sciences Reform Act of 2002 (ESRA) reauthorized the NCES and charged it with collecting, compiling, and disseminating statistics on secondary school completion, among other data. Put simply, the NCES high school completion rate, \"is based on CPS [Current Population Survey] data and represents the percentage of 18- through 24-year-olds who are not enrolled in high school and who have earned a high school diploma or equivalent credential, including a GED.\"\nThe NCES high school completion rate differs from the Title I graduation rate (discussed above) in three key respects:\nUnlike the Title I-A graduation rate, the NCES completion rate includes all those with a high school credential. That is, whereas the graduation rate stipulated in the NCLBA includes only those obtaining a regular diploma , the high school completion rate includes those obtaining an equivalency certification, such as a district- or state-sponsored General Educational Development (GED) certificate. The NCES completion rate is not restricted to those completing high school in a standard number of years . Rather, it is restricted to those in a specific age group—that is, those 18 to 24 years old—and is simply the proportion of the group who hold a high school credential. Whereas the Title I-A graduation rate is tabulated by each state (from district-reported administrative data), the NCES completion rate is estimated using survey data from a large, nationally-representative sample.",
"In addition to the previously described high school outcomes required by the ESEA and ESRA, NCES has recently begun calculating a fourth high school indicator: the average freshman graduation rate (AFGR). Similar to the Title I Graduation Rate required by the NCLBA AYP provisions, the AFGR is an estimate of the percentage of public high school students who graduate on time with a regular diploma. In estimating the AFGR, NCES uses statistical averaging to stabilize the denominator—that is, the number of enrolled students. According to NCES,\nThe Averaged Freshman Graduation Rate provides an estimate of the percentage of high school students who graduate on time by dividing the number of graduates with regular diplomas by the size of the incoming freshman class 4 years earlier, expressed as a percent. The rate uses aggregate student enrollment data to estimate the size of an incoming freshman class and aggregate counts of the number of diplomas awarded 4 years later. The size of the incoming freshman class is estimated by summing the enrollment in eighth grade in one year, ninth grade for the next year, and tenth grade for the year after and then dividing by three.\nThe counts of enrollments by grade and graduates for the AFGR are taken from the CCD subfile called the State Nonfiscal Survey of Public Elementary/Secondary Education . Graduates include those students who are reported as diploma recipients and do not include GED recipients except in states that have in-school GED programs that lead to a regular diploma. Although enrollments are reported by grade, some states report ungraded students. NCES adjusts for this by redistributing these students across grades in proportion to the graded enrollment of the state.\nTable 1 summarizes the four high school indicators described above. Each of these rates provides a different perspective on high school outcomes and applies to different policy issues. The Title I Graduation Rate mandated by the NCLBA is intended to be part of a larger school, LEA, and state accountability system. With no statutory requirement that this indicator be reported to ED or Congress, this rate is mainly intended to shed light on school performance and enhance public notification on the state and local level. The Event Dropout Rate has historically been NCES' best attempt at producing a national standard for measuring high school outcomes. Although data reporting has improved in recent years, this indicator continues to fall short of consistency and completeness. The CPS Completion Rate has long been the most straight-forward, consistent, nationwide estimate of the nation's educational attainment; however, it cannot (and was never intended to) be used for accountability purposes. Finally, the Average Freshman Graduation Rate is the recent culmination of a major undertaking by NCES (along with a body of expert researchers) to produce a national estimate of high school completion (like the CPS rate) using data derived from the local level (like the Event Dropout Rate) to produce an accountability-friendly indicator (like the Title I rate).",
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"As clearly seen in Figure 1 , the United States has achieved a dramatic increase in secondary school participation since the beginning of the twentieth century. According to the U.S. Census Bureau, in 1910, only 13.5% of the adult population had completed secondary school. By mid-century, one-third (34.3%) of the population had completed 12 years of school. And by century's end, 84.1% of the adult population held a high school diploma.\nIt is important to note that the completion rates displayed in Figure 1 are not calculated in the same manner as the NCES completion rate described in the previous section. These historic rates differ from the NCES rate in two critical ways. First, the rates in Figure 1 prior to 1993 are for those completing 12 years of schooling, rather than those obtaining a high school diploma. Second, the population base for the rates in Figure 1 are those 25 years old and older; as opposed to the NCES rate which is based on the population between 18 and 24 years old.",
"According to NCES' most recent estimate, the high school completion rate was 86.8% in 2004—as compared to 85.2% in 2004 calculated by the Census Bureau and shown in Figure 1). The NCES estimate represents the proportion of all persons between 18 and 24 years old who held either a high school diploma or its equivalent in October of 2004. The data used to estimate this estimate, as well as those in Table 2 , are taken from the October supplement to the CPS.\nAs seen in Table 2 , this rate varies somewhat by student characteristics. Females are slightly more likely to finish high school than males. Older persons are slightly more likely to have completed high school than younger persons. However, the most striking differences in the table are those that show completion rates by race/ethnicity and immigration status.\nHispanics are far less likely to have obtained a high school degree by age 24 than all other racial/ethnic groups. In 2004, only 69.8% of Hispanics between the ages of 18 and 24 had completed high school; compared to 91.7% for white, non-Hispanics, 83.4% for black, non-Hispanics, and 95.1% for Asian, non-Hispanics.\nThe lower high school completion rate among the nation's Hispanic population is due in large part to the fact that over 40% of those in this group are immigrants born outside of the United States. The rate of high school completion among 18- to 24-year-old, foreign-born Hispanics in 2004 was 54.7%. The rate of high school completion for 18- to 24-year-old, native-born Hispanics is much higher: 80.8% among the first-generation and 82.0% among the second-generation and higher.",
"As discussed earlier, states participating in the DPP are to provide dropout data to the Secretary in accordance with NCES requirements for reporting to the CCD. Even though fewer than half of the states have participated in the DPP since it was authorized for FY2002; currently, all but five states are reporting appropriate dropout data. While only a small number of states continue to report data incompatible with CCD requirements (and many fewer states than just a few years ago), this prevents NCES from estimating a national dropout rate based on data from the CCD. This section presents dropout data from the only annual source of national estimates, the CPS, followed by state-level dropout data for the states that properly report data meeting the CCD criteria.",
"As stated above, the event dropout rate is the percentage of public school students who left high school between the beginning of one school year and the beginning of the next without earning a high school diploma or GED. Based on CPS data, the NCES estimates that, between the 2003 and 2004 school years, 4.7% of students dropped out of high school. That year, Hispanic students were more likely to drop out (8.9%) than black, non-Hispanic students (5.7%), white, non-Hispanic students (3.7%), and Asian, non-Hispanic students (1.2%). NCES analysis also found that low-income students were more likely to drop out (10.4%) than middle-income students (4.6%) and high-income students (2.5%).",
"The NCES event dropout rates by state for selected years in the past decade are contained in Table 3 (2001-2002 is the most recent year reported). The table shows data for states that reported in accordance with CCD requirements; dashes are shown for states that did not report such data in a given year. The table reveals a trend toward more comprehensive state reporting over the decade. Five states did not report according to NCES guidelines for the 2001-2002 school year; the number of states that did not do so for 1999-2000 was 13 and the number for 1993-1994 was 17.\nFor the 2001-2002 school year, the event dropout rates ranged from 1.9% in Wisconsin to 10.5% in Arizona. In all, event dropout rates for public school students were lower than 3% in nine states: Wisconsin (1.9), North Dakota (2.0), Indiana (2.3), Iowa (2.4), New Jersey (2.5), Connecticut (2.6), Maine (2.8), South Dakota (2.8), and Virginia (2.9). Nine states had event dropout rates of 6% or more: Delaware (6.2), Illinois (6.4), Nevada (6.4), Georgia (6.5), Louisiana (7.0), Washington (7.1), New York (7.1), Alaska (8.1), and Arizona (10.5).",
"Both of the graduation rates described above—the Title I-mandated rate and the NCES average freshman graduation rate—define this rate as the proportion of students who enter high school and finish on time with a regular diploma. As mentioned earlier, states are not required under the NCLBA to report their graduation rates to ED; they need only include them in report cards to the public. State report card data on graduation rates for the 2002-2003 school year were compiled by the Editorial Projects in Education Research Center (see Table 4 ).\nIn addition, NCES convened a task force of education research experts to determine the best method for estimating state-level, on-time graduation rates with currently available data reported to ED. The AFGR was chosen after a technical review and analysis of a set of alternative estimates (see Table 4 ).",
"The AFGR was 74% in 2002-2003 (the most recent year for which all necessary data were reported by all states). This means that just under three-quarters of the students entering high school in the fall of 1999 finished in four years with a regular high school diploma.\nAs shown in Table 4 , the state with the highest AFGR in 2002-2003 was New Jersey at 87%. Four additional states had rates of at least 85%: North Dakota (86), Wisconsin (86), Iowa (85), and Nebraska (85). The District of Columbia had the lowest AFGR in 2002-03 (60%). The state with the lowest AFGR that year was South Carolina at 60%. Seven additional states had rates at or below 65%: Georgia (61), New York (61), Mississippi (63), New Mexico (63), Tennessee (63), Louisiana (64), and Alabama (65).\nThe far-right column in Table 4 displays the difference between the state-reported (i.e., Title I) graduation rate and the AFGR. The range of differences between these estimates is quite large—22 states differ from the AFGR by 6% or less, while five states differ by 18 percent or more.",
"A number of programs are administered by ED and other federal agencies to help dropouts (and students at risk of dropping out) complete their secondary education. The major federal dropout prevention programs are briefly described below, along with each program's FY2008 appropriations level. Generally, federal programs for high school dropout prevention may be categorized as follows:\nprograms with the primary purpose of preventing students from dropping out and/or helping dropouts re-enter and complete high school or an equivalency program, programs having multiple purposes , at least one of which is targeted to dropout recovery or dropout prevention, and programs with broad purposes not explicitly encompassing dropouts but whose funds may be used to help individuals complete high school.\nThe extent of dropout and potential dropout participation in the latter two categories is unknown. However, these programs may reach more dropouts or potential dropouts than the explicitly focused programs in the first category, particularly given that their funding levels are generally higher. For example, the FY2006 appropriation for ESEA Title I-A grants for local educational agencies (LEAs) was $12,713,125,000. If only 0.04% of these Title I-A funds were used for dropout programs, they may have served more students than the DPP, which received $4,851,000 in FY2006.",
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"The DPP, ESEA Title I, Part H, provides support for ED to coordinate a national strategy for reducing dropout rates. The DPP also authorizes grants to state educational agencies (SEAs) and LEAs to establish programs for early prevention, to identify and prevent potential dropouts from leaving school, and to encourage dropouts to reenter and complete school. Authorized activities include professional development, reduction in pupil-teacher ratios, counseling and mentoring for students at risk of dropping out, and implementing comprehensive school reform. At appropriation levels of $75 million or less, the Secretary makes competitive awards to SEAs and LEAs that serve students in grades 6 through 12 and have annual dropout rates above the state average. If the appropriation level exceeds $75 million, grants would be awarded on a formula basis. The appropriation for the DPP was $0 in FY2008. FY2006 was the last year this program received funding; that year the appropriation was $4,851,000.",
"The N&D, ESEA Title I, Part D, provides grants to SEAs and LEAs for instructional services for youth in delinquent, community day, or correctional institutions as well as youth at risk of dropping out of school. Subpart 1 grants are awarded to SEAs for services provided to those in institutions under state jurisdiction. These grants are awarded on a formula based on the number of youth in state-operated institutions and per-pupil educational expenditures for the state. Subpart 2 grants are for services provided to youth in schools and institutions under local jurisdiction. Each SEA is required to reserve funds for Subpart 2 from its Title I-A allocation and award grants to LEAs based on the number of children in locally-operated institutions. The FY2008 appropriation for Subpart 1 grants was $48,927,000.",
"The migrant High School Equivalency Program, HEA Title IV, Part A, Subpart 5, provides five-year competitively awarded grants to institutions of higher education and other public and private nonprofit organizations to support educational programs designed for migrant students ages 16 and up. Grantees operate residential and commuter projects that provide academic and support services to help migrant students obtain their high school equivalency certificate and move on to employment or enrollment in higher education institutions. Appropriations for FY2008 were $18,226,000.",
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"Talent Search, HEA Title IV, Part A, Subpart 2, Chapter 1, is one of several federal Trio programs that provides grants to programs sponsored by institutions of higher education, public or private agencies or organizations, and in some cases, high schools. Talent Search programs provide services to disadvantaged youth such as academic, personal, and career counseling with the goal of increasing the number of youth who complete high school and enroll in postsecondary education. Talent Search also serves high school dropouts by encouraging them to reenter the educational system and complete their education. Participants must be between the ages of 11 and 27 and have completed the fifth grade. Talent Search received $142,884,000 of the total Trio appropriation, which was $828,178,000 for FY2008.",
"Upward Bound, HEA Title IV, Part A, Subpart 2, Chapter 1, is one of the federal Trio programs that provides grants to programs operated by institutions of higher education, public and nonprofit agencies, and occasionally some high schools. Upward Bound projects provide residential programs for disadvantaged students between the ages of 13 and 19 to improve their academic skills and motivation to complete high school and enroll in postsecondary education. Upward Bound received $303,928,000 of the total Trio appropriation, which was $828,178,000 for FY2008. Upward Bound was further appropriated an additional $57,000,000 through an earmark in the FY2008 appropriations bill ( P.L. 110-161 ).",
"Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP), HEA Title IV, Part A, Subpart 2, Chapter 2, awards grants on a competitive basis to states and eligible partnerships to increase high school completion and postsecondary enrollment. Grantees provide continuous mentoring, counseling, outreach, and support services to cohorts of disadvantaged students beginning in 7 th grade, through high school completion, and into postsecondary enrollment. FY2008 appropriations were $303,423,000.",
"The Workforce Investment Act of 1998 (WIA), Title II, Subpart A, Chapter 2, authorizes grants to states for increasing adult literacy, obtaining employment skills, helping adult parents to become active participants in their children's education, and helping adults complete their secondary education. Eligible participants are between the ages of 16 and 61, beyond the compulsory school attendance age under state law, have not obtained a secondary education degree or equivalent, and are not enrolled in a secondary completion program. FY2008 appropriations for this program were $554,122,000.",
"The Youth Activities program (WIA Title I, Subtitle B, Chapter 4) awards formula grants to states that provide eligible youth assistance in achieving academic and employment success, effective and comprehensive activities which include a variety of options for improving educational and skill competencies and provide connections to employers. At least 30% of the funds currently allocated to local areas have to be spent on activities for out-of-school youth. An eligible youth is defined as a low-income individual between the ages of 14 and 21 and who is one or more of the following: deficient in basic literacy skills; a school dropout; homeless, a runaway or a foster child; pregnant or a parent; an offender; or, requires additional assistance to complete an educational program or secure and maintain employment. A three-part formula is used to make allocations to states based on the number of disadvantaged youth and unemployed persons. Dropout prevention and secondary educational completion programs are included in the list of allowable activities. The FY2008 Youth Activities appropriation was $924,069,000.",
"Job Corps (WIA, Title I, Subtitle C) provides residential education and training programs for disadvantaged individuals between the ages of 16 and 24, meeting at least one of the following criteria: basic skills deficient; high school dropout; homeless, a runaway, or foster child; a parent; or an individual who requires additional education, vocational training, or intensive counseling and related assistance, in order to participate successfully in regular schoolwork or to secure and hold employment. Among other things, Job Corps centers—located in all 50 states—are to provide opportunities for participants to receive high school equivalency certificates. The program appropriation for FY2008 was $1,528,427,000.",
"This program (WIA, Title I, Subtitle D) awards competitive grants to entities having a significant understanding of the problems faced by migrant and seasonal farmworker families, familiarity with the service area, and capability to provide workforce development and other related services to migrant families. Funded projects carry out workforce investment activities and other related assistance which may include dropout prevention activities, English literacy, and education assistance, among others, for economically disadvantaged migrant farmworkers and their dependents. In FY2008 the program appropriation was $79,668,000.",
"YouthBuild was originally authorized under the Housing and Community Development Act of 1992 ( P.L. 102-550 ), which added YouthBuild as a subtitle in the Cranston-Gonzalez National Affordable Housing Act of 1990 ( P.L. 101-625 ). By FY2008, the Department of Labor (DOL) will have assumed full administrative responsibility for this program from the Department of Housing and Urban Development (HUD). YouthBuild awards competitive grants to public and private non-profit organizations to assist disadvantaged young adults with education and employment skills. In these programs, low-income young people ages 16-24 work toward their GED or high school diploma while learning job skills by building affordable housing for homeless and low-income people. For FY2008, YouthBuild was funded at $58,952,000.",
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"The ESEA Title I-A LEA grant program provides assistance to state and local educational agencies for the education of disadvantaged children. Grants are used to provide supplementary educational and related services to low-achieving children attending schools with high concentrations of children from low-income families. The FY2008 appropriation for Title I-A LEA grants was $13,898,875,000.",
"The Migrant Education Program (MEP), ESEA Title I, Part C, provides grants to SEAs to assist in the education of migratory children between the ages of 3 and 21. These formula grants are awarded based on the number of migratory children in the state and per-pupil educational expenditures for the state. FY2008 appropriations were $379,771,000.",
"The 21 st Century Community Learning Center program, ESEA Title IV, Part B, supports the establishment of centers in inner-city and rural public school buildings to provide educational, recreational, cultural, health and social services to persons of all ages in the surrounding community. Program funds are targeted to communities with low achieving students and high rates of juvenile crime, school violence, and student drug abuse that need resources to establish an after-school center. FY2008 appropriations were $1,081,166,000.",
"The Safe and Drug-Free Schools and Communities state grants program, ESEA Title IV, Subpart 1, provides support for comprehensive, integrated approaches to drug and violence prevention. States award sub-grants to parent and community groups and other organizations for local drug and violence prevention activities. Priority for funding goes to programs and activities serving: (1) children and youth not normally served by state or local educational agencies, or (2) populations needing special services, including school dropouts. Appropriations for FY2008 were $294,759,000.",
"HEA Title V, Part A awards five-year competitive grants to Hispanic-serving institutions (HSIs) to assist them in planning, developing, undertaking and carrying out programs to improve and expand the institutions' capacity to serve Hispanic and other low-income students. Among the authorized activities is establishing community outreach programs to encourage elementary and secondary school students to develop the academic skills and the interest to pursue higher education. Priority for assistance goes to HSIs that enter into collaborative agreements with at least one LEA or community-based organization to provide them assistance in reducing dropout rates of Hispanic students, improving rates of academic achievement among Hispanics, and increasing the Hispanic enrollment rate into institutions of higher education. Appropriations for FY2008 were $93,256,000.",
"The Personal Responsibility and Work Opportunity Reconciliation Act of 1996, as amended by the Deficit Reduction Act of 2005, authorizes Temporary Assistance for Needy Families (TANF). TANF provides cash assistance to low-income families with children and requires that recipients work within 24 months of first receiving assistance. Recipients who lack a high school diploma may engage in two educational activities to meet the work participation requirement—education directly related to employment and attendance at a qualified secondary school—either of which should lead to a high school diploma or its equivalent. FY2008 appropriations were $17.050 billion.",
"Each of the act's authorizing the programs discussed above is likely to be considered for reauthorization in the 110 th Congress. This section discusses several issues pertaining to dropouts that may arise as these Acts are considered for reauthorization.\nThe ESEA is currently authorized through FY2008 as a result of an automatic one-year extension provided by the General Education Provisions Act (P.L. 90-247). The funding authorization for the HEA programs discussed above is extended through June 30, 2007, under the Third Higher Education Extension Act of 2006 ( P.L. 109-292 ). The authorization for WIA programs expired on September 30, 2003, although annual appropriations have continued funding for WIA through FY2007.",
"Would the various dropout programs be more cost effective and better serve students through additional coordination? The three primary purpose programs in ED—DPP, N&D, and the Migrant High School Equivalency Program—are administered by three different offices within ED. The degree of coordination between these offices is not clearly apparent. Moreover, these programs serve similar students as several of the multiple purpose programs; many of which are further administered by separate offices in ED and DOL. In its FY2006 and FY2007 budget requests, ED proposed eliminating some of the current programs (specifically, DPP, Talent Search, Upward Bound, and GEAR UP) and replacing them with a new high school reform program which, among other things, was intended to improve graduation rates. The high school reform proposal was not made in the FY2008 budget request. ED maintains that eliminating the four programs in favor a single program under one office would improve program coordination.\nThe Dropout Prevention Act authorized the Secretary of ED to establish an interagency working group to, \"address inter- and intra-agency program coordination issues at the federal level with respect to school dropout prevention\" (ESEA, Section 1811(a)(4)); however, this group has not been set up. In its recommendations for ESEA reauthorization, the Aspen Commission on NCLB urged Congress to improve federal, state, and local dropout prevention coordination. Congress may consider requiring the Secretary to establish the working group or some other coordinating body and may also debate whether students are best served by the current array of decentralized programs.",
"How effective have current federal programs been at promoting secondary degree completion among dropouts or potential dropouts? Findings from evaluations of federally supported local dropout programs show that most programs did not reduce dropping out by statistically significant amounts, but that some programs did improve some outcomes. Research on programs funded at the district and school levels have produced more promising results. Determining the degree to which dropouts or potential dropouts have been served, as well as the effectiveness of services offered, may help Congress determine a course of action regarding dropouts or youth at risk of dropping out; these locally-successful models may enlighten that effort.",
"Should states be required to report graduation rates to ED along with its annual report on academic assessments? Should Congress require consistent and better quality graduation, dropout, and enrollment data reporting from states to NCES? And should ED be required to disseminate these data to Congress and the public in a timely manner? The reporting of data appears to have improved as a result of the NCLB amendments; however, a few gaps in the data remain. A handful of states continue to report dropout data incompatible with NCES guidelines. Further, inconsistent reporting and missing data require NCES to undertake substantial data manipulation to estimate the AFGR. In its suggestions for reauthorizing the NCLBA, ED argues that \"States must demonstrate real progress in accurately reporting and improving high school graduation rates. Several other groups have also advocated for more accurate reporting and better data quality. ED and the Aspen Commission joined the National Governors Association in calling for data reporting on high school outcomes to be disaggregated by student subgroups similar to the AYP requirements. Since the strength of the ESEA accountability system depends on accurate data reporting, Congress may consider strengthening the requirements around reporting of high school outcomes.",
"Are current programs well targeted in light of their objectives? The data presented in this report indicate that, for white non-Hispanics, high school attainment has become nearly universal in the last two decades. These data further suggest that perhaps the educational system is reaching something like a \"ceiling effect\"—making further progress toward 100% high school completion increasingly difficult. At the same time, the data in Table 2 show that certain groups in the population still have a way to go. Hispanic immigrants have, by far, the lowest rates of high school completion, but Hispanic, non-immigrants and black, non-Hispanics also have rates significantly lower than whites and Asians. Few of the programs described above are targeted to serve students by race/ethnicity. It is not clear that existing programs are optimally targeted to at-risk individuals in these groups. Some argue that our level of knowledge about the risk factors associated with dropping out could provide for a much more precise targeting of the federal effort.",
"Should the federal effort to encourage high school completion and prevent dropouts be divided between those at risk of dropping out and those who have already dropped out? Some argue that DOL programs should focus on those who have already left school and the ED programs should focus on retaining at-risk students who haven't dropped out yet. While this may seem to be a logical programmatic organization, others argue that this view of the dropout problem fails to recognize that youth do not cleanly move from being students to being dropouts. An underlying issue pertains to whether one believes dropouts are more indicative of problems with the educational system or family and economic hardships. The latter may be more difficult to address with discrete dropout programs.",
"Do NCLBA assessments and accountability provisions encourage students to drop out of school? Some argue that more frequent and early testing of students may cause some to avoid the shame and discouragement associated with poor performance. Such students may also be subtly encouraged to leave school by administrators and teachers whose attention is focused on meeting AYP targets. The Aspen Commission report calls attention to this problem and argues that schools must be held accountable for graduation rates as well as student achievement to avoid the problem of \"pushing out\" low-performing students to raise assessment scores.\nAs mentioned earlier in this report, the NCLBA required the Secretary of ED to conduct a national assessment of the Title I programs and their impact on SEAs, LEAs, schools, and students. Two preliminary reports have been released but neither have discussed the effect of assessments on dropouts. Congress may call for additional information on this issue as it considers amending the current ESEA assessment and accountability provisions."
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"question": [
"What does this report discuss?",
"What provisions are included in the discussion?",
"What analysis is included in the report?",
"What follows the analysis?",
"To what extent does this report consider potential future issues?",
"What did the Elementary and Secondary Education Act authorize?",
"How are additional dropout prevention programs authorized?",
"How can these programs be categorized?",
"How might these acts be reauthorized?",
"What issues are likely to be debated during reauthorization considerations?",
"What are some of these issues?"
],
"summary": [
"This report discusses federal policy, programs, and issues related to high school graduation, completion, and dropouts.",
"The discussion covers the provisions enacted in federal law that govern the definition, calculation, and reporting requirements of these critical high school outcomes. (Note: this report does not address the issue of academic achievement among high school graduates.)",
"The report then looks at historical data as well as the most recent indicators of these outcomes.",
"That analysis is followed by a description of the federal programs designed to help youth who have dropped out, or who are at risk of dropping out, in completing high school or an equivalency certificate program.",
"Finally, the report discusses issues that may arise as Congress considers reauthorizing the laws that pertain to this topic.",
"The Elementary and Secondary Education Act, as amended by the No Child Left Behind Act, authorizes several dropout prevention programs and contains the main federal requirements that stipulate how graduation, completion, and dropout rates are to be calculated and reported.",
"Additional dropout prevention programs are authorized in the Higher Education Act and the Workforce Investment Act.",
"These programs may be categorized as having: (1) the primary purpose of helping students complete high school, (2) multiple purposes, at least one of which is targeted toward dropout recovery or dropout prevention, or (3) broad purposes not explicitly encompassing dropouts but whose funds may be used at local discretion to help students complete high school.",
"Each of these acts is likely to be considered for reauthorization in the 110th Congress.",
"Several issues may be debated as Congress considers reauthorizing some, and perhaps all, of the federal programs and provisions pertaining to high school graduation, completion, and dropouts.",
"These issues include program coordination, targeting, and effectiveness; the quality and reporting of data required to assess high school outcomes; whether the federal effort should focus on \"at-risk\" students or \"out-of-school\" youth; and whether recently enacted testing and accountability requirements have the perverse effect of increasing high school dropout rates."
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CRS_RL31444
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{
"title": [
"",
"Introduction",
"How Inversions Generate Tax Savings",
"Anatomy of an Inversion",
"The Basic Structure of U.S. International Taxation",
"U.S. Tax Consequences of Inversions",
"Economic Effects of Inversions",
"Tax Equity",
"Investment and \"Competitiveness\"",
"Alternative Policy Responses and Proposals",
"Congressional Proposals",
"The House and Senate ETI Bills",
"The American Jobs Creation Act (AJCA; P.L. 108-357)",
"Contracting Restrictions",
"2006 Budget Reconciliation Legislation (H.R. 4297)",
"2007 Senate Small Business Tax Bill",
"Other Approaches",
"The May 2002 Treasury Report",
"Conclusion"
],
"paragraphs": [
"",
"News reports and articles in professional tax journals in the early 2000s drew the attention of policymakers and the public to a phenomenon sometimes called corporate \"inversions\" or \"expatriations\": instances where firms that consist of multiple corporations reorganize their structure so that the \"parent\" element of the group is a foreign corporation rather than a corporation chartered in the United States. A May 2002 study by the U.S. Treasury Department concluded that while inversions are not new—the statutory framework making them possible has long been in existence—there has been a \"marked increase\" in their frequency, size, and visibility. A comprehensive list of firms that have inverted has not been compiled. Some of the more high-profile inversions, however, include Ingersoll-Rand, Tyco, the PXRE Group, Foster Wheeler, Nabors Industries, Coopers Industries, and Stanley Works. (Stanley Works, however, subsequently announced that it would not undertake its planned reorganization.) According to the U.S. Treasury Department, the transactions are increasing in size, scope, and frequency.\nFirms engaged in the inversions cite a number of reasons for undertaking them, including creating greater \"operational flexibility,\" improved cash management, and an enhanced ability to access international capital markets. Prominent, if not primary, however, is the role of taxes: each of the firms in the above list expects significant tax savings from its reorganization.\nThe tax structure that permits tax savings through inversions has long been a part of the U.S. tax system. The question then arises: why now? One plausible explanation is the decline in the stock market that followed the bull market of the 1990s. As described in more detail below, an inversion is accompanied by a required payment of tax by individual shareholders on capital gains. The capital gains tax may thus serve as a brake on inversions. Lower stock prices, however, may mean that capital gains are smaller and capital gains taxes less onerous. Another suggestion has been that increased globalization of markets has exposed U.S. firms to more competitive pressures, leading them to more avidly pursue tax-saving strategies. And yet another reason is simply momentum: firms may have been reluctant to incorporate abroad for fear of public relations damage. Once several firms undertook reorganizations, the damage potential may have been perceived to have fallen, and other firms followed.\nThe corporate inversions apparently involve little, if any, shifts in actual economic activity from the United States abroad, at least in the near term. (See, however, the section below on \"Policy Issues\" for a discussion of possible long-run effects.) Bermuda and the Cayman Islands are the location of many of the newly created parent corporations—jurisdictions that have no corporate income tax but that do have highly developed legal, institutional, and communications infrastructures. But the actual headquarters of inverted firms typically remain in the United States, and an inversion does not apparently involve the outflow of capital from the United States abroad or the shifting of corporate jobs to foreign locations.\nInstead, the chief near-term economic impact of inversions is on U.S. federal tax revenues, which are reduced by the reorganizations, and concern has been expressed about the potential erosion of the U.S. corporate tax base. This has also led some to draw conclusions about their impact on tax equity: unless federal spending is cut or the deficit is increased, the reduction in tax revenue must be made up by tax increases on other taxpayers. Some policymakers have sought a remedy within the existing U.S. system for taxing international transactions. As discussed below in the section on \" Alternative Policy Responses and Proposals ,\" the 107 th and 108 th Congresses have considered a variety of proposals aimed at stemming the growth of inversions. The proposals range from re-imposing U.S. taxes in a manner that would undo the effect of the inversion to more incremental approaches, such as denying the applicability of foreign tax credits and net operating losses to one-time U.S. \"toll\" taxes that may be triggered by an inversion. The latter, more incremental approach was taken by the enacted version of the American Jobs Creation Act of 2004 ( P.L. 108-357 ).\nOthers view inversions as symptomatic of more general problems with the U.S. tax system that have become evident as the world economy has become more integrated. Rather than disallowing inversions, they recommend a more general reevaluation of the tax code \"that drives them to do such a thing.\" The U.S. Treasury Department views inversions as evidence of competitive problems with the U.S. tax system. The Administration initiated a study of inversions in February, 2002 and issued a preliminary report in May 2002. The report stated that a near-term response to inversions should ensure that inversions \"cannot be used to reduce inappropriately the U.S. tax on income from U.S. operations,\" and thus makes several proposals designed to protect U.S. tax revenues generated by U.S. income. In keeping with its concern for competitiveness, however, the report does not propose more stringent rules for foreign-source income and calls for a reexamination of the U.S. international tax system.\nInversions have thus been discussed in terms of tax equity and competitiveness. A more detailed look at their implications for the U.S. tax system in general is presented below in the section entitled \"Policy Issues.\" First, however, it is useful to look at the mechanics of inversions and how they generate tax savings.",
"",
"Although each corporate inversion has unique features, a common reorganization is apparently a \"triangular\" stock transaction merger, where a new foreign corporation is created that is chartered in a foreign country with low tax rates. The new foreign entity creates a U.S.-chartered \"merger subsidiary,\" owned by the new foreign corporation. The U.S. parent corporation is then merged into the domestic merger subsidiary and becomes a subsidiary of the new foreign parent. For stockholders of the U.S. corporation—for example, individuals, institutional investors, and other firms—shares of the old U.S. parent automatically becomes shares of the new foreign parent. Other forms of inversions are \"asset transfers,\" where the domestic parent transfers its assets to a newly created foreign corporation, and \"drop-down\" transactions, where the domestic parent transfers its assets to a foreign corporation, but the foreign corporation transfers some of those assets to a domestic subsidiary.",
"To see how inversions such as these generate tax savings, it is useful first to look at the general structure of the U.S. international tax system. In the international context, the United States bases its tax jurisdiction on residence: it taxes corporations chartered in the 50 states or the District of Columbia on their worldwide income, foreign as well as domestic. At the same time, the United States generally exempts corporations chartered in foreign countries from U.S. tax on their foreign-source income.\nUnder the residence system, a firm's U.S. tax on foreign income depends on how the firm's foreign operations are organized, and a result of the system is a feature known as the \"deferral principle,\" or simply \"deferral.\" Under deferral, income that a U.S.-chartered corporation earns directly through a branch that is not separately incorporated is generally taxed by the United States on a current basis since the income is earned by a U.S. \"resident.\" In contrast, foreign income earned through a separate foreign subsidiary corporation is generally not subject to U.S. tax until it is remitted to the U.S. parent corporation as dividends or other income: it is tax-deferred. Because of discounting, this deferral confers a tax benefit on income earned in foreign countries with relatively low tax rates.\nThe system has several additional complicating features. One is the U.S. foreign tax credit, which is designed to alleviate double-taxation where foreign countries tax U.S. firms' foreign income. Under its provisions, the United States permits its taxpayers to credit foreign taxes they or their foreign subsidiaries pay against U.S. taxes they would otherwise owe. The foreign tax credit is generally limited to offsetting U.S. tax on foreign and not domestic income, but if a firm pays sufficient foreign taxes, it may use the credit to eliminate its entire U.S. tax liability on foreign-source income, whether U.S. pre-credit taxes are deferred or apply on a current basis.\nAnother important feature is a set of \"anti-deferral\" regimes that limit the availability of deferral in some cases. The broadest and most important of these is the tax code's Subpart F provisions that were enacted in 1962 as a means to limit the concentration of passive-investment income by firms in tax havens. Under Subpart F, U.S. parent firms can in some cases be taxed on particular types of subsidiary income, even if it is not repatriated to the U.S. parent firm. Subpart F, however, only applies where a foreign subsidiary is controlled (more than 50%-owned) by those U.S. stockholders who own large blocs (at least 10%) of the subsidiary's stock. The type of income subject to Subpart F is generally income from passive investment and certain types of income whose source is thought to be easily manipulated.\nA second anti-deferral regime is the passive foreign investment company, or PFIC rules. In contrast to Subpart F, the PFIC provisions apply to foreign corporations that invest intensively in passive-type assets, regardless of the degree or concentration of U.S. ownership and even to income that is not itself from passive investment. Although the PFIC rules permit a deferral of U.S. tax in some cases, the rules apply an interest charge to the delayed tax payment, thus negating the benefit of deferral.\nBefore explaining how an inversion within this U.S. tax structure generates tax savings, we first note that foreign taxes are not irrelevant. Foreign countries frequently tax corporations chartered within their borders—as does the United States. Thus, whatever U.S. tax savings an inversion generates could be offset if the country where the new parent corporation is chartered were not to have corporate tax rates lower than those of the United States. Indeed, Bermuda and the Cayman Islands have been a frequent destination for recent inversions, and neither imposes a corporate income tax.",
"Given the U.S. tax structure, inversions potentially provide tax savings in two general ways: by reducing U.S. tax on foreign source income; and by reducing U.S. tax on U.S. income that is shifted outside the United States in \"earnings stripping\" or similar transactions. Where they occur, these tax savings are ongoing but only save taxes at the corporate level under the corporate income tax. Inversions can potentially trigger a one-time tax on gain that is required to be recognized when an inversion occurs; the capital gains tax can apply to individual stockholders or at the corporate level. Further, inversions may be unable to generate tax savings to firms whose foreign tax credits have eliminated U.S. tax on foreign income.\nTo see how these results occur, we look at the straightforward example of a firm that is initially \"uninverted\"; the firm includes a U.S.-chartered parent corporation that is publicly owned and traded on U.S. stock exchanges. The parent corporation earns foreign income through foreign subsidiaries. Under current law, as long as a firm has a dearth of foreign tax credits, at least some U.S. tax burden applies to the firm's foreign income. Some of the income may be taxed on a current basis either through Subpart F or the PFIC provisions. And while other foreign income may be tax-deferred, it is nonetheless ultimately taxed when it is repatriated. At the stockholder level, shareholders who are private individuals generally pay individual income tax on dividends from the U.S. parent corporation and on capital gains when the stock is sold. However, some shareholders may hold their stock in tax free vehicles—for example, individual retirement accounts (IRAs)—while other shareholders—for example pension funds—may be tax exempt.\nNow, suppose the firm inverts, so that the both the former U.S. parent corporation and the foreign subsidiaries become subsidiary to a new foreign parent corporation. First, since the conglomerate's foreign income is now earned by a foreign-chartered corporation, U.S. corporate-level tax on the foreign income that was either deferred or currently paid under the anti-deferral regimes is eliminated. Thus, one source of tax saving is U.S. tax on foreign income.\nInverted firms may also employ earnings stripping to reduce U.S. tax on domestic income. Earnings stripping shifts U.S.-source income from a U.S. corporation to a foreign parent by means of transactions between the related parts of the firm. While the transactions can take a variety of forms, a prototypical earnings stripping transaction involves a foreign parent lending funds to a domestic subsidiary; the subsidiary is able to deduct interest payments to its parent from its U.S. taxable income, thereby reducing its U.S. tax liability. According to the Treasury report on inversions, \"a feature common to many inversions is the presence of substantial indebtedness from the former U.S. group to the new foreign parent or one of its foreign subsidiaries.\" Foreign corporations are generally subject to a U.S. \"withholding tax\" on U.S.-source interest received from related U.S. corporations; the withholding tax rate is generally 30%. However, the withholding tax is in many cases reduced or eliminated by tax-treaty provisions. Thus, if an earnings-stripping transaction is structured so that interest payments are made to a related lender in a treaty country, the tax can be avoided.\nProvisions designed to limit earnings stripping by foreign firms investing in the United States were enacted with the Omnibus Budget Reconciliation Act of 1989 ( P.L. 101-239 ). The provisions deny deductions for interest payments to related corporations, but apply only after a certain threshold of interest payments and level of debt-finance is exceeded.\nAs noted above, although inversions can generate ongoing tax savings at the corporate level under the corporate income tax, they may generate taxes at the shareholder level, under the individual income tax. One source of new taxes may be capital gains: Section 367 of the tax code and Treasury regulations issued under that section impose capital gains tax on transfers of stock by U.S. stockholders to foreign corporations. Thus, for a shareholder of an inverted firm's domestic parent, any appreciation that occurred from the time of purchase to the time of the inversion is generally subject to capital gains tax. The purpose of the provision is to prevent capital gains from flowing out of U.S. tax jurisdiction without being subject to U.S. tax at some point.\nThe triggering of capital gains tax suggests a divergence of interests among an inverting firm's stockholders, with those of taxable shareholders differing from those whose stock is not taxed (e.g., pension funds and those with holdings in IRAs). Indeed, lawsuits were filed by some Ingersoll-Rand shareholders that sought to block the firm's inversion, although stockholders subsequently voted overwhelmingly to approve the reorganization and the lawsuits were settled. For its part, Stanley Works has pointed out that only 40% of its shares are in taxable accounts.\nThe anti-deferral regimes may also be a factor at the shareholder level. Inversions commonly result in stockholders at large owning the new foreign parent corporation. Subpart F, with its thresholds requiring control and concentration of ownership, are not likely to be a factor. The PFIC rules, however, may be more likely to apply. If a foreign parent passes the PFIC passive-investment and income thresholds, individual stockholders may be subject to the PFIC regime where they previously were not.",
"",
"As noted above, the chief near-term economic effect of inversions is to reduce U.S. tax revenue. If the U.S. government has a fixed revenue requirement, inversions' revenue loss has implications for fairness: the lost revenue is made up by higher taxes elsewhere, either on other corporations and businesses, or on individual taxpayers. Equity is one of the chief grounds on which inversions' critics have assailed them.\nEconomic theory, however, points out that equity is a difficult concept to apply in the case of the corporate income tax. To begin, corporations are not people but agglomerations of stockholders, employees, creditors, and managers, each of whom has his own particular income and wealth characteristics. It is therefore not very informative to compare the tax burden of a corporation with that of an individual, no matter how eye-catching the comparison may be. To make equity comparisons even more difficult, the ultimate repository of the tax's burden is difficult to determine with any certainty. In the short run, the burden of corporate income tax (or the benefit of its reduction, as with inversions) likely falls on the corporate stockholders. In the long run, however, economic analysis suggests that market adjustments and behavioral reactions to the tax result in its burden being spread beyond corporate stockholders to all owners of capital. Thus, inversions may reduce the tax burden on capital in general relative to the burden on labor income. And to the extent capital income is associated with individuals with higher incomes, inversions may reduce the progressivity of the tax system.",
"In the short run, inversions probably have little impact on real economic activity. Firms undertaking inversions have indicated that they are only changes in legal structure and substantive headquarters functions will continue to be conducted in the United States. At the same time, however, inversions do reduce the corporate tax burden on foreign-source income relative to that on domestic income. An inverted firm may face a lower overall tax rate on investment in low-tax countries than it does on investment in the United States. As a consequence, a more long-run result may be for inverted firms to shift some amount of investment and business operations from the United States to locations where foreign income taxes are low.\nWhat are the implications of this possible impact on investment flows? In assessing the impact of taxes on investment, economic analysis focuses on economic efficiency and, ultimately, on economic welfare. According to traditional economic theory, taxes best promote economic efficiency when they are least distorting of investment decisions; when taxes do not distort investment decisions, investment is generally employed in its most productive location. As a consequence, economic welfare is maximized. Economic theory also holds that taxes are least distorting of the location of investment when the tax burden on investment is the same in every location. In the international context, taxes do not distort investment location when the tax burden on foreign source income is the same as that on domestic income. (In tax parlance, a tax policy that promotes equal taxation of foreign and domestic investment is a policy of \"capital export neutrality.\") Since inversions reduce the tax burden on foreign income compared to domestic income, their availability likely nudges the U.S. tax system away from capital export neutrality with a corresponding loss in economic efficiency and economic welfare.\nBut any loss in economic efficiency that may result from inversions is not likely to be large, because features of the U.S. tax system that exist quite apart from inversions already reduce the tax burden on foreign investment. The ability of firms to defer U.S. tax on subsidiary earnings in low-tax countries reduces the tax burden on foreign investment as do certain U.S. foreign tax credit rules. While inversions likely do reduce the tax burden on foreign income by granting a permanent tax exemption rather than just a deferral of tax, it is likely their incremental change in the tax burden is not enormous.\nWhile capital export neutrality is thought by economists to maximize world economic welfare, business leaders and others have emphasized the importance of taxes' impact on U.S. competitiveness and the ability of U.S. firms to compete in world markets. This analysis recommends a policy sometimes called \"capital import neutrality\" under which the United States would not tax income from foreign business operations, and would limit its tax jurisdiction to U.S.-source income. For example, several European countries operate \"territorial\" tax systems that do not apply home-country taxes to foreign income; it is argued that the United States should likewise adopt a territorial system to place its firms on the same tax footing as firms from territorial countries.\nThe availability of corporate inversions introduces an element of capital import neutrality into the U.S. system. Supporters of capital import neutrality are likely to view inversions in a more positive light than supporters of capital export neutrality; capital import neutrality recommends an exemption for foreign income and inversions accomplish that for inverted firms. And as noted above, some policymakers have suggested that inversions may signal a need for tax changes that would make the U.S. tax system more \"competitive.\"",
"Proposed policy responses to inversions vary widely, depending on what is viewed as their chief threat. For example, those that are chiefly concerned about the revenue and tax equity results of inversions make little distinction between inversions' loss of tax revenue from U.S. source-income, on the one hand, and foreign-source income, on the other. Their proposals seek to re-impose U.S. taxes on firms when inversions occur. In contrast, others view inversions as symptomatic of a competitive burden imposed by the U.S. tax system, and have suggested more general reforms of the U.S. method of taxing foreign-source income may be in order. The 2002 Treasury Department report, for example, recommended more stringent treatment of U.S.-, but not foreign-source income—for example, more effective measures of limiting earnings-stripping—and called for a general reexamination of the U.S. system of taxing foreign income.",
"",
"A number of bills were introduced in the 108 th Congress that addressed inversions. Prominent among these were two broad business tax bills passed in 2004 by the Senate and House— S. 1637 and H.R. 4520 , respectively—that had as a primary focus the controversy over the U.S. extraterritorial income exclusion (ETI) tax benefit for exporting. Both bills proposed to repeal the ETI benefit and proposed a variety of tax cuts both for domestic and overseas investment. The bills contained many overlapping provisions but also contained differences, including some in the area of inversions. The differences between the bills were resolved in October by a conference committee, and the conference committee version of H.R. 4520 was enacted as the American Jobs Creation Act of 2004 ( P.L. 108-357 ).\nS. 1637 (Senator Grassley) was approved by the Senate Finance Committee on October 1, 2003, and included several inversion-related provisions among a variety of revenue-raising proposals designed to offset the cost of the bill's investment tax benefits. S. 1637 proposed to impose two new tax regimes on inversions, depending on ownership thresholds and on when the inversions occurred. Under the first regime, S. 1637 would have taxed a foreign parent corporation like a domestic corporation if it passed a continuity-of-ownership threshold, thus nullifying much of the tax benefit an inversion can generate. The test would be met if at least 80% of the foreign corporation is owned by the former shareholders of a domestic corporation or partnership that had transferred substantially all of its property to the foreign parent. The threshold also required the foreign parent and its affiliates not have \"substantial business activities\" in the country of incorporation, and applied only to inversions that occur after March 20, 2002.\nS. 1637 's second regime was based on a 50% ownership test and would potentially have applied whether the inversion occured before or after March 20, 2002. (The second set of rules would not apply, however, to post-March 20 inversions subject to the bill's first regime.) The second regime would act as a type of toll tax on the shifting of the firm's foreign subsidiaries from the former U.S. parent to the new foreign parent. The tax would apply the highest corporate tax rate (or the highest individual tax rate, in the case of partnerships) to stock received by the former domestic parent from the new foreign parent in exchange for ownership of the firm's foreign subsidiary corporations. Neither foreign tax credits nor net operating losses would be permitted to offset the tax.\nAn additional provision of S. 1637 proposed to impose an excise tax on stock options related to inversions, thus addressing an area in which the interests of corporate officers with respect to inversions might diverge from those of stockholders. (See the discussion of capital gains taxes at the shareholder level, above on page 5 .) Under the provision, officers, directors, and 10% owners of inverted firms would be subject to a 20% excise tax on compensation that is directly linked to the value of an inverting corporation's stock. Such compensation would include stock, certain stock options (generally nonqualified stock options), and other stock-based compensation. For stock options, the tax would apply to the value of the option at the time of the inversion, determined by an option-pricing model specified by the Treasury Department. The excise tax would apply, however, only when the inversion in question triggers recognition of shareholder-level capital gains. The bill also contained provisions that would extend current law's earnings-stripping restrictions on the deductibility of interest paid to related corporations (see page 4 , above) to partnerships and S corporations. The restrictions currently apply only to corporations.\nAccording to estimates by the Joint Committee on Taxation, S. 1637 's inversion provisions would have increased tax revenue by $2.6 billion over 10 years.\nThe House passed H.R. 4520 (Representative Thomas) on June 17, 2004. Like S. 1637 , H.R. 4520 included more stringent treatment of inversions in conjunction with a broad set of unrelated provisions that would repeal ETI while enacting other investment tax benefits. The House bill's inversion provisions, however, were generally narrower than those of the Senate bill. (Note however, that a temporary inversion provision comparable in scope to that of S. 1637 was included in H.R. 6 , the House-passed energy bill, as described below.) Under current law, the transfer of foreign subsidiaries or other assets from a U.S. parent corporation to a new foreign parent corporation may give rise to corporate-level tax (sometimes referred to as \"toll charges\") under several different tax code provisions. However, \"tax attributes\" such as foreign tax credits or net operating losses (if available) may offset the tax. H.R. 4520 proposed to deny the applicability of tax attributes in the case of inversions.\nLike the Senate bill, the House bill contained a provision that applied an excise tax on stock options related to inverted corporations. The applicable rate of the tax, however, would be 15% rather the 20% rate imposed by S. 1637 .\nUnlike S. 1637 , the House-passed bill did not contain restrictions on interest deductions aimed at limiting earnings stripping. In this respect, it is distinct from the 2003 Ways and Means Committee bill ( H.R. 2896 ), which did contain earnings stripping provisions.\nAccording to Joint Committee on Taxation estimates, the House bill's inversion and earnings stripping provisions would together increase tax revenue by an estimated $488 million over fiscal years (FY) 2004-2014.",
"Like the Senate bill, the conference agreement on H.R. 4520 adopted two alternative tax regimes applicable to inversions; which one applies depends on continuity-of-ownership thresholds. The new rules applied to inversions occurring after March 4, 2003. The new law provides that when a new foreign parent is at least 80% owned by the former parent's stockholders, the new law treats the foreign parent as a domestic corporation, thus generally denying to the firm the tax benefits of the inversion. The second regime applies when there is at least 60% continuity of ownership but less than 80%. In the latter case, the new foreign parent is not taxed like a domestic corporation, but (in a manner similar to the House bill) any toll taxes that apply to transfers of assets to the new entity are not permitted to be offset by foreign tax credits or net operating losses.\nThe conference agreement provides an excise tax on stock options, as did both the House and Senate bills. The rate of the tax, however, will be the maximum capital gains tax rate for an individual: 15% through 2008 and 20% thereafter.\nAccording to JCT estimates, the conference agreement's inversion provisions will increase tax revenue by $937 million over 10 years.",
"Several bills not directly pertaining to taxes have contained anti-inversion provisions. In the 107 th Congress, Section 835 of the Homeland Security Act ( P.L. 107-296 ) contained restrictions on the agency's contracting with inverted corporations. The measure that was approved contained broader waiver conditions than those in the earlier House or Senate bills and provided that the prohibition can be waived in the interests of homeland security, to prevent the loss of jobs, or to prevent the government from incurring higher costs.\nIn the 108 th Congress, the Senate returned to the procurement restrictions issue. On January 23, 2003, the Senate approved an omnibus appropriations bill ( H.J.Res. 2 ) that would tighten the enacted waiver conditions by making a waiver of the contracting restrictions possible only if the Secretary of Homeland Security certifies that it is essential to national security. The provision was included in section 101 of division L of the conference committee version of the bill that became P.L. 108-7 .",
"Additional tax legislation aimed at restricting inversions was included as one of several revenue-raising \"offsets\" in the version of budget reconciliation legislation passed by the Senate in November, 2005. The proposal would have applied restrictions to inversions occurring after March 20, 2002, rather than those occurring after March 20, 2003, as under the AJCA. In addition, the plan would have reduced the 60% threshold that applies to AJCA's second inversion regime to a 50% continuity-of-ownership threshold, thus expanding the scope of AJCA's restrictions. The proposal would also have tightened the tax code's earnings-stripping restrictions (see above) in the case of inverting firms. The Senate proposal was not contained in the final version of reconciliation legislation enacted in May 2006 (Tax Increase Prevention and Reconciliation Act; P.L. 109-222 ).",
"On January 17, 2007, the Senate Finance Committee approved S. 349 , containing a package of tax benefits for small business along with a set of revenue-raising measures designed to offset part of the tax benefits' revenue loss. The bill included expanded restrictions on inversions, a scaled-back version of the 2005 proposals described above, as one of the revenue-raisers. The provisions were subsequently included in H.R. 2 , the minimum wage bill passed by the full Senate in February, and in H.R. 1591 , the supplemental appropriations bill approved by the Senate in March. The inversion measure was not, however, included in the conference agreement reached on H.R. 1591 , nor was it in the small business tax package that Congress ultimately passed as H.R. 2206 ( P.L. 110-28 ).\nThe Senate inversion provision generally applied a part of AJCA's anti-inversion regime, which are the provisions applicable to firms meeting the 80%-or-greater test, to inversions occurring up to (approximately) a year earlier than the effective date specified by AJCA. As described above, AJCA's provisions apply to inversions occurring after March 4, 2003. With some modifications, the Senate measure also applied the AJCA provisions to inversions occurring after March 20, 2002. The modifications were apparently designed to limit the retroactivity of the expanded date. Under their terms, the tax regime that AJCA applied to 80% inversions—treatment of the new offshore parent as a domestic corporation—do not apply until the first year after tax years beginning in 2006.",
"An approach to inversions that is similar to those contained in the legislative proposals would modify the \"anti-deferral\" regimes contained in subpart F or the PFIC provisions. These proposals have not, however, been introduced as legislation. As with the legislative proposals, these suggestions would identify reorganizations that qualify as inversions and apply their tax rules in such situations. The subpart F or PFIC rules would be modified so that the stockholders of foreign-chartered inverted parent corporations would be subject to U.S. tax on at least some of its foreign income.\nIn contrast to the proposals that would apply only when inversions occur, another suggested approach would modify the tax code's concept of residence. Such an approach would be more fundamental, and might be viewed as treating the cause rather than the symptoms. One analyst has pointed out that the residence test applied by the British tax system looks beyond the place of incorporation and generally establishes a firm's residence as the country from which the firm is centrally managed and controlled. Such a system would appear to avoid some potential administrative problems inherent in attempting to identify inversions by means of thresholds, as do the legislative proposals. On the other hand, the British system has apparently encountered difficulties in identifying the substantive location of management and control: control can in some cases be established in tax havens simply by conducting pro forma board meetings there.",
"The Treasury Department's May 2002 report voiced three principal concerns: that the earnings-stripping opportunities from inversion may erode the part of the U.S. tax base consisting of U.S.-source income; that the current tax system may give foreign-controlled firms a competitive advantage; and that inversions \"reduce confidence in the fairness of the tax system.\"\nThe Treasury Department report noted that earnings stripping is not confined to inversions, but can occur within foreign-controlled groups in general. The report's concern with the practice was reflected in a number of proposals aimed at restraining the practice. As described above, the tax code already places limitations on interest deductions when certain thresholds are exceeded; the Treasury concluded that \"the prevalent use of foreign related-party debt in inversion transactions is evidence that these rules should be revisited.\" The report listed a number of specific ways the rules could be tightened. The report also suggested that \"further work is needed\" in income-shifting areas apart from related-party debt, specifically, the tax system's transfer pricing rules in the area of intangible assets.\nAs with earnings stripping, the Treasury report's concern for competitiveness was broader than just inversions. The report viewed inversions as being one aspect of a more general result of the U.S. tax system. The report's analysis concluded that the U.S. system places U.S.-controlled and headquartered firms in general at a disadvantage relative to foreign-controlled firms, a disadvantage that is believed to occur because the United States taxes the worldwide income of its corporations while some foreign countries use \"territorial\" systems that exempt foreign income. The report viewed not only inversions, but a growing number of acquisitions of U.S. firms by foreign companies as possible symptoms of the disadvantage.\nAs a result of its concern for competitiveness, the Treasury report stopped short of proposals that would negate the tax savings on foreign-source as well as domestic-source income, a contrast with bills listed above. Instead, the report stated:\nthe policy response to the recent corporate inversion activity should be broad enough to address the underlying differences in the tax treatment of U.S.-based companies and foreign-based-companies, without regard to how foreign-based status is achieved. Measures designed simply to halt inversion activity may address these transactions in the short run, but there is a serious risk that measures targeted too narrowly would have the unintended effect of encouraging a shift to other forms of transactions to the detriment of the U.S. economy in the long run.\nAs a more general response, the report recommended evaluating the merits of exempting foreign-source business income and re-evaluating the usefulness of the anti-deferral regimes and limitations on the foreign tax credit.\nThe report was generally confined to describing the current legal framework and presenting policy options; it does not present a rigorous economic analysis of inversions or the broader impact of U.S. taxes in the international context. With its focus, however, on protecting the domestic rather than foreign U.S. tax base and its concern with competitiveness, the report's perspective appeared more closely akin to the capital import neutrality perspective described above.",
"The apparent recent increase in corporate inversions has aroused concern in its own right. The spectacle of U.S. corporations engaging in \"expatriation\" in a tax-saving technique not available to most individual taxpayers may, in the words of the Treasury Department, \"reduce confidence in the fairness of the tax system.\" But inversions can be viewed in a broader context. Recent tax policy debate has tended to focus on the international economy, sparked in part by the European Union's successful challenge of the U.S. Foreign Sales Corporation export tax benefit, and in part by the perceived new challenges posed by an increasingly integrated world economy. Some observers and policymakers have suggested that the time is right to consider fundamental reform of the U.S. tax system; one approach might be to adopt a territorial tax system under which the United States would exempt foreign business income from tax.\nInversions present many of the same policy issues as would be presented by adoption of a territorial system. The end result of an inversion, after all, is the exemption from U.S. tax of a firm's foreign income. Accordingly, the debate over the respective merits of capital import neutrality and capital export neutrality occur in much the same manner over inversions as they occur in a debate over territoriality. And the administrative problems inversions present in protecting the U.S. domestic tax base—the problems presented by earnings stripping and income shifting transactions—would be presented by a territorial tax system. Thus, if the question of adopting a territorial tax system moves to the fore of the tax policy debate, the debate over inversions may have provided a preview."
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"question": [
"How has the frequency of \"inversions\" changed in the early 2000s?",
"How are these \"inversions\" typically achieved?",
"What are the typical goals of \"inversions\"?",
"How can inversions affect a firm's U.S. taxes?",
"How can inversions create additional tax savings?",
"How may inversions affect U.S. investment abroad?",
"How substantial are these changes?",
"What is the largest impact of inversions on the short-term economy?",
"How has Congress attempted to restrict the practice of inversions?",
"What has happened to many of the proposed restrictions by Congress?",
"What may happen in the 111th Congress regarding the practice of inversions?",
"Inversions are seen as being symptomatic of what perceived issue?",
"What recommendations did the report make?",
"What suggestions have been promoted regarding the U.S. international tax system?",
"How will this report be updated?"
],
"summary": [
"In the early 2000s, reports indicated that an increasing number of U.S. firms have altered their structure by substituting a foreign parent corporation for a domestic one.",
"Such \"inversions\" typically involved the creation of a new foreign corporation in a country with low tax rates (a \"tax haven\") that becomes the parent of the firm's foreign and U.S. component corporations.",
"A chief motive for inversions was apparently savings by firms on their U.S. corporate income tax.",
"An inversion can thus potentially reduce a firm's U.S. taxes on foreign income.",
"Other tax savings apparently result from \"earnings stripping,\" or the shifting of U.S.-source income from taxable U.S. components of the firm to the tax-exempt foreign parts.",
"In the long run, inversions may be accompanied by some increased level of U.S. investment abroad; a firm that inverts reduces its tax burden on foreign investment.",
"However, any such shift may be small, and the recent corporate inversions do not appear to be accompanied by substantive shifts of economic activity from the United States.",
"This leaves the impact of inversions on tax revenues as probably the leading near-term economic effect.",
"Several bills introduced in the 108th Congress appear to have had the revenue losses and tax equity as their primary concern, and tax legislation aimed at restricting inversions was included in the American Jobs Creation Act of 2004 (P.L. 108-357), an omnibus tax bill addressing business and international tax issues.",
"In 2006, additional tax restrictions were proposed in the Senate-passed version of the Tax Increase Prevention and Reconciliation Act (TIPRA; P.L. 109-222) but were not contained in the final act. In March 2007, the Senate passed a tax package that included inversion provisions as part of H.R. 1591, a supplemental appropriations bill. However, the measure was not included in the conference agreement on the bill.",
"There are indications that the 111th Congress may again look to the corporate income tax as an area where revenue-raising measures might be found to offset tax cuts provided elsewhere.",
"Some have viewed inversions as symptomatic of a burden they believe the U.S. tax system places on the international competitiveness of U.S. firms. A May 2002 U.S. Treasury report saw inversions as just one result of competitive problems posed by U.S. taxes and called for a more general reexamination of the U.S. international tax system.",
"The report's near-term recommendations for more stringent tax rules are confined to changes aimed at protecting the domestic tax base rather than U.S. tax revenue from foreign income.",
"Recent policy discussions of the U.S. international tax system have included calls by some for adoption of a \"territorial\" tax system, under which U.S. taxes would no longer apply to foreign-source income.",
"This report will be updated as events in Congress and elsewhere occur."
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CRS_R41910
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{
"title": [
"",
"Introduction",
"Global Nuclear Power",
"U.S. Nuclear Cooperation with Foreign Partners",
"Enrichment and Reprocessing Worldwide",
"U.S. Nuclear Industry",
"Increasing Importance of Foreign Suppliers to U.S. Nuclear Power Projects",
"Current Proliferation Barriers and Disincentives",
"The NPT and IAEA Safeguards",
"Multilateral Supplier Policies",
"Nuclear Suppliers Group",
"Multilateral Nuclear Fuel Arrangements",
"Other Mechanisms",
"U.S. Nuclear Cooperation Agreements64",
"Congressional Approval Process",
"Policy Goals of U.S. Nuclear Cooperation Agreements",
"Nuclear Nonproliferation",
"Enrichment, Reprocessing, and Additional Protocols",
"Promoting the U.S. Nuclear Industry",
"Bilateral and Strategic Relations",
"Additional Issues for Consideration",
"Liability",
"Potential Limits on U.S. Influence",
"Restrictions on Foreign Firms' Activities in the United States"
],
"paragraphs": [
"",
"The United States has long sought, via its domestic laws as well as foreign policies, to ensure that ostensibly peaceful nuclear commerce does not aid nuclear weapons programs. Mechanisms and instruments such as the nuclear Nonproliferation Treaty (NPT), International Atomic Energy Agency (IAEA) safeguards, the Nuclear Suppliers Group (NSG), and economic sanctions all continue to play a role in stemming nuclear weapons proliferation. The restrictions contained in U.S. law governing nuclear cooperation with other countries comprise another tool for preventing proliferation. However, Congress has become increasingly concerned that, with the growing international interest in nuclear power, U.S. laws and policies may need to be changed in order to prevent further nuclear proliferation.\nThis report begins with a brief overview of the global nuclear power industry, including the possessors of enrichment and reprocessing technology. It then describes the state of the U.S. nuclear industry, particularly its dependence on both international trade and foreign suppliers. The report then reviews the multilateral nuclear nonproliferation mechanisms. It concludes with a detailed summary of U.S. nuclear cooperation agreements, the primary mechanism by which the United States both promotes U.S. nuclear commerce and ensures that such commerce does not contribute to clandestine nuclear weapons programs. The report also includes appendices that provide additional details.\nThe United States has long engaged in civil nuclear commerce with other countries, buying and selling nuclear fuel, reactors, and related components. Perhaps the most significant congressional action to regulate such commerce was the Nuclear Nonproliferation Act of 1978 ( P.L. 95-242 ), which amended the Atomic Energy Act of 1954 (AEA) and imposed additional restrictions on U.S. nuclear commerce designed to ensure that transfers of nuclear energy technology would not contribute to the proliferation of nuclear weapons. In the 113 th Congress, Members have introduced several bills that would add to the nonproliferation criteria and strengthen congressional oversight of bilateral nuclear cooperation under Section 123 of the AEA, as amended ( P.L. 95-242 ; 42 U.S.C. §2153 et seq.) (hereinafter \"123 agreements\").\nDuring the past decade, Members of Congress have become increasingly concerned that, with an increased global interest in nuclear power, additional countries may obtain domestic enrichment or reprocessing technology, the most sensitive components of the nuclear fuel cycle. Uranium enrichment can produce low-enriched uranium for use as fuel in nuclear reactors, but can also produce highly enriched uranium, which can be used as both reactor fuel and as fissile material in nuclear weapons. By reprocessing spent nuclear reactor fuel, a state can produce plutonium, which it might use as fuel in certain types of nuclear reactors and also as fissile material in nuclear weapons. Obtaining fissile material is widely regarded as the most difficult task in building nuclear weapons. (For an illustration of the nuclear fuel cycle, see Appendix A .)\nThese proliferation concerns have generated increased congressional interest in laws governing bilateral nuclear cooperation agreements. Recent congressional debates over 123 agreements with India, Russia, the United Arab Emirates (UAE), South Korea, and Vietnam highlighted concerns about the need to balance nonproliferation, commercial, and strategic goals. Additional agreements are expected to come before Congress for consideration in the next few years.",
"Sixteen countries are planning to build their first nuclear power plants by 2030, according to the World Nuclear Association. IAEA estimates that world nuclear power generation by 2030 will grow 46%-142% from 2012, led by the Far East and Eastern Europe (along with possible reductions in Western Europe). Concerns about the safety of nuclear power and its economic competitiveness are the major near-term inhibitors of nuclear growth, according to IAEA. But the agency predicted, \"In the longer run, the underlying fundamentals of population growth and demand for electricity in the developing world, as well as climate change concerns, security of energy supply and price volatility for other fuels, continue to point to nuclear generating capacity playing an important role in the energy mix.\"\nWorld nuclear power generation has dropped since 2006, particularly after Japan's reactors shut down following the 2011 Fukushima disaster. Nuclear power critics contend that construction delays, cost overruns, and competition from renewable energy will strongly inhibit the future of nuclear power. They point out that three countries—China, India, and Russia—account for two-thirds of the reactors currently under construction worldwide.\nIn the countries considering their first nuclear reactors, such projects are at various stages of planning (see Appendix B ). Ten countries that are currently building or formally planning reactor projects—Bangladesh, Belarus, Egypt, Indonesia, Jordan, Kazakhstan, Poland, Turkey, the UAE, and Vietnam—have never operated nuclear power plants.\nAccording to the Organization for Economic Cooperation and Development (OECD), 36 countries that have never had nuclear power are \"actively preparing\" or have \"expressed interest in starting a nuclear power programme.\" OECD categorizes the potential nuclear newcomer countries by the size of their economies and their electrical grid capacity, because those factors \"may provide a rough indication of which countries may be the strongest candidates to proceed with nuclear development\" (see Table 1 ).\nOnly Canada, China, France, Japan, Russia, South Korea, and the United States export nuclear reactors. India is reportedly attempting to join this group. Some emerging nuclear power states have concluded agreements with non-U.S. reactor suppliers. For example, Vietnam has such contracts with Russia and Japan, Turkey has an agreement with Russia, and the UAE has signed a reactor contract with South Korea.",
"The United States has nuclear cooperation agreements with 25 countries, the IAEA, and Euratom (see Appendix C ). State Department officials have said that approximately 17 nuclear cooperation agreements will be negotiated, renegotiated, or extended in the next three years. Currently, the United States is negotiating a 123 agreement with Jordan, although those negotiations have been suspended.\nThe most recent 123 agreement—with Vietnam—entered into force on October 3, 2014. The preamble of the agreement includes a political commitment that says Vietnam intends to rely on international markets for its nuclear fuel supply, rather than acquiring sensitive nuclear technologies. At the same time, the United States pledges to support international markets to ensure a reliable nuclear fuel supply for Vietnam. Article 6 of the agreement specifically prohibits Vietnam from enriching or reprocessing U.S.-obligated nuclear materials—for instance, materials that are transferred from the United States—without specific future U.S. consent.\nThe United States has concluded Memoranda of Understanding (MoU) regarding potential nuclear cooperation with Bahrain, Jordan, Mongolia, and Saudi Arabia. However, a state's conclusion of such an MoU is neither necessary nor sufficient for a country to conclude a 123 agreement.",
"Only a limited number of countries conduct commercial enrichment and reprocessing of fissile materials and can supply this technology. At the present time, supplier states are not planning any transfers of enrichment or reprocessing technology. As is discussed below, the Nuclear Suppliers Group recently added criteria to its guidelines for the supply of fuel cycle technologies.\nCommercial reprocessing is now being done in France, the United Kingdom, Russia, Japan, and India. China has a pilot reprocessing plant and plans to open a larger facility around 2017, possibly followed by a full-scale commercial plant to be built by the French firm Areva by 2025. South Korea is pursuing a research and development program on pyroprocessing. Some countries with few natural energy resources, such as Japan, argue that they want to reprocess their spent fuel to reduce dependence on foreign energy sources. Reprocessing proponents in those countries prefer a closed fuel cycle, in which spent nuclear fuel from reactors is used to make fuel for other reactors; opponents raise questions about weapons proliferation risks and high economic costs.\nCommercial enrichment is currently being done in the United States, Russia, France, Japan, China, and countries in the Urenco consortium (the United Kingdom, Netherlands, Germany). The Eurodif consortium's enrichment plant is on French soil, and France does not share the enrichment technology with co-owners Belgium, Italy, Spain, and Iran. Argentina is in the process of re-commissioning its gaseous diffusion enrichment plant at Pilcanyeu to provide fuel for one of its nuclear power reactors. Brazil has been gradually expanding a small enrichment facility for its nuclear power reactors. Only Russia and the United States, as well as the European multinational consortia Urenco and Eurodif, supply enriched uranium for commercial purposes to other countries. The only currently operating U.S. enrichment plant, which started up in 2010, is the Urenco USA facility in New Mexico.\nSome reports argue that, for the foreseeable future, current commercial enrichment capacity will be able to provide for global nuclear fuel needs and, therefore, building new enrichment plants on purely commercial grounds may not be justified. According to the World Nuclear Association, world enrichment capacity is likely to continue substantially exceeding world nuclear fuel requirements at least through 2020. Most states depend on foreign enrichment services for their nuclear fuel, and current enrichment providers have been expanding their capacity in anticipation of an expanded market in the future. In addition, Russian and U.S. stockpiles of high-enriched uranium (HEU) from dismantled nuclear weapons are being down-blended for use as low-enriched uranium (LEU) fuel, further adding to market supply. However, an increase in nuclear power plants in countries without enrichment capabilities may increase interest in domestic enrichment in new states.\nThere has been a renewed interest in multinational fuel cycle services as a way to provide fuel supply assurances. Urenco and Eurodif have provided commercial enrichment services for over three decades. The International Uranium Enrichment Centre in Angarsk, Russia, began operations in 2007. It is a commercial uranium enrichment consortium that does not share sensitive enrichment technology, but does share profits. Participants include Russia, Kazakhstan, Ukraine, and Armenia. Non-Russian members pledge to refrain from developing uranium enrichment on their own soil.",
"U.S. exports of nuclear plant components, equipment, fuel, and technology—which require nuclear cooperation agreements—have held steady at modest levels since the mid-1990s, according to an analysis by the Government Accountability Office (GAO). However, the analysis found that, because worldwide nuclear-related exports rose significantly during that period, the U.S. share of the market dropped sharply.\nThe declining U.S. share of the world nuclear market is a dramatic reversal from earlier decades, when the United States was the dominant supplier of nuclear technology and fuel for the non-communist world. The U.S. Atomic Energy Commission (AEC) and its successor agencies were the sole free-world suppliers of enriched uranium until European commercial enrichment plants began operating in the late 1970s. Since then, the U.S. share of world enrichment capacity has fallen to 7%, as all the three former AEC plants were retired, leaving only the Urenco USA plant, and foreign capacity expanded. In the equipment supply sector, General Electric (GE) and Westinghouse directly supplied about three dozen reactors to foreign utilities during the 1960s, 1970s, and 1980s, but only about 10 during the past two decades. U.S. reactor technology has typically been transferred to foreign industrial firms under licenses that allowed them to gradually take over most or all aspects of subsequent reactor projects, diminishing U.S. involvement. That pattern has continued with China, which is currently building four Westinghouse AP1000 reactors under a technology transfer agreement and now is developing its own designs based on Westinghouse technology.\nGAO's analysis found that U.S. exports of enriched uranium and other nuclear materials totaled $20.7 billion from 1994 through 2008 (in 2010 dollars), averaging about $1.4 billion per year. Japan accounted for 63% of those exports, far more than any other country, much of that apparently from uranium enrichment purchases. Sales of reactor components and equipment, according to GAO, totaled $4.4 billion during 1994-2008, averaging about $300 million per year. Japan, South Korea, Mexico, Spain, and the Czech Republic accounted for 70% of the reactor component exports. Exports to South Korea largely resulted from a technology transfer agreement with U.S. supplier Combustion Engineering, now part of Westinghouse. Under the agreement, Combustion Engineering built four reactors in South Korea during the 1990s with Korean industrial firms, which then took the lead on subsequent projects. GAO could not find statistics for U.S. exports of nuclear services, which were described by Commerce Department officials as \"an increasingly important and growing market segment for the U.S. nuclear industry.\"\nAccording to the United Nations Commodity Trade Statistics Database (Comtrade), U.S. exports of enriched uranium and related nuclear material totaled $955 million in 2013. Exports of nuclear reactors, fuel elements, and components in 2013 totaled $471 million.",
"Bilateral nuclear cooperation agreements may increasingly become a necessity for U.S. domestic nuclear energy production. The 100 nuclear power reactors currently operating in the United States were designed and built by U.S. companies using predominantly U.S.-manufactured components. Construction of those plants began in the 1960s and 1970s, when U.S. nuclear power technology was dominant throughout the non-communist world. U.S. companies, especially Westinghouse and GE, built nuclear reactors around the world and established licensing agreements and partnerships with foreign companies to further develop their technology for international use.\nHowever, U.S. nuclear power development stagnated after the 1970s—with no domestic orders after 1973 that were not subsequently canceled—while foreign projects continued at a steady but reduced pace. Westinghouse's nuclear power business was bought by a British firm in 1999 and subsequently by the Japanese firm Toshiba in 2006. GE has partnered with the Japanese firm Hitachi to market and construct new nuclear power plants. Several of GE and Westinghouse's former foreign partners, such as the French firm Areva and the Japanese firm Mitsubishi Heavy Industries, have become fully independent in nuclear power plant design and construction. South Korea and China could follow that path in the future.\nThe significant number of foreign suppliers for current U.S. reactor projects provides a good indication of the changes in the world nuclear industry that have taken place since the first round of U.S. nuclear projects several decades ago. Construction officially got underway in 2012 on the first new U.S. nuclear power plants since completion of the latest U.S. reactor in 1996 (on which construction had begun in the early 1970s). The new nuclear construction was marked by the pouring of concrete foundations for four new units in South Carolina and Georgia, as well as the resumption of construction at a long-suspended reactor in Tennessee. License applications for 12 more new reactors are currently under consideration by the Nuclear Regulatory Commission (NRC)—in addition to about a dozen others that have been withdrawn or suspended since the current wave of applications began in late 2007. Six of the reactors currently listed on NRC's docket are designed by Westinghouse (plus the four new reactors already under construction in Georgia and South Carolina), two are from Areva, and four are from GE-Hitachi.\nBecause of the lengthy gap in U.S. nuclear plant construction, many key reactor components, such as large pressure vessel forgings, can no longer be made in the United States. At least in the near term, \"having sufficient major equipment for new U.S. nuclear units will depend on non-U.S. manufacturers,\" the Department of Energy concluded in 2005. Therefore, the current round of planned U.S. nuclear plants is expected to rely much more on a worldwide supply chain than was the case for today's operating plants, all of which began construction before 1979.\nMany large forgings for the new U.S. reactors that are now under construction or in the planning stage have already been ordered from or produced by Japan Steel Works. Fabrication of the large forgings into finished reactor components has been performed by the South Korean firm Doosan. Also, steel plates for the 200-foot-high containment structure that surrounds the major reactor components in Westinghouse's AP1000 reactor design are being produced by IHI Corporation in Japan for two planned new reactors at Southern Company's Vogtle site in Georgia. The plates are being welded together by Chicago Bridge and Iron Company. Core make-up tanks and pressurizers for the two new reactors at the South Carolina Electric & Gas V.C. Summer plant were built at Mangiarotti Nuclear, S.p.A., facilities in Italy. The United States imported $334.6 million worth of nuclear reactor components from 2006 through 2013, according to the U.N. Comtrade database.\nAnother measurable indicator of the increasing globalization of the nuclear power plant supply chain is the worldwide distribution of \"N-stamp\" certifications by the American Society of Mechanical Engineers (ASME). The N-stamp and related ASME nuclear stamps are recognized by NRC as evidence that suppliers meet quality control standards for producing nuclear plant components. The number of U.S. manufacturing facilities with N-stamp certification fell by half from the mid-1980s to early 2000s before rising slightly with the wave of U.S. reactor license applications after 2007. Even after that rise, fewer than half of N-stamp holders (45%) were located in the United States in 2010, while 38% were in Asia and the remainder were elsewhere in the world. According to the World Nuclear Association, \"China had six ASME N-stamp accredited manufacturers at the end of 2009, by October 2011 it had 26.\"\nBoth of the major U.S.-based reactor suppliers, GE-Hitachi and Westinghouse, have indicated that they will generally rely on a global supply chain for new nuclear projects but would use local suppliers to the extent justified by the size of the host nation's nuclear construction program. A 2009 British report noted that \"the full 'localization' approach cannot be justified for a single reactor build and significant investment will only be worthwhile for situations where multiple reactors are likely to be built within the same country or region, and there is benefit in economy of scale.\" Under that reasoning, the domestic content of U.S. reactors could rise from currently anticipated levels if a significant amount of new U.S. nuclear construction materializes. Anticipation of U.S. nuclear orders has already spurred an increase in U.S. supply capacity, including the restoration of an N-stamp by Babcock & Wilcox at its Mount Vernon, IN, plant, and the opening of a nuclear plant module fabrication facility by the Shaw Group (now owned by Chicago Bridge and Iron) in Lake Charles, LA. A similar facility planned by Areva in Newport News, VA, has been indefinitely delayed.\nNew and proposed U.S. uranium enrichment plants also have significant foreign involvement. The European consortium URENCO began production in June 2010 at a new enrichment plant in New Mexico that uses European gas centrifuge technology. Areva plans to use the same technology at a planned Idaho plant that received an NRC license in 2011 but was indefinitely delayed in 2013. If built, that plant would add to Areva's extensive fuel cycle operations in the United States. The U.S. firm Centrus Energy (formerly USEC) plans to build an enrichment plant in Ohio using U.S.-developed gas centrifuge technology, a project that received past support from Toshiba. However, further financing for the facility has been uncertain since USEC's bankruptcy in March 2014 and re-emergence as Centrus. In another enrichment project with foreign participation, GE-Hitachi is considering construction of an enrichment plant using Australian laser technology in North Carolina or Kentucky.",
"The international community has adopted a variety of means to address the potential for ostensibly peaceful enrichment and reprocessing facilities to enable nuclear weapons programs. These measures are designed to impede or slow the proliferation of nuclear weapons.",
"The nuclear Nonproliferation Treaty (NPT), which entered into force in 1970, prohibits non-nuclear-weapon states-parties from producing or acquiring nuclear weapons. It also specifies that nuclear-weapon states-parties should not \"assist, encourage, or induce\" any non-nuclear-weapon state to acquire nuclear weapons. (See Appendix D .) All U.N. member-states except for India, Israel, and Pakistan are parties to the NPT.\nAn NPT state-party is obligated to conclude a safeguards agreement with the International Atomic Energy Agency (IAEA). In the case of non-nuclear-weapon states-parties to the treaty, such agreements, known as comprehensive safeguards agreements, allow the agency to monitor nuclear facilities and materials to ensure that they are not diverted to military purposes. According to the IAEA, safeguards pursuant to such agreements\nare applied to verify a State's compliance with its undertaking to accept safeguards on all nuclear material in all its peaceful nuclear activities and to verify that such material is not diverted to nuclear weapons or other nuclear explosive devices.\nComprehensive safeguards are designed to enable the IAEA to detect the diversion of nuclear material from peaceful purposes to nuclear weapons uses, as well as to detect undeclared nuclear activities and material. Safeguards include agency inspections and monitoring of declared nuclear facilities. The IAEA's monitoring and inspection authority in a particular country is limited to facilities that have been declared by the government. Additional Protocols to IAEA comprehensive safeguards agreements further augment the agency's ability to investigate clandestine nuclear facilities and activities. Additional Protocols give IAEA inspectors expanded physical access to nuclear-related sites in the member state. They also allow for surprise inspections and environmental monitoring.\nAn increasing number of countries, particularly those with significant nuclear activities, have been signing Additional Protocols and bringing them into force. Of the 190 NPT states-parties, 144 have signed Additional Protocols; of those, 124 are in force. (See Appendix E .) Over 80% of the 72 countries with \"safeguards-significant nuclear activities\" have signed Additional Protocols. Most of the states-parties that have not signed Additional Protocols do not have significant nuclear programs or plans, but six non-signatories (Algeria, Argentina, Brazil, Egypt, Syria, and Venezuela) have nuclear reactors under safeguards. (See Appendix F .)\nAlthough many analysts and observers have expressed concerns about the possibility that a country seeking nuclear weapons might use dual-use technology supplied to a peaceful nuclear energy program in a covert weapons program, all legitimate transfers of nuclear technology to NPT non-nuclear-weapon states are under IAEA safeguards and no country with comprehensive safeguards in place, and a record in good standing with the IAEA, has used declared nuclear facilities to produce fissile material for weapons. As a result, a nuclear weapons program would likely need to include some covert facilities. Specifically, the nuclear programs of greatest concern today, such as those of India, Iran, North Korea, and Pakistan, have utilized combinations of indigenous know-how and overt or covert foreign assistance.",
"The United States has worked to standardize nuclear suppliers' nonproliferation criteria, primarily through the Nuclear Suppliers Group (NSG). However, the United States has struggled in recent years to gain agreement among suppliers to strengthen nonproliferation conditions of supply.",
"Members of the NSG, a voluntary group of countries which coordinates nuclear exports and has developed guidelines for such exports, have since the 1970s adhered to an informal restriction on transferring enrichment, reprocessing, and heavy water technology to states outside the NSG, which currently has 48 members (see Appendix G ). Until recently, NSG Guidelines said that supplier countries should \"exercise restraint\" in transferring any enrichment or reprocessing technologies. These policies were voluntary, but resulted in no contractual transfers of enrichment or reprocessing technology to additional states.\nFollowing revelations about a covert procurement network for nuclear technology run by former Pakistani nuclear official Abdul Qadeer Khan, some NSG countries sought to tighten these restrictions. NSG member states began in 2004 to negotiate a list of criteria that recipient states would need to meet before they could receive enrichment or reprocessing technology. The NSG announced following its June 23-24, 2011, plenary meeting that the group had reached agreement on such criteria.\nThese criteria require a potential recipient to be an NPT state-party in good standing; to have a comprehensive safeguards agreement in force; to have no current breaches of safeguards obligations; to have a bilateral agreement with the supplier that contains nonproliferation assurances; to commit to international standards of physical protection and safety; and to implement effective export controls and adhere to the NSG guidelines. In addition, the amended guidelines require a recipient state to have brought into force an Additional Protocol to its IAEA safeguards agreement or, \"pending this,\" to implement \"appropriate safeguards agreements in cooperation with the IAEA, including a regional accounting and control arrangement for nuclear materials, as approved by the IAEA Board of Governors.\" The NSG also agreed to require that enrichment plants be exported only if they are \"black boxed\"—that is, built to prevent the recipient state from replicating the technology transferred.\nThe final guidelines differ in some respects from a November 2008 draft that contained more subjective criteria, such as general conditions of stability and security; potential negative impact of fuel cycle technology transfers on the stability and security of the recipient state and the region; and whether there is a credible and coherent rationale for pursuing enrichment and reprocessing capability for civil nuclear power purposes. These criteria are not included in the revised guidelines, although the guidelines do state that suppliers should take into account \"any relevant factors as may be applicable.\"\nNegotiations over the guidelines had been contentious. Little public information is available about NSG discussions, but press reports said that Turkey raised objections during the 2010 NSG plenary meeting to several criteria, including the \"black box\" requirement and subjective criteria concerning regional stability. In the past, Argentina, Brazil, and South Africa had raised objections to the Additional Protocol as a condition of supply; the provision allowing a \"regional accounting and control arrangement\" to substitute for an Additional Protocol appears, in effect, to exempt Argentina and Brazil from the Additional Protocol requirement. In general, developing countries are wary of what they characterize as additional obstacles to their ability to access nuclear technology for peaceful purposes.\nWith a lack of NSG consensus, the Group of Eight (G-8) nations had in recent years issued joint policy statements regarding enrichment and reprocessing supply. From 2004 to 2007, the G-8 announced a year-long suspension of any such transfers at their annual summit meetings. The 2008 Summit declaration first stated that the supplier states would only transfer enrichment or reprocessing equipment or facilities on the basis of the NSG draft criteria:\nWe agree that transfers of enrichment equipment, facilities and technology to any additional state in the next year will be subject to conditions that, at a minimum, do not permit or enable replication of the facilities; and where technically feasible reprocessing transfers to any additional state will be subject to those same conditions.\nThe G-8 countries have since issued endorsements of the policies outlined in the November 2011 updated NSG guidelines.",
"In 2004, the United States proposed that the international community adopt a ban on all future transfers of enrichment and reprocessing technology. Developing countries strongly resisted this proposal, even though only some of them had concrete plans to acquire these technologies. Responding to these concerns, the United States and others began discussions at the IAEA on multilateral nuclear fuel assurances that would provide states with an incentive to refrain from acquiring their own fuel cycle capabilities and instead obtain nuclear fuel by using existing suppliers, joining international consortia, or using an IAEA-run fuel bank if commercial arrangements failed. The IAEA Board of Governors approved a Russian-operated fuel reserve in 2009 and an IAEA-administered fuel bank in 2010. The IAEA Fuel Bank is located in Kazakhstan, and final arrangements are being negotiated with the IAEA. In addition, the United States has established its own fuel reserve, the American Assured Fuel Supply program. Fuel banks do not replace commercial supply, but are hoped to provide another reassurance that fuel supply will not be cut off for political reasons. It is worth noting that arguably both Urenco and Eurodif have operated multilateral commercial models for uranium enrichment since the 1970s.\nSome countries are concerned that supporting multilateral fuel arrangements would undermine their right to access nuclear technology for peaceful purposes under the NPT, and argue that only an independent national fuel cycle can provide a country with energy security. Other countries oppose the fuel bank on principle, characterizing it as an effort to create a division between countries that have these technologies and those that do not. However, because domestic nuclear fuel programs may not be economically viable for most countries, multilateral solutions continue to be attractive. Many states with nuclear power depend on the foreign supply of LEU fuel for their reactors.\nProposals for multilateral arrangements to manage spent nuclear reactor fuel and thereby prevent the further spread of reprocessing technology are less developed at this stage. On-site storage of spent fuel is most common, and some countries reprocess their spent fuel rods into mixed-oxide fuel. Multilateral solutions, however, might prevent the further spread of reprocessing technology. Some non-governmental analysts have proposed that a pyro-processing program in South Korea be developed under multilateral auspices. Another proposal has been the establishment of an international spent fuel repository.\nStates also participate in joint research ventures on advanced and fast reactors such as the Generation IV International Forum or IAEA's International Project on Innovative Nuclear Reactors and Fuel Cycles. A major U.S.-led initiative, the International Framework for Nuclear Energy Cooperation (formerly the Global Nuclear Energy Partnership), was meant to stimulate international collaboration on developing proliferation-resistance in the fuel cycle.",
"The United States and the international community have developed other mechanisms to control the spread of enrichment and reprocessing. For example, the U.N. Security Council has adopted resolutions prohibiting the transfer of such technologies to Iran and North Korea. Furthermore, the United States has in the past placed bilateral pressure on suppliers to refrain from providing sensitive fuel cycle technologies to such countries as Pakistan and Iran. Moreover, individual states can refrain from transferring enrichment and reprocessing technologies; as noted, no such transfers are planned.",
"Under existing law (Atomic Energy Act [AEA] of 1954, as amended; P.L. 95-242 ; 42 U.S.C. §2153 et seq.) all significant U.S. nuclear cooperation with other countries requires a peaceful nuclear cooperation agreement. Significant nuclear cooperation includes the transfer of U.S.-origin special nuclear material subject to licensing for commercial, medical, and industrial purposes. Such agreements, which are \"congressional-executive agreements\" requiring congressional approval, do not guarantee that cooperation will take place or that nuclear material or technology will be transferred, but rather authorize and set the terms of reference for nuclear cooperation. The AEA includes requirements for an agreement's content, conditions for the President to exempt an agreement from those requirements, requirements for presidential determinations and other supporting information to be submitted to Congress, conditions affecting the implementation of an agreement once it takes effect, and procedures for Congress to consider and approve the agreement.\nSection 123 of the AEA requires that any agreement for nuclear cooperation meet nine nonproliferation criteria and that the President submit any such agreement to the House Committee on Foreign Affairs and the Senate Committee on Foreign Relations. The Department of State is required to provide the President an unclassified Nuclear Proliferation Assessment Statement (NPAS), which the President is to submit, along with the agreement, to those two committees. The State Department is also required to provide a classified annex to the NPAS, prepared in consultation with the Director of National Intelligence. The NPAS is meant to explain how the agreement meets the AEA nonproliferation requirements. The President must also make a written determination \"that the performance of the proposed agreement will promote and will not constitute an unreasonable risk to, the common defense and security.\"\nThe President may exempt an agreement for cooperation from any of the requirements in Section 123a if he determines that the requirement would be \"seriously prejudicial to the achievement of U.S. non-proliferation objectives or otherwise jeopardize the common defense and security.\" The AEA provides different requirements, conditions, and procedures for exempt and non-exempt agreements.",
"Under the AEA, Congress has the opportunity to review a 123 agreement for two time periods totaling 90 days of continuous session. The President must submit the text of the proposed nuclear cooperation agreement, along with required supporting documents (including the unclassified NPAS) to the House Foreign Affairs Committee and the Senate Foreign Relations Committee. The President is to consult with the committees \"for a period of not less than 30 days of continuous session.\" After this period of consultation, the President is to submit the agreement to Congress, along with the classified annex to the NPAS and a statement of his approval of the agreement as well as a determination that it will not damage the national security interests of the United States. This action begins the second period, which lasts for 60 days of continuous session. In practice, the President has submitted the agreement to Congress, along with the unclassified NPAS, its classified annex, and his approval and determination, at the beginning of the full 90-day period. The 60-day period has been considered as following immediately upon the expiration of the 30-day period.\nIf the President has not exempted the agreement from any requirements of Section 123a, it becomes effective at the end of the 60-day period unless, during that time, Congress adopts a joint resolution disapproving the agreement and the resolution becomes law. If the agreement is an exempted agreement, Congress must adopt a joint resolution of approval and it must become law by the end of the 60-day period or the agreement may not enter into force. At the beginning of this 60-day period, joint resolutions of approval or disapproval, as appropriate, are to be automatically introduced in each house. During this period, the committees are to hold hearings on the proposed agreement and \"submit a report to their respective bodies recommending whether it should be approved or disapproved.\" If either committee has not reported the requisite joint resolution of approval or disapproval by the end of 45 days, it is automatically discharged from further consideration of the measure. After the joint resolution is reported or discharged, Congress is to consider it under expedited procedures, as established by Section 130i of the AEA.\nSection 123 of the AEA requires the President to keep the Senate Foreign Relations Committee and the House Foreign Affairs Committee \"fully and currently informed of any initiative or negotiations relating to a new or amended agreement for peaceful nuclear cooperation.\"",
"The United States often has diverse policy goals when deciding to conclude a nuclear cooperation agreement with another country, including promoting nonproliferation, supporting the U.S. nuclear industry, satisfying the needs of the U.S. domestic nuclear energy program, and improving or sustaining overall bilateral and strategic relations.",
"A major U.S. goal of concluding nuclear cooperation agreements has been to ensure the peaceful use of any transferred nuclear technology. The Nuclear Nonproliferation Act of 1978, which amended Section 123 of the Atomic Energy Act of 1954, added new requirements for nuclear cooperation with the United States. The House report on this legislation explained the new requirements: \"The approach to the legislation is to provide both incentives for foreign nations to conform to comprehensive anti-proliferation safeguards, and deterrents to attainment of technologies and materials which would enable other nations to produce nuclear explosives in a short time.\"\nThe United States and other countries have become increasingly concerned that with the spread of nuclear energy facilities, additional countries may obtain enrichment and reprocessing technology, the most sensitive components of the nuclear fuel cycle. Consequently, the United States and other governments have pursued policies both to persuade countries to refrain from enrichment and reprocessing and to conclude Additional Protocols to their IAEA safeguards agreements.\nFormer State Department official Fred McGoldrick has argued that 123 agreements also \"provide a framework for establishing invaluable person-to-person and institution-to-institution contacts and collaboration that can help advance our nonproliferation objectives.\" These agreements facilitate cooperation between business contacts and laboratories, as well as the Department of Energy and its counterparts, McGoldrick said, adding that such \"intangible\" cooperation enables the United States to establish relationships with foreign nuclear energy establishments that might otherwise be dominated by non-U.S. nuclear suppliers.",
"As discussed, the AEA requires that any agreement for nuclear cooperation meet nine nonproliferation criteria, but these do not include requirements that countries conclude Additional Protocols or forgo enrichment or reprocessing. The AEA mandates that U.S. nuclear cooperation agreements require U.S. consent for any \"alteration in form or content\" (to include enrichment or reprocessing) of U.S.-origin material or any material that was processed in a plant containing transferred U.S. nuclear technology. They also require U.S. consent for any re-transfer of material or technology.\nAdditional options are available under U.S. law to sanction a country for transfer or receipt of enrichment or reprocessing technology under the Arms Export Control Act, as amended. These provisions are similar to those contained in the Foreign Assistance Act of 1961. Section 101 (Nuclear Enrichment Transfers; 22 U.S.C. 2799aa, known as the Symington Amendment), prohibits foreign economic or military assistance to a country if the President determines that it has delivered or received \"nuclear enrichment equipment, materials, or technology,\" unless it is placed under \"multilateral auspices and management\" when available and is under IAEA safeguards. The President can invoke similar penalties after making a determination regarding transfer or receipt of reprocessing equipment, materials, or technology under Section 102 (known as the Glenn Amendment). With reprocessing transfers, there is no exception made if the reprocessing technology is under safeguards. There is an exception for the transfer of reprocessing technology as part of an international program, in which the United States participates, for evaluation of technologies which are \"alternatives to pure plutonium reprocessing.\"\nDuring the past several years, the United States has attempted to persuade certain countries with which it is negotiating nuclear cooperation agreements to forgo enrichment and reprocessing and conclude additional protocols. Washington has argued that its December 2009 nuclear cooperation agreement with the United Arab Emirates (UAE) could set a useful precedent for mitigating the dangers of nuclear proliferation. For example, President Obama argued in May 2009 that the agreement \"has the potential to serve as a model for other countries in the region that wish to pursue responsible nuclear energy development.\" Similarly, then-State Department spokesperson P.J. Crowley described the agreement as \"the gold standard\" during an August 5, 2010, press briefing.\nThe agreement's status as a potential model is grounded in two nonproliferation provisions not found in any other U.S. nuclear cooperation agreement. First, the agreement requires that the UAE bring into force its Additional Protocol to its IAEA safeguards agreement before the United States licenses \"exports of nuclear material, equipment, components, or technology\" pursuant to the agreement. Second, the agreement states that the UAE:\nshall not possess sensitive nuclear facilities within its territory or otherwise engage in activities within its territory for, or relating to, the enrichment or reprocessing of material, or for the alteration in form or content (except by irradiation or further irradiation or, if agreed by the Parties, post-irradiation examination) of plutonium, uranium 233, high enriched uranium, or irradiated source or special fissionable material.\nFurthermore, the U.S.-UAE agreement also provides the United States with the right to terminate nuclear cooperation and to require the return of any nuclear \"material, equipment or components ... and any special fissionable material produced through their use\" if, after the agreement's entry into force, the UAE \"possesses sensitive nuclear facilities within its territory or otherwise engages in activities within its territory relating to enrichment of uranium or reprocessing of nuclear fuel.\"\nThe U.S.-UAE agreement also includes a provision that apparently intends to establish the agreement's conditions as a minimum standard for future such agreements in the Middle East. An Agreed Minute to the nuclear cooperation agreement states that \"the fields of cooperation, terms and conditions\" accorded by the U.S.-UAE agreement \"shall be no less favorable in scope and effect than those which may be accorded, from time to time, to any other nonnuclear-weapon State in the Middle East in a peaceful nuclear cooperation agreement.\" The Minute explains that, in the event that a future U.S. nuclear cooperation agreement with another regional government contains less-stringent requirements, the United States will, at the UAE's request, consult with the UAE \"regarding the possibility of amending\" the U.S.-UAE agreement in order to make its terms equally favorable to the new agreement. A similar provision in the 1981 U.S.-Egypt agreement made it necessary for the United States to ensure that the agreement with the UAE would be at least as stringent. Since the latter agreement is more stringent than the Egypt agreement, it has established a higher standard for future U.S. nuclear cooperation agreements in the region.\nThe United States has made efforts to elicit from other regional governments nonproliferation commitments similar to those described in the U.S.-UAE agreement. Washington has signed Memoranda of Understanding with Bahrain, Jordan, Mongolia, and Saudi Arabia that express those countries' intention to refrain from pursuing enrichment or reprocessing technologies. The United States signed a similar memorandum with the UAE in 2008. These memoranda are statements of intent regarding future cooperation, but are not legally binding and are neither prerequisites for nor guarantees of concluding future nuclear cooperation agreements. However, the Department of State has argued that the memoranda are useful tools for cooperating with countries interested in the responsible use of nuclear energy, because they create opportunities to solicit specific commitments with regard to nuclear technology and safeguards choices.\nNevertheless, U.S. efforts to establish the UAE agreement as a model for future such agreements in the Middle East may be faltering. Jordan, the next regional government most likely to conclude a nuclear cooperation agreement with the United States, reportedly may no longer be willing to include in the agreement the fuel-cycle commitments described in its Memorandum of Understanding. However, Ambassador Richard Stratford stated on March 29, 2011, that the two sides had been \"very, very close\" to an agreement containing similar commitments. As noted, the negotiations have been suspended.\nThe Obama Administration does not envision that the U.S.-UAE agreement will necessarily be a model for nuclear cooperation agreements with countries outside the Middle East. Crowley stated during the August 2010 briefing that the United States \"would encourage countries to make the same decision that the UAE has made.\" However, he acknowledged that \"not every country is going to make that decision,\" adding that \"a particular approach is going to be different ... country by country or region by region.\" The Administration has not yet decided whether to solicit from other countries commitments similar to those contained in the U.S.-UAE agreement.",
"U.S. nuclear cooperation agreements with foreign countries are also designed to help promote growth in the U.S. nuclear industry by facilitating U.S. nuclear exports. As noted, U.S. exports of nuclear plant components, equipment, fuel, and technology—which require nuclear cooperation agreements—have held steady at modest levels since the mid-1990s and comprise a decreasing share of the global market. That downward trend could be altered by new, higher-efficiency uranium enrichment plants currently planned in the United States and by new U.S. contracts to supply reactor technology and components in China and elsewhere.\nRecent plans for nuclear power expansion around the world, particularly in China and India, could lead to future growth in U.S. nuclear reactor exports. A consortium led by Westinghouse signed a contract with Chinese nuclear firms on July 24, 2007, to supply four AP1000 reactors—Westinghouse's newest design—at a cost estimated at $8 billion. The four reactors are currently under construction at two sites. According to the World Nuclear Association, 14 additional AP1000 reactors at seven sites are currently planned, 20 others are planned but deferred, and as many as 80 more AP1000 units have been proposed. Much like earlier U.S. agreements with South Korea and other countries, the Westinghouse-China deal includes the transfer of the AP1000 technology to Chinese firms, who are expected eventually to be able to build the reactors on their own. Westinghouse is also working with another Chinese consortium to develop larger versions of the AP1000. India has announced plans for up to 12 U.S. nuclear reactors at two sites, although the projects have been held up by liability issues.\nU.S. uranium enrichment exports could see future growth resulting from planned new enrichment plants, despite the scheduled decommissioning of the main previously operating U.S. plant. The first new commercial enrichment plant in the United States since the 1950s began commercial production in June 2010 in Lea County, NM. Built by a U.S. subsidiary of the European enrichment firm Urenco, the Lea County plant reached full initially licensed capacity in April 2014, with expansion of up to 50% planned by 2017. Two other new enrichment plants of similar capacity are planned by the French firm Areva in Idaho and by Centrus in Ohio to replace a closed plant in Kentucky, although neither has a firm schedule. The Urenco, Areva, and Centrus plants use advanced gas centrifuge technology, which is far less energy-intensive than the gaseous diffusion technology used by previous U.S. plants. GE-Hitachi is considering building an enrichment plant using laser enrichment technology that it is developing. If all the planned and proposed U.S. enrichment capacity were to come online, total U.S. enrichment capacity would reach more than six times its current level. 123 agreements are required for the construction of enrichment facilities by foreign firms and for the export of enriched uranium.\n123 agreements benefit the U.S. nuclear energy program in other ways. For example, licenses under the U.S.-Australia agreement have been primarily for the import of uranium to the United States from Australia. More recently, as noted, foreign firms have been involved in sustaining the U.S. nuclear energy program by, for example, participating in nuclear reactor projects in the United States (see discussion above \" Increasing Importance of Foreign Suppliers to U.S. Nuclear Power Projects \").",
"Lastly, but in some cases most importantly, nuclear energy cooperation agreements are very often a part of an overall diplomatic strategy to improve U.S. bilateral relations with a country. For some policy makers, this was a key motivation for nuclear cooperation agreements that the United States concluded with both India and Russia.",
"This report has focused on nonproliferation and bilateral nuclear cooperation agreements. Additional factors may strongly influence the outcome of U.S. attempts to influence other countries' nuclear policies.",
"Many foreign governments provide liability insurance for their nuclear industry, or cap liability exposure. Other companies, such as Rosatom in Russia and Areva in France, are granted sovereign immunity protections since they are at least partially state-owned. Some argue that the U.S. nuclear industry is at a disadvantage when competing for foreign contracts because the U.S. government does not provide similar liability protections.\nThe United States has ratified the Convention on Supplementary Compensation for Nuclear Damage (CSC), which would cover U.S. nuclear equipment suppliers conducting foreign business, but the convention has not yet entered into force. For many U.S. companies, ratification of the CSC by the importing state is a requirement for them to do business there, although U.S. firms have built reactors in countries that are not CSC signatories. Each party to the CSC would be required to establish a nuclear damage compensation system within its borders. For any damages not covered by those national compensation systems, the convention would establish a supplemental tier of damage compensation to be paid by all parties.\nWhether French and Russian nuclear companies are actually shielded from nuclear liability claims is unclear. French companies have recently stressed that the CSC, which requires additional compensation limits apart from liability, is a prerequisite for them to do business in a country. Moreover, France and Russia are discussing with India means of resolving their concerns about that country's liability law, which was adopted in August 2010 and, according to many observers, is inconsistent with the CSC. However, according to a Nuclear Energy Agency analysis, Russian and French companies could, in the event of a nuclear accident, still be less exposed to lawsuits than U.S. companies because Moscow and Paris would be in a \"more powerful position to negotiate a settlement with the Indian government than a private supplier may be.\" Additionally, suppliers are more likely to be subject to class action lawsuits in the United States than would suppliers in Russia or France.",
"The ability of the United States to influence regulations for international nuclear commerce has arguably diminished. As discussed above, the U.S. nuclear industry's market power has declined and foreign competitors have been concluding nuclear supply agreements with other countries. Moreover, some influential governments have demonstrated limited enthusiasm for such regulations.\nFor example, as noted, some members of the NSG displayed resistance to proposals that would restrict the transfer of enrichment and reprocessing technology. Furthermore, the NSG decided in 2008 to exempt India from some of its export guidelines—a step which many observers argued would assist New Delhi's nuclear weapons program. Some suppliers may use the 2008 decision to justify supplying other states that do not meet NSG guidelines; indeed, China has agreed to supply Pakistan with two additional nuclear reactors. It is also possible that Israel and Pakistan, which, like India, do not have full-scope safeguards and have not signed the NPT, may continue to ask for exemptions from NSG guidelines. For its part, Israel proposed export criteria in 2007 that would have had the effect of exempting Israel from the current NSG guidelines and is widely believed to have sought a nuclear cooperation agreement with the United States.",
"Recent proposals have called for restricting foreign nuclear firms' activities in the United States if they provide nuclear power plants to countries that have not agreed to forswear enrichment and reprocessing. Such restrictions would be intended to encourage other nuclear supplier countries to adopt export standards similar to those in the U.S.-UAE 123 agreement. For example, in a November 2010 letter to President Obama, 16 nuclear energy policy experts specifically targeted France, urging that federal loan guarantees for proposed French nuclear projects in Maryland and Idaho be conditioned on France's adoption of the U.S.-UAE framework. In addition to loan guarantees, the letter recommended that licenses from the Nuclear Regulatory Commission, as well as federal contracts, be denied to foreign firms \"unless they are willing to support the very toughest nuclear nonproliferation standards our own government has developed in the U.S.-UAE deal.\"\nMany foreign firms operating in the United States or participating in U.S. nuclear projects could potentially be subject to such sanctions. The French firm Areva, which plans to build a reactor in Maryland and a uranium enrichment plant in Idaho, and also hopes to sell reactors in the Middle East, says it has nearly 5,000 employees in the United States and Canada. Many foreign companies that are likely to be involved in the worldwide supply chain for U.S. nuclear projects may also be involved in nuclear projects that do not include agreements by the recipients to forswear enrichment and reprocessing. It would appear, therefore, that U.S. denial of loan guarantees, licenses, and contracts could be painful for the targeted companies, possibly putting pressure on their home governments. However, such sanctions could also impede or halt planned U.S. nuclear projects, harm the U.S. operations of foreign companies, and disrupt federal nuclear activities.\nAs noted, Congress has become increasingly concerned that U.S. laws and policies may need to be changed in order to prevent further nuclear proliferation. In the future, Congress may choose to consider such factors as the 2011 Nuclear Suppliers Group's (NSG) decision on the supply of enrichment and reprocessing technology; the extent to which the U.S. nuclear industry is dependent on foreign suppliers; the magnitude of the proliferation threat from nuclear power programs; the efficacy of current nonproliferation mechanisms, including IAEA safeguards; and whether and to what extent the United States can influence other governments' nuclear supply policies.\nAppendix A. The Conceptual Nuclear Fuel Cycle\nFor a detailed discussion, see CRS Report RL34234, Managing the Nuclear Fuel Cycle: Policy Implications of Expanding Global Access to Nuclear Power , coordinated by [author name scrubbed].\nAppendix B. Status of World Wide Nuclear Power Plants\nAppendix C. U.S. Nuclear Cooperation Agreements\nThe following states and other entities had civilian nuclear cooperation (Section 123) agreements with the United States in force as of November 1, 2014:\nAppendix D. Articles I, II, and IV of the Nuclear Nonproliferation Treaty\nArticle I\nEach nuclear-weapon State Party to the Treaty undertakes not to transfer to any recipient whatsoever nuclear weapons or other nuclear explosive devices or control over such weapons or explosive devices directly, or indirectly; and not in any way to assist, encourage, or induce any non-nuclear weapon State to manufacture or otherwise acquire nuclear weapons or other nuclear explosive devices, or control over such weapons or explosive devices.\nArticle II\nEach non-nuclear-weapon State Party to the Treaty undertakes not to receive the transfer from any transferor whatsoever of nuclear weapons or other nuclear explosive devices or of control over such weapons or explosive devices directly, or indirectly; not to manufacture or otherwise acquire nuclear weapons or other nuclear explosive devices; and not to seek or receive any assistance in the manufacture of nuclear weapons or other nuclear explosive devices.\nArticle IV\n1. Nothing in this Treaty shall be interpreted as affecting the inalienable right of all the Parties to the Treaty to develop research, production and use of nuclear energy for peaceful purposes without discrimination and in conformity with Articles I and II of this Treaty.\n2. All the Parties to the Treaty undertake to facilitate, and have the right to participate in, the fullest possible exchange of equipment, materials and scientific and technological information for the peaceful uses of nuclear energy. Parties to the Treaty in a position to do so shall also co-operate in contributing alone or together with other States or international organizations to the further development of the applications of nuclear energy for peaceful purposes, especially in the territories of non-nuclear-weapon States Party to the Treaty, with due consideration for the needs of the developing areas of the world.\nAppendix E. Additional Protocol Trends\nAppendix F. Reactors, Additional Protocols, 123 Agreements\nAppendix G. Nuclear Suppliers Group Members\nThe following 48 countries are members of the Nuclear Suppliers Group as of November 1, 2014. The European Commission participates as an observer."
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"question": [
"What are U.S. civil nuclear cooperation agreements?",
"Why have there been new concerns about nuclear weapons?",
"How important is ensuring peaceful use of nuclear technology to the United States?",
"What is the stance of the United States regarding international nuclear export policies?",
"What have some Members of Congress been calling for regarding nuclear cooperation?",
"What might these new conditions entail?",
"How would these protocols affect IAEA's legal authority?",
"What near-term threat is posed by civil nuclear commerce?",
"How does the international community mitigate the threat posed by civil nuclear commerce?",
"To what extent has the NSG been successful in its mission?",
"Why does the United States conclude nuclear cooperation agreements?",
"How does the lack of U.S. government liability protections for U.S. reactor exports affect the industry?",
"How has the U.S. nuclear industry market share changed recently?",
"How does the NPT affect nuclear fuel production capabilities?",
"How do some argue that the United States should use its influence on nuclear matters?",
"Why might fears regarding reprocessing technologies be unsubstantiated?"
],
"summary": [
"U.S. civil nuclear cooperation agreements (\"123\" agreements), which are bilateral agreements with other governments or multilateral organizations, have several important goals, including promoting the U.S. nuclear industry, which is increasingly dependent on foreign customers and suppliers, and preventing nuclear proliferation.",
"Increased international interest in nuclear power has generated concern that additional countries may obtain fuel-making technology that could also be used to produce fissile material for nuclear weapons.",
"Ensuring the peaceful use of transferred nuclear technology has long been a major U.S. objective, and Congress has played a key role.",
"Moreover, the United States has been a longtime proponent of restrictive international nuclear export policies.",
"In recent years, some observers and Members of Congress have advocated that the United States adopt new conditions for civil nuclear cooperation.",
"These would include requiring potential recipients of U.S. civil nuclear technology to forgo fuel-making enrichment and reprocessing technologies and to bring into force an Additional Protocol to their International Atomic Energy Agency (IAEA) safeguards agreements.",
"Such protocols augment the IAEA's legal authority to inspect nuclear facilities.",
"The near-term proliferation threat posed by civil nuclear commerce, particularly reactor transfers, is far from clear: All but three states (India, Israel, and Pakistan, all of which have nuclear weapons) are parties to the nuclear Nonproliferation Treaty (NPT); all legitimate transfers of nuclear technology to NPT non-nuclear-weapon states are subject to IAEA safeguards; and no country with comprehensive safeguards in place and a record in good standing with the IAEA has used declared nuclear facilities to produce fissile material for weapons.",
"Further, the international community has multiple mechanisms to dissuade countries from developing domestic enrichment or reprocessing facilities.",
"States such as India, Iran, Israel, North Korea, and Pakistan did acquire enrichment or reprocessing technology, but did so either clandestinely or prior to the establishment of the Nuclear Suppliers Group (NSG) in the mid-1970s.",
"The United States concludes nuclear cooperation agreements for a variety of reasons, including promoting nonproliferation, supporting the U.S. nuclear industry, and improving or sustaining overall bilateral and strategic relations.",
"Some argue that the absence of U.S. government liability protections for U.S. reactor exports puts that industry at a disadvantage relative to foreign competitors who enjoy such protections.",
"The U.S. nuclear industry's market share has declined in recent years; foreign customers and suppliers are important to the industry's viability.",
"Although countries have the right under the NPT to develop their own nuclear fuel production capabilities, a functioning nuclear fuel market should reduce the need for them to do so. Nevertheless, as noted, states have previously managed to acquire these technologies.",
"Some argue that the United States should use its influence to persuade other countries to adopt additional constraints on nuclear transfers. However, the relative decline of the U.S. nuclear industry, as well as some key states' demonstrated lack of willingness to accept such constraints, suggests that U.S. influence in this area is limited.",
"Fears of additional states obtaining enrichment or reprocessing technologies may not materialize. Neither the United States nor any other states possessing enrichment or reprocessing technology have plans to transfer any such technologies (although the United States is currently conducting joint reprocessing research with South Korea)."
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